Saturday, February 17, 2007

thoughts: the macrovision DRM letter

As a former MVSN employee, it was painful to read certain interpretations of Fred Amoroso's response to Steve Jobs' open letter. The MVSN strategy that's been unfolding for the last year starts (but does not end) with DRM, so it's a shame to see them painted exclusively as a "DRM vendor". It sells their vision short.

Note - none of what I'm writing here is proprietary information. I learned that lesson a long time ago.

The company hopes, as they describe in their PR, to help manufacturers of digital goods "protect, enhance and distribute" their products to "maximize revenue". That sounds good, but what does it mean? Let's look at some parts of their portfolio to find out.

"Protect" can be loosely translated as DRM. eMeta products are used to provide "access rights management" for the delivery of on-line content. The venerable FLEXnet Publisher (formerly FLEXlm) is about providing "access rights management" for packaged software. The portfolio of IP and services the company sells the movie industry is about providing "access rights management" for DVDs.

The thesis is that people creating digital goods won't go to market unless they can guarantee that their products will only be used by the people who are authorized to use them. Unless a customer's business plan calls for the explicit absence of DRM, an entirely valid approach. That's an argument for another day.

But when you add "enhance" and "distribute" to the MVSN solution stack, you see that the company is not just interested in DRM. For example, the company has a product from its InstallShield acquisition called FLEXnet Connect (formerly Update Service) that enhances software by adding a remote "update" hook to deployed software. And the Mediabolic capabilities are "software solutions for connected consumer electronics devices such as televisions, set-top boxes and digital video recorders". I'm sure they have other goodies that contribute to this vision. They certainly have a large amount of cash to execute on it - $438.7 million at the end of 2006. And their recently-reported revenue surge doesn't hurt either.

An end-to-end solution stack that connects manufacturers of all forms of digital goods to consumers is a big vision. I am a fan of big visions. I wish them good luck.

But I will humbly submit the following as a good-natured tweak to my former marketing colleagues:

Wikipedia describes the Flesch-Kinkaid Readability Test as follows:
As a rule of thumb, scores of 90.0–100.0 are considered easily understandable by an average 5th grader. 8th and 9th grade students could easily understand passages with a score of 60–70, and passages with results of 0–30 are best understood by college graduates. Reader's Digest magazine has a readability index of about 65, Time magazine scores about 52, and the Harvard Law Review has a general readability score in the low 30s.

Most states require insurance forms to score 40–50 on the test.

The Jobs Letter:

Flesch-Kinkaid Reading Level: 12
Flesch Reading Ease: 43.9

The Macrovision Response:

Flesch-Kinkaid Reading Level: 12
Flesch Reading Ease: 27.5


Salut et encore merci pour le poisson said...

Bob, as another former Macrovision-ite and one who has spent more time outside of the MVSN DRM reality distortion field, I'm going to call BS on you here.

Our friend Fred and the shareholders he represents (and whom he is hoping to please with his trenchant response) have one concern and one concern only: corporate profits. What Steve Jobs is proposing, if it was enacted across the industry players whom MVSN serves (primarily video, with a smattering of software), would decimate the value that Macrovision offers to the market. Who needs DRM if everyone suddenly agrees that selling content minus the digital condom creates a more satisfying experience for the customers. If this happens, let's just say I'd be glad that I have already cashed out on my options.

Now, at Macrovision we liked to delude ourselves into believing that DRM was a good that consumers wanted because it increased value by greasing the rails to encourage content producers to release their music, videos, games, software, print, into the digital universe. Sure, that is important, and if that is what it really did, the whole world would have adopted MVSN's technology by now.

Usability, not accessibility of the technology remains the single biggest barrier to adoption for DRM by vendors. And MVSN continues to struggle at this just like every other major vendor in the market. Customers hate DRM because it has a habit of locking them out of content to which they legitimately should have access. This becomes a determining factor for customers as to what and where they will buy their content.

