The conversation is eternal.  In a never-ending quest to out-Apple Apple, Internet music download sites are continuing to invent new ways to attract buyers.  (See article.)  Apparently, the iTunes behemoth represents a market too big to be ignored by the music companies themselves or entrepreneurs with “a better idea.”  New download services seem to pop up all the time, each of them with a better idea about rights management, pricing, convenience, or some combination of the three. 

Better Ideas for Music Downloads?
Just recently, we’ve seen new ideas from Qtrax, Spiralfrog, AmieStreet, Ruckus Network and Lala.  Perhaps more importantly, equally-sized behemoths like Amazon and Wal-Mart are getting into the act as well.

The music industry is warming to these new download models for two reasons: a viable alternative to decreasing CD sales, and a way to gain bargaining clout with Apple and its iTunes stronghold by creating alternatives to iTunes.  But, the same old problems exist.  How do I compete with Apple’s price and convenience, and legally control the distribution of the content so that everybody who has a value investment gets a fair return?

As for price, perhaps Qtrax Chief Executive Allan Klepfisz said it best when he noted “The idea is to make a better version of free.”  Qtrax, Spiralfrog and Ruckus Networks are offering downloads free to consumers supported by advertising sales.  AmieStreet has a new take on the price equation, making songs free at first, but having the price inch up as high as 98¢ based on the popularity of the tune.  In this case, popularity is measured by the number of downloads.  As usual, Wal-Mart has undercut the Apple threshold by offering unfettered tunes free of DRM for 94¢ instead of iTunes $1.29, and DRM-encumbered music for just 88¢ versus iTunes 99¢.  Amazon’s pricing scheme is unclear. 

Are These Ideas More Right?
But price is not the whole story.  Rights management is also key to online music sales; music companies must feel they are getting reasonable compensation for themselves and their artists.  None of the download outlets has access to the full catalogue of music from the major record producers.  Most new outlets are promoting rights-free downloads (with various pricing schemes), but that is a further restraint on the number of tunes that are made available at the price points being applied.  Trust in the technology to give fair value for use remains a stumbling block.  Like iTunes, Wal-Mart is attempting to put a price on rights and give a value to trust for fair use.  For some merchants, control of the technology to create content management (e.g., Apple’s FairPlay) often leads to control of the content rendering devices that can deal with that technology (e.g., an iPod).  So, the value equation for DRM expands to the devices as well as to the value chain for music producers.

Trust, particularly digital trust, is a big factor.  It is at the core of sharing music downloads and, now, even returning them.  Among other things, start-up Lala is planning to allow returns of downloaded songs a user doesn’t like.  Lala’s founder, Bill Nguyen, admitted, “There’s a significant amount of trust involved….But it’s unsustainable if we don’t do it right.”  Volume 3 of the Digital Trust series, “Intellectual Property Protection: Minding Your Mind Power,“ provides a more complete treatment of DRM as a digital trust technology.

No End in Sight
There is no end in sight to this story of fair value return for content.  In fact, the story gets more intricate with the inclusion of media beyond audio.  For example, NBC will begin offering free downloads of its most popular TV shows in the next few months under a service called NBC Direct.  Having appropriate rights management for the shows, which include “The Office” and “The Tonight Show With Jay Leno,” is a key factor to making this breakthrough service work.  The shows, which will be available the night they are broadcast and will contain ads that can’t be skipped, are not transferable to other computers or disks.  After seven days, the shows (files) essentially self-destruct.  So, rights management is a big part of fair value capture for NBC Direct.  An NBC executive emphasized the importance of rights management, asserting that “piracy was and is our No. 1 priority.”

But wait – there’s more!  In addition to the free downloads, next year NBC plans to offer downloads for a fee, without ads, that are transferable and do not self-destruct.  This is a classic example of digital trust, in the form of rights management for content, as a key enabler of new business value.  This kind of value creation through digital trust for intellectual property (IP) is also described in Volume 3 of the Digital Trust series.

