Speaking of similarities between the game and music industries, one common threat both industries face is piracy. On the one hand, you have Activision going RIAA on individual game pirates, and on the other you have class action lawsuits brought by disgruntled Spore players as a result of iffy DRM software embedded in the digital download. The RIAA already demonstrated how completely ineffective and bad for business suing kids is, but if Activision believes doing so will really cut down on console game piracy, more power to them. The current climate is antagonistic to say the least. You have disgruntled publishers who feel the value of their product is severely undermined by copyright infringement, and you have disgruntled consumers who are a) being sued and b) are required to install questionable DRM software that limits their ability to use the product they purchased at full retail price. It's a highly controversial topic and really resolving the issue would require completely reformatting how we view digital property as distinct from personal property. I'll get to that later. First I'd like to discuss what DRM is, and how it's treated under the law.
What is DRM?
DRM is Digital Rights Management, and it typically comes in the form of encryption software embedded in a program, CD, or DVD that prevents certain uses of content. This isn't always a bad thing. DRM can be used to provide a means of creating new business models (i.e., subscription or 'rental' based digital download models). However, DRM becomes a problem when it is used in a manner that conflicts with the ordinary understanding of "first sale" and personal property rights. It is here that the ultimate conflict between publisher and consumer arises.
DRM and the Law
DRM and rights protection software generally are given substantial protection under the Copyright Act. Chapter 12 prohibits circumvention of rights protection technology and creates criminal liability for circumvention and the distribution of circumvention technology, and the No Electronic Theft (NET) Act creates criminal liability for electronic reproduction and theft of copyrighted works that exceed a total value of $1,000. So circumventing the technology is one crime, and then willfully reproducing and distributing the underlying content by electronic means (or otherwise) is also a crime. It is clear that lobbyists for the entertainment industries have been quite successful in getting the law on their side as far as protecting digital rights.
Even now lawmakers are attempting to increase the severity of punishment for both civil and criminal copyright infringement. A new bill seeks to increase the scope of forfeited property in criminal copyright prosecution and create a new executive branch position, the Intellectual Property Enforcement Coordinator. Furthermore, the original (and unsuccessful) versions of the bill sought to enable the Department of Justice to pursue civil action on behalf of content owners. Interestingly, the Department of Justice refused. They contend that taking on that role is tantamount to providing pro bono services to content owners.
Yet there is another aspect of the Copyright Act and personal property law generally that is in many ways undermined by DRM and rights protection technology. When a person purchases a product to own that product, they do so believing that they have rights in and to that product. Ownership connotes control over the use and enjoyment of the property. The Copyright Act supports this notion by way of the First Sale Doctrine, which cuts off the copyright owner's distribution rights in a particular copy once that copy is lawfully purchased. There are limitations to the first sale doctrine. You can't, for instance, make additional copies of the physical copy you purchase and sell those copies to other people; and most notably, the first sale doctrine does not apply to the rental, lease, or lending of computer programs or sound recordings in most cases. It should be noted here that console games are still fully protected by the first sale doctrine and can lawfully be rented or leased by the lawful purchaser. The reason for this is arguably justified. You can "lend" the physical copy you purchased to someone, who can then reproduce a digital copy and return the original physical copy to you. Yet this still handicaps the purchaser of the product, who is now unable to dispose of the product in the same manner that they can any other good under the law. The question, then, is how do we adjust our perception in a way that can adequately ameliorate the divergent interest of copyright owner and purchaser with respect to digital technology and digital ownership?
Digital versus Physical Software
The first thing I'd like to note is that you rarely have a right to copy something you purchase. There are a few exceptions to this, including recording television programs for "time-shifting" purposes, the Audio Home Recording Act, which permits the private, noncommercial taping of analog and digital sound recordings (but doesn't apply to MP3 files transmitted via file-sharing), and the obvious exception of installing a physical copy of software on your hard drive in order to use the software. As of yet, there has been no clear court ruling that generally states that making multiple copies of a legally purchased copy for personal use is fair use (except as noted above). This is complicated by EULAs and the licensing of software generally. This is also in no way set in stone, and it is a very murky area of copyright law. I'm making this point because when I talk about ownership and control in the context of purchasing software and music, the reason this is often relevant is because before DRM, people were able to make copies for personal use. The legality of that practice is highly suspect, but up until DRM, no technology existed to prohibit that practice (even if the law does).
Ownership of a physical copy is not the same as "ownership" of a digital copy. Both are subject to EULA's, and in both cases you are arguably only getting a limited license to the actual content. When you purchase a physical copy, you purchase the right to have physical control over that specific copy, although that control may be limited in some ways by DRM. You can still sell the physical copy or break the CD when you can't get past a certain level and decide to rage. When you purchase a digital copy protected by DRM, you aren't purchasing the right to have physical control over that copy. There is no physical copy that you can control. You are only accessing the content itself, which is limited by the EULA and DRM.
This is why DRM bothers people when it comes to purchasing goods. It places limitations on our ability to use and enjoy something that we believe we own. We exist in an age where copyright and content owners can control the use of each physical copy long after the first sale. As a result, we are forced to accept that the consumers are not purchasing any kind of ownership in a particular copy. They are purchasing the right to access content in a manner proscribed by the content owner.
Developing a Different Business Model
Where this really becomes a problem is in the actual "sale" of a product. With more and more games moving strictly to digital download, consumers are no longer "purchasing" physical copies of games. They're accessing content. Yet they're paying the same amount as they did (and sometimes more) when they could purchase and control a physical copy of the game. Adding a premium to that cost just to allow a purchaser to re-download the game in the event of a computer crash or virus, which is something that wouldn't be necessary if a physical copy existed (it being legal to make a copy if it is necessary to make the software function on your computer, as noted above), makes this even worse.
There are a couple of simple methods that could be and have been used to "modernize" the business models for digital distribution:
Reduce the Cost: From an economical standpoint, a digital copy should rarely cost as much as a physical copy. I'm not saying this is a universal truth. There are always counter-arguments, not the least being that cost reflects the value of the product and not the cost of production. None the less, selling access to the product under the marker of a "sale" and then charging more for greater access is a disservice to your consumer base. You're giving them less than they would get for a physical copy and you're charging them more. Physical copies require manufacture and packaging, not to mention the purchase of shelf-space and the costs of distribution generally (i.e., payment to third-party foreign distributors). Digital distribution requires server space.
Sell Access, not Copies: If you are only selling access to content, sell it as such. Subscription based models like Steam and GameTap are good examples of this—consumers are paying to access the content freely. They are not purchasing copies of the game.This also makes DRM more attractive in general. It enables new business models such as subscription based and "Play once" models exist, allowing consumers to enjoy content at a fraction of the cost of a full purchase.
Attempting to apply old brick and mortar business models to digital distribution will not remedy the problems facing the industry. Laws are only effective to the extent that they are enforced. When the primary threat to revenue comes from countries where copyright infringement goes unenforced, you can't expect to fix that problem by penalizing those who do want to lawfully purchase your product.