Contribution to Digital Media Manifesto discussion

by Leonardo Chiariglione

on behalf of some experts attending the 65^th MPEG meeting in Trondheim

Background

During the 65^th MPEG meeting in Trondheim a group of 15 experts discussed the Digital Media Project (DMP).

There was agreement that the initiative was worth supporting and that one study case should be carried out and the result contributed to the Digital Media Manifesto (DMM) reflector.

Although important differentiating elements exist between different content types, at this stage there is merit in an analysis that is agnostic of the specific content type.

Table of content

1. Matching demand and supply
2. Hurdles in deciding digital content distribution
3. Conflict of expectations
4. Bit delivery
5. Value chain player remuneration
6. Interoperability of content flowing through the system
7. Issues in different content protection systems
8. Deployment costs
9. Compliance
10. Technology Licensing

1. Matching demand and supply (Marc Gauvin)

Digital Media change the capability of suppliers to provide and end user to access content

Tension between embracing new paradigms with their unknowns/promises and adapting old ones

"Matching demand and supply" is mostly about the former

Supply/Demand Before and After

Consequences of Changes

• Markets tend to fragment.
• Not all is for money.
• Content availability going up but per capita time for consuming is constant.
• The ‘consumer’ interacts and is intelligent, TV is the idiot box, access devices are smart.
• The consumer can be better informed.

Producer Strategic Advantage

• Before strategic advantage was based on both service and access to/control of scarce resources.
• In the Digital world there exists a much more level playing field for the production of content, more dependent on meeting personalized needs than controling resources.
• Client becomes producer.

Hard to Secure and Sustain Market Advantage

• The Conventional Economic Precepts are challenged when trying to reduce venture risk in the Digital Media world.
• Market predictability is not based on control from the production side anymore.
• Perhaps predictability may be based on a new treatment of the ‘client side’.
• May need to concentrate less on creating demand and more on identifying it.

Mobility of Value

• Before, value was scarce and not very mobile.
• Value in the digital world is abundant and extremely mobile
• Means of value interchange also abundant in the Digital Arena.
• Do we reduce access to Digital Media to make it fit the scarcity model?
• Or, do we depart from the scarcity model to accomodate abundance?
• Do we have a choice?
• How do we transfer abundant value in the Digital World so we can buy a house with it?

Conclusions

2. Hurdles in deciding digital content distribution

Beware that there is so much at stake that companies may be reluctant to try aggressive ideas

What is the problem

The vision of the Digital Media Project entails a re-shaping of the business environment that goes beyond mere evolution. This project is stated in terms that explicitly go beyond mere incremental progress, say from tape to disc based media. In these terms, a transition from physical to digital media has consequences that have no parallel within the physical world. The consequences inherently carry global impact, and fundamentally change both legal and business relationships between stakeholders. This lies behind debates such as ‘bits must be free’, the consideration of software and business process patenting, and the nature of copyright.

Stakeholders in this future include powerful industry sectors and consumer groups, each holding very high ambitions to see that their interests are advanced, or at the least are not destroyed, by the structural changes at hand. These interest groups are backed up by various laws, shareholders, and national interests that are often brought into conflict by the rollout of digital media and the global scope of the Internet.

Examples

Example: Patent Licensing

Example: Content Rights

Example: Legislative Agenda

Example: Content protection & rules

Importance of the issue

The scale and scope of what is at stake engenders a particularly difficult environment for experiment and compromise, when the rise or fall of global business and enterprise hangs on the results. The very scale of the Digital Media Project is itself an impediment to rapid or experimental adoption. It will be essential to find ways to allow industry space to experiment in ways that do not expose them to excessive risk. This may not be easy and no solution is presently clear.

It is unrealistic to expect these underlying dislocations to be amended within a short period, and it is unrealistic to expect that stakeholders will irresponsibly relinquish their own interests. Time is required to ensure the adoption of any new technology.

CD 10 yrs

MP3 10 yrs

IEEE floating point – took 10 years to complete!

Time is certainly required to see the wide adoption and support for something as complex as MPEG technologies. Especially as there are many compromises to be made in terms of technology licensing, patenting, access to rights in content etc.

