When Microsoft Corp. announced the Windows Server 2003 version of its market-dominating operating system last month, it gave a boost to an emerging technology called digital rights management.
DRM controls what people do with digital content, which can include software, data files, music and video. It encrypts the material and checks the identity of anyone who tries to work with it, using a set of predetermined rules to decide who may do what.
Although software developers have been working on ways of protecting intellectual property since the mid-1990s, and the term digital rights management was first used around 1998 or 1999, DRM has begun to be taken seriously thanks to the involvement of computer-industry heavyweights such as Microsoft and International Business Machines Corp.
"Microsoft alone is going to change some of the market dynamics here," predicts Joshua Duhl, research director for rich media at International Data Corp. in Framingham, Mass.
Microsoft's Windows Server 2003 announcement included Windows Rights Management Services, meant mainly for corporate use and available later this year as an add-on to the server product. The company also offers rights management technology for entertainment content through its digital media division.
Bill Rosenblatt, president of GiantSteps Media Technology Strategies, a New York-based research firm that specializes in DRM, says the technology began getting attention when the Napster music-sharing system achieved notoriety in 1999. Copyright-holders of music and other material began looking for ways to control what could be done with digital information. This led to copy protection on newer audio compact disks and DVDs and to devices for controlling the copying and distribution of digital material over the Internet.
A number of startup companies jumped into DRM over the past three years or so. Many failed, having underestimated the capital needed to get established in this emerging sector and having been caught in the fallout from the dot-com bust of 2001.
"It's been difficult for digital rights management companies to make a living selling nothing but digital rights management software," says Howard Leventhal, chief executive of one of the survivors, Stealth MediaLabs Inc. of Richmond, Ill., whose StealthChannel technology can be used to add digital watermarks to audio files or to embed other kinds of content in the files.
Mr. Duhl says IDC estimated DRM software and services revenues in 2001 at $69.6-million (U.S.), down from about $84-million in 2000. IDC expects 2002 to show a rebound to roughly 2000 levels; the firm projects 55.6-per-cent compound annual growth in DRM revenues from 2001 to 2006.
That does not mean smaller DRM technology companies are out of the woods yet. Microsoft's strategy seems to be to embed DRM capabilities in Windows, which could reduce market opportunities for others. Mr. Duhl expects, though, there will still be room for standalone DRM products.
While controlling the use and distribution of entertainment material is the most visible use of DRM and the largest use so far, it is not the only one. The same technology can be used to protect confidential business information.
Jon Murchinson, program manager of Microsoft's security business unit, says insurance and financial services companies and the health-care sector are especially interested in using DRM to control access to information and ensure privacy.
The use of DRM in business could grow dramatically, because of increased sharing of confidential data among companies, says Paul Rettig, director of digital media development at IBM.
IDC also sees two emerging market opportunities for DRM. One is in controlling the use of news and entertainment content delivered to wireless devices such as cellphones and handheld computers. The other is preventing unauthorized copying of software.