If Apple wants to drop DRM, that might be some evidence that we have reached that point. See Beyond Abstraction, The Law And Economics Of Copyright Scope And Doctrinal Efficiency

81 TULANE L. REV. 187 (2006) for my further thoughts on this topic.

If Apple wants to drop DRM, that might be some evidence that we have reached that point. See Beyond Abstraction, The Law And Economics Of Copyright Scope And Doctrinal Efficiency

81 TULANE L. REV. 187 (2006) for my further thoughts on this topic.

If Apple wants to drop DRM, that might be some evidence that we have reached that point.

See Beyond Abstraction, The Law And Economics Of Copyright Scope And Doctrinal Efficiency

81 TULANE L. REV. 187 (2006) for my further thoughts on this topic.

Very nice post. You forgot one of the key assumptions of the neoclassical law and economic types. If an actor can’t ring every last penny of rents out of an innovation, they will not bother innovating. That is a testable proposition, not a postulate. Aside from the fact that the proposition may not be true empirically, the neoclassicists use it to justify all sorts of practices that have the demonstrated effect of transferring income from buyers (consumers) to sellers (producers) under the guise of enhancing “consumer welfare.”

The brief article A Simple Way to Skin the DRM Cat by Leonnardo Chiariglione, chair of the Moving Picture Experts Group (MPEG), responds to Steve Jobs comments on DRM. The article notes that one can manage files and then one can also protect files.

It seems the key point is that DRM as the music industry uses it fails to capture or serve user concerns. If he is correct, that view seems to undercut the market is working view. He also offers GSM as a DRM that created a huge industry. I am not sure it is apples to apples (no pun intended) but I think both sides may want look at the article to see the full idea.

Here are some quotes of note

“The way to go is to have a standard, straightforward, non arcane system like GSM that anybody can practically implement and anybody can use to enjoy the content that they legitimately purchase.

Let’s suppress the enthusiam and avoid an easy criticism: clearly a DRM standard is a different beast than most other standards. The ways people may want to apply DRM technologies for their needs are countless, starting from the management/protection varieties, continuing with the network/broadcast/unconnected varieties, supporting user privacy etc. It would be really hard to define a “one size fits all” DRM standard.”

“Twenty years ago the mobile telephony industry barely existed and 10 years ago it was still serving a small élite community. By cleverly designing a standard – GSM – that accounted for user concerns – DRM – the mobile telephony industry has become global, multiplied its size by orders of magnitude and is poised to become the first digital technology affecting each of the six billion humans on the Earth. While getting rich that industry has made billions of people happy. In contrast with this the music industry, because of the absence of a standard that accounted for users concerns – DRM – has shrunk in size, punished its stakeholders and made millions of people unhappy.”

(On a more philosophical note, Martha Nussbaum might suggest that emotional tones themselves disclose judgments of value, so a certain tinge of alarm or dismay is not merely gratuitous venting, but essential to conveying the urgency with which one views the situation.)

As for the points on the inconsistency of saying DRM is “a) utterly useless, (b) harmful to consumers, and (c) persistent,” I don’t see it. I think there are all sorts of situations where we get locked into arms races we can’t control. More to the point, a sheerly economic approach is indifferent to, say, a high margin equilibrium that generates $X profits, and a lower margin (but higher volume) one that generates the same. So one could easily imagine a persistent-but-harmful DRM that persists because its adopters would rather have the proverbial “bird in hand” than two in bush.

GMU 3L: Yes, and I’ve seen some good points to that effect on the IPCentral blog (on the “fallacy of zero marginal cost”). The question, though, is how to most efficiently to pay the “total cost” plus some reasonable profit. I think William Fisher’s “Promises to Keep” gives the best answer to that question.

http://www.tfisher.org/PTK.htm

Now Frank, I realize that you’re not too keen on economics, but if you subtract marginal cost from total cost, what are you left with? Hint — it’s not zero, nor is it nothing.

