Mobile music is hot. We figured that out pretty fast, when we started organising the first INDICARE workshop on the topic of „Business Models for Mobile Music and DRM“. The workshop took place in Berlin on September 30, 2004 at the same time as the Popkomm music fair (Dufft 2004). Almost everybody we approached immediately agreed to come and to present his or her ideas on this topic. In the end around 70 experts from industry, academia and policy spent a whole day packed with presentations and discussions in the stimulating atmosphere of an 18th century palais in the centre of Berlin. Fitting the workshop topic, the last fierce DRM discussions ended around 4 o’clock in the morning in a well-known Berlin music club.

We have chosen this workshop topic, because mobile music is a more limited field than DRM in general. This enabled us to discuss very specific DRM and business model issues without running into the danger of simply exchanging general positions. What we wanted to know were basically two things: What is the role of business models and DRM for the development of a mobile music market? And second, what does the industry know about consumer wants and needs and how do the players involved treat these?

The workshop was organized in four sections focusing on “mobile music standards and DRM”, “content protection beyond technology”, “mobile operator strategies”, as well as “chances and challenges for the music industry”. The following selection of issues raised and insights gained is a rather personal “best-of” list. Depending on personal background and professional role, each participant took home a different set of insights.

Mobile Music Standards and DRM
The first block of presentations discussed the role of standards for the development of the mobile music market. As in most emerging technology markets, several open and proprietary standards compete in the field of mobile music distribution. Things are even more complicated here than in other markets because different technologies overlap: there are competing operating systems for mobile devices, competing standards for DRM systems, and even competing standards for such simple music formats as ringtones. This situation was generally seen as an obstacle to market development. It raises costs – somebody has to transform each piece of digital music into all the different formats necessary – and it slows down investment – nobody wants to invest in a DRM system that might not survive the standards competition.

Although it is well understood that this current situation is not satisfactory, it might not improve soon. Quite on the contrary, it was pointed out, there might be further trouble ahead: There exists the threat of lengthy intellectual property disputes involving the rights expression language chosen by the Open Mobile Alliance, since the company ContentGuard claims to have rather broad patents on rights expression languages in general. As one participant put it, this might be “a bomb waiting for an explosion”.

If the industry is unable to solve these issues, one discussant pointed out, the outcome might be that consumers decide to stick with MP3 and other unprotected formats for digital music. As mobile devices become more powerful, and as it becomes easier to transfer music from a PC onto a mobile phone or between mobile phones, consumers are able to obtain many of the benefits of mobile music consumption without the help of mobile operators. While there was much debate on this conclusion, it was not generally rejected as being unrealistic.

Content protection beyond technology
The second block of presentations dealt with legal and economic aspects of content protection. One very basic question turned up at the workshop: Where should the line between illegal and legal activities be drawn and who should be able to draw it? Obviously, there are different approaches to answer this question. One approach is to discuss the issues in principle. For example, one position, often heard in the public discussion on DRM and also presented at the workshop, is that copyright owners should be able to draw this line wherever they want to draw it. After all, so the argument, intellectual property should be treated just like any other form of property. There do exist a variety of equally fundamental arguments against this position, and these are exchanged intensively in the public discussion on DRM. However, in the end it is very difficult to reconcile the opposing world views behind the different positions.

Luckily, much of the industry already seems to be beyond this fundamental discussion. At least this was an impression from the INDICARE workshop as well as from discussions on the Popkomm, where a pragmatic view prevailed. This pragmatic view is to a large extent a business view: On the one hand, there has to be some form of protection, otherwise there is no viable business model, but on the other hand the protection does not have to be perfect for a business model to be viable. One presenter pointed out Apple’s Fairplay DRM as a good example for such a design: The line between disabled and allowed activities is the line between scalable and non-scalable copying. Copying that does not scale, such as making copies on a limited number of machines or burning playlists to a limited number of CD-ROMs is OK, but sharing files with an unlimited number of other users is not.

This pragmatic view goes along with a blurring of the lines between commercial distribution of digital music and P2P networks. Some presentations at the workshop showed elements of P2P networks moving into commercial music distribution. For example, a restricted form of music sharing among peers forms the basis for the concept of superdistribution, where mobile phone users can transfer music files from phone to phone, can listen to them a few times but then have to purchase the right for unlimited usage. Another P2P element in commercial services can be personal playlists or a restricted access to the digital music collected by friends. Such P2P elements help users to discover new artists and may be a rather efficient recommender system. In such services DRM systems are understood as enablers of new service offers, not any more as “Digital Restriction Management”.

