The Digital Media Manifesto



Jinwoong Kim


Levy model vs. DRM model




1.  Regarding “blank media levy issue”, we may need to call for ideas on possible scenarios for gradually phasing out the blank media levy. Let me here draw a picture just for the purpose of brain storming.  

2.  Let me rephrase the logic behind the blank media levy imposing. Blank media levy is the means of compensating for presumed loss of the content owners caused by illegal copies. In other words, it is generally believed that by purchasing blank media, anyone can make illegal copies of a content, which otherwise can only be obtained after paying some money. So the conclusion is that since sales of blank media generate content owners’ loss of sales, some reasonable portion of the blank media sales should go to content owners. This means that “Content owners’ loss caused by sales of blank media” is compensated by “distributed burden to media consumers”. Refer to Fig. 1. Here, the loss of content owners caused by blank media is +, and only is recovered by imposing the levy.  

3.  Now, let us assume that a blank media has DRM implemented inside that is capable of preventing illegal copy, so that only those who pay to the content owners can make a copy. In this situation, one buys content from the content owner and buys a medium to retain it from a medium manufacturer separately. Here, we can say that actual loss of content owners even after collecting blank media levy, which is in Fig. 1, is now completely recovered. That is a surplus income to content owners compared to Levy model. What this means is that “sales of blank media with DRM implemented” generate “guaranteed income to content owners”, which is much bigger than that from the levy in the Levy model.  

4.  We now understand that DRM model is obviously more profitable to content owners. But what about from the viewpoint of the blank media users? Let us assume that we have both models co-existing at the same time and the actual price of the media for the Levy model is + while the price for DRM model is to be determined. Here the question is : what would the price of the blank media with DRM implemented should be in order for media users to go and buy blank media with DRM implemented rather than media without?  

5.  I am almost close to the conclusion of what I am trying to say. The surplus income to the content owners, which is in DRM model, should be used as a subsidy to blank media manufacturers so that the final price of the blank media be determined to be much less than basic cost of the media . This is one of the scenarios for phasing out the blank media levy. 



Fig. 1 Levy model vs. DRM model