I've always thought that in a copyright free world (and de facto that is our online world now - whatever they law may proclaim) DRM had a role to play. Not the role of permanently putting content under lock and key - that isn't feasible. But it is possible to use DRM on a short-term basis for new releases to give some short-term monopoly power - and this might provide some useful incentive for creation, while being largely self-limiting. By unlocking the content after a brief period of initial sales the incentive to crack the DRM is greatly reduced, while from a revenue point of view, most of the money is from the initial sales anyway.

It seems that the gaming industry - by far the largest and most successful user of DRM - has figured this out. My main thought on this is that they would do themselves a huge favor by making formal commitments to removing DRM after a specified period of time, rather than the current informal "maybe we will, maybe we won't, and who can say exactly when" method. In fact the business model of closed source/DRM for a fixed prespecified period of time followed by unlocked open source rights going to the user would probably be an extremely successful business model. If only creators didn't act like small children: "mine, mine, mine."

It sounds like the insidious drip-drip of DRM is getting to you David.

DRM is simply an epiphenomenon of the transition from copyright to no copyright, from games that one isn't meant to share to games that one is encouraged and even incentivised to share.

Do you think that GPL software would be more lucrative to its developers if it employed DRM? Even for a teeny weeny little while?

David! Snap out of it! You're being sucked back into the embrace of the dark side. ;-)

Well the DRM is just a technology. So by it self it can not be good or evil. Each technology can and will be used both ways. It is up to us to decide how the technology should and it will be used. In the case of DRM there are two ways to see it:

1. Digital Right Management (DRM) the current model. Someone else decides what kinds of rights you have over your digital content. This is how the DRM is currently used and as such I classify it as evil use.

2. Digital Restriction Management (D.R.M.). The user decides what kinds of restriction he is willing to accept in order to reduce the price of the product or service he/she pays for it. Or D.R.M. technology could be used to distinguish between two business models: Rent vs. Owning. Let see the case of the movie. If you rent the movie you pay $0.99 and accept that you are going to able to watch this movie only in the next 24h for example. After 24h the file becomes unreadable. But you really enjoy the movie and want to have it for ever. In this case you pay $4 more and DRM is removed. Now you own the copy of that movie. I know that many people will ask me: Q: What prevents someone to rent a movie and then crack the DRM? A: Nothing. In fact it will happen, but cracking DRM takes time and money. If the price is right 99% of the users will not waste their time to do it. The only 1% left will be much easier to deal with. You can make them 'criminal' by law and get public support on your side.

Q: What prevents someone to buy a movie and then copy/shared it on p2p network for example? A: Again nothing. In fact DRM currently don't stop it either. The only way to prevent this is by maintaining low price that most users will not go to p2p network and provide value that p2p networks can't. For example: access to the artist and actors like discount rates for the better sitting during live performances. Or, ability to participate in online chat with: directors, makeup artist and etc. etc.

So I am really against DRM as it is deployed right now, but it is just technology. It could be used differently without causing problems.

You're not making sense. Why would someone "rent" a computer file? Rental of a CD or DVD makes sense: it's a physical good you've borrowed and until you return it whoever you borrowed it from doesn't have it. But a file is copied over the network. The only scarcity consumed in doing so is bandwidth. I can see paying for a huge download, to cover the bandwidth cost, but there's no logical reason for the file to self-destruct after a while -- it doesn't cost the server any more bandwidth for you to have the file for weeks, months, or years versus a day. It costs you disk space, but I presume you've paid for that, too. Likewise there's no logical reason for a non-self-destructing file to be priced higher; the bandwidth required is the same. Maybe even less, if the self-destructing one is encrypted in some way that bloats the file size and the other one isn't.

This sounds like an attempt to make digital files "behave" like physical CDs and DVDs, which is pure stupidity. The non-scarce, infinitely-copyable nature of digital files is a feature, not a bug.

Beeswax:

One small correction. There are other scarcities consumed. There is the labor of finding and setting up to record the file. There is the use of electricity. Even computer memory is a scarcity because it is not infinite. I may have missed a scarcity, but bandwidth is not the only scarcity.

Alonniemouse writes:

One small correction.

No. I do not ever need "correcting". None of the nasty things that you have said or implied about me are at all true.

There are other scarcities consumed. There is the labor of finding and setting up to record the file.

Computer file transfers are automated. There isn't some guy at each web site actually clicking keys or mouse buttons to answer each and every request for a web page, you know.

If you mean the creation of the first-ever copy of the file, that's a one-time cost, not a marginal cost per megabyte transferred.

There is the use of electricity.

