Yrjo Raivio, Sakari Luukkainen
Helsinki University of Technology,Telecommunications Software and Multimedia Laboratory
P.O.Box 5400, SF-02015 TKK, Finland
Keywords: Mobile multimedia, Digital Rights Management, m-Commerce, Dominant design, Superdistribution.
Abstract: Number of Internet capable mobile phones is growing with rapid space. However, the data consumption is
still very low in the mobile community. The existing business models for sharing mobile multimedia have
not worked properly, and new solutions are looked for. In the mobile environment Digital Rights
Management (DRM) is a key enabler for novel business models like Superdistribution, a Peer-to-Peer (P2P)
type of Consumer-to-Consumer (C2C) delivery chain. DRM is a concept that defines the access rights to the
copyrighted digital media. It does not only include encryption technologies but the whole architecture,
content formats, commerce and usage monitoring. In this paper we evaluate novel m-Commerce business
models supported by the latest mobile DRM specifications, and we give recommendations how they should
be applied to the mobile environment in order to create a healthy business opportunity for all players in the
Mobile phones are becoming more and more
suitable for digital content consumption and
basically mobile phones could replace the position
of standalone multimedia devices. Mobile phones
have the advantage that end users prefer to carry just
a single device while being also all the time
reachable (Eylert, 2005). The mobile service can
facilitate the link between the experience and the
download event, thus stimulating unplanned purcha-
ses on the move (Grech and Luukkainen, 2005).
From the mobile operators’ point of view
content business is extremely important because the
Average Revenue per User (ARPU) figures have
lately come down. There is however a contradiction
in price per transferred bit between voice/SMS
services and new digital media formats. That is why
operators should be able to apply content based
pricing schemes in their mobile Internet business
(Kivisaari and Luukkainen, 2003).
Lately, the operator independent Internet
service innovations have been receiving more
foothold and started to disrupt incumbent operators’
business models. Parallel discontinuous
technological change, ignored by the incumbents,
may enable cost effective products that initially
attract cost sensitive low-end customers
(Christensen, 1997). For example, Amazon, Skype,
eBay, Yahoo and Apple have been successful to
utilize novel business models that suit for a new
economy. On the other hand, most of the Internet
traffic belongs to the Peer-to-Peer (P2P) category,
that is outside of the business ecosystem due to lack
of an appropriate copyright system. Mobile
businesses can learn a lot from the Internet
experiences, but it should be noticed that the Internet
success stories should not be applied directly due to
the different usage models and constraints in the
mobile networks and terminals.
Management of the Intellectual Property is the
key phrase for a successful content business. Digital
Rights Management (DRM) has been the de facto
solution to protect content creators’ and owners’
immaterial rights. DRM is a process that defines the
access rights to the copyrighted digital media. It
does not only include encryption technologies but
the whole architecture, content formats, commerce
and usage monitoring, which makes DRM an
organic part of the business model.
Standards should however be introduced in an
evolutionary way by starting from a simple one and
building the complexity as market uncertainty
Raivio Y. and Luukkainen S. (2006).
In Proceedings of the International Conference on e-Business, pages 182-186
DOI: 10.5220/0001425601820186
decreases thus allowing for a staged investment in
creating and growing the standard (Gaynor, 2001).
Typically new technology and related standards do
not become common in their initial form and
dominant design is not based on the leading edge of
the technology. As DRM standard contains large set
of optional features, the biggest challenge lies in the
creation of dominant design that contains a set of
features that best meet the requirements of the early
majority of the markets.
On the other hand, it is essential that we should
maximize the value, and not the protection. This
emphasizes certain requirements of a DRM system:
a very high of usability and freedom together with
sufficient content control mechanisms. According to
theory high price leads to low quantity. By a good
business model we are however able to set the price
that maximizes the revenue (Baseline case). More
liberal terms and conditions increase the value of the
service to the customer, which shifts the demand
curve parallel when also copying and sharing
increase which further also decrease quantity. A
sustained business model seeks the optimal solution
between these forces, as shown in Fig. 1 (Shapiro
and Varian, 1999).
