Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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Colossal Blunders Department

Slashdot draws our attention to an an article by security researcher Peter Gutmann about DRM in Windows Vista. The gist of the article: Microsoft has chosen to degrade in important and significant ways the performance and capability of their operating system to protect "premium content." He is of the view that it probably won't work as far as protecting premium content, but will significantly raise the cost and lower the performance of such things as video cards - as well as making them difficult to reverse engineer for open source operating systems such as Linux and FreeBSD. It may well be that the latter is the intention of Microsoft - certainly the evidence is that Apple's music DRM doesn't do much for protecting content - but protects Apple from competition in the music business.

That said - the demand for degraded computers that can play "premium content" is limited. People just don't buy computers to play movies on them. Michele and I previously dug out some numbers on the size of the "premium content" industry versus the IT industry. According to the RIAA, the value of all CD's, live presentations, music videos, dvds in 1998 was 13.72 billion US$. According to the SOI, in 1998 the business receipts of the computer and electronic product manufacturing including both hardware and software was 560.27 billion US$. I looked up at the census 1997 revenue in the telecommunications industry: 260.50 billion US$. So: are people going to give up their general purpose computers they spend $560 billion on to access less than $14 billion in content? Predictions are dangerous, but I will venture one: Microsoft's decision to build heavy DRM into the core of Vista will go down as one of the colossal business blunders of all time.


It is probably bad form to comment on your own posts - but I want to elaborate. The real reason for the DRM in Vista is no doubt the effort to lock competitors out of the market. Why am I confident that it won't work for Microsoft? As I pointed out, this has worked for Apple to a certain extent. Apple has some success because their business competitors can't legally produce compatible machines that play itunes music. Why is it that Microsoft won't be able to kill free software by forcing all hardware to be incompatible? The answer is: either they have the market power to do it or they don't. If they had the market power to do it, they would have done it long since. Since they don't, trying to do it secretly in the form of DRM isn't going to help. Do you really suppose that all peripheral manufacturers in the world are going to produce only peripherals that won't work with any system except Microsoft? The switch from Windows to Linux is no longer a big one - all that is needed is a compelling reason. Microsoft seems to being doing their best to provide one. That means a huge market for peripheral manufacturers who aren't Microsoft premium content compatible.
First off, I am genuinely shocked; I had no idea that anyone used the data that the SOI puts out. Second, I feel this does not bode well for Microsoft. Enhancing their own DRM while Apple's has been recently cracked knowing we are likely to soon see increased Ipod/Itunes usability. It almost seems as if Apple is taking a lesson from Microsoft's playbook. Finally, and I wonder, how much of what Microsoft is doing is to prevent future litigation? I know they give $1 from each Zune they sell to Universal Music Group which some say is an attempt to cost Apple money but, pragmatically, I see it as a combination of the two. Any ideas?

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