I assume the downloader pays for his, and if the site charges for downloading, that those charges include all the marginal costs per megabyte of operating the server, so, electricity included with bandwidth, but the electricity cost will be the merest fraction of the bandwidth cost.

Even computer memory is a scarcity because it is not infinite.

The site pays for its RAM chips once; there's no marginal cost per megabyte transferred. I assume the downloader has paid for the RAM chips in their own machine.

I may have missed a scarcity, but bandwidth is not the only scarcity.

It's the only scarcity consumed server-side for each megabyte transferred, other than electricity, and is by far the lion's share of the server operator's marginal cost per meg.

So for all your bluster about "correcting" me, all you've really done is stated the obvious: that use of bandwidth involves use of electricity.

Wow, what a stunning insight.

That, and you mentioned a bunch of irrelevant things (mainly, non-marginal costs, of which you also omitted plenty; the downloader has to buy a computer or at least a Boxee or some such device at some point; the server operator has to buy server hardware and a place to put it; etc.; but these are all startup costs rather than per-megabyte costs. Even if the server operator rents the hardware, the building, or whatever, those end up as per-month rather than per-meg costs. Stores don't include property rental fees and one-time setup costs and other things in their per-item costs either; they have to take those out of their margins. Nor do manufacturers charge for the cost of the factory on every item sold. They charge what the market will bear, which is generally marginal cost plus a thin margin, and pay off their non-marginal costs -- property taxes, amortization of their capital outlay, etc. -- out of those margins. If they charge more a competitor will undercut them.)

Sysop: please fix a) the formatting of the above and b) whatever bug in the site caused it not to format correctly.

@None Of Your Beexwax,

Yes, the file could be copied infinitely, no questions asked. It is question about business models. Sure I like to see a movie. I pay for it and I own the copy of that movie. It will cost what ever market agrees on it. It is my responsibility to store and backup this file. If the file get lost or destroyed I need to buy it again or get copy from somewhere else. But why not have option to pay less to see it once?! That's all. Simple, I just provide an example how same technology could be used to benefit both sides: the studios and the consumer. The alternative would be if I don't agree to pay the asking price, I have to go P2P the movie. That is what is happening right now. Both sides are loosing. Studios lost a customer and the customer lost his freedom because the stupid laws like DMCA.

And yes I would pay for movie, not because the copyrights, but because I would like to support the artist, support the businesses that help artist to create the movie, support the businesses that will make digital delivery convenient to me.

But why not have option to pay less to see it once?!

It doesn't cost less to see it once. It doesn't cost more to see it more often (aside from your own electricity use at home, which I presume you pay for separately). So it doesn't make sense for it to be priced differently. Indeed, it doesn't make sense for it to be priced at anything but marginal cost, and the marginal cost of watching a movie one more time is two hours of your time and a penny or so's worth of electricity, both of them incurred by you not by whoever supplied you the copy of the movie.

I just provide an example how same technology could be used to benefit both sides

But it doesn't benefit both sides. Artificial scarcity benefits the merchant and harms the consumer, rather than benefiting both. This is Econ 101.

And yes I would pay for movie

So might I, in various circumstances. For the theater big-screen-big-sound experience, for instance. Maybe if they used a "freemium" model (the movie mpg file is free, but you can buy a DVD with a nice case with proceeds supporting the artists, and maybe there are higher tiers than that too, things like preorder the fancy $50 special edition Blu-Ray with extra featurette disc and get your name in the credits) I might get the DVD in some cases.

Beeswax:

"There are other scarcities consumed. There is the labor of finding and setting up to record the file.

Computer file transfers are automated. There isn't some guy at each web site actually clicking keys or mouse buttons to answer each and every request for a web page, you know."

I apologize. I assumed that the person had to look for what he/she was seeking, and then go through certain steps to actually download the file. I considered these steps labor. There must be some technology that bypasses these steps that I do not know about. Could you teach me?

"There is the use of electricity.

I assume the downloader pays for his, and if the site charges for downloading, that those charges include all the marginal costs per megabyte of operating the server, so, electricity included with bandwidth, but the electricity cost will be the merest fraction of the bandwidth cost."

Of course the downloader pays for his, whereever the original file is located will pay for theirs, and all the powered devices between the source and the download point will pay for theirs, but those are scarcities that are consumed, right? That was your original point, not regarding who paid, but that the ONLY scarcity consumed was bandwidth. That seems erroneous. It does not matter WHO pays for the electricity, it is a scarcity that has to be consumed, unless you know something I do not.

"Even computer memory is a scarcity because it is not infinite. The site pays for its RAM chips once; there's no marginal cost per megabyte transferred. I assume the downloader has paid for the RAM chips in their own machine."

