Download with caution

Digital rights management may be the key to turning content into cash, but consumers should be wary.

IN THE WAKE OF NAPSTER and what seems like an infinite number of copyright infringement lawsuits clogging up the courtrooms across America, protection of intellectual property is fast becoming a top priority for any company in the music, movie, electronic software distribution, and publishing industries—in other words, anyone who's interested in making money with content.

As a result, old-school companies like IBM and Microsoft and relative upstarts like Reciprocal and Verance have dedicated countless hours to developing digital rights management (DRM) technology to combat piracy and give content owners more control over distribution.

So just what is DRM?

"The main goal is to try to create an environment where content owners feel comfortable in making their work available in a way that's more controlled, where they receive payment and the content producers receive payment. Certainly, by doing that in a controlled way, it will also inhibit any unauthorized activity," says David Leibowitz, chairman of Verance Corp. and former executive vice president and general counsel for the Recording Industry Association of America.

Larry Miller, president of Reciprocal, adds, "[DRM] is about making the content secure enough so that the company can build a business and a value proposition to a consumer that is strong enough for a consumer to want to pay something to interact with whatever the content is."

Keeping content secure is obviously a top priority for industries worried their content can and will be traded like baseball cards on a playground, but content security is only part of the whole DRM picture. Security measures like Verance Corp.'s audio watermark prohibit unauthorized copying of digital files protected by copyright. The watermark, currently encoded in the stream of the new DVD-audio format, can identify if a work is protected by copyright and whether the consumer is allowed to make a copy of the content. The other part of DRM involves the handling of licenses and the tracking of financial transactions. Reciprocal's clearinghouse applications and others like them generate licenses and distribute them to consumers on behalf of the content owner. These licenses determine how a consumer can use that content.

Overzealous content owners could thus pose pitfalls for consumers. The music industry, for example, is considering the possibility of limiting the number of copies that can be made from a downloaded song and the number of times a file can be downloaded to a portable digital-audio device, as well as restricting increasingly popular CD burners. In addition, the requirements for what a consumer has to do to get a license for a download is totally up to the person that owns the content. It can be nothing, it can be money, or it can be an e-mail address. Although an e-mail address is considerably less sensitive in terms of a consumer's privacy than a Social Security number, the fact that a company could trace the content to a specific person may drive people back to the anonymous act of buying a CD with cash in a store.

THE MAIN FOCUS of companies like Verance and Reciprocal, their executives say, is to streamline the process in a way that protects copyrights and consumers. "I think it's about making the consumer experience simple enough for the vast majority of [them] to want to be able to electronically access digital content and be able to do so without having to go out and get a Ph.D. in computer science," says Reciprocal's Miller.

It's a goal with serious consequences. The music industry is on the front lines of the DRM battle, but identical issues lurk ahead for the movie and publishing industries, especially as bandwidth, processing speed, and storage capabilities become more readily available. Current limitations on size make music files more manageable than an entire feature-length film, but that's changing. The motion picture industry is scurrying for ways to avoid a Napsterlike debacle.

Yet widespread adoption of DRM technology could be several years away. "There still is confusion with competing approaches to doing the same thing," says Verance's Leibowitz, "and that confusion, just like the confusion over the VHS and Beta formats, slows down global acceptance."

Perhaps more profoundly, attitudes of consumers must shift from viewing the Internet as a forum for the free exchange of content and ideas to a viable commercial marketplace where very little, if anything, is really free.*

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