WPIE on digital content
This summer, the OECD’s Working Party on the Information Economy (WPIE) released separate reports on digital content in four areas: scientific publishing, music, online computer games and mobile content. They focus on new business models for digital content, changing value chains, growth drivers and barriers, changing market structures and their impact on economic growth and employment (cf. OECD website).

Focus on DRM
The analyses also cover copyright infringement and DRM issues. As could be expected, the reports have been received with mixed emotions. Free market advocates agree that they "do not underestimate the harms of copyright infringement; indeed, they urge the use of so-called 'digital rights management' technology to try to limit piracy. Yet the report cautions that these systems must not crush interoperability among different technologies. Moreover, the OECD worries that technologies may undermine ‘fair use’ provisions for lawfully excerpting portions of a work" (The Economist 2005).

Content providers follow a deviant agenda. Consequently, Adrian Strain, spokesperson for the International Federation of the Phonographic Industry (IFPI), objects: "The report does not recognize the vast proportion of the use of P2P services that is infringing copyright. It fails to acknowledge the extent of the damage that this does to the legitimate industry and oversimplifies the issues surrounding DRM in the development of the online music sector" (Gain 2005).

With one side claiming the reports to be fairly balanced and the other accusing it of oversimplification, I want to take a closer look and discuss what the OECD has to say about DRM.

Scientific publishing
The report describes the industry structure and value chains as well as existing and new business models based on online access. It concludes with challenges and policy considerations. Digital rights management is mentioned only once throughout its 106 pages. Several surveys cited vaguely touch the fields of copyright and access (Accenture 2001, Kraemer et. al. 2002a, E-Business Watch 2002) asking about security concerns, lack of a transparent regulatory framework, inadequate legal protection for purchasers, etc.

However, more than 70 percent of enterprises responding to one survey stated that "goods and services do not lend themselves to selling online" (E-Business Watch 2002). "Given the potential for digital delivery, it is perhaps surprising that unsuitability of goods for online sales should be such a widely cited barrier for media and publishing firms. (…) It may also reflect security and copyright concerns" (p. 50).

The report then introduces the concept of open access publishing. Authors following this concept "grant to all users the free, irrevocable, worldwide, perpetual right of access to copy, use, distribute, transmit and display the work publicly and to make and distribute derivative works, in any digital medium for any responsible purpose" (Bethesda Statement of Open Access Publishing 2003). Articles and papers are usually based on publicly funded research. Accordingly, funding agencies and institutions are more and more adopting the open access policy. Thereby, they are stressing the importance of knowledge creation and distribution and the integration of all the actors and activities within innovative systems. According to the report, DRM does not lend itself to the idea of open access publishing, as it is primarily meant to limit users’ rights in terms of openness and interoperability.

These findings are very much in sync with, for example, the interview INDICARE conducted with Arnoud de Kemp, who used to be responsible for Springer’s digital publishing activities (Springer is a major scientific publisher). According to de Kemp, scientific publishers rely on watermarking at the most. Other, more restrictive approaches would contradict the nature of scientific discourse (de Kemp 2005).

The report starts with a description of the music industry. It also traces changing value chains and business models. A special focus is distribution via P2P networks, including commercial P2P. Also, the impact of online music on artists and consumers is evaluated. The report closes with challenges and policy considerations.

The OECD’s position on DRM in the music industry is quite balanced: "Despite their shortcomings, they [DRMs] may be an essential tool to protect intellectual property rights" (p. 94). They supposedly help to tailor content to the consumers’ needs and preferences, leading to increased consumer choice and satisfaction. But two of DRM’s shortcomings are also addressed: (i) the technology seems to have failed to prevent unauthorised uses, and (ii) increasing use of DRM has raised concern of potentially limiting usage rights.

However, the authors grant that "as opposed to some CD-Rom copy-protection technologies, so far DRMs have rarely been known to prevent legitimate uses of content and services. Still, developers of DRM, players in the market employing DRM, and users of DRM-protected material should be equally concerned to ensure appropriate usage rights, transparency, privacy, as well as ease and reliability of access" (p. 94). The analysis concludes that "one of the first aims should be openness and interoperability" (p. 95).

