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MARKET INTELLIGENCE FROM:
"Making the market for digital content"
CLICKSHARE AND DIGITAL RIGHTS MANAGEMENT:
Adding customer focus to content control
OVERVIEW
The
Clickshare Service was engineering from inception to be compatible with content-encryption
technologies which serve the Digital Rights Management (DRM) marketplace.
Clickshare’. customer exchange technology which works with standard HTTP, XML
-- and ultimately the open XrML spec (Backed by Bertelsmann Services Group) for
assigning usage rights. Clickshare is
able to authenticate users, log their activity and settle their charges for
purchase of any object which can be served in response to an HTTP request –
whether encrypted or “in the clear.” This makes Clickshare-enabled customers ideal
users of any content-control service.
EXECUTIVE SUMMARY
Clickshare Service Corp. has not identified any DRM solution which is incompatible with Clickshare. In all cases, some minimal amount of integration work will be required.
The
ability to integrate with DRM solutions stems from the difference in the design
philosophy of each. Clickshare addresses the publishing and digital content
environment from the perspective of the user -- managing users, identifying
users, recording user activity and purchases. DRM solutions originate from the
perspective of the content provider -- encrypting objects, transmitting them
along with a usage-rights voucher either attached or alongside, providing an
end-user client program for de-encryption, and in some cases providing for
second-use pass along.
Thus Clickshare "wraps" DRM's technical functionality with key missing
pieces of business functionality. Clickshare provides for the aggregation of
consumer relationships by one party and the referral of those users to a
plurality of content providers. The content provider can sell to a Clickshare
user any digital object which can be vended in response to an HTTP request. And
since all the DRM solutions identified below transmit objects in response to an
HTTP request, Clickshare is compatible with each. Clickshare's technology
doesn't need to know what is transmitted, only HOW it is transmitted.
All file types can be supported, encrypted or "in the clear." Clickshare
facilitates execution of payment either before the object is send to the
desktop or at some point later when the user seeks to "open" or
decrypt it for use or viewing.
Because Clickshare’s customer-exchange platform wraps around DRM and embraces it, DRM vendors generally perceive Clickshare as a potential collaborator.
MARKET ANALYSIS
As
of late 200, no DRM vendor had derived any significant revenue from content
sales and none has achieved ubiquity in the marketplace. Clickshare’s ongoing
DRM market analysis includes periodic conversations with strategic DRM vendors,
ongoing acquisition and review of analyst and trade-press reporting on the
subject, and review of vendor websites. Clickshare has entered into
non-disclosure agreements with at least six existing or potential DRM vendors
in order to facilitate the exchange of technical and market intelligence and to
maintain up-to-date knowledge of partnership opportunities.
Among the vendors Clickshare studies or regularly consults with are:
Adobe Corp. (PDF Merchant/WebBuy)
ContentGuard (Xerox-controlled/Adobe-Microsoft stakes)
Copyright Clearance Center Inc.
IBM
Copyright Inc.
InterTrust Corp.
Microsoft Reader (and Documents Rights Management System)
Preview Systems Inc.
Reciprocal Inc. (VC-backed by SoftBank, Microsoft, others)
Rights Market Inc.
SealedMedia Inc.
Digital Goods (f/k/a Softlock.COM (Softlock Services Corp.)
Recent
analysis and the judgment of the equity markets suggests that DRM vendors are
not getting traction in the marketplace. Valuations have plunged with the
dot-com market generally. DRM vendors are coming to be viewed as providing a
solution which is relevant to a mature or rapidly growing market. But the
solutions threaten to cripple the development of a nascent market for digital
content sales because:
(a) Encryption
seeks to stop consumers from what they want to do – easily buy and use content
(b) All
DRM solutions require end-user client software, which impedes fast adoption
(c) The
majority of DRM solutions “bind” use of the content to a specific machine on
which it resides, making the content non-portable.
DRM
AS DEKSTOP COMMODITY – Microsoft vs. Adobe?