Rights in a “Liquid” Form
One of the irritants in many rights management techniques is the need to have rights-managed content transfers to a PC, and then controlled transfers to subsequent rendering devices (players).  As technology continues to advance, the presumption of a specific platform for receiving and rendering content becomes less and less plausible.  One of the main reasons consumers seek to have rights-free versions of tunes is to be able to play them on any kind of rendering device.  Even today, companies like Lala are offering a direct download to the player (in this case an iPod), bypassing the PC altogether.  That doesn’t eliminate the rights management on the iPod (songs cannot be transferred elsewhere), but there seems to be value in eliminating that interim step…especially if the song is somehow “free.”  And, it’s a first step to the ultimate “liquid platform” of players of all types.

As technology continues to make the platform more and more irrelevant (more liquid), rights management technology has to keep up.  Otherwise, the clash between fair value and fair use will continue forever.  In the end, the only thing that will matter is the application itself, not the platform on which it sits.  Volume 5 of the Digital Trust series, “Liquid Security: Digital Trust when Time, Place, and Platform Don’t Matter,” explores the emergence of the liquid enterprise and the digital trust that is helping to capture value in this new model of operations.

The Right Right Will be Mighty
New forms of content, particularly in packaging, distribution and rendering, are possible with digital trust for IP.  When flexible and fair rights management is combined with the liquid security that makes the application pre-eminent (not the platform), then we have an explosion of value on our hands.  This is how enterprises can use digital trust to make the most of their valuable IP.

For the first time in two years, Ford Motor posted a quarterly profit!  (Article.)

If you are a Ford shareholder or drive a Ford, that’s wonderful news.  And, we can hope for a sustained turnaround for the struggling auto maker.  But Ford would not even have a shot at becoming competitive if it were not for the value of its intellectual property (IP), including the blue oval logo.  In its quest for cash to fund a restructuring, Ford mortgaged its North American factories and its IP for a $20 billion loan.  Even without knowing exactly how much of that loan is secured by factories and how much by the IP, we know that the loan would not have been possible if the IP, including the brand value of the blue oval logo, had not been included as collateral.
It seems a bit extreme, but that’s certainly one way to monetize IP!  As with anything used as collateral, the lender must continue to value the IP high enough to justify the credit that’s been extended.  So, Ford must work to preserve the value of IP assigned to the loan.  In this current time of tightening credit, the value of IP will probably even need to rise, else credit terms will have to be revised.  If you thought IP was just something warm and fuzzy, think again.  IP, including brand value, has real value, and that real value can be used in real ways.

Companies who recognize this real value pay close attention to ways to optimize the value of their IP, even while protecting its use.  Certainly, the application of information technology security matters a lot in IP protection strategies.  For example, the Chief Marketing Officer (CMO) Council has recently completed studies that show just how important security is to brand reputation and the resulting value of the brand.  Since the great majority of our IP is created, stored and exchanged in soft copy, an IP optimization strategy that doesn’t include security technologies is doomed.

Some enterprises are finding new ways to optimize the digital portions of their IP protection strategies, using new technologies for digital trust.  The IP Protection volume of the Digital Trust report series examines how IP value can be optimized with creative applications of new technologies and new approaches.

The irony of this research is that strict protection of IP is not the answer.  IP must be acknowledged, accessible, in useful formats, monetizable, and accountable as well as protected.  Otherwise, its value (even as Ford has chosen to use it) is not available.

Brand value rises and falls on a number of factors, including the amount of trust that consumers and enterprises assign to the brand.  And, Ford’s problem with IP value (including brand value) continues.  Though not necessarily attributable to problems with digital trust, the latest global brand value rankings show that Ford’s brand value has slipped 19% in the past year.  That could mean trouble for the credit-based restructuring plan at Ford.

Sometimes we think of intellectual property just like clouds – soft, fluffy, interesting to look at, but vaguely unreal.  The reality is that intellectual property delivers value just like plants, equipment and inventory.

Just ask the owner of the blue oval logo.