I agree that openness and interoperability are main issues to be resolved soon. However, I disagree that the restrictions DRM imposes on legitimately downloaded songs are less severe than in the CD-environment. Take for example music downloaded from iTunes – you cannot use them with portable devices supported by Microsoft’s DRM and vice versa. The customer should be free to consume music on the device of his choice.

Online computer games
The report to a large degree follows the structure already described for scientific publishing and music. Beyond that, it identifies drivers of the online game industry (technology, demographic factors, venture capital, spillovers from computer games), as well as barriers to its development (broadband coverage and latency, market factors, industry and financial conditions).

Given that musical content mostly is the focus of attention when it comes to digital entertainment, I appreciate the OECD’s effort to devote a separate report to computer games. However, DRM is only mentioned once in the 68-page report. The authors name copyright and piracy as one barrier to the development of the computer game industry, "as is the case for all software-related and digital content-based industries" (p. 43).

According to the report, there are some things that make the gaming industry distinct from other digital products such as movies or music: (i) games are not static, with evolving game conditions and players’ positions, with two-thirds of programming remaining on the suppliers’ servers, leading to (ii) server-based piracy (unauthorised access or copying of content located on servers) as an emerging challenge.

Finally, the question arises of how to handle items that gamers can develop themselves, leading to the issue of user production rights. This certainly deserves debate, given the outcome of several cases where digital items have been sold without the original owner’s authorisation (BBC 2005; see also Vogeley 2005a and 2005b for a more detailed discussion on DRM and online gaming).

Mobile content
The report on mobile content has a more technological angle and stresses the need for a political framework. It also describes value chains, business models and the general state of mobile content (music, games, video, information, other).

WPIE is right in singling out mobile distribution, because "the mobile environment does pose some additional challenges" (p. 55). On the technical side, the authors identify the Open Mobile Alliance’s DRM, Microsoft’s Janus DRM and Apple’s FairPlay as the relevant regimes.

Asserting that it’s the industry’s obligation to provide marketable solutions, WPIE also calls for policy makers to take action, following the OECD Council Recommendation on Broadband Development: "Regulatory frameworks that balance the interests of suppliers and users, in areas such as the protection of intellectual property rights, and digital right management without disadvantaging innovative e-business models" (OECD 2004). (The European Commission is also represented in the OECD’s Council, its decision-making body.)

In particular, this means that national IP laws must be harmonised and anti-piracy enforcements be coordinated, which has already been recognised by the European Commission. On the business side, key issues include interoperability of DRM technologies and consumer acceptance.

The authors conclude that "IP, DRM and technical standards are essential to continued growth of mobile content. Industry and government-facilitated policies to encourage consensus and development in these areas must also take into account the mobile environment" (p. 61).

Again, I believe that the authors might be a bit too optimistic in assessing the industry’s basic willingness to strive for interoperability. Even given pan-European legislative initiatives, DRM-interoperability might still stand in the way of the individual stakeholder’s profit maximisation goals. The industry as a whole could so far not agree on a common mobile DRM standard. This is underlined by their inability to come to terms with MPEG LA, the company bundling patents relevant for the implementation of OMA DRM (MPEG LA 2005, see also the GSM Association’s response to MPEG LA’s revision and Faultline 2005 for further comment).

Bottom line
While the reports taken as a whole are very fair and balanced, taking into consideration the interests of all stakeholders, I disagree on some details concerning DRM, namely in the fields of music downloads and mobile content.

I largely agree with WPIE’s assessment of the situation in online gaming and scientific publishing, especially when it comes to open access publishing. Also, I can to some extent relate to both commentators cited in the beginning of the article: the reports rightly stress the overriding importance of DRM interoperability. At the same time and as the authors indirectly admit, DRM-related issues are presented in a slightly oversimplified way: "In sum, the social and economic dimension of DRMs may necessitate further study" (Music, p. 13).


About the author: After having graduated from University of Mannheim (Business Administration), Philipp Bohn has joined Berlecon Research as Junior Analyst. He is a member of the INDICARE-team. Contact: pb@berlecon.de

Status: first posted 21/10/05; licensed under Creative Commons
URL: http://www.indicare.org/tiki-read_article.php?articleId=149