Competitive Strategy of Digital Rights Management Systems

• Main Authors: Yu-Ching Wu, 吳宇菁
• Other Authors: 江炯聰
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/05902941884565135577

碩士 === 國立臺灣大學 === 商學研究所 === 92 === The Napster phenomenon has brought great impact on the music Labels and these companies are now seriously considering Internet as an additional channel to the physical one which dominated most music sales before. The proliferation of Napster-like service has made it more than clear that digital music is just like an unstoppable train, and the days of stamping out albums by the million, stacking discs in record shops, and then ringing up huge profits are over. But technology has imposed two inflection points on the digital music industry: The first was putting content in digital format, as opposed to physical forms such as tape and CD. Digital content can be copied with perfect fidelity. Unlike in legacy media, a copy of a copy of a copy of a copy is just as good as the original. The second point is the Internet, by which digital content can be sent from place to place instantaneously and extremely cheaply. For these two reasons, there is widening gap between Labels and consumers in terms of the definition for “fair use”. Restoring the consense among sellers and buyers in this regard is the first step to establish a digital music industry with a real future, and this is why Digital Rights Management Systems come in for help. There are four non-interoperable DRM systems presently on the market- FairPlay from Apple Computer, OpenMG from Sony, Helix from RealNetworks, and Windows Media DRM from Microsoft. This thesis will see the competitions between DRM systems as architectural competitions, so the company who holds the architecture of the system is the one responsible for forming the competitive strategy to win more install-bases, and usually there are two ways it could start with. The first one is that the architecture-leader can boost the market demand for their systems by pushing the side where system users stand, either by activating the direct network effect from obtaining more installation or by the indirect network effect through raising the utility users can gain from using the system. The second one focuses on the supply side instead. By participating in relevant standard bodies and offering a software platform solution, the architecture leader can outpace its competitors in building a larger install-base through ubiquitous access to its system. Apple Computer, Sony, RealNetworks, and Microsoft, these four DRM system architectural leader companies have chosen different competitive strategies according to its own unique strength and the resource it has. Since Microsoft has positioned its DRM system as a strategic product to extend its existing dominance in Personal Computer to more mobile devices with connections to the Internet and to other PCs, in view with Microsoft’s huge war chest, the rest companies should go after the a second goal as the major alternative to Microsoft. By differentiating their DRM system offerings, and avoiding a direct collision with Microsoft’s product, Apple, Sony and RealNetwork still have the chance to coexist with Microsoft in the DRM market. For example, Apple and Sony use a lead/proprietary standard strategy and they do not license their technology to any third party developers or manufacturers. These two DRM systems are positioned to boost the hardware (portable digital music player) sales, thus a DRM system is more like a means than an ultimate goal to Apple and Sony. As for RealNetworks, its streaming technology has led it to choose a DRM market where most client devices have limited storage space, or where end users do not want to download the content, such as the emerging digital movie industry. For Microsoft, one of the benefits about having a rivary system to compete with is that the competition is very likely to make the digital music market bigger. As for content providers and service provider, in order for them to relish the thought of their business becoming heavily dependent on a standard that Microsoft has total control, there will be some room for another major player who can gain their trust and build innovative content services that bring value to consumers.