In this world of online fraud, the last thing I would expect from a financial services company, when calling for customer service, is to be asked for my online password as a means of verifying my identity!  This company assured me they were who they said they were, for I did dial their number.  Yet, with Web sites being spoofed these days, and VoIP on the rise, who says that you can’t spoof phone numbers as well?  So, after I refused to give an “in the clear” password over the phone, they said they’d have to transfer me to their “identity verification service.” 
After a long wait, I was finally connected with their fraud unit.  Now, that was interesting.  After presenting my case, they asked what phone number I was calling from.  I gave them my number, still finding it pretty dumb as they could have easily looked at the caller ID.  They acknowledged that the number I provided was, indeed, a number they had on file, so I was then instructed to hang up and they’d call me on that number. 

When they did, I asked again, “Why in the world do you ask for passwords?”  Their response was that they have found this is more secure than asking for a social security number and has significantly decreased fraud.  That’s scary!  How in the heck would they know that?  Maybe they have a clearer conscious against identity theft by not asking for SSNs, but what if the password to my credit card account online is the same password I use to identify my credit card or financial account password vault?!  I graciously asked that they refrain from this “worst practice” and consider some other two-factor approaches.
Sad that this whole encounter with identity was only to get me to a point where I could finally tell them why I was calling.  I had recently disputed a credit card charge (online) but was calling to say that the charge was valid after all.

Here we go again.  The Computer and Communications Industry Association (representing industry giants like Google and Microsoft) just filed a complaint with the U.S. Federal Trade Commission claiming that content providers (copyright holders) are issuing excessive, misleading warnings with movies, games, books and music.  (See story.)  Essentially, this complaint seems to be saying “stop telling us so loudly to stop breaking the law.” 

At the same time, a coalition of Japanese television, music and film companies are once again criticizing YouTube, complaining that the video-sharing site is “not doing enough” to rid the site of clips that infringe on copyrights!  In the same commentary, the group expressed skepticism about the work YouTube parent Google was doing on its own new video recognition and purging system.  (See story.)

Damned if you do and damned if you don’t!

This is yet another example of dueling claims about rights – digital rights – and the effort required to protect the value of digitized intellectual property without ruining distribution channels.  This particular exchange of claims and demands illustrates once again the shortfall in digital trust technologies to satisfy the competing interests of content providers and content purveyors.  Watermarking, acoustic and video fingerprinting, encryption-based DRM, and content summary and comparison techniques are all being tried and used to one extent or another.  Yet, the dueling rights argument continues.

It’s not completely a technology issue.  Intellectual property protection laws vary from nation to nation, and there are no comprehensive standards for formats or interfaces.  Without updates in legal frameworks and standards, and without digital trust technologies that satisfy both interests and provide evidence that rights are being managed in accordance with agreements, we can expect the argument to go on and on and on…

The Digital Trust volume on Intellectual Property Protection (Volume 3) will be out soon.  Subscribe to the LEF RSS feed www.csc.com/lefpodcast and you’ll get the volume when it’s released.  There’s some encouraging news in that volume, but the basic shortfalls remain.  If you have the “right” idea to solve this one, .  We can go far together.

Passwords, hardware tokens, software tokens, public key certificates, one-time key pads, virtual keypads, fingerprints, retinal scans, facial recognition, question and answer systems, picture selections, public records data base hint systems…and the list goes on and on.  These are all methods for authentication, and apparently these are not enough.  There is always “yet another authentication mechanism” (YAAM) being introduced.  And, every time a YAAM appears, it is introduced with a rationale that is some combination of:

• less expensive
• easier to deploy
• simpler (and therefore more effective)
• better scalability

Two of the most recent YAAMs are Vidoop and Passfaces.  Both are variations on the theme of picture selection and recognition instead of password entry.  And, both are pretty clever.

However, every time a new YAAM emerges, we seem to be a little more confused than we were before.  This is especially true whenever the YAAM looks like other methods that are already being used.  There are the inevitable questions: How much better? What else has to change? How do existing methods compare? But the issues around authentication run much deeper than the typical tradeoff studies.

Without an identity strategy that defines what subjects are, what the set of identity claims includes, how far the span of the identity extends, and which authorities give meaning to the identity, worrying about authentication is premature.  Authentication is important, but no type of authentication can fix shortfalls in foundations of identity.  (Incidentally, even picture-based authentication can fail.  See article.)

So, before you invest too much effort pondering the selection of an authentication mechanism, first review the foundations of your identity infrastructure.  After that, the YAAMs are waiting!