The Ovum View: DRM - protecting content and revenues

People have long trumpeted digital rights management (DRM) technology. But how can organisations make it work for them? Ovum senior analyst Michele MacKenzie sheds some light on DRM in wireless...

After high profile disasters such as WAP, the wireless internet finally seems to be experiencing an upturn.

The first signs are that MMS applications, such as picture messaging are proving popular and uptake of Java is growing. Ringtone downloads continue to grow and Ovum estimates that revenues from this application grew to $900m in 2002.

Evolution to the next phase, that of rich media incorporating music and video downloads, depends on a number of technological issues being resolved. This is where DRM (digital rights management) and content protection come into play.

What's at stake?

Premium content represents a significant opportunity for operators. Revenues will grow from around $9bn in 2003 to $39bn in 2007 but this revenue growth is dependent on DRM being in place.

In the fixed world, many service providers have ignored their responsibilities in protecting content and many have taken a short-term view on illegal file sharing as a means to generating extra traffic.

Content providers claim to have suffered significant losses from online piracy. The International Federation of Phonographic Industries (IFPI) estimates, in its June 2002 report, that the pirate market for music was worth $4.3bn and that this figure is conservative. It does not include any estimate of losses to the recording industry from Internet copying but estimates that 99 per cent of music files available online in 2001 were unauthorised.

Understandably, perhaps, content providers are now taking extreme measures to protect their content by limiting its availability. This business model is unsustainable and greater collaboration is required between the players.

Mobile operators will learn from the fixed experience but will have to educate both the users and the content providers.

Finding a middle ground

In order to get buy-in from the content providers, mobile operators will need to convince them that they have a viable DRM solution in place. Initially this will consist of simple forward lock (once a user receives content that he has paid for he is unable to forward it to other mobile terminals), as in OMA (Open Mobile Alliance) version 1.

But it is critical that mobile operators work with content providers to gain their confidence in the mobile channel if they are to move to a super-distribution model at a later phase. O2 is a good example. It has worked closely with its content providers for its music download service to determine which DRM solution should be implemented.

Content owners need to ensure that they can capture the revenues for their content while allowing a fair degree of flexibility to meet user requirements. A 'fair play' policy - the middle ground - has to be reached and DRM is the technology that facilitates it.

Both parties have to build an understanding of the needs of mobile users. Those needs include the rights to use the content they have paid for the way they want to – including porting, duplication and distribution.

When will DRM be ready?

Early deployments of DRM are taking place now. Version 1 of the OMA standard was only released at the end of 2002. Handsets supporting DRM will be shipped in volumes in Q3 2003, although the first DRM handsets were announced in Q2. Deployment of the technology supporting version 1 will not really begin until 2004.

And phase 2 of OMA, which supports a more sophisticated and flexible DRM solution allowing rights management and super-distribution, is not expected commercially until the end of 2004. Therefore, most deployments of the standardised version 2 will only start in 2005.

Educate the users

Mobile users are used to paying for content over their mobile phones. Operators will need to manage the introduction of forward lock carefully as it might annoy some users to find that they cannot port their content to other devices or 'share' it. It is critical that do not view this as a long-term inflexible approach by operators to curb their rights. Once super-distribution becomes available, probably towards the end of 2004, operators will need to re-educate users to the benefits of DRM. That is the right to port, duplicate and distribute content.

Think long term

In order to provide a dynamic portfolio of rich content, it will be imperative to have a viable DRM solution to: Encourage content owners to consider mobile as a channel for their content Protect operator revenues from sources from piracy Eventually enable a 'paid-for' super-distribution mode. This will stimulate traffic as users become a distributor of content as well as generate new revenues from content.

To understand more about present and future opportunities in the wireless services market, see WirelessMultimedia@Ovum, an Ovum Advisory Service. Contact Michele MacKenzie, senior analyst and service manager for WirelessMultimedia@Ovum, on MMK@Ovum.com.