Fox, Apple and FairPlay
Studio executives keep saying they've learned from the mistakes made by the music industry, and yet many of their actions seem straight out of the major labels' playbook. Today, the Financial Times reported that 20th Century Fox's home video unit, Fox Home Entertainment, had agreed to offer new titles for rent through Apple's iTunes store and sell DVDs with an extra copy of the movie locked in Apple's proprietary FairPlay DRM. If the latter proves to be true (no mention of it in the NYT piece), it means the movie industry may be on its way to the same DRM incompatibility problem that has vexed the music industry.
The story appeared the same day a chastened Warner Music Group announced plans to sell music in the (gasp!) MP3 format, reversing the company's longstanding insistance on DRM for its permanent downloads. Its reasoning was simple: multiple DRMs in the music industry were confusing customers, inhibiting new services and stunting growth.
The movie industry has pretty much stuck to uniform electronic locks on each new packaged format: Macrovision on VHS, CSS on DVD, AACS on HD DVD and AACS and BD+ on Blu-ray. Downloads have attracted a greater variety of DRMs, but the major studios have rallied around Windows Media DRM as the lock of choice for rentals. The only significant variation is in permanent downloads, where Disney (for all releases), MGM and Paramount (for just library titles) have embraced Apple's FairPlay in addition to Windows Media DRM and, for burnable downloads, CSS.
Fox's reported deal with Apple would increase the uncertainty over DRM, but it's consumer-friendly in some respects. Adding a new, Apple-powered rental option is a good thing for anyone with an iPod that supports video or and Apple TV set-top box. Given the popularity of the iPod, that category has millions of people in it. Similarly, offering DVDs with copies that can be moved onto a laptop, a video iPod or an Apple TV makes those movies more valuable to buyers because they can be watched in more ways.
It's also easy to see why Fox would want to make a deal like this. Hollywood is better off providing a legitimate product for video iPods than letting people fill them with downloads of, ahem, uncertain provenance. But the studios have been working for several years with tech and consumer electronics companies on standard approach to portable video players (dubbed "managed copy"), one that wouldn't lock consumers into a particular brand of software or device. The standard has been slow in coming, not because of technological challenges so much as business-model issues and the studios' demand for a non-trivial quid-pro-quo from consumer electronics manufacturers: the addition of watermark detectors to DVD players that might blunt the playability of bootlegged movie discs.
Managed copy would be a great thing for consumers, particularly ones who have large collections of videos that they watch repeatedly (read: parents of young children). The Fox-Apple deal could be interpreted as a blow to the managed-copy efforts because it's a step away from an industry standard. It could also be seen as the first step toward Apple's FairPlay becoming the de facto standard for managed copy. If that happens, though, I wonder how long it would be before the studios started to complain about Apple's dominant market position and its unwillingness to do things the studios' way -- in other words, for the studios to reached the same point that the major record labels did. Today's announcement from Warner Music Group shows where that path leads, namely, to abandoning DRM for permanent downloads.
As much as consumers might like to see that happen, the studios don't seem to be anywhere near that point. For starters, many executives think that even an ineffective DRM (such as CSS) is better than nothing because it tells consumers that they're not supposed to copy the movie. That ethical speed bump may deter some people from copying the films they rent or borrow from the library, although it's obviously not enough to stop anyone who really wants to do such things. Of course, the inescapable FBI and Interpol warnings inserted into every movie play pretty much the same role. Second, and probably more important, DRM provides a measure of control over the business model. For example, if a studio wants to provide one free copy of the movie but charge $5 or $10 for each additional copy, it needs DRM. If the industry is wedded to DRM, though, it would be better off with a standard one -- not just for its own interests and for consumers, but also for entrepreneurs who want to offer Internet-based movie services. That's the group with the most to lose if FairPlay, which Apple has so far refused to license to any rivals, becomes the industry's de facto DRM standard.
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you make it sound like getting DRM right is the only problem. There is no way to make DRM work.
Fritz Hollings squandered his legacy and retired a laughingstock. Sony executives narrowly escaped prison after trying to infect the world's computers with a virus that prevented copying. If you want to know why Blu-Ray is going nowhere, it's because a large proportion of people no longer trust Sony anywhere in their lives.
The only way that the DRM issue will be solved will be with the bankruptcy of the major players. Whoever takes their place will be more humble.
There is no solution to the problem. Music is now worth zero, if you can make money off the t-shirts and concert tickets, fine, but otherwise forget it. Movies are heading that way. The industry's attempts to mandate copy controls in electronics and computers was so arrogant that they have lost any voice in the process going forward.