Our
research suggests that the (b) requirement for end-user client software will
stall DRM adoption until end-user machines are shipped with or otherwise
acquire DRM clients as a matter of course. This suggests that no content-sales
solution should rely on DRM for a viable business model in the near term and
that DRM winners will therefore be those with access to the desktop. Some
sources suggest that Xerox Corp. is likely to close ContentGuard or spin it
completely off – possibly to Microsoft.
InterTrust may be for sale or looking for an alliance with Adobe.
InterTrust is the only DRM solution certified by Adobe. America Online Inc.
announced on June 26, 2000 that it would bundle InterTrust’s client on CD’s
containing AOL 6.0.
Microsoft’s
VP of technology in the business-productivity division, Dick Brass, is
co-chairman of ContentGuard’s board. If Microsoft took control of ContentGuard
it is likely that a Microsoft Reader/Passport/ContentGuard
vs. Adobe-Intertrust-AOL channel race could
erupt to push DRM software onto the desktop.
This will force other DRM players into the role of providing other
solutions which “wrap” the core DRM functionality. In such an environment, it
becomes important to content providers and user owners alike that open
competition exist in access to, management of and billing of content served via
the DRM “commodity.” This can be achieved
by orienting “wrapping” solutions toward customer extension and retention and
the ability to serve content in other ways besides just PDF and Microsoft
Reader formats (i.e., open HTML, XML, etc.)
Clickshare supports this strategy and is working with DRM vendors to
implement it.
RESEARCH / NEWS OVERVIEW
The
most relevant research on the DRM environment is a Sept. 18, 2000, Forrester
report, “Content Out of Control,” by Eric Sheirer (617-497-7090).
http://www.ecommercetimes.com/news/articles2000/000920-2.shtml
http://news.cnet.com/news
http://interactive.wsj.com/archive/(Search on “Content Out of Control” dated Sept. 19, 2000)
http://www.contentguard.com/news.htm
The
Forrester report concludes: “Consumers have spoken -- they demand access to
content by any means necessary.
Traditional publishers must focus on
beating Napster at its own game. They must create compelling services
with the content consumers want, in the formats they want, using the business
models they want." Sheirer writes that the best response for the record
labels is to move toward subscription services that use the open MP3 file
format and charge a flat monthly fee, making it feel free for consumers to
sample new songs.Clickshare supports
this approach. Clickshare provides the infrastructure for the aggregation and
settlement on a per-usage basis of royalties to the underlying bands or rights
owners whose tracks are downloaded, yet permits, fast, easy, privacy-protected
purchase by consumers on a per-item basis of resources outside the basic
subscription fee.
”When I look at the space, I look for vendors seeing DRM technology
that is only one part of a larger solution. Today when a DRM vendor talks to
one of their clients, the content company is really anxious to buy DRM because
they feel they have a big problem with piracy. But within a couple of years,
particularly in the entertainment space, that interest is going to dry up
because they are going to realize that isn’t a problem anymore. So they should
be looking for partners where the relationship goes beyond any DRM
relationship.”
(Source: Eric Sheirer telephone interview with Bill
Densmore, 10-17-00)
CNET.COM
writer Gwendolyn Mariano penned a “think piece” on Oct. 6, in which she quoted
analysts and content vendors on the E-books market, concluding in the last two
paragraphs:
"Even within the DRM industry, however, executives
admit that their technology can't stop all illegal copying. That, analysts say,
raises serious doubts about the wisdom of putting security issues ahead of
building a market. "Publishers are worrying too much about security
control," said Forrester Research analyst Dan O'Brien. "If this is
purely a defensive move, it's probably not going to succeed."
VENDOR-SPECIFIC ANALYSIS
Based
on Clickshare’s own direct contacts and research, here are some key points
about each vendor (alphabetical order):
Adobe Corp. (PDF
Merchant/WebBuy) – Because it owns the Acrobat distribution standard, Adobe has
a wide lead over others in understanding the needs and processes of content
providers. Versions of Acrobat from 4.05 and up ship/download with the WebBuy
module included. This provides for the handling of ContentGuard-encrypted
objects. Adobe itself has so far limited itself to providing a toolkit, but CEO
John Warnock says they may move to an “ASP” model, suggesting the company may
move into the transaction space, as well. See Reciprocal, below.
