DRM, DMCA and Competitive Lock-In

If you haven’t read Cory Doctorow’s Information Week editorial about the economic consequences of DRM in the context of the DMCA, you should. I’ve previously commended Apple for their “loose DRM”, pointing out, quite correctly, that loose DRM that is acceptable to consumers provides a competitive advantage over “tight” DRM. But Cory points out how the DMCA, which outlaws any circumvention of DRM systems, converts even loose DRM into a serious anti-competitive tool that will ultimately reduce choice for consumers:

The DMCA makes the kind of reverse-engineering that’s commonplace in most industries illegal in copyright works….So say that in 2008, Creative finally manages to nail an iPod killer just as you’re ready to retire your 2006 iPod Nano. At $180 for the new device, it’s a no-brainer to pick one up on your next Amazon run or duty-free trip.


But say you’re the kind of iPod user who also buys the occasional iTunes Music Store song. Just one or two a month, maybe 20 a year. If you do that every year from the year the Music Store launched, you’ll have 100 tracks by 2008. That’s a $99 investment in music that only plays on the iPod/iTunes combo. Creative won’t play Apple’s music, and if Creative tries to do so, they’ll find themselves in legal jeopardy under the DMCA, which would give Apple the right to sue them for trying.

At 20 tracks a year, you add 50 percent to the cost of switching away from an iPod in five years. In ten years, you double the cost. And if you buy more than 20 tracks a year — or splurge for audiobooks, full albums and other high-ticket iTunes Music Store items — you’ll find yourself in hock for thousands of dollars that you’ll flush away if you change vendors.

Cory’s right. I still think that loose DRM is an OK thing in theory — I remember being told when a student in Cambridge, MA many years ago that bike locks were simply a moral deterrent, a reminder to honest people that you valued your bike, not a deterrent to determined thieves, and I do think those reminders are sometimes useful — but when you put together DRM, dominant market share, and the DMCA, you have a lethal recipe for anti-competitive lock-in.