DIGITAL CONTENT BUSINESS MODELS
In Part 1 of this article, I discuss an overview of what Digital Rights Management (DRM) is, some basic examples of DRM and the arguments from copyright owners and consumers on this controversial technology.
In Part 2, I will outline 5 business models that have been proposed by copyright scholars to utilize DRM technology to offer digital content online. Of course these are not the only available models, but I find these models either prevalent or at least thought-provoking.
These models vary depending on how they deal with three aspects of digital content: access, copying and distribution.
The first two are “extremist” models – the Extreme User Model and the Extreme Owner Model.
EXTREME USER MODEL
The Extreme User Model would purge copyright from the internet altogether, permit all access, copying and distribution and only use DRM to identify authors for “tip jar” purposes.
EXTREME OWNER MODEL
The Extreme Owner Model has two potential forms – one where all digital works (including those in the public domain) are strictly protected through DRM; and one where only copyrighted digital works are strictly protected against access, copying and distribution while public domain works are protected against copying and distribution but not against access.
STATUTORY LICENSE MODEL
The third model is the Statutory License Model, which is based in copyright. There are two major forms of this model – one propounded by Professor Netanel of UCLA Law School (Non-Commercial Use Levy) and one by Professor Fisher of Harvard Law School (Tax and Royalty System).
NON-COMMERCIAL USE LEVY
Netanel’s Non-Commercial Use Levy thesis is that copyright owners should allow the non-commercial copying, distribution, performance and adaptation of digital works in exchange for compensation, in the form of a levy paid by entities involved in providing digital content to users.
These would include ISPs, P2P software and services providers, computer hardware and consumer electronics manufacturers, media storage companies and others. The levy rate would be determined by negotiations and possibly arbitration, and revenues would be distributed proportionately among the copyright holders.
TAX & ROYALTY SYSTEM
Fisher’s Tax and Royalty System is similar to Netanel’s levy, except instead of providers and manufacturers paying a levy, consumers pay a tax when they purchase digital content or related services.
Both Netanel’s levy model and Fisher’s tax model involve setting rates and using DRM to collect fees and allocate revenue. However, the levy model would permit adaptations of digital works in addition to copying and distributing, while the tax model would only permit copying and distributing.
CONTROL & DISCRETION MODEL
The fourth model is the Control & Discretion (C&D) Model, which is also copyright-based but gives owners more power over access to and use of their content than the statutory license model. There are 5 types, which vary depending on the level of copyright owner control and the necessary DRM, and unlike the other theories already mentioned, each type has been or is currently being used in the marketplace.
C&D TYPE 1 (PASSWORDS)
Online newspapers are typical of the C&D Type 1, where DRM (a password) is used to prevent unauthorized access but does not control subsequent copying or distribution. This is the simplest of the C&D Model types.
C&D TYPE 2 (ENCRYPTION + DECRYPTION SOFTWARE)
C&D Type 2 uses DRM (encryption for which decryption software is
required) to control access, copying and distribution of digital
content. Adobe eBook and Windows Media content are examples of this,
and these companies provide and control the software used to decrypt.
C&D TYPE 3 (ENCRYPTION + DECRYPTION HARDWARE)
In C&D Type 3, DRM (encryption for which decryption equipment is
required) controls access but not copying or distribution, as seen in
cable television boxes. Here, any special design features necessitated
by the industry are added voluntarily by the manufacturer, and users
own or rent the equipment.
C&D TYPE 4 (ENCRYPTION + DECRYPTION HARDWARE)
C&D Type 4 DRM (encryption for which decryption equipment is required) controls access, copying and distribution. The failed technologies of CSS with DVDs and SDMI with CDs are representatives of this type. Again, design features are added voluntarily and users own the equipment.
C&D TYPE 5 (WATERMARKS)
Finally, C&D Type 5 DRM (watermarks, not encryption) controls access, copying and distribution through instructions imbedded in the digital content and communicated to the playing devices.
Examples are the Serial Content Management System (SCMS) and the controversial Broadcast Flag. Users are not able (or if able – not authorized) to edit the watermarks – that power ultimately resides with the copyright owner. Also, certain design features would be mandatory in the industry to foster interoperability between digital content and consumer electronics devices.
ISP AS DIGITAL RETAILER MODEL
The fifth model is the ISP as Digital Retailer Model propounded by Professor Sobel of Southwestern Law School. Acccording to this model, ISPs such as Comcast, AOL, SBC, Earthlink and NetZero could themselves become digital retailers. An ISP would license the use of digital content at wholesale prices set by copyright owners and would then sell those works to their subscribers at retail prices the ISPs set. Sobel bases his theory on the notion that ISPs are already handling the flow of digital content across their servers; by tracking which content goes to which subscriber, they would be able to charge for the delivery and redistribution of that content.
Below is a summarized list of the 5 discussed digital content business models, and how they each deal with access, copying and distribution of digital content.
EXTREME USER MODEL
Access: absolute access
Copying: absolute copying
Distribution: absolute distribution
EXTREME OWNER MODEL
- All Works (Copyrighted + Public Domain)
Access: absolutely no access
Copying: absolutely no access
Distribution: absolutely no access
- Copyrighted Works Only
Access: absolutely no access for © works; absolute access for PD works
Copying: absolutely no access
Distribution: absolutely no access
STATUTORY LICENSE MODEL
- Non-Commercial Use Levy
Access: yes (subsidized by industry levy)
Copying: yes (subsidized by industry levy)
Distribution: yes (subsidized by industry levy)
- Tax & Royalty System
Access: yes (subsidized by consumer tax)
Copying: yes (subsidized by consumer tax)
Distribution: yes (subsidized by consumer tax)
CONTROL & DISCRETION MODEL
- Type 1 (password)
Access: not without password
Copying: yes (subsequent to access)
Distribution: yes (subsequent to access)
- Type 2 (encryption + decryption software)
Access: not without decryption software
Copying: not without decryption software
Distribution: not without decryption software
- Type 3 (encryption + decryption hardware)
Access: not without decryption hardware
Copying: yes (subsequent to access)
Distribution: yes (subsequent to access)
- Type 4 (encryption + decryption hardware)
Access: not without decryption hardware
Copying: not without decryption hardware
Distribution: not without decryption hardware
- Type 5 (watermarks)
Access: yes (but traceable)
Copying: yes (but traceable)
Distribution: yes (but traceable)
ISP AS DIGITAL RETAILER MODEL
Access: yes (charged to subscriber)
Copying: yes (if done without re-distribution)
Distribution: yes (charged to subscriber)
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