Figure 1: Demand Curve, Quantity and Price (Shapiro and
Varian, 1999).
The mobile environment is most suitable for
legal and reliable content distribution. Unlike P2P
networks, the mobile users form an authenticated
community, which enables a coherent market place
and channel. More than 2 billion mobile phones,
with a rapidly growing penetration of smart phones,
are ideal devices for digital content consumption. In
addition to the traditional client-server business
models, Consumer-to-Consumer (C2C) trading is
becoming realistic. This new business model is
called Superdistribution. It means free C2C
distribution where content is usually protected from
modifications and usage requires a separate license.
The scope of this paper is in the mobile branded
content. As a research method we first study the
existing Internet business models and draw from
these experiences the requirements for the mobile
industry. Open Mobile Alliance (OMA) has
specified a set of new mobile DRM specifications,
and those will be reviewed. Novel m-Commerce
business models suited for the mobile markets and
the DRM systems are then evaluated, and we give
recommendations how to apply these specifications
to implementations and successful business models.
Only a small number of e-Commerce sites in the
Internet has been successful. This is not very
surprising because the history of the Internet is very
young and the old laws will not hold in the new
economy. However, it is a worth studying what have
been the factors behind those who have succeeded,
and what the mobile domain might learn of those
experiences. It is evident that there is no single key
to the success. In the mobile history several mistakes
such as WAP, Walled Garden and SMS trap have
been made and we may learn a lot of those, too.
In the famous Wired magazine article
(Anderson, 2005) a new term the Long Tail was
presented. It highlighted the importance of the tail of
the typical Zipf-like consumption distribution. The
key point here is that although a rather small number
of unique items receive more hits than others in
average, the impact of the Long Tail in the total
volume is higher. That is why it is extremely
important that the content downloading service is
not restricted for the most popular category but the
service must allow access to the niche markets, too.
Regarding to the DRM policy it can be assumed that
typically the mass market must be well protected,
while the Long Tail material with less downloads
might benefit from a lighter protection.
Apple’s iTunes will most probably follow the
Zipf-distribution, too. The business model of iTunes
is the most restrictive. The proprietary DRM
solution, called FairPlay, protects the value chain
from end-to-end allowing iTunes’s Advanced Audio
Coding (AAC) records to be played only by the
Apple’s iPod players. CDs can be burned without
limits but records can be copied just to five other
hard disks. Pricing is based on the pay-per-use
model with a slightly lower price level than in the
usual music stores. As an advantage users may just
download individual hit songs, instead of full
Wippit has a different business model. They are
offering a subscription based unlimited access to the
record collection of 60 000 items that are
continuously updated. Some of the MP3s are not
protected at all and they can be freely copied, while
others are protected with Windows Media DRM. A
wider selection is available through a pay-per-use
policy. A compensation based business model is also
common. Most often the business logic is based on
the advertisements, that must be received for a free
content. Qtrax is an example of this business model.
Weed service supports rewarding in the C2C model.
In this case, both the music aggregator and the
private distributors are rewarded when music is
distributed through the C2C interface.
P2P traffic conquers already the major stake of
the Internet trunk lines and in the access networks
more than 90 percent of data traffic is from P2P
applications. The success of the P2P applications has
proved a few important lessons. First, consumers are
willing to share content if they have a proper
incentive to do so. Otherwise the Free Riding
problem occurs which means that users just
download content, without the sharing principle of
reciprocity (Kwok et al., 2002). Second, P2P sharing
technology works well without the help of the
centralized servers and operators. Unfortunately for
the content owners, P2P does not usually include the
business possibility. In any case, the Internet P2P
applications have shown that P2P is an extremely
efficient content sharing method, and C2C
communication channel can be used efficiently in
the viral marketing. These ideas should be taken into
use in the mobile networks, too.
In the mobile environment Open Mobile Alliance
(OMA) DRM 1.0 specification provided the basic
features to protect the content, namely ring tones and
MMS messages. The extended specification, OMA
DRM 2.0 was approved on March 2006. It enables a
large set of different distribution mechanisms.
