January 13, 2009

Apple, DECE Clash Over Digital Rights

The battle for the future of digital entertainment rights is heating up between Apple, the largest U.S. music retailer, and DECE, a U.S. consortium of entertainment, retail and IT companies.

The DECE is lobbying to set new standards to transform how consumers buy, access and play digital content.

MG Siegler of online news site VentureBeat.com said it seems that DECE is working on a kind of new generation of DRM (Digital Rights Management or copy protection) so that they will still be able to be in control of the content of their members.

But Apple is not a member of DECE and will likely challenge the consortium.

"Without Apple's participation in DECE, you can be sure that its devices will not play content made by the consortium. It will surely work the other way around also with none of the DECE content being able to be played on Apple devices," said Siegler.

Apple announced last week at Macworld in San Francisco that it would drop DRM restrictions on the 10 million songs in its iTunes store, meaning users can now play what they have purchased on any device. The lifting of the copy restrictions does not apply to movies and TV shows.

Over 25 major companies have inked a deal to become part of the Digital Entertainment Content Ecosystem which plans to set standards and specifications for upcoming devices such as phones, DVD players, streaming services and computers.

DECE currently includes Sony, Paramount Pictures, Lionsgate, Microsoft, Best Buy, HP, Cisco, and Intel among others.

"All of the companies in this consortium realize if we can do this and do this right we have the potential for a very large market," said DECE President Mitch Singer, who is the chief technology officer for Sony Pictures.

He estimated it would be a five or six billion-dollar business and noted, "we are in the very very early stage of this global digital marketplace."

Singer, however, disagreed with suggestions that DECE's decision to set up its own ecosystem for digital entertainment such as movies, books, TV programs and games will result in a major clash.

"Yes, Apple has the lion's share of the digital sell through and a lot of consumers are using it but DECE will give consumers choice and a greater digital experience.

"I don't see Apple and DECE being rivals in this eco system. We will live alongside one another in the same way Blu-ray lives alongside DVD's and Netflix alongside Apple."

DECE was expected to make a "coming out" announcement about standards during last week's presentation at CES, the world's biggest electronics show. Instead it announced six new partners including Panasonic and Samsung.

Five of the largest TV manufacturers, six Hollywood studios, five powerhouse tech companies and an array of players in other segments of the industry now support the group.

"If the DECE system doesn't work with iPods, iTunes and iPhones, won't that make it a non-starter for millions of consumers?" asked Jon Healey of the Los Angeles Times.

Both parties are on a possible collision course, according to Mike McGuire, vice president of Gartner's media industry advisory service.

"A face off is going on now because we are talking rhetoric and not deployment. When it will really matter is when this stuff hits the marketplace and that is a long way off," he said.

Apple could still join the DECE, if the partnerships continue to add up.

Siegler said if what DECE does adds up to a huge ecosystem, then it might be hard for Apple to keep out of it. "But it is Apple we are talking about and they have always done their own thing," he added.

But McGuire believes there isn't much chance of Apple joining the consortium.

"One has to ask the classic Apple question which is "how do we benefit?" In other words we are doing pretty well just now, so why sign onto another standard?

DECE would love to have the company join but it isn't going to campaign for them to get involved, Singer said.

Apple has yet to comment publicly.

Singer said DECE members are working hard and meeting regularly to progress plans for an architecture that he envisaged will result in an "everywhere entertainment vision" based on open standards.

"We are saying let's create an ecosystem where we can let the mass of people enjoy content by downloading it on devices without having to count copies for example.

"You should be able to stream content to a centralized "virtual locker" so you can buy from multiple store fronts and access that content anywhere you happen to be," said Singer.

However, some tough challenges may still be ahead, particularly from the competing interests of the companies involved.

Ryan Lawler of Contentinople.com said the large number of stakeholders involved may actually be slowing it down.

"Participants range from the major movie studios that create digital content, to the technology companies that make software and devices on which that content can be viewed, to digital rights management companies that protect that content, to telecom equipment companies that make the gear over which that content is delivered," he said.

The civil liberties organization, the Open Rights Group, suggested that any new generation of digital rights management is likely to be unpopular with consumers.

"Consumers don't like DRM. They want to be able to play their movies on their computer, ipod, or whatever device they've bought, and DRM gets in the way. If movie sellers make it difficult for consumers to play their movies, then they will sell less films," said Jim Killock, Executive Director of the Open Rights Group.


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