ContentGuard™ Inc. (Xerox-controlled/Microsoft
stake) – McLean, Va.-based ContentGuard, spun off from Xerox in April 2000,
immediately suffered a mass-defection of key engineering and marketing talent,
including the copyright-holder on much of its technology, Dr. Prasad Ram, who
is now with Savantech Inc., in Redondo Beach, Calif.
Might Xerox Corp. move to close or spin it off?
ContentGuard and Reciprocal collaborate on
the Electronic Publishing Clearing Service (eCRM) and ContentGuard works with
Adobe PDF files.http://www.contentguard.com/ePCS.htm)
Also see Reciprocal, below.
Copyright Clearance Center Inc. – A Danvers,
Mass.-based not-for-profit owned by the major worldwide publishers, CCC in mid-2000
was seeking a CEO to head up a for-profit spinoff which was piloting a DRM
solution for republication and second-use rights. Content would reside on
publishers’ servers, but user management and payment settlement would be
handled by CCC. The status of the spinoff effort is not known. Also see
iCopyright, below.
Digital Goods, f/k/a Softlock.COM (Softlock Services
Corp.) – Maynard, Mass.-based Digital Goods has shifted its focus from a pure
DRM solution to the “marketing and merchandising of persistently protected,
redistributable, rights-protected content
and would likely abandon its own DRM solution for Microsoft or Adobe if
either “gets good enough.” DigitalGood’s own technology works only with PDF
files. Its touts as its unique value the ability to allow downstream recipients
of a locked file the opportunity to click and preview contents to a level
defined by the rights-owner prior to being locked-out and prompted to buy.
Purchase, like SealedMedia and RightsMarket, can be negotiated with Digital
Goods central server without requiring a separate usage-rights voucher bound to
the machine. Clickshare is in talks with SoftLock.
IBM – The Electronic Media Management System (EMMS)
has been piloted with music downloads but is not in production with any
partners. IBM is refocusing its strategy toward traditional publishing and is
reformulating its technology. In
January, 2000, IBM said it was unveiling a new DRM solution to prevent the
re-use of downloaded music files when sent by one user to another.
Billed as an encrypted envelope for data,
IBM’s Cryptolope Live requires a digital key to unlock it.
iCopyright Inc.
Seattle-based, venture-backed iCopyright had been focused on providing
a financial clearinghouse for enterprises which seek to outsource the
management of multiple-use permissions for copyrighted print content. The
company, which sees itself as directly competitive with CCC initiatives, went
through a management reshuffle in fall 2000.
InterTrust Corp. – The Sunnyvale, Calif., NASDAQ-traded
company is the “granddaddy” in the DRM field and holds several patents which it
considers to be valuable. Tightly aligned with Adobe and with Reciprocal Inc.,
which licensed its technology and resells it in an ASP approach. InterTrust.
During 2000, InterTrust said in SEC filings that it has yet to realize any
revenues from content transactions and Reciprocal pilots appear largely to be
using other’s technology.
Microsoft Reader™ (and Documents Rights Management
System)
Microsoft’s entry is still a
work in progress. Initial reports said that anyone downloading the Reader
desktop client had to also register for Microsoft Passport™, Microsoft’s
multi-site Internet indentity management service. Amazon.COM, which said in
1999 when Passport™ was adopted that it would never use it, announced that it
would sell books in the Microsoft Reader™ format, but using a customized
version. Reader™, which incorporates
ContentGuard technology, appears to be part of a larger Microsoft effort to
develop direct customer relationships. One potential of Reader™ bundled with
Passport™ is the possibility that content can be protected by binding it to the
identify of the user who is accessing it, rather than the machine access is
sought form. This is a core value proposition of Clickshare, as well.