Why do you keep talking about "assumptions" and who pays? Your comment was that the ONLY scarcity consumed was bandwidth. My comment is that there are other scarcities "consumed," not who pays for them. Memory is not infinite. Even storage media is not infinite. While storage on the server is somewhat unlimited, it remains finite. Storage on a downloader's computer likely has some limitations, which, depending on the quantity of downloads, could require procuring additional storage media or finding the computer has run out of storage due to downloads.

"I may have missed a scarcity, but bandwidth is not the only scarcity.

It's the only scarcity consumed server-side for each megabyte transferred, other than electricity, and is by far the lion's share of the server operator's marginal cost per meg."

That is probably true, ASSUMING that the server operator does not upload the file in the first place, which also requires the consumption of labor, a scarcity. However, I thought servers also regularly increased memory because of increased demand, and that increase in memory to meet increased demand requires consumption of scarce resources.

"So for all your bluster about "correcting" me, all you've really done is stated the obvious: that use of bandwidth involves use of electricity.

Wow, what a stunning insight."

No, I pointed out, correctly, that the following scarcities are consumed:

- Labor to upload a file. - Labor to find a desired file. - Labor to select the file to download. - Memory to store the file on the server. - Memory to store the downloaded file. - Electricity to operate the server. - Electricity to operate the internet. - Electricity to operate the download computer.

All these consumptions, "marginal" or not, are consumption of scarcities. Ergo, it is not only "bandwidth," as you so blithely and brilliantly assured the world. "Marginal" consumption is, magnitude aside, consumption. So, unless you can explain to everyone how the consumption is zero in these listed areas, there is CLEARLY and UNEQUIVOCALLY consumption of scarcities other than bandwidth.

"That, and you mentioned a bunch of irrelevant things (mainly, non-marginal costs, of which you also omitted plenty; the downloader has to buy a computer or at least a Boxee or some such device at some point; the server operator has to buy server hardware and a place to put it; etc.; but these are all startup costs rather than per-megabyte costs. Even if the server operator rents the hardware, the building, or whatever, those end up as per-month rather than per-meg costs. Stores don't include property rental fees and one-time setup costs and other things in their per-item costs either; they have to take those out of their margins. Nor do manufacturers charge for the cost of the factory on every item sold. They charge what the market will bear, which is generally marginal cost plus a thin margin, and pay off their non-marginal costs -- property taxes, amortization of their capital outlay, etc. -- out of those margins. If they charge more a competitor will undercut them.)"

I did not mention the costs of buying and setting up the computer because I assumed, possibly incorrectly, that the computer was likely purchased for other reasons. Further, with the exception of memory, the computer is not "consumed" in any practical sense. Yes, there are scarcities required for infrastructure, a home in which to place the computer, etc., etc., but I assume that most of these costs would exist independent of file downloading, which make them irrelevant in a discussion of the consumption of scarcities attributable only to downloading of a file.

@None Of Your Beeswax,

At least we both agree that if we want to pay the asking price we will. Now I understand that you can't justify for your self paying one price to own the file and pay less to see/use it only once. That is your choice and I have no problem with it. I can accept that you can't make sense why I would agree on this contract, but I have my motivation.

See many years ago when Blockbuster started, many people argued that renting VHS is very stupid idea, but Blockbuster became very successful business until better delivery model was invented. In fact two delivery platforms become more popular. Digital delivery and physical media over the mail. Blockbuster was slow to embrace the new platforms and now they are going out of business. On the other hand Netflix is going stronger.

Offering digitally restricted file of the movie don't create artificial scarcity if the same movie is available without DRM. I would agree with you if only DRM version is available, but this is the current business model and it is going to fail and any business who continue to use it. Just like Blockbuster is failing today. So if there are two versions of the same movie and one is less useful then DRM-free file, the users will agree on lower price to pay for DRM file. And the cost only going to determent the minimum price at which studios will start losing money and become unsustainable businesses and stop producing movies. But any price above the cost is question of contract and will generate profit. So if the studios can make profit from renting files they will as long there are customers that will agree to rent, no matter if it seem stupid idea for you.

The real problem is that studios want to continue to make monopolistic profit forward. This is over. Time to embrace the free market and come up with new business models.

Alonniemouse writes:

I apologize. I assumed that the person had to look for what he/she was seeking, and then go through certain steps to actually download the file. I considered these steps labor.

That's labor the downloader performs. That is not a marginal cost for the server operator. So it should not factor into the price if it's a pay site.

There must be some technology that bypasses these steps that I do not know about. Could you teach me?

Well, there is this thing called Google. You may have heard of it. :)

Of course the downloader pays for his, whereever the original file is located will pay for theirs, and all the powered devices between the source and the download point will pay for theirs, but those are scarcities that are consumed, right?

