Virtuous cycle

Bartlomiej Owczarek weblog

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Sony after all not affected by rootkit disaster?

Andrew Orlowski wrote an interesting story related to Sony rootkit case (Sony unsinged by rootkit CD fiasco). I am personally curious about the bottom line aspect of all of this, so it was fun to compare someone else’s point of view.

My take-outs from his article:

  • Sony’s sales were actually little affected despite a storm in the blogosphere and mainstream media
  • The vocal blogosphere population represents in fact a minority of tech-savvy users, while most people are well served when their CDs can just play in stereo system and their car
  • Lawsuits will hardly make any more difference since corporations learned to treat them as merely operational overhead, following Microsoft?s case
  • Sony can just ignore geeks and lawsuits and move forward with its DRM strategy

It’s meant to be provocative reading and it serves its purpose well, at least as far as I am concerned. Couple of points that I was pondering upon are below.

How important are the geeks?

If rip & burn population is so overestimated why Sony decided to bother with this rootkit stuff anyway? After all, it does not nothing to stop professional pirates.

Even if geeks are a minority among music CD buyers and music itself is just a part of Sony’s business (from a quick look at annual report, 7% in FY2004 and 3.3% in FY2005, after joint venture with Bertelsmann AG), Sony cares about some other areas where goodwill with geeks matters. For example, Sony wants players to wait for its playstation and being associated with evil DRM practices won’t help.

Influence on DRM future

Andrew draws from Microsoft’s example to emphasize that at the end of the day lawsuits have little influence on corporate giants.

While judging the real impact on Microsoft business is not something I would like to go into just right now, I feel there is something more to the legal troubles than just financial costs.

After recording industry’s ruthless legal offensive against file swappers, now Sony finds itself on the wrong end of the lawsuits. Extent of financial damage, if there will be any, is to be seen. More important may be losing the initiative.

Till now the label thought it could do just about everything it wanted, taking advantage of its perceived moral high ground over its file swapping customers. Portraying oneself as a victim was also helpful in getting the regulators do the right thing. Public scrutiny resulting from the lawsuits may keep Sony from moving ahead with its DRM ideas.

Final judgment on sales impact

Then again it may be too soon to tell what the actual impact on the sales is. Andrew seems to be basing on data from the CNET story. They quote Nielsen SoundScan figures, which looks like industry’s standard (music industry is not exactly my territory, so I may be wrong).

On the other hand, there is Businessweek article by Lorraine Woellert reaching an opposite conclusion by looking at some Amazon figures. It then focuses on tension that the affair generated between the label and its artists, who are losing sales because of rootkit scare. Not suprisingly, BW is eagerly quoted in the blogosphere, for example at Curiouser & Curiouser (More Sony Damage), which leverages on it to conclude:

The outrage by the fans, the backlash by artists who lost sales and income, and the general trashing of Sony’s approach to DRM could spell the beginning of the end for the whole copy-protection effort by the vendors.

To be fair, CNET piece seems to have an edge as far as sources authority. Even if I don’t understand how exactly Gracenote lookups (they happen when music is played in certain players) are related to new album sales.

Or maybe the reason for difference is due to Amazon buyers caring more than brick and mortar buyers. I don’t know what share of CDs is sold online, still Amazon is fourth largest music retailer in the US, at least from what I can see here.

I would wait to see what the real impact will be after Christmas season. Judging if bad publicity infects anyhow other Sony’s businesses will require even longer wait.