For almost ten years now I have argued that digital rights management has little to do with piracy, but that is instead a carefully plotted ruse to undercut fair use and then create new revenue streams where there were previously none. I will briefly repeat my argument here before relating a prime example of it in the wild.

The theory

Access control technologies such as DRM create "scarcity" where there is immeasurable abundance, that is, in a world of digital reproduction. The early years saw tech such as CSS tapped to prevent the copying of DVDs, but DRM has become much more than that. It's now a behavioral modification scheme that permits this, prohibits that, monitors you, and auto-expires when. Oh, and sometimes you can to watch a video or listen to some music.

The basic point is that access control technologies are becoming more and more refined. To create new, desirable product markets (e.g., movies for portable digital devices), the studios have turned to DRM (and the law) to create the scarcity (illegality of ripping DVDs) needed to both create the need for it and sustain it. Rather than admit that this is what they're doing, they trot out bogus studies claiming that this is all caused by piracy. It's the classic nannying scheme: "Because some of you can't be trusted, everyone has to be treated this way." But everybody knows that this nanny is in it for her own interests.

Like all lies, there comes a point when the gig is up; the ruse is busted. For the movie studios, it's the moment they have to admit that it's not the piracy that worries them, but business models which don't squeeze every last cent out of customers.

In a nutshell: DRM's sole purpose is to maximize revenues by minimizing your rights and selling them back to you.

The history

History repeats itself, especially the bad parts. What I find most puzzling, however, is how history hasn't taught the movie industry this lesson yet.

In 1982, then-MPAA head Jack Valenti testified before the House of Representatives on the emerging phenomenon of VCR ownership. He famously said, "I say to you that the VCR is to the American film producer and the American public as the Boston Strangler is to the woman home alone." Valenti said this in response to a claim that the VCR would be the greatest friend the American film producer ever had. Valenti was vehement in his opposition to the idea that the VCR could be a good thing. He, and many in the industry, believed that it was fundamentally wrong to allow the public to make decisions for themselves about how to use a VCR. They even expressed worry that multiple people could watch the same movie on a VCR, but not all of them would have to pay. The idea of Joe User buying a movie for a fixed price and then inviting friends over to see it was anathema to the industry.

Yet by the late 1990s, sales of VHS movies were generating more revenue than movie ticket sales. DVD, the successor to VHS and Betamax, greatly widened the gap thanks to outstanding profit margins. The "Boston Strangler" was nowhere in sight. Of course, Hollywood lost the battle over the VCR, and its enemy became the best friend it ever had. That is, until behavior-modifying DRM was born, and Hollywood saw another chance to take a crack at the holy grail.

The practice

As a quick aside, let's put this piracy excuse to rest. You can easily find almost any DVD online, for free, because CSS has long been cracked and the movies uploaded. All of these new DRM schemes can't change that one simple fact: at least for the DVD market, a pirate's lifestyle is a matter of downloading some easily obtainable software. There is simply no evidence whatsoever that DRM slows piracy. In fact, all of the evidence suggests the opposite, and arguments that DRM "keeps honest people honest" are frankly insulting. If they're already honest, they don't need DRM.

So given the windfall generated by the VCR, which was followed by an even greater explosion in revenue thanks to DVD, why aren't popular services like the iTunes Store being embraced? At a time when TV networks are seeing ratings boosts and fattened profits thanks to downloadable video, how come Disney is still the only movie studio to release new releases on iTunes?

If we believe Ronald Grover's sources in his BusinessWeek article of last week, the problem is liberal DRM and not piracy, and this is a startling admission. According to him, an unnamed studio executive said that a major reason why studios weren't jumping on board with the iTunes Store and other similar services is that their DRM is too lax. "[Apple's] user rules just scare the heck out of us." It's not piracy that's the concern, it's their ability to control how you use the content you purchase.

As it turns out, five devices authorized for playback is too many, and the studios apparently believe that this is "just as bad" as piracy. Hollywood believes that iTunes Store customers will add their buddies' devices to their authorization list, and like evil communists, they'll share what they have purchased. This makes little sense, because the way iTunes works, you can only issue so many device authorizations at a time. You could share with a friend, but then your friend would have to be authorized to play all of your purchased content, taking up an authorization. Inconvenient, huh? But is it a big problem?

I can walk in to Best Buy right now, buy a DVD, and lend it to every person I know. Who hasn't lent a DVD to a friend or colleague? This is perfectly legal behavior, but you can see that Hollywood hopes to stop this kind of thing via DRM. Thanks to the DMCA, once copyrighted contents have been encrypted, your rights fly right out the window.

It sounds like a bad Hollywood tale: "In a world... where DRM is liberal... there's only one fowl that's not foul... Chicken Little. And the Sky. Is. Falling."</movievoice>