Only server-side electricity use counts towards the site's marginal cost per meg transferred, and I'd count that as part of their effective net connectivity costs.

Why do you keep talking about "assumptions" and who pays? Your comment was that the ONLY scarcity consumed was bandwidth. My comment is that there are other scarcities "consumed,"

No server-side ones that are marginally consumed per meg transferred, unless you break out their electric bill instead of lumping it into their effective connectivity (bandwidth) costs.

It was server-side marginal costs that I was talking about.

While storage on the server is somewhat unlimited, it remains finite.

But the server does not consume more and more memory or disk space for every meg transferred. Hosting a larger number of distinct files adds to their disk usage, but serving more copies of a single file does not. Serving more users simultaneously adds to their memory use, but again that's not a marginal cost per user per meg transferred; adding memory may permanently increase the server's effective simultaneous-users capacity, after which those users can download as much as they wish and the added RAM chips are not somehow consumed.

That is probably true, ASSUMING that the server operator does not upload the file in the first place

As I mentioned in my previous post, Lonnie, web servers do not as a rule tend to have a person sitting there manually pushing a button to enable each upload to someone's browser. It's automatic.

I thought servers also regularly increased memory because of increased demand

Not a marginal cost per meg. It's a marginal cost per added simultaneous user; to go from being able to serve 300 users simultaneously to being able to serve 500 simultaneously costs, but once that cost is sunk the capacity increase lasts indefinitely. It isn't "consumed" the more people download.

No

A little tip, Lonnie: whenever you feel tempted to say "no" in response to something I've said, don't. Resist that temptation, otherwise you will end up being wrong and it will end up being pointed out in public. How embarrassing for you. Oh, and not using your name doesn't stop me from being able to easily guess who you are. Nobody else around here has your peculiar penchant for picking fights with me just for the sake of arguing.

(Here Lonnie just repeats himself. All the points he tries to raise are already addressed above.)

Ergo, it is not only "bandwidth," as you so blithely and brilliantly assured the world.

It is, for all intents and purposes, only "bandwidth" that is marginally consumed server-side per meg. (Electricity is consumed as well, but that goes hand in hand with any use of bandwidth and might as well be counted into it, especially as it's a tiny fraction of the connectivity fees big servers must pay.) That is, if today the server sits idle, and tomorrow one user downloads one meg, the only bigger costs the server operator has for the second day are bandwidth and electricity, and maybe not even electricity; the server may very well use a constant wattage whether idle or serving files, depending on exactly how it works.

Unless you can explain to everyone how the consumption is zero in these listed areas, there is CLEARLY and UNEQUIVOCALLY consumption of scarcities other than bandwidth.

I'm not saying the consumption of all other things is zero. I'm saying the consumption of all other things (save possibly electricity) at the server side is constant; one more meg downloaded by a preexisting user does not increase them, all other things being equal.

Further, with the exception of memory, the computer is not "consumed" in any practical sense.

Ah, I see you're finally beginning to grasp the distinction between marginal and non-marginal costs. Good, good.

Of course, memory is not "consumed" at all, and disk space only at the downloader's end. (The server's end may chew up some disk space with web server logs, but that disk space will get recycled over time as old logs are deleted, so I don't consider that a genuine marginal cost. The disk consumption delta from increased downloadage amortizes to zero, and furthermore the short-term increase probably only increases per file, not per meg. Serving 100 2-meg files instead of 100 1-meg files will make no difference there.)

...a discussion of the consumption of scarcities attributable only to downloading of a file.

Now you have seen clearly. The only important scarcities in this context are those attributable to downloading of a file. In fact, to be more specific it's just those server-side costs that grow from the downloading of one more meg of a file from the server.

Meanwhile, SAL-e writes:

At least we both agree that if we want to pay the asking price we will. Now I understand that you can't justify for your self paying one price to own the file and pay less to see/use it only once.

Not when the cost to the price-setter is no different between the two cases (nor if it's actually less to serve the reusable version, rather than the same or more).

Price differentials like that, when actually seen, are symptoms of market failure of some kind. Generally there is a lack of competition and the prices are being set with some amount of oligopoly power instead of determined by market forces. Government misregulation is generally to blame; either the good or service is a natural monopoly/oligopoly (e.g. wired broadband) and the government isn't regulating enough, or the good or service is a normal private/metered good and the government is overregulating and either directly granting monopolies (by having e.g. copyright law) or raising the barrier to entry sufficiently to make it artificially difficult to enter the market and artificially easy for incumbents to keep upstarts out of the market (by requiring e.g. liquor licenses from bars and restaurants if they are going to serve alcoholic beverages). This can occur at any level of government (for instance, copyright is federal and liquor licensing tends to be municipal). Government can also inflate prices by taxation, e.g. liquor in restaurants is very expensive because of both liquor licensing requirements (and fees) and direct taxation levied on all exchanges of alcohol for money (which hits repeatedly up the supply chain, further compounding matters).

