We attended the CTIA’s (Cellular Telecommunications and Internet Association) Fall show a couple of weeks ago in San Francisco, along with the Billboard Mobile Entertainment conference, to check on the latest developments on the mobile content DRM front.
With all the activity around DRM-Free music online, we were wondering how that will translate into the mobile sphere.

Discussions with a number of content providers, mobile carriers, and technology enablers revealed that the majority of content providers are not willing to give up the DRM on the mobile channel. They would rather wait and see how DRM-free models work out in the online world before they decide on how to proceed in the mobile domain.

Specifically, we can categorize our conversations into three types:

Mobile DRM as the Security Blanket
The music industry, faced with “serious challenges” (as Quincy Jones put it in the Billboard Celebrity Q&A session), is now more sensitive to monetizing its content the best way it can. Mobile music today constitutes 50% of digital music sales. From a global perspective, the mobile channel may be the only bright spot in terms of secure music distribution. Therefore, record labels see DRM-free music initiatives online mostly as experiments and are not in a hurry to extend them to the mobile market. An accompanying sentiment is that consumers are used to paying for ringtones, and that can carry over to song downloads as well.

Matthew Yun, Director of Music Services for RealNetworks, believes there is an inherent conflict between going DRM-free and supporting superdistribution. Superdistribution is valuable but DRM-free may be more popular with users. As a side note, we heard a rumor that EMI and Universal Music Group are preparing for DRM-free mobile music, along with Independent Online Distribution Alliance (IODA), one of the major indie digital distributors. Nokia also says it is in discussions with key industry players about providing DRM-free content.

Mobile DRM as a Monetization Engine
Most mobile video and mobile TV providers come from a TV background, where they are used to monetizing content using advertising. Cyriac Roeding, EVP at CBS Mobile, answered our DRM question as diplomatically as possible: Key for us is not protecting the content; we are after monetizing the content. So, putting advertising with our content can make us happy. MediaFLO, Qualcomm’s mobile TV broadcast network, allows advertising, as does Sprint TV. We will only use DRM as a monetization engine when needed.

Mobile DRM as the Business Model Enabler
>Adam Ritter, VP of wireless at Major League Baseball Advanced Media, says DRM is very important for their mobile sports content. Their content is subscription-based, hence it requires DRM support. He also believes DRM can also enable easier content sharing and content discovery. Brett Leary, Verisign’s Product Manager of Storefront Solutions, believes superdistribution is still very interesting, especially to mobile carriers.

The sobering realization underlying the many discussions at the show was that mobile content business in the US is not growing as expected. So, the industry is trying to determine the right balance between paid and ad-sponsored mobile content business models. That determination, which will be a joint decision between the mobile carriers and the content providers, will have implications on if, how, and when mobile DRM should be used.

Moving forward, Joel Espelien, VP of Strategy for PacketVideo (owners of mobile DRM technology company SDC) believes that we will see more content convergence across the three screens (Mobile, PC, and TV). We’ll need to transfer content between mobile phones and home devices, and between mobile phones and removable media. Supporting secure transfer of content across the three screens will require seamless support for various DRMs. “From our perspective, the picture is getting more complex. In no way, do we see the DRM disappearing.”

Azita Arvani is Principal of Arvani Group.