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DRM Is Dead, But Watermarks Rise From Its Ashes

With all of the Big Four record labels now jettisoning digital rights management, music fans have every reason to rejoice.  But consumer advocates are singing a note of caution, as the music industry experiments with digital-watermarking technology as a DRM substitute.

Wired News David Kravets

Context & Ripple Effects

The labels' retreat from DRM has been a year in the making: Reuters flagged an ailing industry ready to relax digital restrictions in January 2007, and by late December Warner Music Group's exit left one holdout among the Big Four. With that final domino now fallen per Wired, every major label sells unprotected files — vindicating warnings dating back to 2005 that lock-in formats would leave buyers' collections stranded.

The catch is what replaces the locks. Ars Technica had already surfaced the template in August 2007 with a Microsoft deal pointing to free but "watermarked" music, and consumer advocates quoted by Wired treat watermarking not as liberation but as enforcement relocated inside the file itself — echoing The Register's December complaint that going legal can still get buyers burned.

First-order effects

  • Music buyers gain genuinely portable purchases — files that play across devices and stores without license-server dependencies — while simultaneously accepting that each download can be traced back to their account if it surfaces on file-sharing networks.
  • Retailers and device makers no longer need to negotiate or maintain per-label DRM licensing for downloads, removing a compatibility tax that has constrained every player in the chain since paid downloads began.

Second-order effects

  • Watermarks flip liability toward the customer: a shared file identifies its original buyer, giving labels a forensic path to pursue purchasers rather than just uploaders — the scenario consumer advocates are cautioning about.
  • Download stores face pressure to compete on price against free-but-tracked alternatives like the Microsoft arrangement, since unprotected files erase the format exclusivity that justified premium pricing.

Third-order effects

  • Enforcement shifts structurally from controlling access to attributing copies — an identification regime embedded invisibly in media that operates without any consumer consent mechanism, likely drawing scrutiny from privacy and consumer-protection advocates over disclosure standards.
  • If attribution-based tracking proves viable for the majors, other content industries weighing DRM's unpopularity have a template: keep distribution open and police leakage after the fact rather than constraining playback up front.

The trend: Digital music enforcement is migrating from copy protection that limits playback to forensic watermarks that identify who leaked a file, trading consumer inconvenience for traceability.