The slow and lingering death of DRM ?

Amazon has now completed deals to sell DRM-free music from Sony-BG, EMI, Warner and Universal. When a player as large as that makes it easy to buy DRM free music, we really are into "injury time" for DRM methinks. It won't be 2008 (interests are still vesting), but by 2009 I'd expect DRM for music to be effectively dead. The battleground then will be video DRM

So how will musicians make money then?

TechCrunch notes that the last bastion defence the Olde Industry may try is to exact an auto-tax on all broadband ISP users (c $5 pm has been mooted). I agree with their analysis, which is that giving the current bunch a guaranteed income will stifle any further creativity - if anything it will militate against it.

Nonetheless, the acceptable long term price of music cannot be $0.00, as that is merely the market price of piracy - not the value of the goods. The result will just be back catalogues and ringtone length snippets, as it will be hard to tempt talent into recording new full-length content online.

Analysis we did a few years back showed that the "average" $10 price of a CD had about $2 (very roughly) of actual added value (the artist's payment and the costs of bringing on an act, recording, publishing etc) and these cost segments need to be recovered if we want to inspire musicians to create well made content.

The rest was to feed the bloated music industry infrastructure and marketing costs, and to pay for physical distribution of CD's, which are all costs that can be lost in an online world.

A question is whether the true value of creativity per unit can still be $1 - $2 in a UGC world - I suspect not, its probably an order of magnitude or so lower now.

Even so, how does one extract $0.1- 0.2 per album equivalent while not handing a guaranteed "do nothing and get paid" payola to the music industry? Plus, any attempt at direct charging can be pirated away today. TechCrunch (and all the others who decry the flat tax) alas have no answer.

Known popular bands are able to sell merchandise and live gig seats to make money, and that is one option - but its hard for "long tail" and new acts to monetise quite so easily with "physical" assets, (and there are only so many band-name T shirts I need) so they will need to make money digitally.

At present I have no good answer either, but I can see 4 options:

(i) A much less intrusive "son of DRM" that marks a piece of media when sold so that some micropayment goes to the creator, the aggregator making money from advertising and offset sales.

(ii) Advertising supported - but this has its own risks in terms of restricting new creative media. Good art and Ads seldom co-exist easily

(iii) Customer gives away personal data to aggregators in exchange for music - at $0.1 - $0.2 per download its probably a viable model now.

(iv) There is a ($5?) "ISP Media" monthly tax , but it is used in conjunction with the marking above in (i) so the money goes directly to the creators of the media that is downloaded.

I like option (iv), but it will be quite hard to do methinks.

(one day...later) Hah - young Mr Orlowsky must've been in the pub l day - he's only just grokked this one...its nice to be first on occasion

Update - Wired notes that watermarking is now rearing its head as the New New DRM, noting:

Watermarking codes are digitally woven into the fabric of a download and do not restrict listeners from making backup copies or sharing music with friends, as does DRM coding.

I didn't originally mention it as a possible approach, as the problem with watermarking is it enables a whole lot of privacy abuses, as it can track every event on any file - if you thought Facebook Beacon was bad, you ain't seen nothin' yet if people were tempted to abuse watermarking.....

Microsoft is betting on watermarking's future, winning a patent for a "stealthy audio watermarking" scheme called El Dorado in September.

....but, as with all other attempts at media encryption restrictions, they do get hacked fairly soon, and Watermarking's problem is its a static encryption, ie once hacked it can't be re-inserted.