Rights issue
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Digital rights management is about more than music piracy. The enterprise market will be much bigger.
When Microsoft agreed to settle its long-running legal wrangles with arch rival AOL Time Warner in May 2003, it signalled the start of a new era for digital content.
Both parties needed to settle the dispute so they could move on to establish themselves as leaders in the digital assets management market. Microsoft was keen to take poll position in the embryonic market for software that protects, manages and commercially exploits digital assets. AOL wanted to be the primary hub for content access and distribution.
AOL CEO Dick Parsons says his company's adoption of Microsoft's digital rights management (DRM) technology is "the most exciting part of this agreement".
"We are asking other media groups to adopt the technology [too] because it will significantly accelerate the adoption of digital media. Piracy of digital [assets]
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Parson's point is not only relevant to the music, video and software industries. Organisations from all lines of industry need to protect their digital assets. In one survey, PricewaterhouseCoopers found 138 companies that had lost between $35 billion and $39 billion because of intellectual property theft and corporate leaks. Most thefts were of research, customer lists and financial data.
So while DRM continues to create headlines in the online media and music industries, it is gaining a foothold in the corporate market. And the DRM software suppliers that once targeted the music and media companies are beginning to respond to this opportunity.
"When we started out, there was a lot of hype around DRM in the media and publishing industries - for example with eBooks. So like many other companies at that time, we targeted that market but it never really materialised," says Bruce Gitlin, vice president of business development at ContentGuard, a DRM supplier that span out of document processing and management giant Xerox in 2000. "In my view, the enterprise market will be much bigger."
Embryonic market
At present though, the market for digital rights management software is tiny compared with the rest of the software industry. "If you look at the companies supplying DRM products at the moment they either sell media players - of which DRM is a small component, or they are 'pure plays' that only sell DRM. But their revenues tend only to be about $2 million or $3 million," explains Dario Betti, an analyst at market research company Ovum.
But a number of factors are speeding up the DRM market's growth. One of the greatest drivers will be increased regulation and legislation of how organisations manage and distribute data and documents.
Two major pieces of legislation in the US, for example, are the Health Insurance Portability and Accountability Act - which regulates how patient information is handled - and the Gramm-Leach-Billey Act - which requires financial institutions to protect non-public personal information from unauthorised access. These laws will stimulate sales of DRM because they require organisations in these sectors to create an audit trail of information both inside and outside their corporate networks.
Casting that net more widely, the Sarbanes-Oxley Act, passed in July 2002 in the wake of numerous paper-shredding and email purging scandals at companies such as Enron and Arthur Andersen, includes provisions for criminal charges if documents required for auditing purposes are destroyed.
Productivity is another important driver of DRM market growth. By collaborating on projects online - for example, sharing documents, software development, or online discussions - organisations can shorten production times and save money. Games publisher Electronic Arts, for example, uses software that 'wraps' parts of its game designs in an encrypted 'envelope' so only authorised parties can make changes and outsiders cannot pirate early versions.
Persistence, persistence
But many organisations have already invested in some form of document or content management system, and may also have security or authentication technologies to sit alongside this. Do they need a separate digital rights management technology?
Alan Cornwell, CEO of DRM software company SealedMedia, says organisations must augment current systems with DRM. "Document management systems are protected throughout the workflow of a document in that system," he explains. "But as soon as that data has been taken out of the system - for example by downloading it to a corporate portal - you lose control."
The main difference with DRM, says Cornwell, is that access and denial policies are built into the data and therefore stay with it. The DRM suppliers refer to this as 'persistent' protection of digital assets. And increased audit-related legislation could open up a huge market for this capability.
Soon though, document and content management vendors may try to buy some of the pure-play DRM companies so they can add persistence to their products, suggests Betti from Ovum. "The big names in corporate content management will be interested in adding these features to their portfolios, so we could see some consolidation," he says.
One company that is likely to trigger much of that consolidation is Microsoft, which plans to enter the enterprise market for DRM when it releases the next version of Office this autumn. According to Stuart Okin, chief security officer for
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"Most rights management systems today focus on organisations' file systems or directories rather than the data itself," says Okin. "WRM is an infrastructure upon which businesses can put applications and embed rights management in them. No one has this technology yet, so we're at the leading edge."
However, some analysts are sceptical of Microsoft's claim to be the pioneer of this market. Scott Lundstrom of AMR Research, for example, warns that WRM will only police access to data in Windows applications, which could lead to an element of supplier lock-in. In response, Okin argues that WRM is built on the open rights expression language XrML (see box on standards), so organisations can build WRM into other, non-Microsoft applications using its software developer kit. But building these interfaces is likely to be time-consuming.
Sector shaper
However, Microsoft's entry into the DRM market will be a positive driver. "Clearly, Microsoft has huge market clout - it validates the market we're in," concedes Cornwell of SealedMedia.
But the market validation won't happen overnight. Only a small proportion of organisations will deploy Office 2003 in its early release phase and it will need to gain critical mass before customers embed policies in documents and exchange them with other organisations.
Furthermore, the industry has yet to agree on a single standard for expressing rights to view digital content. Although a number of suppliers support XrML, many DRM systems or DRM add-ons to existing packages are still proprietary, and larger organisations could end up owning several different and incompatible DRM technologies that will need to be integrated for specific purposes.
Ultimately, most organisations will want to see evidence of the business benefits others have achieved from this technology before they buy, concludes Betti from Ovum. But evidence of what could happen to organisations that do not have DRM could also be a key driver. "What this industry really needs is a big lawsuit over a breach of confidentiality," says Betti. "Then there will be a great push towards DRM."
