[dvd-discuss] .002 Online again -- DRM Business Case for Si

["John Zulauf" <johnzu(at)ia.nsc.com>]

Greetings all,

I managed to get "copyright issues" on my annual goals list, and thus am
able spend work time on this list.

I have a personal goal of exploring this question:

"What is the business case for (or against) DRM collaboration?"

Believe it or not most corporations have no great passion for the
fair-use and free-speech issues.  Their POV (arguably understandable) is
the best return for the investors.  My goal is to show that even if the
short term tactics are those of collaboration (building products with
DRM support or technologies) long term it is in the interest of the
stockholder of technology companies to oppose the DMCA, CTEA, et. al.

My initial case *against* DRM was the following (from the POV of a
semiconductor company)

A. DRM reduces functionality of a technology product (hereafter
"Product")
B. Reduced functionality reduces the value of "Product" to the customer
C. Reduced value reduces supply-demand curve intersection point (i.e.
lowers the average selling price (ASP) of "Product"
D. Reduced ASP of "Product" places pricing pressure on the components
("Si" -- i.e. silicon) -- reducing ASP of "Si"
E. Reduced functionality of "Product" is artificial, thus "Si" is no
less (and probably more) complex
F. Lower "Si" ASP with equivalent complexity implies lower margins and
ROI for "Si" QED.

This argument has several clear weakness

Attacking "B" -- if DRM entices media companies to release otherwise
unreleased material (for example movies still in theater, or prior to
DVD release) -- then the device acts as an access enabler, with *added*
value to the customer.  This is true whether the the product is funded
by the end-customer (who sees value in enhancing their couch potato
abilities) or by the service provider (who see value enhancing their
average revenue per user (ARPU, or sometimes just RPU -- read "are
pooh")

Attacking "F" if the "B" attack is true then a DRM enabled "Si" device
may in fact have higher margins and volumes than one without.

Finally the "Si" vendors may be in a "prisoner's dilemma" -- "if we
don't collaborate, someone else will".   Though this is typically
couched in a more "customer focused" way.

From my POV "Si" vendors are really in this position *because* of
current laws and policy -- and focusing on the immediate customer blinds
one to the longer term threat of stagnation (technology progress gated
by the most paranoid) and longer term opportunities (new killer apps --
e.g. video rip-mix-burn or ...)

Anyway this is a first statement of the problem to this forum.  Overtime
I'll have other more target questions.