Australia: When Copy Controls Upset Customers, It´s Time For New Tune

When politicians start describing acts of common sense as "groundbreaking" then you must wonder what you’ve been missing out on in the past.

Federal Attorney-General, Phillip Ruddock’s recent round of amendments to Australia’s copyright legislation risk leaving consumers further frustrated.

On the plus side, citizens can now avoid penalties for enjoying music on their mobile music devices. However, given the way the legislation has been drafted, it is arguable whether the new section 109A ‘format shifting’ exception will in fact solve the original problem.

On the down side, parts of Minister Ruddock’s brave new copyright world may already be redundant, if reports from the music industry’s major annual conference in Cannes this week are to be believed.

The issue? Digital rights management, or DRM.

Called ‘technological protection measures’ in the legislation, DRM is generally understood as technology that comes with digital content, designed – according to entertainment companies – to prevent copyright infringement. And under the Copyright Amendment Act 2006, Australia now has substantially more of it.

But copyright protection can be a smokescreen for more profitable pursuits like controlling markets and consumers.

That hasn’t gone unnoticed by the High Court which in 2005 unanimously declared a DRM technology to have unfairly limited consumers’ rights.

Since then the House of Representatives Legal and Constitutional Affairs Committee and Britain’s Gowers Review have come to similar conclusions about DRM’s anti-competitive tendencies.

The bottom line, and one thing no amount of copyright legislation can fix, is that in embryonic digital entertainment markets, DRM is bad news.

Bombarded with ads promoting seamless interoperability, portability and compatibility of modern technology, consumers get understandably frustrated when DRM interferes with the capabilities and lawful use of technology.

While bamboozling politicians about DRM’s imperative is one thing, convincing those in the real world who bear its burden is proving harder.

Sensing a growing consumer backlash against DRM, the entertainment industry is changing its tune.

"I think that the marketing side of our company and the copyright-protection side have contradictory impulses," chairman of Universal Pictures, Marc Shmuger, said in reference to disruptive online technologies like YouTube.

Paul Birch of the International Federation of Phonographic Institutes (IFPI) went further.

"DRM as we know it is over…the new model for us is partnership. It always was, I’m just not sure we got it," he said.

And no less than Microsoft founder Bill Gates has stated "DRM is not where it should be" and does not deliver "in terms of simplicity or interoperability."

For it’s part EMI Music, one of the world’s leading entertainment companies, has announced a small yet significant move to sell music online from major artists, like Norah Jones, entirely DRM-free.

Endorsing the inevitability of movement away from DRM, UK music industry supremo John Kennedy said at MIDEM the annual global music industry gab-fest on currently in Cannes that "each of the majors is wrestling with the advantages and the disadvantages of going with MP3s without any restrictions at all."

Perhaps explaining this strategic shift, the Wall Street Journal reported recently on a marked slow down in sales from the dominant online music retailer: Apple iTunes.

Songs sold through iTunes come wrapped with Apple’s proprietary DRM software called ‘FairPlay’ which, among other things, limits iTunes songs to use only via its iTunes software and on iPod devices.

EMI’s move may not, however, be all that surprising. The music industry owes Apple little, and still smarts from Apple’s deft out-manoeuvring as it leveraged value in its iconic iPod and iTunes brands off the back of the music industry’s singular asset: its music.

In weighing the risks, EMI may consider abandoning DRM a lesser of two evils because, to all intents, DRM does little to prevent copyright infringement.

Why? Because online sharing is already uncontrollably rampant: music and films will end up online whether they are DRM ‘protected’ or not.

A viable online entertainment industry doesn’t really compete with this content. Rather, it competes for the attention of mass mainstream consumers. But for these consumers, DRM is merely another reason to reject digital market offerings.

This point was subtly made recently by Apple’s Steve Jobs’ when he issued an ‘open letter’ admonishing the music industry for, in his view, its stubborn refusal to respond to growing public frustration at DRM systems.

If nothing else, Jobs’ timely foray into the DRM debate is indicative of the entertainment industry’s sensitivity to the consumer backlash against DRM.

Aside from legal concerns about its overreach, one has to ask what practical uses remain for DRM?

The entertainment industry is already learning from DRM-free environments like MySpace and YouTube.

Although community network throw up other legal issues, a touchstone of online success will be delivering new and innovative experiences in partnership with consumers, not patronising and hectoring them.

Recognising the power of online networks to "virally" market content with an accuracy and economy never previously imagined, studios and record labels in the US are moving fast to cut licence deals for their content with the likes of Google (owner of YouTube).

As Mr Shmuger concludes: "If you want to be involved in the cultural debate, you have to allow consumers to be more actively involved. That’s a different world order which we are not used to."

With ink on Australia’s new DRM laws barely dry, its ardent proponents are already moving to a post-DRM world.

Consumers, meanwhile, remain short-changed.

Swaab was recently named winner 'Best Law Firm in Australia (Revenue < $20m)' at the 2007 BRW-St George Client Choice Awards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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