My guess is that by 2020 music and movies will be advertising-supported web pages, and nothing more.
The point is, there is no way to protect content, if it can be heard by human ears or seen by human eyes, it can be copied. And the content industry, worth less than $20 billion, will not be able to dictate to the $120 billion consumer electronics industry.
Studio and label bosses are cut off from the world, surrounded by yes-men. They will only interact with the real world when the bailiffs come to seize their headquarters.
Good riddance to all of them. They are doomed, stay away from them or they will drag you under the waves with them as they drown.
Posted by: a nony mouse | December 29, 2007 at 08:05 AM
There has never been a packaged home movie product without some form of rights management, and the revenue from those products has been astronomic. Why, suddenly, would the masses reject packaged home video because of *digital* rights management? The vast majority of consumers accept the bargain offered by Hollywood, and I don't think that's going to change.
As for music being worth zero, that might be your perception, but I don't think it's true for the masses of people, either. It's a form of entertainment that people are willing to pay for; the question is the format. If a band never tours (think: the Beatles), will it be unable to sell its recordings? What about soundtrack records and compilations?
I agree that we're likely to see lots of advertiser-supported music and video, but I don't think that's going to be the only offering. People pay for things they think are valuable. Radiohead will make millions off of "In Rainbows," despite the fact that it's available for free (and the songs can be heard live). The best explanation for that, I think, is because lots of consumers see value in the recording, and they're willing to pay for it even though they don't have to.
And by the way, the Sony copy protection scheme wasn't a virus. The software was a rootkit, which hid itself on people's PCs but didn't spread.
Also, you might look at Sony's last quarterly report before suggesting that the company has lost consumers' trust. You might also look at the sales rankings of TV brands.
Posted by: Jon Healey | December 29, 2007 at 08:30 AM
What Fox is proposing to do is to ADD an extra to their DVDs, making it more convenient for the consumer to device/format shift the content. It is already possible, and really not that difficult. to rip DVDs, so the ADDITION of Fairplay protected material isn't really adding further restrictions to the consumer's use of the DVD content.
Also, in terms of there being an industry standard for managed copy/DRM for handheld media players, what is it? Hint: There is none. The article notes that Fairplay has become the de facto standard because of the iPod's overwhelming market share. Fairplay has also been the lesser of evils when compared to any of the other DRM "solutions" available. Fairplay doesn't interfere with the enjoyment of the consumer's fair use rights in 90% of the cases (that number courtesy of my ass). If one is going to grudgingly accept DRM, Fairplay is really the least onerous scheme.
Healy gets it wrong with regards to Apple not licensing Fairplay to its "rivals". It's hardware rivals, yes. Obviously Apple has no problem with rival content distributors using Fairplay, or Fox wouldn't be using it for this new feature.
Anyway, Jon, if you read this, I think you're confusing several different issues. Regardless, thanks for writing this and fostering discussion.
Lastly, an anecdote: Last year I saw the movie American Astronaut on an illegal DVD rip that a friend had obtained from a torrent. I loved the movie so much that I felt compelled to order the DVD online from the movie creators' website (buying from Amazon was also an option) to reward and encourage them. This is similar to my usage of p2p music downloads to preview before I buy. If I like a song, I'll seek out the CD and buy it or pick it up on iTunes. If I really like the artist, I'll buy tickets to shows and buy merch. If I don't like the song, I don't listen to it and I'll delete it from my laptop during one of my periodic purges to free up space.
Posted by: Marcos | January 04, 2008 at 09:18 AM
Marcos, I'll concede that the Fox move amounts to an extra feature. But I think you go too far in saying it's easyfor the average person to rip a DVD. DeCSS tools are widely available, but they're not legal. And when a company tries to sell a packaged version of a DVD ripper at retail, it gets sued out of existence (e.g., 321 Studios). So Fox isn't giving people two equal ripping options; instead, it's effectively saying, "We won't let you rip the disc. But if you want to put a version of the movie onto your computer, you can install these Fairplay-ready beauties."
Also, Apple hasn't been willing to license its technologies to anybody. Period. Look at the deal with HP for iPods -- Apple continued to control the manufacture, and the only thing HP was allowed to do was put its name on the things and sell them. In other words, HP never got the rights to build iPods. I don't know how Fox is going to be able to get Fairplay files onto DVDs, but I wouldn't be surprised if Apple does the encoding and encrypting, then supplies those files to the DVD pressing plant. I just can't see Apple turning over the keys to Fairplay to Fox. We can only guess about it until there's an official announcement, and even then the details may remain obscure.