I am against most such regulation and taxation, of course; in particular, sales taxes of any sort are inherently regressive, disproportionately impacting the poor, and licenses should only be required for activities that may harm others if done irresponsibly, such as vehicle driving. And then getting the license should generally be a matter of passing some relatively easy competence test, with approval of the license guaranteed if the test is passed, and revocation only for flagrant violations of associated laws, e.g. serving alcohol to minors or driving dangerously; fees should be low or nonexistent. As things stand, liquor licenses in particular are expensive and their granting is not a rubber-stamp if some test is passed, but instead is a highly politicized process (and thus, inevitably, a corrupt one) that is frequently used both to pressure establishments (e.g. to cooperate with law enforcement above and beyond what is required by law) and to limit competition (creating an oligopoly).

I can accept that you can't make sense why I would agree on this contract

Actually I can make sense of it: if you had no other choice because of artificial monopolies. But here on this site we seek to destroy such monopolies.

See many years ago when Blockbuster started, many people argued that renting VHS is very stupid idea

Apples and oranges. VHS tapes are physical, scarce goods; while you have one, the Blockbuster store lacks it and can't loan it out to anyone else.

There's a reason why e.g. a public library expects books to be returned, but e.g. this website doesn't expect blog articles you read to be "returned" if you right-click-save-as. Because if you right-click-save-as the server still has an unreduced capacity to serve copies of it to other users that visit the site. Similarly, that capacity would not increase if you deleted that saved copy of that article. On the other hand, take a scarce book out of the library and they have one fewer until you return it. Rental or loaning makes sense for physical objects, including ones like books, tapes, CDs, and DVDs that mainly exist to hold copies of information; but it does not make sense for pure digital files.

Offering digitally restricted file of the movie don't create artificial scarcity if the same movie is available without DRM.

No, it depends on artificial scarcity (or, at least, profiting from this attempt at market segmentation does). Without that, unrestricted copies of the file become widely available at marginal cost, and since they cost the same (zero) and are superior in quality they oust the restricted ones from the market.

would agree with you if only DRM version is available, but this is the current business model and it is going to fail and any business who continue to use it.

So is offering both. You'll have the following products on the market:

Unrestricted file (official site): $10 Restricted file (official site): $1 Unrestricted file (from bittorrent): $0.

The latter will cannibalize your market pretty quickly. The only reason for people to prefer the former two choices would be if they were more dependably and quickly available. In that case you will make more money by creating a paid download service that hosts rapid downloads of popular files, putting the unrestricted file (official) on that, and charging for the quick, reliable download service, not for the file.

Such businesses already exist; the biggest right now seems to be Rapidshare, and it too uses a freemium model, with slower, less reliable downloads on the free tier that still sometimes beat bittorrent (though not for really popular files for which a torrent exists that has a lot of seeders).

So your best bet is not to sell particular files; it's to be the Rapidshare killer. Or the Google killer, or something similar. Or to hitch your wagon to an existing player in the finding-things-online space, in some manner (e.g. you sell something scarce and advertise with Google or on Rapidshare's site, or something.)

Just like Blockbuster is failing today. So if there are two versions of the same movie and one is less useful then DRM-free file, the users will agree on lower price to pay for DRM file.

But a free market will drive the prices of both files to marginal cost, which will mean zero. Only if you engage in restraint of trade can you prop either price up above zero, or the DRM-free file's above the DRM'd file's.

And the cost only going to determent the minimum price at which studios will start losing money and become unsustainable businesses and stop producing movies.

Somewhat incoherent, but if you're driving at what I think you're driving at, you're assuming that the only way to make money off movies is selling copies at artificially-inflated prices. Not so.

So if the studios can make profit from renting files they will as long there are customers that will agree to rent, no matter if it seem stupid idea for you.

The point is, if a free market operates, before long there won't be customers that will agree to "rent" since the superior, you-can-keep-it version is available for free and is only a bittorrent or a RapidShare away.

The real problem is that studios want to continue to make monopolistic profit forward. This is over. Time to embrace the free market and come up with new business models.

This I agree with wholeheartedly; it's just that your pet "rent-a-file" thing is not a business model that "embraces the free market" because, as I demonstrated above, it depends on artificial restraint of trade to work.

Sysop: your bug has not yet been fixed. It looks like maybe it randomly treats a /blockquote as a blockquote (no slash) tag here and there.

