Digital piracy management

Thierry Rayna of the Internet Centre at Imperial College London and Ludmila Striukova Department of Management Science and Innovation, University College London, point out that privacy issues have come to the fore as e-commerce has matured. One area of particular concern to those involved in civil rights and data protection is the use of so-called Digital Rights Management (DRM).

While DRM provides a way of protecting the copyright holders’ intellectual property in music and video files, it is a serious issue for consumers because of privacy concerns and a lack of flexibility when using files among their personal media players and computers. This has considerably undermined the adoption of DRM and, thus, its ability to reduce piracy.

The main advantage of DRM, they explain, is to prevent piracy, thereby maintaining a high demand for legitimate products and enabling firms to recover initial investment costs. DRM also has crucial additional benefits in that it allows the copyright holder to retrieve information about the individual using the file as part of the activation of the music or video file they wish to use. “This revealed information can indeed be very valuable for firms, since it enables them to use price discrimination and increase their profits,” the researchers explain, “This is precisely this collection of information that is criticised by the proponents of piracy.”

Indeed, one of the greatest concerns of the consumers is that, by using personal information, firms would be able to uncover the true value of each media product for each consumer. Instead of charging the same price for every product and for everybody, they could instead charge a very high price for products considered as very valuable. For instance, Amazon used personal information collected from its customers to charge different prices to different clients for the same DVD.

The researchers have now outlined two approaches to solving the dilemma of how to fight piracy and yet not compromise consumer privacy. Their first solution consists of sharing the extra profit obtained by price discrimination and rewarding consumers for revealing personal information. While such a system is based on price discrimination, which means that consumers pay for each song, album or film a price that corresponds to its actual value, a safeguard is introduced in the form of a partial refund for all much valued items. This means that consumers never pay more than the regular market price and are, thus, protected from the negative effect of price discrimination. At the same time, there is a benefit for consumers, since they can now purchase products they do not value much for less than the regular market price. They can, thus, consume a large quantity of products that they would have not otherwise purchased (but most likely pirate, if given the chance).

Rewarding consumers for disclosing personal information has proven effective many times online. It is a the core of Google’s business model, Google Mail, for instance, offers several gigabytes of “free” storage space in exchange for permission for Google to index their emails. Similarly, Microsoft's SkyDrive is set to increase its online storage space for individuals to 25 Gb. Millions of users worldwide are quite happy to forfeit some degree of privacy in return for this “free” email facility and large amount of storage space, as well as the being able to search their email archives quickly. The drawback of such system, however, is that it relies on advertisement, which is often regarded a nuisance by consumers. Unsurprisingly, services which offer free music or films in exchange for watching ads have had so far a limited success.

This rewarded price discrimination will work best with digital products that are consumed repeatedly, such as music, software, games, and video, but will not work so effectively for movies or books. The team has thus devised a second solution that introduces a different type of DRM system that aims to make digital goods rival, thereby leading to anonymous DRM.

This second approach would involve simply tagging the digital product with a unique code that would retrieve no personal data, but would prevent the same download from being played on more than one device at a time. In addition to precluding piracy without compromising privacy, such a system would enable consumers to behave with digital products in the same way they do with any other: protected products could be consumed in many different ways and locations and could also be lent to friends.

The researchers suggest that whatever solution is used to address the privacy concerns of consumers and to attack the piracy concerns of producers, a serious change of strategies is needed if DRM is to be used to its full potential.