Closed Systems = Closed Opportunities
By Mark Frauenfelder, Tue Jan 25 08:15:00 GMT 2005

A word of warning to DRM-crazed companies, says the outspoken Cory Doctorow: somewhere out there is a competitor who will steal your customers with more open products.

Cory Doctorow is a popular figure in Internet culture. He's an award-winning science-fiction author whose work explores the social implications of digital communication, and he recently moved to London to be the European Outreach Coordinator for the Electronic Frontier Foundation, a non-profit organization created in 1990 to defend our "right to think, speak, and share our ideas, thoughts, and needs using new technologies." Ask you might expect, Doctorow's an outspoken critic of digital rights management, which he believes is an impediment to the rights the EFF was established to protect.

More interestingly, he believes that DRM is bad for business, too. Doctorow shared his views on DRM as it applies to the mobile industry with TheFeature.

TheFeature: Why do you think digital rights management is a bad idea for the mobile industry?

Cory Doctorow: There are a lot of different reasons, but I think the first one is that if you want to predict whether or not technology or a business is going to be successful, you have to imagine whether or not it's doing what the underlying technology is designed for. The Internet is designed for making copies. What computers are designed for is making copies. What computers are designed for is for slicing and dicing bits and moving them from one place to another. And if you're going to start a business that starts out with the presumption that it's a problem that the Internet and computers -- which is what a phone is -- make it easier to copy things, then you're going to be out-competed by someone who decides to start a business that's about using the Internet and computers to make copies.

TheFeature: But the ability for people to easily make and distribute copies of music and movies is new. Entertainment content providers want to protect themselves with DRM.

Doctorow: Well, locomotives didn't require horseshoes. You know, the blacksmiths might not have liked the fact that locomotives didn't require horseshoes. But if you started a business to outfit locomotives with special horseshoes in order to keep the blacksmiths happy, you probably wouldn't have lasted very long. Likewise, if you're starting a business to outfit phones with special locks that make it hard to copy things in order to make the music industry happy, then you're probably not long for this world.

Here's another example: Imagine if it were ten years ago and the first CD-based alarm clocks were coming out and there were two different alarm clocks on the market. One would allow you to take any CD that you own and put it in your alarm clock and use it as an alarm to wake you up in the morning. And there was another clock that used proprietary CDs. Now maybe it would be a CD that you didn't have, and it would be slightly cheaper than buying the new CD and putting in your alarm clock, but chances are you actually own the CD that you want and then in that case, you'd just be buying the same music over again.

Now put yourself in your customer's shoes: are you going to buy the alarm clock where you have to pay your alarm tone tax every time you wake up in the morning? Or are you going to buy the alarm clock that lets you load your own CDs into it? Somewhere out there, there is a competitor of yours who will sell your customer a phone that lets him listen to his own music. And that company will attract more business at the expense of companies that treat their customers as wallets to be held open for the music industry.

TheFeature: But one of the differences between mobile platforms and traditional personal computer platforms is that the mobile platform is much more tightly controlled. The mobile phone industry could probably get together and agree not to pursue an open solution to using music on mobiles.

Doctorow: Well, that's true. So long as all of the mobile carriers and all the phone companies get together in a smoke-filled room and agree that certain features will be never offered to the public, then it's possible that those features will never be offered to the public. Although I have my doubts, because customers often avail themselves of the services of companies that add new features to their devices even if the industry that created the devices doesn't want those features to be there, as anyone who's ever used a VCR-plus or a TiVO or had their phone unlocked knows.

But even so -- assuming that there is a perfect smoke-filled room conspiracy -- what do you do about the Chinese carriers and the Chinese hardware vendors? What do you do about the first company that says, "You know what? I have an opportunity here to smoke our competition in a field that they don't even want to get involved with. Not that I'm breaking the law -- because obviously offering an open phone doesn't break the law -- But simply by offering a more capable device. Here's an opportunity for us to double our margins and to double our customer loyalty."

TheFeature: What's an example of a company that did break away from a locked-up inter-company agreement?

Doctorow: Disney. Back in the fifties when TV came along, the movie companies were completely convinced that no one would ever go to see a movie again so long as they could watch them on TV. And so they all got together in a smoke-filled room and they said, "There will never be movies on television. End of story." And for a couple years, it worked. But then one company got the jump on the rest of them: Disney. To start Disneyland, they needed to raise $17 million, and ABC offered them $10 million if they would open up their vaults to their network. It was a good partnership for both of them. Disney got a huge competitive advantage over the other entertainment companies.

The lesson? If you're a smart executive, you're going to jump for the opportunity to sell your customers a better product that does more and costs less.