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October 9, 2006
The Revolution Will Be Downloaded
So today, Google announced that they’re buying YouTube which was big news.
Target threatened the movie studios about iTunes pricing vs. DVD sales.
Last week there was “Anti-DRM” day which was no news. As my roommate put it, DRM is what white buys who don’t have real problems complain about.
Tower Records gave up.
Meanwhile, I spent Thursday through Sunday talking to software publishers.
Here’s what I found out.
Boxes are Dead
Currently, when I buy software the process is something like this.
- Go to store/Amazon, see if it is in stock.
- Pay for item/order.
- Take item home/wait for UPS to deliver it.
- Open box, throw away crappy manual.
- Search through packaging, extract license card.
- Go to internet, install latest version from companies website.
- Type in serial number.
In other words, the box of software I got contains nothing of value.
Of course, this has been painfully obvious for awhile.
The thing is, the software industry has clutched onto this model of shipping boxes for years.
But software isn’t really a tangible good. When you buy software, you’re really negotiating with the software publisher for permission to use their ideas. It’s not a good, its a contract between you and the software publisher. The free software zealots talk about information being “free”. They’re not getting it. Sure, the bits on your hard disk are information, but the permission to use them has been granted to you by the software publisher in exchange for money.
That’s a fundamental principle of capitalism, you give people money, they give you something. So far so good. Where this has broken down is that the software model was more complicated then that. The software publishers wanted the process to be something like this:
- You give them money.
- They give you the bits.
- You promise not to copy the bits.
The first two steps are capitalism, but that last step is just naive. It’s never worked, even before BitTorrent. So its going away. It’s just taken the software publishers a long time to let go.
My Nephew Has Never Been In a Record Store
My Nephew has never been in a record store. He downloads music onto his iPod from iTunes, and sees no reason to go to a Record Store. The same thing is going to happen to software. However, I don’t see this as the death of software retail, I see that two things are going to happen.
Death of the Sales Drone
Half the people who sell software are going to stop or go out of business. Just like how small booksellers got driven out of business by Barnes & Noble, and iTunes killed Tower Records. If you want to hire a bunch of teenagers who don’t know anything to shove boxes, your business is going to die.
Really, why should I buy TurboTax from Staples when I can buy it from WalMart if they both have idiot salespeople? But if Staples had classes on how to use QuickBooks…
The Barnes & Noble Model
Barnes & Noble crushed the small bookseller because lets be honest here. The big giant corporation was less greedy then the small store. When I go to Barnes & Noble, its an event for me. I wander the whole store of 100,000 books, read some of them in the store, drink coffee, leaf through magazines, and walk out with $150 in books. Barnes & Noble understood that the best way to sells books was to put chairs in a bookstore.
Every time I’ve gone in an Apple store, its been packed with people. Happy people, talking to salemen who know their shit. Meanwhile, Apple is running free classes to teach people how to use their computers.
Apple has been opening a new store every 9 days. They’re one of the fastest growing retailers in America, because they are actually selling computers the way Barnes and Noble sells books.
That’s going to happen in software sales as well. The retail software stores that remain are going to throw out all the shelves of boxes of software, and replace them with computers with the software already installed so people can try it out. They’ll have something like 1500 titles available on each machine. If you want to buy the software, they’ll print you out a license code and sell you a better written manual then what the software publisher provides. Don’t think its going to happen?
It’s already been happening in the Mac market for awhile. Half the software I own, I downloaded a trial over the internet, and paid for a license code. Every mac has a menu item, #3 under the Apple menu that links to downloadable software provided by Apple. When I bought iWork, basically the only thing that was in the box was a DVD and the license code. In fact, QuickTime Pro is basically only a license code.
Want Dreamweaver 8? You can download it directly from Adobe. Sure they sell boxes, but they see how things are going. Pretty much their entire catalog is available as a download.
Enter iLok
The thing that is missing in all this is either DRM, or bad DRM. I’m sort of an optimist when it comes to people. I think that if you explicitly made people promise not to share software, they wouldn’t. But the software industry doesn’t do that. They pretend to have this model of selling a box of bits. Well, that makes people think that if they copy the bits they haven’t done anything wrong. Since the publishers didn’t explicitly extract the promise from them not to copy its not clear that they’re wrong either.