Posted by: Jon Healey | January 04, 2008 at 09:30 AM
Of course Apple is not going to voluntarily license fair play to another device manufacturer! I'd never suggest such a thing.
As far as the ease of DVD ripping, I couldn't say as I've not ripped one. (That almost sounds like a fart joke.) My understanding of the legality of ripping is different than yours and I could very well be wrong. My understanding is this: while it is unlawful (DMCA) to distribute the tools, it's not illegal to use them for purposes covered by fair use. Back up is considered fair use. While precedent for device shifting has not been specifically set by the courts, there is the precedent for time shifting (the old Sony VCR case). I think interoperability might also be covered (not sure on this).
However, your scenario of Apple providing encoded versions to Fox for their DVDs is very plausible. If I was going to pull numbers out of my butt, I'd say it's 75%/25% in your favor.
Regarding your response to a nony mouse, I agree with you. I do think that the music industry is under much greater threat than is the movie business because they've become technologically obsolete and unnecessary. The functions they serve, i.e, develop, record, market, and distribute, can now be done by the artist. There is no longer a need for a middle man. (Which is not to say that artists won't use a middle man, but the middle man is no longer the gatekeeper.) However, the movie business is different in important ways, as I am sure you know. With a few exceptions, movie making on a commercial scale is capital and labor intensive. Even low budget movies typically have budgets in the millions. Very few ultra low budget movies gain mass popularity. So I agree with you that it is unlikely that the studios are going to be forced to drop DRM any time soon. They're not under siege. They might need to modify their business models a bit and try different strategies, but their roles at gatekeepers will not be entirely undone any time soon.
Posted by: Marcos | January 10, 2008 at 04:17 AM
Re: the legality of ripping -- IANAL, but I think your reading of the law is dead on. The question is whether ripping a DVD for personal use is legal under fair-use principles. Nobody's ever been sued for doing so, and I doubt anybody ever will be. Therefore we may never have the certainty of case law on this. Still, the studios do not concede that making a back-up copy is a fair use. Their arguments on that point include a) making back-up copies interferes with the market for replacement discs, and b) Congress specifically allowed people to make back-up copies of software programs, so by not extending the same provision to movies, lawmakers implicitly declared that it's not legal to back up DVDs. I'm merely repeating these arguments, not endorsing them. There are decent legal arguments on the other side as well.
Posted by: Jon Healey | January 10, 2008 at 10:45 AM
>you make it sound like getting DRM right is the only problem. There is no way to make DRM work.<
And you are an expert? Credentials please.
>Fritz Hollings squandered his legacy and retired a laughingstock.<
Unsubstantiated.
>Sony executives narrowly escaped prison after trying to infect the world's computers with a virus that prevented copying.<
Unsubstantiated.
>If you want to know why Blu-Ray is going nowhere, it's because a large proportion of people no longer trust Sony anywhere in their lives.<
Unsubstantiated. Do you have any polling data or consumer research indicating this?
>The only way that the DRM issue will be solved will be with the bankruptcy of the major players. Whoever takes their place will be more humble.<
Once again, unsubstantiated rant.
>There is no solution to the problem. Music is now worth zero, if you can make money off the t-shirts and concert tickets, fine, but otherwise forget it.<
iTunes revenue generation for music is on an upward trend.
Movies are heading that way. The industry's attempts to mandate copy controls in electronics and computers was so arrogant that they have lost any voice in the process going forward.
Unsubstantiated. CE companies need content companies. Without high value content, nobody needs CE devices.
>My guess is that by 2020 music and movies will be advertising-supported web pages, and nothing more.<
Your guesses and insight have been spectacularly accurate so far.
>The point is, there is no way to protect content, if it can be heard by human ears or seen by human eyes, it can be copied.<
Copy protection is not trying to lock down content like Fort Knox. It is trying to deter casual copying.
>And the content industry, worth less than $20 billion, will not be able to dictate to the $120 billion consumer electronics industry.<
The movie industry alone generates over $40 billion in revenue. The game industry alone is close to $20 billion. Is this another one of your "facts"?
>Studio and label bosses are cut off from the world, surrounded by yes-men. They will only interact with the real world when the bailiffs come to seize their headquarters.<
What about the game industry? They are one of the biggest supporters of copy-protection.
>Good riddance to all of them. They are doomed, stay away from them or they will drag you under the waves with them as they drown.<
There will alway be people who value entertainment and are willing to pay for it.
Posted by: Jim | July 24, 2008 at 01:02 PM