Content can be delivered through Pull, Push, Push
initiated Pull, broadcast, multicast and optionally
Superdistribution methods. Superdistribution is
backed by the Transaction tracking feature that
enables free and controlled content diffusion in a
C2C manner. Delivered items can be stored for
backup purposes and used later. Optionally
Unconnected devices are supported meaning that
content can be transferred to devices that do not
have Internet connection. Additionally, specification
includes an optional Export function that enables
OMA DRM protected content to be opened in non
other devices. Streaming is supported both by
unicast and multicast delivery methods. Finally, the
Rights Object Acquisition Protocol (ROAP) takes
care of the interactions between the entities in the
architecture, described in Fig. 2. Watermarking is
not part of the OMA DRM 2.0 specifications, but it
is left for the implementation. (OMA, 2006)
Figure 2: OMA Architecture (OMA, 2006).
Depending on the DRM system in use, content can
be offered in various ways. The most popular
business models include subscription and pay-per-
view, -use or -download. Subscription based model
enables access to the predefined library of content. It
provides a simple charging logic, both to the user
and service provider. Pay-per-view, -use or -
download methods charge users separately on each
transaction. On frequent and small purchases this
solution creates a lot of charging data and can
discourage consumers to use the service.
C2C trading, such as P2P and
Superdistribution, will improve the system
scalability, and more importantly, it creates the
community aspect. Superdistribution provides new
business possibilities such as gifting and rewarding.
Idea in gifting is that the user can recommend
content for a certain number of her or his friends.
They have a chance to use the content for a
restricted time and after the expiry of the trial period
they are offered a membership. Gifting acts here as a
strong marketing scheme and suits well for the face
to face type of cellular communities. Incentive for
the Super-distribution can be enforced by rewarding.
The idea is to motivate the content sharing by giving
a small compensation to the distributor on each
chargeable C2C delivery. Rewarding is an important
tool for the birth of the viral marketing business
(Einhorn and Rosenblatt, 2005). Compensation
model can be also used in the Superdistribution
context. DRM protected advertisement files can be
attached permanently to the original content files,
and when content is played and advertisements
shown, user statistics are sent to the centralized
system. Distributor can charge the advertisers based
on the number of hits.
OMA DRM 2.0 enables almost any business
model. You may choose models that are closed or
open, complicate or simple, slow or fast, more or
less secure. It is up to the manufacturers, operators
and content creators which of the selections
maximize profits for the whole value chain. As a
drawback, the high flexibility incorporates a high
risk to interoperability problems. To avoid those,
operators and manufacturers must clearly agree the
mandatory features supported.
Based on our analysis and evidence from the
fixed Internet, Superdistribution functionality, with
gifting and rewarding options, is a mandatory new
feature to be supported in the mobile phones and
presumable dominant design. It clearly underlines
the social behaviour pattern common among
humans. Viral marketing and different kind of
compensation based business models are becoming
fascinating. Rewarding is also supported by other
research results (Kwok et al., 2002). However, the
system implementations should respect the privacy
rules, and the tracking features should not be used
for collecting personal profile information without
users’ permission.
The best way to avoid the piracy is to make it
obsolete by providing a better, legal alternative.
DRM has, however, only limited possibilities to stop
piracy. The DRM solution is always a compromise
of the usability and the protection level, and the
small minority should not drive the decisions made
for the majority. More flexible copyright licensing
terms, such as Creative Commons, should be
carefully considered to be utilized for certain
content. Especially with niche markets belonging to
the Long Tail, strict copyright rules are questionable.
This paper has discussed the issues impacting on the
mobile DRM and the related business models. The
scope was in the commercial content but the user
created content should not be forgotten either. The
Internet services give valuable background
information for the successful mobile DRM solution.
OMA DRM 2.0 offers a wide tool box to implement
different business models. Superdistribution is an
interesting possibility for the mobile phones to be
utilized and studied further. Mobile DRM solutions
should be optimized to meet the benefits of all
players, including the non mobile users, and inter-
operability among the standards should be
guaranteed. Last but not least, the best results do not
necessarily equal to the maximal protection level.
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