DRM didn't work for Apple, will it work in TV?

Back in 2007 when this was published in Marketing magazine, DRM was rapidly becoming an embarrassment for Apple and they dropped it soon after.  It seems that as Santayana said, "those who cannot remember the past are condemned to repeat it"; with Time Warner prevented from giving customers access via their iPads to channels they'd already paid to view.  They're at liberty to view in the kitchen or the living room.  Just not on an iPad in either room.  My guess is this won't last either, as customers just won't wear it.

Here’s the deal.  I’m going to sell you a CD that you really like, but there are a few conditions.

You can only lend it to your friends whilst they’re in your house, once you’re bored with it you can’t sell it on eBay or give it away.  You can only play it on the machine I sell you, not on any others (so forget buying a competitor’s machine next time, because your whole record collection will be useless).  Oh, and in a few years it won’t work anyway, because once you’ve changed machines a few times it won’t play any more.  And you’re going to change machines, because the batteries on the machine I sold you often stop working after 18 months.

I would be amazed if you didn’t tell me where to stick it.

But millions across the world have signed up to terms like this, as they download music from the iTunes website.

Digital Rights Management, or DRM, is the encoding given to music files that prevents or limits their being copied, and right now it’s causing a storm in the digital world.  

When the downloading of music started, it was mostly based on illegal filesharing – people allowing others to copy music they either owned or had themselves copied from others.  Services like Napster (now reinvented as a legal music service) and KaAaA enabled this to spread like wildfire, to the great concern of the music industry.

As they had when cassettes were launched, the music industry resisted the new technology, fearing its impact on sales.  

Then along came Apple with the iPod, and crucially the iTunes store.  The iPod used a different file format - .M4P – and for the first time, music companies could exercise real control over what happened to their music once it left their hands.  Within weeks, Apple were selling millions of legal downloads – over two billion by last month.

So with business seemingly booming in the download market, everything in the garden looks rosy.  Except it isn’t.

Apple are creating a timebomb – as users approach their fifth device, their music libraries are starting to die.  Consumers’ awareness is growing that they’re being taken for a ride, and there’s increasing resistance from consumer groups, with complaints from groups in France, Germany and the Netherlands.  They’re also the target now of an antitrust case in the US, alleging that the lack of interoperability that Apple forces upon its users is restraining competition.

On top of all that, business isn’t so good either.  Despite soaring sales of digital music players, downloads still represent only 10% of music sales.  And according to a Forrester analysis, iTunes revenues have fallen substantially during 2006.

Finally, the DRM just doesn’t work.  Every iTunes exclusive track has been available for illegal filesharing within minutes of release, and every copy of iTunes allows users to circumvent the restrictions by burning the music back to CD.  It’s beginning to look like DRM is just an inconvenience for honest consumers, and no more than an elaborate joke for the technically capable.

So in the light of this the recent call by Steve Jobs, CEO of Apple, for music companies to drop their insistence on DRM is perhaps less surprising.  

Many mobile phones now come equipped with an .mp3 player, as consumers prefer to carry just one device – and that’s hitting iPod sales.  At the same time, content owners are beginning to relax their attitudes to DRM.  Yahoo Music struck a deal with Sony/BMG to let it sell an unprotected .mp3 version of a Jessica Simpson track as a test, and after EMI-controlled Norah Jones followed suit, EMI have announced that they’re dropping DRM from all future CDs. 

As others abandon DRM, Apple know well that if they don’t put in some nimble footwork, the competition authorities are going to start seeing them as the cheerleader for restrictive trade – and with years of defining themselves as ‘not Microsoft’, that’s just not a place the Apple brand wants to be in. 

Innovation is about survival; not just competitive advantage

First published in Marketing magazine in 2007, what's amazing is how the pace of chance hasn't let up one bit since I wrote this.  If anything, it's faster; and the capacity to innovate even more vital than it was back then.