So enter some sort of Digital Rights Management. Adobe now requires you to activate your software before using it, which basically locks it to the computer.
This blows. Almost everyone these days ends up with a home computer and a work computer. Power users have a desktop, a notebook and a home computer. So Adobe ends up allowing you to lock it to two computers. If you get a new computer, you have to “de-authorize” one of the computers. If you don’t have access to the computer, you have to call tech support, which just cost Adobe $20 whether they give you access or not.
Microsoft does the same thing. As does Palm Source and numerous other software companies.
So basically, the #1 (Microsoft) and #2 (Adobe) software companies in the world have embraced DRM. Except it turns out that they’re both a bit behind the times with their DRM solution. Pro Audio figured out this problem a long time ago. It’s called the iLok:
Disclaimer: I work for PACE the maker of the iLok.
You’re thinking “A dongle?” Dongle’s suck, who want’s to have to carry around something to plug into their computer to authorize their software.
Let me tell you: I do. I don’t know what your experience has been with dongles, but I suspect that they were pre-USB 1st generation dongles.
The iLok is a second generation, which means that:
- It has good crypto. The iLok has never been cracked, unlike all the crappy previous generation of dongles.
- It stores multiple licenses on one dongle. Which means ALL your software can be authorized onto one dongle.
- It’s a hot-swappable USB device.
What this means is that the iLok get’s in your way the least of all of the other software DRM solutions. In Pro Audio, its common to have a work computer, a notebook, a home computer, a studio computer, and to upgrade them all every 4 months. With iLok, they unplug from one computer and plug into the other. The iLok, with their $50,000 worth of software licenses can travel with them as needed. So yeah, you have to carry a dongle around, but it gets in they way of your work the minimum possible.
It goes beyond that though. The real key to iLok though is ilok.com. iLok.com lets you move your software licenses between your own iLoks, and even transfer licenses to other users. It lets you as an end user manage your software licenses.
For software publishers, they can use iLok.com to deliver licenses directly to users. They also can use iLok.com to mix/match their products to produce bundles, provide discounts for software upgrades that enforce surrendering the previous product. (It’s currently a big headache for software publishers if people sell their old “box” software on eBay; people buy it, then want a discount for upgrading it…)
In short, iLok enforces the contract between the publisher and the end user in the least intrusive way.
Win/Win for everyone.
Pro Audio is a tiny portion of the software industry. Yet the portions of that industry that use iLok are the healthiest. There are basically two types of companies in Pro Audio these days: Companies that are going out of business (unless they have a rich corporate sugar daddy) or companies that use iLok.
So those companies are doing better, because of the iLok. And because the software industry in Pro Audio is healthy, customers do better because they have more choices, more software, and higher quality software. Software in Pro Audio has even gotten cheaper, because there is less theft.
Yet it goes beyond that. Because the software companies can trust their users, its become common for them to give their best customers a break. The more of a companies products you own, the bigger discounts they give you on upgrades. When bad things happen, they’re more willing to give you a break.
If they even need to. One of our customers at PACE had a fire. He sent his half-melted iLok in to us, and we were able to verify his licenses and send him a new iLok with all of his software intact. If his $50,000 worth of software had been in ‘boxes’ he would have been screwed.
I have 50 serial number emails
My only complaint about the iLok is that more software doesn’t use it. I have 50 emails saved with serial numbers for software I’ve purchased. Every time I get a new computer, I spend the first 2 weeks typing in new serial numbers.
It blows. I’d rather embrace good DRM like iLok then bad DRM like most companies cheesy serial number scheme.
The other day, I bought CoverScout from Equinix software. Except their sucky DRM ties me to my notebook, because its a MAC locked serial number.
Does Equinix really think they’re going to make money off their $19.99 program when I have to email their support the next time I get a computer in order to change serial numbers? Meanwhile, I can’t use their program at work.
Long Live DRM
So long live DRM. But bad DRM? Let’s hope that dies a quick death. Because the future of software/music/movie distribution is clear.
You’ll be downloading.
Posted by the at October 9, 2006 10:35 PM
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