The other fundamental problem with the DRM "Macro-Vision" as outlined by Fred and which is inherent to MVSN's strategy is this idea that consumers should pay to access content across multiple devices. Hello? What? Excuse me, but why? If I purchase rights to view, play, experience the content - it shouldn't matter what device I view it on. In an ideal world, I should be able to acquire the content and then decide where I want to view it - and it should, and will follow me in the future as I move from my car, to my office, to my phone, to my vacation home. I expect this is the world as Steve sees it and so do most futurists. The bottom line question is whether DRM remains relevant in such a world. In its current state, No, but in a more usable format, yes. We're a long way from there and as a result, especially for the music market, DRM remains a massive barrier.

So why did Fred write a letter in response to Steve Jobs?

A. It has been a slow news quarter for MVSN and Fred wanted to look like he was hanging with the cool kids and impress the analysts by trotting out an important response to the world changing Steve. i.e. he hoped to gild his own lily by drafting behind Mr. Jobs' attention grabbing talent.

B. He's desperate to shore up Macrovision's crumbling edifice that has stumbled along for 30 years without a single important innovation that was internally developed. Go ahead, name me one real revenue generating, innovative product that Macrovision has developed internally since ACP was patented by John Ryan. Right, everything was built through acquisition and I wouldn't say they have maintained even a consistent strategy in that area either. Lots of synergies being flushed down the toilet on a regular basis.

Look, I'm not bitter toward Macrovision, I just think we need to call a spade a spade. Fred talks a great game and I wish them the best of luck in pursuing their strategy. But the reality is that they are facing almost a Sisyphean task in implementing this enhance and distribute component. At best they will own niches, at worst they will blow $438 Million on small fry technologies that struggle to compete against the gorillas of the marketplace. It's not like they didn't do that with FlexLM. The NPV on that investment is a travesty and some of their other investments don't fare much better.

bob said...

It's curious that you call BS on me without speaking to my point - that I like big visions, and that the vision of connecting digital manufacturers to consumers via a platform that helps them protect, enhance and distribute that content is, in and of itself, sufficiently big to warrant my respect. But that's OK.

Whether I believe that they can execute on that vision is another matter entirely. Since my name is on this blog, and they know where I live, I need to be very precise in my language.

And now, to your points, M. Poisson:

1. To your first point: if video and music DRM "go away", the MVSN cash cow goes away too. It is no secret that the company acknowledges that it has been too reliant on copy protection IP profits for too long, and is working to build other businesses to take the place of music/video DRM when those go away. Because someday they will.

2. Software DRM is good for consumers - when it works, when it is invisible, and when it enables interesting new options for packaging and pricing. The market will conclude whether or not MVSN's software DRM solutions are any of these. But software DRM is very, very different from music/video DRM - software DRM is about packaging and protection, whereas music/video DRM is all about protection. My area of expertise at MVSN was software DRM (in addition to installation), not music/video DRM, as I think yours was (judging by your comments).

3. To your point of usability being the biggest barrier, amen brother. As long as DRM gets in the way of legitimate use, and is by association seen as a crass profit vehicle, it will continue to attract the sort of (righteous) vitriol it attracts today.

4. To the point that consumers should pay to have access to content across multiple devices, I think this is something for the market to decide, not technology. The second a content provider comes up with a DRM that empowers their customers to use their content in any way they want on all the devices they own is the day that this issue goes away. But since DRM is device- and provider-balkanized, a deadly combo, I see it unlikely for any vendor to get away with this. Unless. . .they own the distribution and consumption channels. Like Apple does. . .or MVSN hopes to be (see esp. Mediabolic). As I said, it's a bold vision.

As to why the letter was written, do you call their quarterly report a slow news item? If anything, I was surprised they dropped this PR stinker so close to the earnings call. After all the work they've done to try and define themselves as something other than a DRM vendor, here comes a letter that does exactly that.

And to your final point: when you've got a right to tax the entire VHS/DVD world, what need is there for new internal development? You can just buy and integrate. The trick is you have to integrate.

The mission of the current crew (and their fresh solutions approach) is to try and find new and novel ways to wrap their current rag-tag portfolio in marketing language that makes it more appealing. At the same time, One Would Hope they are working hard to write some new software. One Will Have To Wait and See.