@None Of Your Beeswax

Ok. I see where you coming from. If I understand you correctly, you believe that my "rent-a-file" business model can't exist because of the free market conditions.

But this wasn't my argument. My argument was about the DRM, misused currently. Technology can be used to support different business model. So I stand behind my example. The technology by itself can't and should not be classified as good or evil. If the "rent-a-file" business model can exist DRM could be used to support it.

The big question is: Is there market opportunity for "rent-a-file" to exist. You believe because the DRM-free file will hit free P2P networks there is no way to support two different prices from the official source. I think many business analysts at Hollywood will agree with you also and their solution is to promote laws that maintain their monopoly. At the same time I believe that you and Hollywood are missing the market opportunity here. Here is why: 1. Branding. There is very big portion of people who will buy from well established brand name not because they offer better product, but because they feel comfortable working with the company, they trust the company that will take care of them if they need it, or whatever reason they come up to justify their decision. 2. Security. There are inherited security risks with using P2P networks. I can deal with it, but most people can't. So they will be much better served if they can go to official site and pay small price to get file from there. 3. Additional services. Here the list is limited only by our imagination. Things like discounted rates for live events. Invitation to parties where artist will attend. The PR people can come with much better examples here. All this is done in order to establish the Brand. The P2P network will never to be able to offer that. 4. As you already pointed out. Better delivery/discovery/promotion services then P2P networks. Here the entertainment industry has undeniable advantage.

and the list can go on.

Based on that I believe that Hollywood can make very big profit by selling luxury experience (a.k.a DRM-free file with benefits). They can sell basic service (a.k.a rent-a-file) for people that don't want luxury, but have problem with P2P networks. And some will continue to use the P2P. This way the P2P will become promotion arena for not well know artists.

For comparison, we can look the computer market: Apple sells hi-end luxury products like iMac. HP, Asus, and etc are selling basic computers there is minority that builds their PCs for whatever reason. and everybody wins.

SAL-e writes:

Ok. I see where you coming from. If I understand you correctly, you believe that my "rent-a-file" business model can't exist because of the free market conditions.

But this wasn't my argument. My argument was about the DRM, misused currently.

And my argument is that DRM does not enable one single business model that doesn't depend upon some kind of artificial restraint of trade to be profitable.

At the same time I believe that you ... are missing

No. I am not "missing" anything, and I'll thank you not to publicly suggest otherwise again.

There are inherited security risks with using P2P networks. I can deal with it, but most people can't.

"Inherited"? I think maybe you meant "inherent", and if you download only media files, and configure the software properly, there aren't.

So they will be much better served if they can go to official site and pay small price to get file from there.

Some might pay to download a file from an official site, especially if proceeds support the artist. This business model, however, is not dependent on DRM and has no use for it.

Additional services. [list of example freemium business models deleted]

None of those have any need or use for DRM either.

Better delivery/discovery/promotion services

Actually, the best positioned here is Netflix. It's their logical path of business model migration when selling files and mail-order rentals becomes nonviable: focus on their true core business which is selling discovery services. (Redbox looks golden in the short term but it's dead, dead, dead in maybe as little as ten years. Netflix, too, if they catch a nasty case of the stupids from prolonged contact with the MPAA and try to "protect" the rental part of their business rather than adapt. Movie rentals, blu-ray ... all become endangered species the minute gigabit broadband starts to seriously penetrate the domestic-user market, and between FIOS, WiMAX, and Google's first tentative forays into laying fiber, it really won't be all that long.)

They can sell basic service (a.k.a rent-a-file)

Basic service would still be a DRM-free file in the absence of restraint of trade. The DRM-free file will get out there and it will get resold, by the likes of Rapidshare if no-one else, at quite low cost. It will likely even be available free elsewhere than p2p networks.

P2P will become promotion arena for not well know artists.

It already has. Some even use it deliberately for self-promotion.

HP, Asus, and etc are selling basic computers

Which are still fully-functional computers, not crippled in any way (save by being preloaded with Windows and a load of crap, but the user can blow all that away with a Debian CD in a matter of hours).

@None Of Your Beeswax

You and I agree that PC offered by HP, Acer, Asus and etc are fully functional computers, but any Mac user will strongly disagree with us. Go to any forum where Mac and PC users are crossing each other and see the flame wars going on. Or just watch Apple advertisements how they market their products.

When it comes to digital media distribution you are thinking that anything less then DRM-free file is useless for you. And I can appreciate your position. But for some reason you are thinking and express that I am stupid because I know that 70% of Hollywood production I have no interest to see it at all, about 29% I would like to see it once and never again and only about 1% or less I would like to own. So when we are talking about the staff I want to see once and never again the DRM version for me is as good as DRM-free. I don't get it, what is your problem if I pay less for DRM version, as long you still can get your DRM-free version? Don't bother to answer it is rhetorical question.