In 1476, William Caxton established the first printing press in England.  It took him a year to get his first book out and whilst history doesn’t record whether it was a smash, by 1590, towards the end of the reign of Elizabeth I, over 250 books were being published every year.  This was the white heat of technology, and it ignited an explosion of knowledge and political discourse across Europe that changed the course of that civilisation. 

In 1993, the first graphical web browser was launched.  Later that year, the first commercial website for the Digital Equipment Corp was launched, and within just seven years, there were 17.5 million websites.  Fast-forward a further five years through the dotcom crash, and there were 65 million websites.

When printing came to Britain, the change it wrought was far-reaching, but it was gradual.  But now we are experiencing change that’s as far-reaching, but immeasurably faster.  The internet has caused markets to be created, subverted, destroyed.  It has introduced new competitors, new business models and new channels to market.  The ability it gives people to communicate and share information has caused an unprecedented surge in creativity and innovation in businesses, as people rush to take advantage of new opportunities and others scurry to defend positions.

Ten years ago, we typically looked at sources of sustainable competitive advantage in terms of processes and functional components of the business mix – the ability to make widgets cheaper because of a patent, the control of particular channels to market.

So now we need to look deeper within organisations to see where their winning characteristics lie.  In this new era of hypercompetition, companies increasingly derive advantages from the skills they deploy – and in a period of intense change, the most important is the ability to innovate.

This trend had already started some years before, spurred by globalisation, consumer choice and deregulation.  But the internet has accelerated it and multiplied its effects.

The capacity to evolve rapidly to thrive in new market environments, to respond to new consumer demand and to exploit new models.  This is what sets the winners apart – Google who adopted a charging model from a competitor but added it to their superior search product, eBay who exploited the power of online community by adding it to an auction site, Amazon who invented the affiliate market – beating wealthier competitors by creating huge distribution at minimal capital cost.

These companies demonstrated an ability to innovate, and each prizes its ability to do so over time, devoting significant resource to the continuous development of new products. 

But in the digital age, innovation isn’t something that just happens at this macro, corporate level.  Testing of new techniques, approaches and even just media selections should be part of business as usual at every level.

In the media and marketing world, this isn’t just a pursuit of ‘media firsts’ – innovation for its own sake.  The brutal reality is that chasing too single-mindedly the lowest cost conversions means you paint yourself into a corner, with no options in development when the market is disrupted by a new dynamic.

Your competitors, the media environment, individual publishers and your audience change all the time, and what failed to work three months ago might work today.  The successful online campaign continuously tests new approaches, because they offer the potential to deliver an edge.

And ultimately that’s what we all want.  An edge.  A competitive advantage – we know something our competitors don’t – something we can exploit for a while until they catch up, at which point we’ll already be off doing something else.

There’s a natural tendency to do what worked before, and that’s exactly what many agencies and advertisers continue to do.  But trying new things isn’t just a strategy for competitive advantage today – it’s a strategy for survival.

TV moves to the net

A version of this was first published in Marketing in 2007; this piece looked at the future of TV, seeing Joost as a seminal moment in TV's move to the net.  It was (even though in the end it didn't happen for Joost), and we're now seeing online TV move to the big screen, closing the circle.

Agencies aren't investing in digital yet, but it's clients' fault

First published in Marketing in 2007, this piece looked at how agencies were responding to the growth of digital.  The City certainly took the view that they weren't.  The piece points to clients; ultimately it's demand from them that will spur agencies to action, and in 2010 we're still seeing a skill shortage on the client side resulting in investment shortage on the agencies' side.

Digital: just another media channel?

Wow... I was a bit cross when I wrote this.  But it does seem like we still suffer from the same complacency; just recently another media agency person was quoted saying the 'natural home' for digital was in the media agency.  With this sort of self-satisfied smugness, no wonder we were able to take hundreds of millions of pounds of business away from the traditional agencies over the 11 years we ran i-level.