All for One Unified DRM Solution Say “Aye”

With so many unknown variables swirling around pay-to-play online music distribution, the phrase “a day late and a dollar short” is
hardly applicable to research firms who step up to comment.

GartnerG2, the fairly new addition to Stamford, Conn.-based Gartner Inc., offered their perspective Wednesday in a
research report, titled “Digital Copyright Law: Protect Content – and Consumers.” The crux of the study is that the onus must be put
on the “Big 5” record labels (Universal, Sony, BMG, EMI and Warner Music) to agree to a standard platform for digital music
distribution for their business models to work effectively. Not surprisingly, the report echoed what most of the Jupiter Media
Metrix analysts (as well as those from Webnoize) had to say at last month’s digital music fest Plug.In last month in New York City.

GartnerG2 predicts that digital rights management (DRM), or the key process by which digital content is protected, will be
standardized by 2004. What is going on now, as the Big 5’s MusicNet and pressplay prepare for rollout possibly in September, is a
distinct lack of consensus over how digital music will be protected — even with Microsoft Corp.’s weighty
Windows DRM influence and RealNetworks Inc.’s RealSystem Media Commerce Suite.

This, GartnerG2 said, is detrimental to their businesses.

“As each label struggles to find “the right” DRM solution, they are simultaneously alienating their consumers and stalling the
economics of the proposition,” the report said. “Ultimately, consumers will vote with their wallets or they will go elsewhere if
they can’t get what they want online.”

P.J. McNealy, senior analyst for GartnerG2, said digital distribution needs to be “brain-dead simple” for users.

“…Any DRM solution deployed should work with all music software and hardware,” McNealy said. In order for this to happen, the Big
5 need to work together, and that doesn’t look hopeful before 2002.”

What do other analysts think? Webnoize analyst Matt Bailey somewhat agreed with the GartnerG2 report Tuesday, saying that compatible security software would mean less downloading on the part of the consumer — an obvious convenience. However, Bailey also told that the standard DRM issue addressed by GartnerG2 was “a minor issue, with consumer adoption of subscription services far more dependent on price, the quantity of music available, and restrictions placed on music files by record labels.”

Still, McNealy’s and GartnerG2’s evidence came in the form of a survey of 156 million Internet users they took up in June, in which they
found that nearly 50 percent of those polled listened to CDs on their PCs, with 25 percent claiming they listen to music downloads
from the Internet on their PCs. In the same survey, it was found that only 6 percent of the same demographic purchased digital music
downloads in the last 3 months. GartnerG2 then concluded that consumers have not fully accepted purchasing and downloading music via
the Internet.

So CDs are here to stay for awhile, right? That is what GartnerG2 feels, at least until a stand is taken to forge a unified DRM
solution. Even that will pose new dilemmas, the research firm said. Those come in three waves as the firm predicted: DRM viral
marketers to rearrange their business models; poorly implemented or restrictive locks will either stall the market or force
consumers to become copyright pirates; marketing or product plans that are based heavily on copyrighted content, or use identifiable
pieces of copyrighted material will have to be altered.

In conclusion, GartnerG2 called for the Big 5, technology firms and associated groups such as the Recording Industry Association of
America (RIAA) to work together (no snickering please). This, GartnerG2 believes, will ultimately facilitate the adoption of digital
content distribution on a larger scale.

“What happens with the music industry’s adoption of DRM technologies will serve as a leading indicator for other types of content
such as movies, video games, and print,” said Mike McGuire, research director for GartnerG2. “More importantly, is that DRM
implementations for each will have an enormous impact in getting consumers to shift from buying products — CDs, tapes, and books —
to buying these content types as services — be they subscriptions or pay-per-download.”

News Around the Web