Mobile Operator Strategies
In the third block of the workshop, mobile operators from Europe presented their mobile music strategies. Of all industry players, mobile operators are probably those mostly concerned with consumer preferences, although more in the sense of Hayek’s “competition as a discovery procedure”. Since they have spent billions on 3G licenses, mobile operators are under strong pressure to offer additional valuable services to consumers that provide additional revenue streams. Mobile music is seen as one of these.

Consequently, operators have spent quite some effort on understanding the wants and needs of consumers to get it right this time – after a disappointing success record of WAP, MMS and a variety of mobile content ventures. One could probably say that mobile operators understand digital content distribution much better than they did a couple of years ago.

One belief coming from this research and shared by most workshop participants is the necessity to enable transferability of digital music. It is generally assumed that buyers of mobile music want music to be transferable between different devices, not only mobile devices (including future generations), but also including home and car stereos, for example. Obviously this has significant implications for DRM systems: It requires that DRM systems work across different types of devices and be in some way upward compatible. Establishing such systems will be difficult and will also pose a variety of challenges for competition policy.

Chances and challenges for the music industry
The final session discussed mobile music from the point of view of the music industry. The presentations showed that mobile music is much more than simply selling digital music files.

One presenter showed that mobile music can also be used as an additional marketing instrument. For example, by making available new songs as mobile music downloads right before the release of new records, mobile music can help to create additional buzz and push songs quicker and higher into the charts, which in turn leads to additional purchases.

Another presenter showed that the mobile phone can also be used for streaming music. Such streaming services pose fewer problems in terms of copy protection, and they might be an interesting alternative to mobile music downloads. This newly launched service also coincided with a variety of new streaming services announced at the Popkomm music fair. It may well be the case that the success of iTunes and everybody’s familiarity with downloading digital content have made people to overlook the opportunities of streaming music onto a mobile device.

Bottom line
Overall, my general impression of the workshop discussions was that of an industry that tries hard to understand what type of mobile music products and services consumers want. While the success is far from guaranteed, business models and understanding of consumer behaviour seem to be much better than in the mobile euphoria era around the year 2000.

However, in addition to understanding consumers’ demand for mobile music, there do exist a variety of challenges involving DRM issues as well as consumer acceptance of DRM. Missing standards, intellectual property issues and the task of creating device-independent DRM systems are only some of these challenges. What this workshop showed, however, was that most of these DRM issues can be analysed and discussed in a pragmatic way without too much ideological ballast. This is in stark contrast to the fundamentalism often found in other public DRM discussions.

My conclusion would be that workshops like this one, where participants from an industry can meet on neutral ground to exchange their views and to learn from each other, are a good tool to come to a common understanding about crucial DRM-related issues. It probably helped much that the topic of the workshop was rather specific.

About this issue
As the INIDICARE workshop has shown, digital music distribution is intensely discussed by the representatives of industry, policy and academia alike. Therefore the INDICARE Monitor Vol 1, No 5 is dedicated to digital music as an important issue within the DRM debate. In order to raise 'hot discussions' as well, the articles are dealing with digital music distribution not only scientifically but also historically and personally.

Starting with an article on “Net Music the Danish way”, where Kurt Westh Nielsen from the magazine Ingeniøren describes the choice of DRM protection the Danish project Netmusik made as well as the implications this choice had for users. The Danish case of Net Music shows well the different interests of players within the process of implementing DRM. Marc Fetscherin from UC Berkeley and Cristina Vlietstra from the University of Bern present the results from an empirical analysis on the relationship between different usage rights and prices for online music.

Based on personal experiences with digital music Ulrich Riehm, ITAS, describes his attempts to find the music of Greg Koch online. More optimistic are in contrary the results of the Popcomm music fair in Berlin. Nicole Dufft, Berlecon, who organized the first INDICARE workshop, also spent quite some time on the Popkomm and summarizes her insights.

Natali Helberger from the University of Amsterdam, IViR makes one thing clear about the “right” to make private copies of digital products: It’s not a right, silly! Michael Rader, ITAS, continues this topic and asks “What is ever a right?”. He has examined record labels from the last decades for information about the rights granted to consumers.

Last but not least Frederick J. Friend, consultant for the Joint Information Systems Committee (JISC) and OSI (Open Society Institute), UK, comes to the interesting conclusion that open access publication, e.g. freely available academic content on the web, needs DRM to protect the interests of the authors. Related to this subject, Ulrich Riehm, ITAS, reviews the DRM study by Intrallect on behalf of the JISC, which analyses DRM needs of the educational system in the UK.


About the author: Thorsten Wichmann is founder and managing director of Berlecon Research and member of the INDICARE project team. He has been working on a variety of IT and mobile topics during the recent years. Contact: +49 30 2852960,

Status: first published in INDICARE Monitor Vol. 1, No 5, 29 October 2004; licensed under Creative Commons