The carrot is the entertainment industries' promise of access to their copyrighted works. Add DRM to your iPhone and we'll supply music for it. Add DRM to your TiVo and we'll let you plug it into our satellite receivers. Add DRM to your Zune and we'll let you retail our music in your Zune store.
The stick is the entertainment industries' threat of lawsuits for companies that don't comply. In the last century, entertainment companies fought over the creation of records, radios, jukeboxes, cable TV, VCRs, MP3 players and other technologies that made it possible to experience a copyrighted work in a new way without permission. There's one battle that serves as the archetype for the rest: the fight over the VCR.
The film studios were outraged by Sony's creation of the VCR. They had found a DRM supplier they preferred, a company called Discovision that made non-recordable optical discs. Discovision was the only company authorized to play back movies in your living room. The only way to get a copyrighted work onto a VCR cassette was to record it off the TV, without permission. The studios argued that Sony — whose Betamax was the canary in this legal coalmine — was breaking the law by unjustly endangering their revenue from Discovision royalties. Sure, they could just sell pre-recorded Betamax tapes, but Betamax was a read-write medium: they could be copied. Moreover, your personal library of Betamax recordings of the Sunday night movie would eat into the market for Discovision discs: why would anyone buy a pre-recorded video cassette when they could amass all the video they needed with a home recorder and a set of rabbit-ears?
The Supreme Court threw out these arguments in a 1984 5-4 decision, the "Betamax Decision." This decision held that the VCR was legal because it was "capable of sustaining a substantially non-infringing use." That means that if you make a technology that your customers can use legally, you're not on the hook for the illegal stuff they do.
This principle guided the creation of virtually every piece of IT invented since: the Web, search engines, YouTube, Blogger, Skype, ICQ, AOL, MySpace... You name it, if it's possible to violate copyright with it, the thing that made it possible is the Betamax principle.
Unfortunately, the Supremes shot the Betamax principle in the gut two years ago [ed: 2005], with the Grokster decision. This decision says that a company can be found liable for its customers' bad acts if they can be shown to have "induced" copyright infringement. So, if your company advertises your product for an infringing use, or if it can be shown that you had infringement in mind at the design stage, you can be found liable for your customers' copying. The studios and record labels and broadcasters love this ruling, and they like to think that it's even broader than what the courts set out. For example, Viacom is suing Google for inducing copyright infringement by allowing YouTube users to flag some of their videos as private. Private videos can't be found by Viacom's copyright-enforcement bots, so Viacom says that privacy should be illegal, and that companies that give you the option of privacy should be sued for anything you do behind closed doors.
The gutshot Betamax doctrine will bleed out all over the industry for decades (or until the courts or Congress restore it to health), providing a grisly reminder of what happens to companies that try to pour the entertainment companies' old wine into new digital bottles without permission. The tape-recorder was legal, but the digital tape-recorder is an inducement to infringement, and must be stopped.
The promise of access to content and the threat of legal execution for non-compliance is enough to lure technology's biggest players to the DRM table.
I started attending DRM meetings in March, 2002, on behalf of my former employers, the Electronic Frontier Foundation. My first meeting was the one where Broadcast Flag was born. The Broadcast Flag was weird even by DRM standards. Broadcasters are required, by law, to deliver TV and radio without DRM, so that any standards-compliant receiver can receive them. The airwaves belong to the public, and are loaned to broadcasters who have to promise to serve the public interest in exchange. But the MPAA and the broadcasters wanted to add DRM to digital TV, and so they proposed that a law should be passed that would make all manufacturers promise to pretend that there was DRM on broadcast signals, receiving them and immediately squirreling them away in encrypted form.
The Broadcast Flag was hammered out in a group called the Broadcast Protection Discussion Group (BPDG) a sub-group from the MPAA's "Content Protection Technology Working Group," which also included reps from all the big IT companies (Microsoft, Apple, Intel, and so on), consumer electronics companies (Panasonic, Philips, Zenith), cable companies, satellite companies, and anyone else who wanted to pay $100 to attend the "public" meetings, held every six weeks or so (you can attend these meetings yourself if you find yourself near LAX on one of the upcoming dates).
CPTWG (pronounced Cee-Pee-Twig) is a venerable presence in the DRM world. It was at CPTWG that the DRM for DVDs was hammered out. CPTWG meetings open with a "benediction," delivered by a lawyer, who reminds everyone there that what they say might be quoted "on the front page of the New York Times," (though journalists are barred from attending CPTWG meetings and no minutes are published by the organization) and reminding all present not to do anything that would raise eyebrows at the FTC's anti-trust division (I could swear I've seen the Microsoft people giggling during this part, though that may have been my imagination).
The first part of the meeting is usually taken up with administrative business and presentations from DRM vendors, who come out to promise that this time they've really, really figured out how to make computers worse at copying. The real meat comes after the lunch, when the group splits into a series of smaller meetings, many of them closed-door and private (the representatives of the organizations responsible for managing DRM on DVDs splinter off at this point).
Then comes the working group meetings, like the BPDG. The BPDG was nominally set up to set up the rules for the Broadcast Flag. Under the Flag, manufacturers would be required to limit their "outputs and recording methods" to a set of "approved technologies." Naturally, every manufacturer in the room showed up with a technology to add to the list of approved technologies — and the sneakier ones showed up with reasons why their competitors' technologies shouldn't be approved. If the Broadcast Flag became law, a spot on the "approved technologies" list would be a license to print money: everyone who built a next-gen digital TV would be required, by law, to buy only approved technologies for their gear.
The CPTWG determined that there would be three "chairmen" of the meetings: A representative from the broadcasters, a representative from the studios, and a representative from the IT industry (note that no "consumer rights" chair was contemplated — we proposed one and got laughed off the agenda). The IT chair was filled by an Intel representative, who seemed pleased that the MPAA chair, Fox Studios' Andy Setos, began the process by proposing that the approved technologies should include only two technologies, both of which Intel partially owned.
Intel's presence on the committee was both reassurance and threat: reassurance because Intel signaled the fundamental reasonableness of the MPAA's requirements — why would a company with a bigger turnover than the whole movie industry show up if the negotiations weren't worth having? Threat because Intel was poised to gain an advantage that might be denied to its competitors.
We settled in for a long negotiation. The discussions were drawn out and heated. At regular intervals, the MPAA reps told us that we were wasting time — if we didn't hurry things along, the world would move on and consumers would grow accustomed to un-crippled digital TVs. Moreover, Rep Billy Tauzin, the lawmaker who'd evidently promised to enact the Broadcast Flag into law, was growing impatient. The warnings were delivered in quackspeak, urgent and crackling, whenever the discussions dragged, like the crack of the commissars' pistols, urging us forward.