Thursday, April 20, 2006

Can you sell an iTunes on eBay?

I have always viewed the digital world with a great deal of suspicion. Every time I have tried to make sense of it, I have run into the murky terrain of property rights. But I am fascinated by the "rules of the game" and moreso business models. (Read my post Can academia contribute to business thought? for more on business models.) Because they either innovatively make, use or break the rules of the game. And in the process can illuminate policy-making for uncomfortable terrain. Now that I am having to work on the issue, here is a first take.

There are not many successful business models out there for digital content. I would think of it as a phase of an evolving market. Part of the reason has to do with rights and compensation. I make a song. You buy it and then, your friends copy it. I lose revenue. Next, I make a song. There are n restrictions on copying. I stand to lose the customer. Dilemma! Another "cracker" idea that I heard on the blogosphere was making scanned pdf copies of textbooks and then selling/ sharing them. How can business models protect against these "consumer models"?

Given these kinds of situations, I was intrigued to come across the rapidly developing idea of Digital Rights Management (DRM). I have often thought that it is the headache of the business to comply with customer requirements and create appropriate business models in the digital world. They shouldn't be doing stupid things like taking customers to court for "illegal" downloading. It is their job to create an "enforceable" property right to extract value. That is where DRM comes in. iTunes is one of the successful ones that has created a viable business model around digital content, i.e. music. And even so the software only sells to drive the hardware part of their business. Here is a case study of iTunes.

The test for DRM may well be this. Right now, I cannot sell any "downloadable media" on eBay. See news article eBay mutes iTunes song auction. The reason has to do with eBay's policy, which may be retrogressive in a fast-evolving technology market. I am quite sure that the stand neither helps consumers nor the businesses involved. Can DRM find a way out of this? Apart from the rights aspect of DRM, we have the security issue. Suppose you are a client of mine for 3 months. I provide you a few confidential documents that cannot be copied. Sounds reasonable. Next I install the required technology to make sure that nobody can access those documents after 3 months. In other words, the granted access can "self-destruct". Or the client may require a new grant of permission from me.

The issue gets more complicated if I add my code to your code and then sell it. Should you get compensated? How does one determine it? Hopefully, DRM will enable the development of a sound market in digital content.

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