Moreover, the marginal cost, while negligible is not ZERO. Atoms have a negligible weight that is non-zero; objects comprised of atoms do not have a non-zero weight.

Costs need not come in monetary varieties either — even free copying is not costless. Time is money, and waiting for massive files to upload or download (and the opportunity cost of that bandwidth) must also be considered.

Despite what Frank thinks, even in the digital age of IP, the “free lunches” are not cost-free.

http://www.concurringopinions.com/archives/2006/07/dont_write_angr_1.html

I’m not sure I get why DRM is so aggravating from a legal standpoint. If as you say it adds little to the bottom line, and only annoys customers, well then it will fade out, won’t it? Restaurants that serve bad food are not a violation of consumer rights, even if you are pretty steamed for having shelled out the money to eat there. Unless, of course, there’s collusion, but that hypothesis would require collusion occurring simultaneously in multiple industries (online music, prerecorded video, computer software, games), and also it’s unclear what would be motivating the collusion–why would industry players collude to provide bad service in return for no benefit? What I suspect is driving the sense of alarm instead is that many are afraid DRM *won’t* fade out, because the benefits to content owners will wind up outweighing the costs in defecting consumers. But the combination of claims that DRM is (a) utterly useless, (b) harmful to consumers, and (c) persistent, strikes me as internally incoherent.

I also dismissed the utility of the notion of replacing consumer welfare with some fuzzy concepts of fairness on behalf of consumers in the antitrust context. If the folks that you quote in those clips are right that various conduct related to DRM actually does harms consumers, my position happily embraces condemning that conduct under the antitrust laws. My priors suggest to me that this is unlikely — and we clearly seem to disagree on this point. But surely even you would agree that consumer welfare metrics should matter to antitrust analysis if you were antitrust king for a day, no?

However, I made clear in my post that I was rejecting these non-economic judgments in the *antitrust* context. But your comment suggests that maybe it is worth repeating this point and getting on my way.

“[A]nother interesting side effect of losing DRM that hadn’t occurred to me yet: music could become cheaper if DRM goes away, since music fans won’t have to subsidize DRM schemes that will only grow more complicated and expensive over time. Overall, the trend seems to be away from paying people who are in the music business (including those who develop DRM) and, hopefully, towards paying people who are the music business.”

at

http://blog.wired.com/music/2007/02/no_drm_could_me.html

Fortunately, as Bruce Schneier notes, even DRM’s biggest proponents are beginning to understand that the systems do little, if anything, to add to their bottom line:

“What the entertainment companies are finally realizing is that DRM doesn’t work, and just annoys their customers. . . . It’s an arms race, and the defenders can’t possibly win.”

From that fiery hotbed of socialism, Forbes:

http://www.forbes.com/security/2007/02/10/microsoft-vista-drm-tech-security-cz_bs_0212vista.html

What you take as “burden shifting” (”If I can’t show concrete, immediate consumer harm arising out of iTunes incompatibility, I can’t criticize it”) is a statement about the shortcomings of your approach under the antitrust law.

The rest of your post strikes me as inapposite. I am happy to concede, contrary to the allegations in your post, that it is quite possible that Apple’s conduct harms consumers and thus should be condemned after an appropriate antitrust analysis. My prior is that this is unlikely; but that is a separate issue from claiming that I know the answer to be true and would like to eschew real analysis. If consumers are harmed, lets conduct an analysis appropriately and *THEN* condemn the conduct. That seems to be the right sequence, no?

As to the argument that consumer welfare is not the appropriate metric for antitrust analysis, I believe that ship has sailed. The point of the post, which appears in the title, is that substitution for non-consumer welfare elements appears to be nothing more than hand waving and imposing one’s own personal policy preference at the cost of consumers. I stand by that proposition.

P.S. The three tenors case did not find dominance, the case was about an agreement between firms not to compete on price for a 10 week period. This has very little to do w. dominance.