Would You Pay $1 To Make Your Product Less Valuable?
By Mike Masnick, Sat Feb 26 02:00:00 GMT 2005

Despite putting together an "open" copy protection standard for mobile phones last month, handset makers are complaining that the cost is too expensive. That's only half the story.

With great fanfare last month, a group of companies with intellectual property in the digital rights management (DRM) space agreed to pool their patents to offer a single DRM offering that would cost $1 per handset. There were some obvious problems, however. The standard only protected (loosely, at that) content designed for mobile phones, when many smartphones are at the point where they can access full Internet content or play music files in a variety of other formats (often with their own types of DRM).

More importantly, however, are the business model questions around DRM. It is, essentially, something that takes away what an end-user wants on his or her phone. It's an anti-feature. In a competitive market this opens you up to much greater threats from a competitor who realizes it can steal away market share by actually offering that missing feature.

It appears that some handset makers are recognizing this fact. While they remain anonymous, they're saying that they can't see the value of paying $1 for this DRM. There is no ROI for them. While the article mistakenly claims that vendors need DRM, there is no evidence of this. It's become clear that no copy protection is perfect -- and once a piece of content is free of the copy protection, an infinite number of copies can be made. In other words, for the determined copier, the content will get out there -- and once it's out there, it's impossible to stop.

At the heart of this issue, though, is the business case for handset providers. The complaint is that $1 is too expensive. However, it's not just the dollar that's expensive -- it's the fact that they would be paying an extra dollar to make their own handsets less valuable to customers. That's a very difficult business proposition to sell at any price.