Preview Systems Inc.
Sunnyvale, Calif.-based Preview (NASDAQ-PRVW) is focused on
enabling “try-before-you-buy” music and software distribution across multiple
formats and using multiple DRM solutions. Partners include Reciprocal, Real
Networks, Microsoft, Warner Music, Adobe, Ingram Micro, Navarre, Sony Marketing
of Japan, Beyond.com, Netscape, EC Direct, ReleaseNow.com, somm.com, Softline,
Dustin and Prisma. Acquired Portland
Software Inc., in August, 1998, acquiring the ZipLock™ technology.
Initial backing came from SoftBank, Olympic
Venture Partners, France Telecom and Telos Venture Partners.
Has $80 million left from IPO.
Reciprocal Inc. (VC-backed by SoftBank, Chase
Capital, Venrock, Microsoft, others) – Buffalo, N.Y.-and NYC-based Reciprocal
has blue-chip backing, an ex-IBM CEO and a host of announced relationships,
including with Bertelsmann. Reciprocal has no DRM technology of its own, but offers
bits and pieces from InterTrust, ContentGuard, Adobe, Preview Systems and
Microsoft, and recently announded it would offers it customers payment
technology from QPass Inc. Reciprocal’s core differentiator is what the company
regards as a financial-services industry hardened backend processing center in
a secure Buffalo building. They want to provide an outsourced, end-to-end
solution to publishers, handling encryption, hosting, sale, customer support
and settlement. But this makes them expensive from an integration standpoint
and difficult to mix-and-match with other e-commerce aps.
Reciprocal does not appear to support RMA
file types from Real Media; only WMA (Windows Media Player).
Reciprocal/ContentGuard’s latest announced trial is at:
http://publishing.reciprocalrights.com/pearson/Other trials involve McGraw-Hill, Houghton-Mifflin
RightsMarket Inc. – Calgary-based and financed with
Canadian VC money, RightsMarket’s principal differentiator is the way they
manage access to content. Instead of a usage-rights voucher (essentially a
decryption tool) residing on the consumer desktop, bound to the machine ID
number and the content filed, RightsMarket also allows a potential second user
to acquire the voucher from a RightsMarket server. This adds the potential for
some level of portability of content objects, without sacrificing security, and
makes vending to wireless devices possible.
RightsMarket announced Oct. 2 that OutsideGuide.COM had selected
it to secure and manage a 75-publisher verticle-market content aggregation
website. Another reference customer is
the Canadian Broadcasting Corp.
SealedMedia Inc. – San Francisco-based SealedMedia
Is focused on secure sale of streaming and on-demand QuickTime content for the
entertainment industry. Unlike Adobe,
ContentGuard and Microsoft, SealedMedia’s SoftSEAL™ claims to deploy encryption
and digital signatures which work with a variety of file types, including:
HTML, PDF, GIF, JPG, MP3, QuickTime, Java Applets and others. Conceptually like
RightsMarket, the object contains everything necessary for a recipient to seek
access. Usage information not in separate voucher.
The company (http://www.sealedmedia.com)
lists 14 partners, including iCopyright, Rowe.COM, Savantech, and a unit of
Wolters Kluwer. SealedMedia is the only DRM solution-provider studied with a European
presence. Its engineering is located in Beaconsfield, U.K. Major investors are
3i Group, Crescendo Investors and Pond. File-type independence broadens
applicability and customer base.
CONCLUSION
Clickshare’s
position as a customer exchange platform which connects digital content with
user bases is agnostic to DRM technology solutions. Clickshare maintains
current awareness of the DRM marketplace, which is not yet commercially
launched except in a few niche arenas (software downloads) and is in talks with
at least five of the players. Commiting
to Clickshare-enabling content or users does not imply a commitment to use, or
not use, any particular DRM solution.
FOR MORE INFORMATION CONTACT:
Clickshare Service Corp.
477 Congress Street, Suite 1300
Portland ME 04101 (USA)
207-871-7000
EMAIL: corp@clickshare.com
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