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DRM challenges inhibit digital media opportunities

Posted: 02 Oct 2006 ?? ?Print Version ?Bookmark and Share

Keywords:DRM? DRM challenge? conditional access? CA? digital media opportunities?

Many potentially multibillion-dollar markets hinge on effective DRM and conditional access (CA) implementation and adoption. At technical, business-model and competitive levels, DRM is affecting many of today's highest-potential markets, such as digital music, broadband video, mobile TV, HD-DVD, IPTV and home networking.

For many of these markets, the lack of effective DRM is holding back faster market growth. The current technology industry vision of "any content, any device, anywhere" is indeed a mirage hidden behind a sandstorm of DRM complexity and challenges.

In the ideal world, DRM would be nearly invisible to the consumer. However, current DRM still complicates the user experience and diminishes ease-of-use. The lack of DRM interoperability is becoming a major issue as digital media markets grow.

DRM is more than just a market barrier for digital media and the underlying equipment markets. DRM sits at a convergence point between media companies, service providers, equipment manufacturers and technology providers. As a result, conflicting interests abound among industries and companies. Moreover, each industry has its own standards association and trade groups, resulting in many incompatible standards and DRM-related proposals. The diversity of interests in DRM, however, is driving in a competitive deadlock in solving interoperability.

As arbitrator of business models and revenue flow, DRM positions proprietary DRMs inline with cash flow for service providers and content owners. DRM also lends itself to integration in service offerings, media players and content/transaction management software. Thus, proprietary DRMs have the potential for backward integration into other software applications, as well as the potential for direct impact on service provider and content owner revenue streams.

Besides strategic implications, DRM holds risks. Consumers expect ease-of-use and "fair use" of content. Bad DRM implementations or policies can result in legal liability and damaged company reputations. Major record labels are facing all the challenges of both lack of DRM and bad DRM.

CA vs. DRM
CA and DRM are terms often used interchangeably, but iSuppli distinguishes one from the other. CA refers to controlling consumer access to content on a service provider network. It protects the pipe and prevents theft of service. It doesn't define what happens to content once delivered to users.

On the other hand, DRM was focused on protecting the content itself. DRM grew out of the Internet where the pipe was unprotected, so the content had to be encrypted. DRM also features a more complex set of rights and defines permissible uses. As DRM and CA are coming together, the term DRM is becoming the superset of content protection that included CA, content protection and content rights. Indeed, within the newer markets of IPTV and mobile content, DRM and CA are increasingly integrated into a single offering.

CA is already deployed to over 120 million pay-TV subscribers. By 2010, growth of IPTV, digital cable, direct-to-home satellite and mobile TV will drive this number up to over 400 million subscribers.

New markets and business models are developing. CA is seeing a transition from a hardware-centric smart-card model to a subscriber-based maintenance model. In addition, in the new markets, DRM and watermarking are integrating into unified CA offerings.

While CA is relatively mature and still seeing continued strong opportunity, the broader market is addressed by DRM. DRM is applicable across nearly every digital consumer device and digital media delivery service. Thus, the growth of media-centric digital devices is driving DRM adoption across different platforms. Annual shipments of consumer electronics devices with DRM are projected by iSuppli to exceed 1 billion units annually in 2009.

At a technical level, major efforts are focused on interoperability, increased security and renewability. Several initiatives are under way to address today's interoperability challenges. Among them are Coral Consortium, Marlin Development Corp., Secure Video Processor, and DVB-Content Protection and Copy Management System.

Each initiative has a different approach to advance interoperability. Moreover, several other groups and initiatives exist. A general theme appears to be a progression toward increased use of software-based DRM and downloadable DRM/CA. Downloadable DRM/CA solutions are aimed at interoperability and renewable security.

Offensive, defensive
Content owners have substantial clout in the emerging digital-media markets. Their digital business models rely on protecting and monetizing copyrighted content. As a result, they won't release content for digital distribution without DRM. Moreover, they face the careful balance of rights restrictiveness vs. consumer's expectations and experience.

Perspectives vary among different segments and companies, but there are common positions and generalizations. Content provider's DRM objectives are both offensive and defensive.

On the offensive side, they want to protect content while preserving a positive consumer experience. Interoperability and ease-of-use are top priorities. Another priority is preserving the distinctions between distribution channels so that release windows are leveraged to maximize revenue. This implies distinct usage rights for different channels and tiered pricing structures.

On the defensive side, content owners are using legal strategies to attack illegal copying of content. Watermarking technology is useful to enable forensic tracking of illegal content. Finally, they are pursuing legislative and regulatory strategies to address protection of free-to-air digital broadcasts, and protecting analog content from being digitized and re-distributed.

DRM and CA are important technologies in today's digital-content markets, representing a barrier to them, a competitive weapon and a direct market opportunity. In addition, the DRM/CA market is highly fragmented, with numerous proprietary technologies and an array of disparate interoperability initiatives. While there is a distinction between CA and DRM in today's market, this distinction will blur over the next five years, particularly in the segments of IPTV and handsets. Finally, the value of DRM is often encapsulated within broader software or hardware platforms, based on vertically-oriented business models.

iSuppli forecasts the overall market for CA/DRM across all segments to grow to over $4.5 billion by 2010. The strongest growth is in the IPTV and handset segments. The opportunity is widespread across STB, portable media player, satellite radio, and other platforms and services. On a geographic basis, Asia will see the strongest growth.

- Contributed by iSuppli Market Intelligence

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