Benefits from solving the problem

Reduction of perceived unacceptable risk to stakeholder interests

Better progress and compromise within underlying political and legal discussion

More scope for stakeholders to experiment with new business models

Conflict of expectations

What use consumers expect do of the content

What use rights holders expect will be made of their content

What support players on the value chain can provide to the expectations of both

Use Case - 1

Consumer purchases Music CD

She can play it on

She can play it in

Use Case - 2

Consumer purchases CD

She can

Consumer expects to enjoy the same benefits in the digital domain, even when the content is no longer fixed to the medium.

Consumer Expectations

Ease of Use of Technology

Replicate Use Patterns from Analogue World

Hurdles to Consumer Expectations

Value Proposition – Does the consumer feel that they have received a fair bundle of benefits for the price charged.

Legal – Will the consumer be able to exercise all of their legal rights having to do with their use and disposition of the digital media.

Hurdles to Technology Providers

Legal – Functionality that new and existing technology provides the consumer the ability to ignore certain legal restrictions but simultaneously have certain of their legal rights ignored as well.

Ease of Use – New technology to address the expectations of both Consumers and Rights Holders frequently requires more than merely turning on the product - Registration, authentication, updating SW, etc.

What Rights Holders Expect from Technology and CE Vendors

Current model (i.e. Outright purchase)

• To be able to exploit current business models
• Technology must be capable of enabling consumer to behave in the same way with digital goods
• That the freedom afforded to the consumer by digital technology does not jeopardise ownership of their IP.

Future models

• To be able to deploy new business models, not necessarily outright purchase
• To be able to relate directly to consumers without intermediation
• To be able to gather information about the consumption of content
• To be able to create multiple channels and multiple relationships across the value chain.

Digital Sleeping Policemen

The expectations of Consumers and Rights holders collide when

4. Bit delivery

Digital delivery is the main driver in the change of content supply/access relationship

• Physical media
• Physical delivery
• Over the air

We are far from exploiting the capabilities of digital delivery channels

There are cases where delivery channel upgrades

• Require huge investments
• Can be done with different technologies
• Decisions are not just based on economic resons

5. Value chain player remuneration

Distribution of content follows a Value Chain. Each link has a specific ROLE and adds a specific VALUE.

2 problems can be identified:

• The exact role of a link is not always well defined. Elements of a value chain are always trying to extend their role, beyond their level of competence (ie. A Record Label acting as a distributor).
• The value of each link must be well established and acknowledged. The sum of the values of each role cannot exceed 100% of the final price.

Consequences

• A critical link will block the chain, as to obtain higher value.( ie. An ISP will impose 50% commission for handling the billing -> sales price soars beyond market value)
• Disintermediation: when a role is not ackownledged to bring value to the chain, there is temptation to bypass or overtake this role. Removing a critical link may lead to a poor delivery of the content. Reducing the value chain to its bare minimum (ie. « from the creator to the consumer »), has never succeeded on a large scale.

Action Item: We should look at the ideal value chain and map it against the existing one.

6. Interoperability of content flowing through the system

Content distribution implies that content will flow across different players on the value network.

These players often rely on proprietary elements for the purpose of retaining a level of control of their business, leading to forms of restriction of content flow across the value chain

Translation/adaptation/conversion is always possible but at a cost that may negatively affect the economic viability of the distribution system

Insufficient interoperability is of particular concern in the end user domain because it may affect the cost of consumption device and the end user experience (e.g. ease of use, functionality, possibility to distribute content on multiple devices, etc.)

Interoperability dilemma

Voluntary investment drives creation of enough number of interoperable platforms.

Benefit of interoperability only became notable after two or more platforms reaches massive use.

Investors do not have motivation for interoperability between different platforms.

In the communication industry, some connectivity are obligation of service operators.

Appropriate technology, potentially combined with supporting legislation may insure the content accessibility among the different terminal.

No appropriate combination of technology and legislation is identified so far.

7. Issues in different content protection systems

The alternative – a single protection system

Analysis

Benefits

8. Deployment costs

Issue

9. Compliance

10. Technology Licensing