Retailers call for download standard

NARM: Concern over iTunes prompts call for 'interoperable' DRM

By Susanne Ault -- Video Business, 8/3/2006

AUG. 3 | With digital music downloads continuing to eat away at CD sales, music retailers are growing concerned that the use of proprietary digital rights management systems could freeze them out of the download market.

The National Assn. of Recording Merchandisers issued a statement this week on the eve of the group’s annual convention held Aug. 2-5 calling on record labels and device makers to adopt “interoperable” DRM technologies so music downloaded from any legal Web site will play on any consumer device.

“Efforts to grow the legal digital marketplace will be derailed if the entertainment and technology industries do nothing to eliminate the confusion, frustration and disillusionment consumers encounter when they cannot seamlessly enjoy their entertainment on a variety of systems, services or devices,” the statement said. “Retailers will also be hampered from effectively performing their unique and valued role to help advance digital delivery and successfully competing to deliver digital entertainment in compelling ways that consumers desire.”

The main object of NARM’s concern is Apple Computer’s iTunes service.

According to NPD research, Apple commands as much as 80% of the legal online music market. But tracks from iTunes will play only on Apple’s iPod players thanks to the computer maker’s proprietary DRM system, called AAC.

Similarly, songs downloaded from other online services using other DRM systems will not play on iPods, preventing competitors from selling downloads for the most popular brand of portable music players.

Concerns about the use of proprietary or incompatible DRM systems is not confined to the music business, however.

Last week, the DVD Copy Control Assn. formally announced new rules that will allow downloaded movies to be burned onto blank DVDs using the same Content Scrambling System DRM used on commercially manufactured DVDs.

That will ensure that movies burned at home or in-store will be compatible with all set-top DVD players.

“The creation of new ways to legally create secure DVD content is the logical next step to answer industry and consumers’ demand for additional legal digital distribution alternatives,” DVD-CCA chairman Chris Cookson said. “Allowing the creation of high-performance protected DVDs in the business or at home that, until now, could only be mass produced in factories is another major step forward.”

The announcement comes just as the first handful of movie download-and-burn services are coming online, using a variety of different DRM systems with varying degrees of compatibility with each other and with set-top DVD players.

According to Cookson, who also serves as chief technology officer for Warner Home Video, among the first applications for CSS-enabled download and burn will be in retail kiosks, although the DVD-CCA statement did not reveal which retailers might be involved.

Although the DVD-CCA agreement might head off the proliferation of incompatible systems in the movie industry, music downloads remain difficult competitive ground for retailers because of Apple’s dominance.

Tower and Trans World’s F.Y.E. stores are among chains that have launched music downloading services this year, but their reach remains limited.

At a test F.Y.E. outlet in Albany, N.Y., an in-store kiosk allows customers to download music onto most media devices except for iPods.

Trans World expects to install similar kiosks in 20 to 25 outlets by the end of the year.

Similarly, downloaded songs off Tower’s new TowerRecordsDigital.com site will play only through the Windows Media computer infrastructure, which remains incompatible with iPod.

“Absolutely, I wish that [our songs] would play on iPod,” Tower VP of business development Jason Munyon said. “But we are happy to experiment and try out the digital download store with a brand that people have come to trust.”

Trans World chief financial officer John Sullivan and other retailers think a unified DRM might be adopted once downloading becomes more widespread. To maximize revenue, record labels, studios and other content providers will likely be moved to seriously fight for interoperability among consumers’ digital devices.

“[Apple] has the largest share of what is an infant market,” Sullivan explained. “[Standard DRM] may become reality once downloading is more popular. We support NARM’s position. They are taking the right approach.”

But others doubt that Apple’s DRM redoubt will be taken easily.

“To chase it and say it’s not fair because it’s not the standard, well, you should have thought of the idea yourself,” said Tom Rosenbaum, CEO of media kiosk provider Polar Frog Digital.

Because of limitations with personal digital devices, Polar Frog has centered its business model on installing kiosks that download and burn films onto DVD.

Rosenbaum does wish that Apple soon agrees to license its technology to outsiders. That would help Polar Frog and retailers reach the majority of digital device downloaders, who own music or video iPods.

“If you can’t force [Apple] to be standardized, maybe it would be more attractive if [competitors] paid to play,” Rosenbaum said. “Maybe it could be another revenue stream” for Apple.

NARM is happy that this issue is at least being debated.

“We need to have a dialog and bring everything to the table,” NARM president Jim Donio said. “All of our informed points of view [put together] are what’s best for the consumer.”

Paul Sweeting contributed to this report