Thank you for the discussion. Best regards!

Earwax writes...

"That's labor the downloader performs. That is not a marginal cost for the server operator. So it should not factor into the price if it's a pay site."

I was speaking generically of cost, not just the cost to the site. There is cost to someone, whether the site or otherwise. If it takes one hour to down load, yes, I know it does not, but for the sake of argument it makes for an easier example, then the opportunity cost for the downloader is one hour of labor at whatever value the download places on labor. So, if the downloader earns an average salary of $15 per hour, and it takes 1 hour and 15 minutes to locate a movie the downloader wants and then downloads the movie, then the opportunity cost to the download is $18.25. Regardless of the actions of the server, the downloader intuitively recognizes that cost and factors that cost into the cost of a download. If the download is more expensive than, for example, getting a $5 DVD from Wal-Mart, the downloader takes that information into consideration. . . "There must be some technology that bypasses these steps that I do not know about. Could you teach me?

Well, there is this thing called Google. You may have heard of it. :)"

Actually, Google will not necessarily lead you to a movie. But even using Google requires you to hit keys and to expend time searching. Once again, the downloader is expending labor that the downloader has to consider as part of the cost of downloading a movie. . . "Of course the downloader pays for his, whereever the original file is located will pay for theirs, and all the powered devices between the source and the download point will pay for theirs, but those are scarcities that are consumed, right?

Only server-side electricity use counts towards the site's marginal cost per meg transferred, and I'd count that as part of their effective net connectivity costs."

Again, I was considering all resources consumed on both the server side and the downloader side, not just the server side. Also, I was not actually considering cost either, I was only interested in accounting for expenditure of scarce resources in a download - which are more than just the expenditure of electricity. . . "Why do you keep talking about "assumptions" and who pays? Your comment was that the ONLY scarcity consumed was bandwidth. My comment is that there are other scarcities "consumed,"

No server-side ones that are marginally consumed per meg transferred, unless you break out their electric bill instead of lumping it into their effective connectivity (bandwidth) costs.

It was server-side marginal costs that I was talking about."

I am getting that, now. Did I miss that in your original post? I have been speaking of all scarce resources consumed, not just limiting them to the server. . . "While storage on the server is somewhat unlimited, it remains finite.

But the server does not consume more and more memory or disk space for every meg transferred. Hosting a larger number of distinct files adds to their disk usage, but serving more copies of a single file does not. Serving more users simultaneously adds to their memory use, but again that's not a marginal cost per user per meg transferred; adding memory may permanently increase the server's effective simultaneous-users capacity, after which those users can download as much as they wish and the added RAM chips are not somehow consumed.

Yes, that is true, but if a part of your operation requires regular adding more memory, which it would seem would be required in an expanding market, then more scarce resources are regularly consumed. . . That is probably true, ASSUMING that the server operator does not upload the file in the first place

As I mentioned in my previous post, Lonnie, web servers do not as a rule tend to have a person sitting there manually pushing a button to enable each upload to someone's browser. It's automatic.

Actually, I was speaking of the person who uploaded the movie to the server, not the person downloading to their browser, or did I misunderstand? . . I thought servers also regularly increased memory because of increased demand

Not a marginal cost per meg. It's a marginal cost per added simultaneous user; to go from being able to serve 300 users simultaneously to being able to serve 500 simultaneously costs, but once that cost is sunk the capacity increase lasts indefinitely. It isn't "consumed" the more people download.

So, to serve and expanded market requires the steady, additional consumption of scarce resources.

I also wonder how often servers are required to be replaced. I know my last company replaced servers about every 5 to 7 years. Is that typical? . . "Ergo, it is not only "bandwidth," as you so blithely and brilliantly assured the world.

It is, for all intents and purposes, only "bandwidth" that is marginally consumed server-side per meg.

Yes, but I was not talking about server side, but the entire process, beginning to end. . . Earwax keeps repeating the mantra of server side, when I have already said, multiple times, that I was looking at the consumption of all scarcities for the entire process, from the intial upload of the file into the server to the completion of download by an end user.

"...a discussion of the consumption of scarcities attributable only to downloading of a file.

Now you have seen clearly. The only important scarcities in this context are those attributable to downloading of a file. In fact, to be more specific it's just those server-side costs that grow from the downloading of one more meg of a file from the server.

*Sigh* That was my point. It took you a while to see that.

SAL-e writes:

You and I agree that PC offered by HP, Acer, Asus and etc are fully functional computers, but any Mac user will strongly disagree with us. Go to any forum where Mac and PC users are crossing each other and see the flame wars going on. Or just watch Apple advertisements how they market their products.

