Archive for February, 2007

Towards a DRM-free music distribution?

In a recent publication Steve Jobs, the big boss at Apple, has given arguments to stop DRM (‘Digital Rights Management’) for the download of music. He is convinced this will lead to a significant rise of the online sale of music. The music industry badly needs the additional revenue from music downloads to compensate the decrease in revenue from CD sales. Will it be possible for them to keep their grip on music distribution still exclusive, or will they soon have to let go of all DRM security?

DRM, central in the strategy of the record companies
The large record companies have been struggling for years with the problem how to battle against the illegal copying and downloading of music. The past few years, the rise of the Internet and popular tools to copy CDs have caused the downfall of income for record companies. In Belgium IFPI, the association of record companies, reports a decrease between 2000 and 2005 of no less than 30%.
The development of DRM techniques initially seemed a blessing for the record companies. Through DRM music files are protected and can only be listened at by the person for whom the file was intended (and who necessarily also paid for it). Thanks to DRM, a legal music download business has developed. In Belgium this brought 4 million euro of income in 2006. This income is still only 5% of all music revenue.

iTunes Store

Executing DRM: complex and no interoperability
To prevent illegal copying, DRM systems have to make sure that only authorized appliances have the right to play the protected music. Therefore DRM systems use secret keys and complex cryptographic algorithms. However, no DRM system is 100% fully secure. Many hackers find a challenge in searching holes in such systems and then report them on the net.

Because of the intrinsic complexity and the need for a secret setup of the DRM systems, it is not easy to develop an ‘open standard’. The result is that every hardware producer has setup and maintains his own DRM system, and that these systems are not compatible with each other.

The world without DRM, a dream?
‘Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players.’ dreams Steve Jobs out loud in his open letter.

For the consumer, such a system only has advantages. To make this acceptable for the music industry, the business model will have to be further clarified.

Two possible scenarios appear. In the first, the price of a download purchase is lowered significantly, which takes away the incentive for illegal copying. In this scenario, downloading stays the most important distribution model. In a second scenario, the consumption of online or mobile music is only offered in streaming. The consumer has permanent access to the entire catalogue and pays a monthly fee to his ISP or mobile operator. Research has proven that consumers are willing to pay up to 6 EUR per month for such a service.

Both scenarios have significant pros and cons. No matter what, the music industry is confronted with the devastating choice to let go of the DRM model, that generates only limited revenues, and to try alternative ways.

Microsoft introduces new mobile operating system

Among the new product presentations at 3GSM on monday, was also Microsoft, introducing Windows Mobile 6, their new operating system for mobile phones.
This OS promises an improved search function for mail contacts or music. Windows Live Messenger is now also integrated. Microsoft aims for a full compatability, to ease to transition from version 5 to 6.

Another improvement is the security of the system. To save data on a removable memory card, the user has to encrypt it first. Companies can also configure the system to deny too obvious passwords.

Microsoft has developed different versions of this operating system:
– Windows Mobile Professional for devices with touch screen
– Windows Mobile Standard for smart phones
– Windows Mobile Classic for PDA without built-in phone

The first mobiles using Windows Mobile 6 are expected in the spring of 2007.

Windows Mobile

Warner sees challenge for mobile internet

Talking at the 3GSM congress in Barcelona, Edgar Bronfman, CEO of Warner Music, sees many challenges for the <a href=””Mobile Internet as a music distributor. He pointed out that, while most mobile phones are now capable of playing and storing music, only 8,5% of the end-users are actually using these phones to buy music. “Why only 8,5%?” Bronfman asked out loud, “I’ll tell you why: it’s expensive, it’s complicated and it’s slow”.

It is a challenge for the mobile industry to make it affordable, easy and quick to download tones and songs as well as new music experiences – including video – to the mobile phones. To reach such a potential, Bronfman argued the offering needs to contain more than just better devices, services and prices. Warner wants to create new experiences, to include video, artwork, text and more. Beyond that, they want to create a constant flow of products and information from artists so consumers can stay connected regularly to their favorite artists, via their favorite carrier.

Bronfman also reached out to the mobile manufacturer to collaborate on these challenges. He denounced the often inadequate interfaces and the many mobile platforms that are not capable of handling the most basic content configurations, such as buying a simple ringtone.
“We know the basic technology exists to overcome the obstacles the industry faces today. Now it’s just a matter of putting it to work, […] to meet the customer hopes and expectations, and to fulfill the emerging demand.”
“We have the chance to redefine the way people access, share and enjoy their music”

Edgar Bronfman

3 billion mobile users in 2008

By 2008 no less than 3 billion people in the world will have a mobile phone.
At least that’s what Thomas Ganswindt, CEO of Siemens Communications, announced at the 3GSM congress, the largest telecom event which took place last tuesday in Barcelona.

This would mean that the number of mobile phone users will be the double of the number of users on the fixed phone networks.
Most of those GSM users will be situated in Asia (1,25 billion), followed by Western Europe (518 million), Eastern Europe (361 million), South America (344 million), North America (292 million) and Africa (202 million).

In Western eUROPE the data services will become increasingly important. Siemens wants to play a leading role on the market of wireless networks, introducing new products that respond to the new tendancies of the market.

Record sales for mobile phones

In 2006 Belgium saw a record sale of 4,36 million mobile phones, worth almost 600 million euros. That’s 15% more than 2005, which held the previous record of 3,8 million phones.
This was announced in De Tijd, based on statistics of market researcher GfK. Since there are about 9,5 million mobile phone numbers in Belgium, nearly half of those users bought a new phone in 2006. Although this is an impressive number, the Belgian growth is low compared to international sales. Worldwide almost 1 billion phones were sold, which is a rise of a staggering 23% compared to 2005. This growth is largely caused by upcoming markets such as India, Brasil and Africa. Low-cost mobile phones are definitely on a rise. Almost half of the sold mobiles were priced less than 100 euro. On the other hand, the clamp shell models are becoming more popular than the simple rectangular ones. Mobiles with camera are becoming more and more common, and 26% of the mobiles contains a MP3 player. UMTS is still an unknown and therefor unpopular technology.

Record sales for mobile phones