Implications of Digital Rights Management for Online Music – A Business Perspective

Abstract

This paper will examine and categorize potential business model scenarios for online music. The virtualization of music leads to market uncertainties. On the supply side, the offering party might not be able to sufficiently privatize online music by using digital rights management technologies. On the demand side, with a changing cost structure for digital goods, consumers might not be willing to pay directly for digital goods so that revenues would have to be collected indirectly by public or private entities. As a result, business models for online music can be categorized into four scenarios. In the first scenario, online music is used to promote the traditional offline business while in the second scenario, consumers are willing to pay for additional services to access online music. The third scenario is significantly different from the first two scenarios as music providers are expected to be able to protect their content by using digital rights management technology. In the fourth scenario peer-to-peer technologies allow consumers to use a mechanism called super distribution with which they can share and recommend songs. The paper concludes with a recommendation to music companies regarding privacy and strategic positioning.