Suppose you were working for a company, HoloMedia, that developed a new movie player that stored several movies on little clear, sugar-cube-like media. HoloMedia has developed and patented this technology, which uses holography to store 20 GB on these tiny cubes, which are rugged and handy. Consumers like the idea, and somehow you’ve convinced the folks that have movies and music to offer to let you put their entertainment offerings on your little cubes. HoloMedia is the only company that can make this technology, because it’s patented.
If consumers really do like this, you’ve got a monopoly. Worse, if this technology is better than DVDs and videotapes and movies on demand from digital cable and everything else, then eventually those other technologies might die out, and HoloMedia would become the gatekeeper of movies and music. They could then start raising your prices to pay for all the development you’ve made up until now. That’s the fear that Leander Kelly is promoting in Wired.
Is this OK? Has HoloMedia broken the law? Even if they haven’t broken the law, should there be one keeping them from doing this? The French think so. A law that forces companies to give away their intellectual property is working its way through French parliament right now.
It is possible for this monopoly to occur, for HoloMedia to make this wonderful new technology that’s so good that the entertainment industry is willing to put all their eggs in one basket and that consumers don’t even look for alternatives. It’s possible, but it’s not likely. And if HoloMedia were successful and drove everyone else out of the market, they might be able to raise prices arbitrarily, but at some point the consumers would complain and a new company would come along to compete.
Even Microsoft has experienced this. Unlike the theoretical HoloMedia, Microsoft didn’t just have better technology, they used unfair market practices to force others to use their products and extend their monopoly. That’s illegal. But even though they broke the law, there are still alternatives that survive, such as Apple, Web applications and Linux. If the French law were to be passed, then what HoloMedia developed would be taken from them, patents aside, and given away to their competitors, all in the name of protecting the consumers. What would you do? It’s quite likely they’d not risk giving away this proprietary information, and simply abandon the French market. So a law, presumably intended to protect the French consumer, will simply punish them.
The French law “requires companies that sell digital-music files in France to open up their digital rights management systems so that the files can be played on any device.” Right now, this is basically aimed at Apple and the iTunes Music Store. While it is not impossible to download music from Apple and play it on other players, it certainly is inconvenient (actually, about as inconvenient as making a cassette tape used to be, maybe less so). If the law were to pass, Apple would either exit the French music market, or be forced to open up their digital rights management software so that competitors could play music bought from Apple, too. In doing so, their whole business model would fail, and their hard work at developing a distribution network that works and also supports sales of their hardware would be stripped from them by government fiat. Would you want to develop new technology in this atmosphere? Will this foster advancement?
We don’t have to like digital rights management (which I believe, in some cases, violates the fair use clause of the Constitution!) but we are not, at this time, required to buy it. I don’t buy my music from Apple because I don’t find it to be good value. I buy CDs and rip them myself for my iPod or whatever player I prefer. We have a choice. Hopefully Apple leaves the French to their meddling and walks away.
[Update: 23 March 06]
I completely missed a better analogy! Would France’s proposed law require Microsoft to make it’s X-Box games playable on PlayStation? Isn’t that a monopoly? After all, entertainment vendors, other than Microsoft, make games that work only if you buy Microsoft’s hardware… You get the idea.