[FTC Town Hall] Digital Rights Management FTC Town Hall – Intro and first panel

Bill Covington, Prof at UW Law School introduces the session.

Proceedings are being webcast at www.ftc.gov and will be archived and transcribed.

Mary Engle, Acting Deputy Director, Bureau of Consumer Protection, FTC. FTC is not trying to take sides on whether DRM is good or bad, but they want help in understanding how the technologies affect consumers and how to promote informed consumer choice. There is an avalanche of choices for consumer in procuring digital content, but consumers have a hard time discerning what the bargain implies. What are unfair practices mean with respect to DRM? Case a few years ago against Sony/BMG for putting DRM technology on CDs without adequate notification to consumers. Lesson is that sellers need to particularly careful in advance to disclose all measures taken. Limitations on use right must be conspicuously disclosed by sellers. Consumers and content owners alike benefit from clear disclosure. The marketplace may solve many problems. We’re here today to discuss how content owners can provide adequate information to consumers.

Fritz Attaway, MPAA –

We can’t have a debate about whether DRM is good or bad – without DRM, how can we provide consumers choice (???). He maintains that DRM is “an enabler of consumer choice and innovation”. Consumers should be informed “fortunately, DRM technology is for the most part transparent” – there’s an icon on DVDs showing that consumers can’t make copies.

Jason Schultz – Acting DIrector, Samuelson Law, Technology and Public Policy Clinic, Berkeley School of Law.

How do we make it the best it can be for consumers? It poses a serious threat to consumers, how do we mitigate it? Are consumers surprised when they can’t copy a DVD or play it in another country? DRM doesn’t report back when consumers are frustrated. Uses example of President Obama giving DVDs to Gordon Brown, which wouldn’t actually play in Britian.

Goals of effective DRM notice – meet consumer expectations, lower information costs for understanding consumer value proposition for digital goods, communicate unique risks that digital goods may pose outside of standard value proposition.

Why information costs matter – Value > price + information/transaction costs (the time energy it takes to figure out what’s going on). When Information costs > value = market failure. Consomers either don’t buy or don’t read. Example of CMU study on privacy policies (McDonald & Cranor) – would cost an average of $3k per year per consumer to read all the policies they encounter (200 hours).

3 information costs in DRM market – 1. Limitations on use/transfer; 2. Limitations on interoperability with complementary goods and services; Limitations upon continuation of service.

There are security risks, privacy risks, and legal risks.

IF labeling will help, it will have to help DRM align with expectations, lower DRM information costs, and warn/prevent risks.

Bill Rosenblatt, President, Giant Steps Media Technology Strategies

Plays the role of “informed moderate” in these discussions. What do DRMs govern that users might want to know about? What are the trends for each of these?

DRMs govern: Devices, Identities and authentication, extents of usage, and usage information.

Device trends – more connected, device sets growing and changing faster.

Interesting use of “domain” to define all the devices a given consumer owns and uses.

Subscription services are slowly growing, managed copying rights for DVDs, etc.

Held a poll on his blog “How should the FTC regulate disclosure of content services that use DRM?”

1. Mandatoray disclosure in detail, like food ingredient lists (39%)
2. Mandatory disclosure at a high level (31%)
3. Mandatory simple rating (15%)
4. Keep it voluntary (15%)


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