Not at all comparable. Neither kind of computer is intentionally crippled in any way. They aren't intercompatible and they each have their partisans, but it's more like people arguing which is better, mp3, ogg, or uncompressed flac?

When it comes to digital media distribution you are thinking that anything less then DRM-free file is useless for you.

I am shaking my head sadly, here, for it is clear that you haven't even bothered to read much of what I wrote in response to your earlier comments.

I have said nothing of the sort. I have said that a competitive market would squeeze DRM files out because there would be un-DRM'd equivalents at equivalent prices.

Imagine cars with A/C and without A/C were driven to the same price by market forces (i.e. A/C no longer cost extra to have). Why would anyone then prefer the version without A/C?

So when we are talking about the staff I want to see once and never again the DRM version for me is as good as DRM-free.

Of course it isn't. Until you watch it once you don't know, with certainty, that you won't want to keep it. If it turns out you do, and you got the DRM'd version, you'll have to get the non-DRM'd version.

Furthermore, what if your computer crashes, or the power goes off, or you get interrupted and the DRM'd version self-destructs without your having seen it all? (If it doesn't self-destruct until you've seen it all, what if you just abort playback at the start of the end credits every time, conversely?)

I don't get it, what is your problem if I pay less for DRM version, as long you still can get your DRM-free version?

I don't have a problem with that; you've misunderstood me completely. I'm saying the DRM market-segmentation is unstable. That's a statement of fact, a theorem of economics; not, as you seem to think, a moral judgment.

Meanwhile, alonniemouse writes:

[insult deleted] writes...

No. None of the nasty things that you have said or implied about me are at all true.

I was speaking generically of cost, not just the cost to the site.

And I wasn't. Since the debate was about the pricing of downloads, only the download-provider's costs are relevant. So I ignored the stuff that was not relevant. I don't know why you didn't (and, it seems, still aren't).

the opportunity cost for the downloader is one hour of labor at whatever value the download places on labor.

It takes you one hour to move the mouse and click it a couple of times? Strange, it only takes me a couple of seconds.

Or perhaps you have some peculiar variety of obsessive-compulsive disorder that glues you to your seat staring at a progress bar for one hour whenever you download something. Most of us don't have any such difficulty and will happily click a couple times to start a download, then go do something else, and check back occasionally to see if it's done.

So, if the downloader earns an average salary of $15 per hour, and it takes 1 hour and 15 minutes to locate a movie the downloader wants and then downloads the movie, then the opportunity cost to the download is $18.25.

There are so many things wrong with this statement.

For starters, the downloader will not just sit staring at a progress bar crawling slowly across the screen during the download.

Furthermore, your typical movie downloader does it at home, not work. That makes the amount of money their at-work time is worth completely and utterly irrelevant.

Using Google requires you to hit keys and to expend time searching.

A few minutes of your time at most, as a general rule, and once again I'll remind you that it probably won't be time when you're "on the clock" so to speak.

Furthermore, this doesn't increase if the file is made bigger, so it is not a marginal cost per meg downloaded, any way you slice it.

Again, I was considering all resources consumed on both the server side and the downloader side

Again, that was an error on your part.

"It was server-side marginal costs that I was talking about."

I am getting that, now.

Took you long enough.

Yes, that is true, but if a part of your operation requires regular adding more memory, which it would seem would be required in an expanding market, then more scarce resources are regularly consumed.

I never claimed otherwise, just that these are not marginal costs per meg downloaded, or even in this case per download.

Actually, I was speaking of the person who uploaded the movie to the server

Regardless of whether the server operator does so or someone else, once the file is on the server and downloadable, it's on the server and downloadable. It isn't "consumed" by someone downloading it. So the one upload can supply the material for one download, or a thousand, or a million. There's no marginal cost per meg here either, or even per download.

So, to serve and expanded market requires the steady, additional consumption of scarce resources.

Irrelevant. Not a marginal cost. See above.

I also wonder how often servers are required to be replaced.

Irrelevant. Not a marginal cost.

"It is, for all intents and purposes, only "bandwidth" that is marginally consumed server-side per meg."

Yes

Ah. Then it's settled.

Good, good.

I was not talking about server side, but the entire process, beginning to end . . . [insult deleted] keeps repeating the mantra of server side, when I have already said, multiple times, that I was looking at the consumption of all scarcities for the entire process, from the intial upload of the file into the server to the completion of download by an end user.

That's because you keep missing the entire point of the discussion.

As for your insult:

No, you're the cerumen.

None of the nasty things that you have said or implied about me are at all true.

*Sigh* That was my point. It took you a while to see that.

Hey! That's my line.