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  The sum of piracy, copy protection and price fixing? 
  Feb 15, 2005, 08:00am EST 
By: Sander Sassen

In these past few weeks we’ve been talking about quite a few controversial subjects, we discussed online product activation, digital rights management, Valve’s Steam content delivery system, user agreements and last, but certainly not least, piracy. The reason for discussing these subjects was actually twofold; we wanted to get your perspective about all of these subjects and fortunately a few of these discussions were linked on Slashdot, allowing a vast number of people to join in the discussion. And the second reason was to collect some statistical information about how online activation or online content delivery has influenced your purchasing decisions as well as your approach to piracy. We’ve come away with an entirely different perspective of what the majority of you find acceptable in terms of online product activation and distribution, rights management, user agreements and piracy. Read on as we explore these subjects further, and paint a proper perspective.

Although a lot of people were skeptic at first when Microsoft announced their plans for an online activation scheme for their upcoming Windows XP, many see no problem with using it today. The ability to use Windows XP for up to 30-days after installation and then registering either online or by phone was met with broad acceptance. A major concern for many is that Microsoft in the future could deactivate certain keys, basically rendering your copy inoperable when installing an update, which will lock you out of your own data, but we doubt Microsoft will do this for any other reason than to lock out pirated copies. Another form of online activation was introduced by Valve Software. Prior to the introduction of their long awaited game HalfLife 2 their Steam content delivery system was brought online. Even before the official launch people could purchase and download the game to their system, where it would sit and wait to be unlocked on the launch date.

Retail copies bought in the store were priced similar to copies downloaded through Steam due to the publisher, Vivendi, fearing a decline in retail sales, which was met with skepticism all around as a physical copy is quite different than a copy downloaded from the internet. The reasoning behind this is that in the latter case it only costs bandwidth on their servers as each copy is identical and thus there’s no added cost for creating them which is a very valid argument. What made matters worse was the fact that retail copies had to be activated online as well, before you could actually play the game. To make matters worse, Valve did not implement an option to call a (international) toll free number to validate your copy, whether bought online or retail, instead they only offered online validation. This locked a lot of people who didn’t have an internet connection and bought the game in a retail store out of playing the game. But what really put the nail into Steam’s coffin is the fact that their servers haven’t always been able to handle the load, or were offline or unreachable for unknown reasons, locking thousands of people out of their game. Many of you however mentioned they’d be happy to use online content delivery systems such as Steam if the games were about half the price and they only had to validate their game once, or when updating, not all the time, like Steam requires.

But matters would even get worse, as we discussed when we bought a HD DVD that featured DRM protection. As an example of things to come, if the movie and music industry has their way, this DRM scheme only gave us the right to use the content for 5 days, after which we had to go through the authentication process again. It also limited playback of the content based on our IP address, so we had to jump through a few hoops, or rather proxy servers, to get it to play eventually as we’re not in the continental US. Not even a single reader subscribed to this form of copyright enforcement, which clearly indicates that this form of copy protection is not acceptable for the consumer. What even made matters worse was the fact that nowhere on the cover any warning was printed that this DVD was protected by DRM, and that it could only be played after authentication with an online server and thus needed an internet connection to work, and most importantly, would only allow you to use the content for 5 days.

We quizzed a number of publishers about their perspective on DRM and copy protection schemes in general. Most of them indicated that they are primarily concerned with movies that are not yet showing in theaters or available on DVD being offered online. But they also want to make sure that initial releases of DVDs make a profit, and hence they use protection schemes to make it harder on the pirates to copy these. DRM is usually only used on special edition DVDs or movies that are only released on DVD and never made it to the big screen, this again to ensure the release at least breaks even. But they were also very clear on the fact that they see piracy as a reason for declining sales, regardless of the fact that the majority of people has stated that they pirate because of the high price, or price fixing policies of these publishers. To also get the other side of the story we looked at your comments as well. Many of you argued that if a DVD is about the price of a movie ticket you’d not even bother to download it online, or buy a pirated copy. You also commented that if a DVD featured DRM or some other elaborate copy protection scheme you’d not bother to buy this DVD, as you’d like to play the content back wherever and whenever you like.

Many of you were also quick to comment that online music distribution such as iTunes is far from perfect yet. The fact that a single song costs $0.99 still means you’ll be paying 15 to 20 dollars for the full CD, without actually owning the physical copy. This, much like with online software distribution is perceived as price fixing and another scam to not give consumers what they want. Songs available for download should be priced significantly lower than what you’d pay for a physical copy of the CD, many of you however said that anywhere from $0.10 to $0.50 is acceptable with no restrictions on use, such as limiting it to a specific device to be played back on. Obviously this will not go down easy with the publishers; Apple for example has used DRM to lock songs downloaded from iTunes to only play on the PC/Mac they were downloaded on, or to an iPod connected to that system.

So if we sum all of these up we arrive at the conclusion that most consumers are indeed looking for other ways to fulfill their demands, the fact that they resort to up- and downloading music and movies online should indeed be considered as a public outcry for change. However the majority of them expressed they would be fine with using online content delivery systems such as Steam or iTunes if that doesn’t limit them too much in how they can use the content and the price is significantly lower than retail. To give a few examples; Steam’s requirement for frequent online verification needs to go, and should only be used when acquiring updates. Furthermore retail copies should not require online verification for a period of at least 10-days. Apple’s iTunes should lower their prices as well and open up the use of the songs on other devices, such as the ability to burn them to a CD or playback on regular MP3 devices. DVDs and CDs should be priced much more in line with what people expect to pay; about the price of a movie ticket. New releases on DVD and CDs to be priced around $9.99 and older titles discounted to $4.99.

This might all sound like wishful thinking on the author’s part, but when you factor in the number of replies we’ve gotten to the discussions mentioned in the first paragraph, this is more than just that. With hundreds of posts in the forums and close to three million people stopping by for a read lets hope that these publishers get off of their high horse and face the music. Consumers are sick and tired of paying through their nose just to keep their business model afloat and their profit margins up, as like any business they should adapt to a changing market to stay profitable, and frankly isn’t it about time they did?

Sander Sassen.

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