From September 29 to October 1 2004 the music came to Berlin: “Popkomm”, an international music fair and congress, which had formerly taken place in Cologne, opened its doors in Berlin to 663 exhibitors and more than 1.600 participating companies from 41 countries. For 16 years now, Popkomm has been an important meeting point for the music industry. In previous years, the ailing music industry had used the Popkomm to whine about decreasing music sales and to blame Internet piracy for its bad health.

This year, Gerd Gebhard, chairman of the German Phonographic Association, announced that the worst is over for the music industry: sales of music DVDs continue to grow, sales of online music services are on the rise, sales of ring tones are mounting, and overall music sales are decreasing at a slower pace than over the last three years (Gebhard 2004). And what about piracy? Which role did the discussion about copyright infringements, DRM and the consumers’ acceptance of DRM play at this year’s Popkomm?

DRM was an important topic in several ways: DRM was present wherever the digitisation of music was at the agenda – and this was very often the case in the booths of the exhibition hall as well as on the congress. In addition, two of the 42 panels of the Popkomm congress explicitly dealt with DRM and consumer acceptance of DRM. And last but not least, the reform of German copyright law, and with it “the right to private copying”, was intensely discussed during the Popkomm congress.

DRM acceptance: “No consumer wants a DRM”
Keynote speaker of the congress was Eddie Cue, Apple’s Vice President Applications. He claimed that iTunes is so successful, because it was designed from a consumer’s perspective. He regards seamless integration and good user experience as the key reasons for iTunes’ success, because they allow iTunes to effectively compete with Internet piracy. “iTunes offers better user experience than Kazaa” said Cue.

According to Cue, the consumer’s perspective on DRM is very simple: “No consumer wants a DRM,” he stated. “Most people are honest, if you give them a great product”. Apple’s official approach to the problem of digital piracy is to give consumers good products they are willing to buy. However, as we all know, the result is not that Apple doesn’t make use of DRM systems. Rather, Apple doesn’t talk about DRM as much as others. They call it “Personal User Rights”. And, as Alex Luke, Director of Music Programming and Label Relations at Apple, added, “consumers shouldn’t recognize that a DRM system is working in the background”.

DRM standards: private party or open house?
On the panel “DRM: private party or open house? Proprietary systems vs. open standards” the importance of DRM standardisation was discussed. Pierre Emmanuel Struyven, Senior Vice President at Universal Mobile International, stressed that the lack of standardisation in DRM systems implies higher costs for content distributors, because it makes encoding in many different formats necessary. Opinions differed, though, about how to achieve better standardisation. While Willms Buhse, Vice Chair of the Open Mobile Alliance, sees open DRM standards as the ways and also as an absolute necessity to enable innovative content services such as superdistribution, Cyrill Glockner, Senior Business Manager at Microsoft, believes that proprietary systems should form the basis of DRM systems. In his ideal world, different proprietary DRM systems should be able to talk to each other to enable interoperability and ease of use for consumers.

The issue of using DRM for CRM (Customer Relationship Management) was raised from the audience. It was stated that for the first time, DRM enables the music industry to get to know their customers and their usage behaviour in detail, without spending significant sums on market research. However, it was pointed out that this could raise significant privacy concerns for consumers. Therefore, DRM issues should strictly be separated from CRM issues to not further weaken customer acceptance of DRM.

DRM acceptance: Control phobia vs. megalomania?
The panel “Hot potato rights management – control phobia vs. megalomania?” explicitly discussed how far consumers accept DRM systems. It became clear that DRM needs to impose as few restrictions as possible in order to be accepted by consumers. However, simple watermarking techniques, which allow the tracking of content files back to the original user, cannot replace far-reaching DRM solutions the panellists from Microsoft, Musicnet and Apple agreed. Most large content providers would not accept such solutions to protect their content. Only some smaller, independent labels would be willing to rely solely on watermarking or fingerprinting for their digital music offerings.

All panellists agreed, though, that DRM is not only about copy protection, encryption and usage tracking. Rather DRM should be used as a new marketing tool, to offer new features, new products, and invent new ways to offer content.

A basket full of questions: The new copyright law
On the panel „A basket full of questions: The new copyright law – politics and music biz in harmony?” politicians from all larger political parties in Germany discussed the recently published draft of the second basket of the German copyright law. Special focus was given to the question of private copying. The new law intends to allow private copying, given that copies are not made from illegal sources and that the copied content is not copy-protected by technology.

The representatives of the SPD (Social Democratic Party), Dirk Manzewski, and of the FDP (Free Democratic Party), Hans-Joachim Otto, supported the recent draft and the private copying exemption. The representative of the Green party, Jerzy Montag, even regarded private copying as a consumers’ “right” that needs to be protected against technical limitations. On the contrary, the representative of the CDU (Christian Democratic Party), Günter Krings, stated that consumers do not have a right to private copying and that the law needs further modifications in order to fully respect the interests of copyright holders. In his view, there even needs to be an obligation for ISPs to make personal data of clients accessible to copyright holders, to enable prosecution of copyright infringements under civil law.

However, Germany’s economics minister, Wolfgang Clement already stated in his opening speech that meeting their clients in the courtroom would not really help the recording industry. Rather the industry has to understand that new technologies are changing the usage behaviour of consumers and has to pick up consumers from there. Accordingly, copyright law has to respect not only the interests of the music industry, but also those of consumers and technology manufacturers (Bundesministerium für Arbeit und Wirtschaft 2004).

Bottom line
Popkomm showed once again: The music business is not only about music anymore. In the digital world, technology is playing an ever increasing role for the creative und cultural “industries”. Accordingly, technology providers were more present at this year’s music fair than in previous years. Downloading platforms, music search engines, ringtone providers and particularly various mobile technology providers did not only have a strong presence in the exhibition hall. They also dominated the discussions and panels of the Popkomm congress.

In parallel to this trend towards an ever increasing role of technology, a rather pragmatic view of DRM and content protection could be found in presentations and discussions. This view, which puts the consumers and their wants back into focus, was in striking contrast to the strongly expressed positions characterising many previous discussions about DRM. It seems that many technology and music firms have accepted that consumers want to buy good, integrated music products and services that respect new usage habits resulting from the digitisation of music. And only if technology providers and the music industry work together to fulfil these expectations, will the future of the music industry look bright again.

As Germany’s economics minister Wolfgang Clement stated: "I ask the music industry to win back music lovers, by offering an attractive and broad range of legal products to them!”


About the author: Nicole Dufft is a Senior Analyst at Berlecon Research. She has been analysing a variety of ICT topics ranging from mobile computing and application service providing to DRM. Currently, she works in the field "digital consumer". She is a member of the INDICARE project team.

Status: first posted 26/10/04; included in INDICARE Monitor Vol. 1, No 5, 29 October 2004; licensed under Creative Commons