Business Model Matters
The record companies lack strong, watertight DRM. But its not even clear that such DRM would help all that much. No matter how good the DRM technology, The Beatles The White Album will never be DRM-ized---the bits have escaped into the wild, never to be domesticated again. One potential solution to this dilemma can be summed up as "if you cant beat em, join em." This concept has been championed by, for example, Exploit Systems. Exploit Systems does not try to eliminate P2P file sharing. Instead, they attempt to gently coerce users to pay a small fee in order to receive a legal version of the content. The legal content is distributed over the same P2P network that distributes the pirated content. In return for paying protection money, a user has fewer hassles to deal with and also obtains extras that are not (yet) available with the free download. However, the freebies still exist, and a user with sufficient tolerance for hassles can obtain his music for free.To date, the record companies dont see things this way. Apparently, they would rather dig in their heels and hope that they can bludgeon the world into accepting strong hardware-based DRM. Via this technical fix, they might hope to effectively roll back the clock to a pre-P2P era. Personally, Ill believe this is possible when I see the Titanic steaming across the Atlantic carrying passengers willing to pay $50,000 for a ticket.
Even a relatively weak form of DRM will suffice in the Exploit Systems model. The content obviously must be priced so that a significant fraction of users will deem it worthwhile to pay, even though free copies are available. Its doubtful that this business model supports $14.95 CDs. But assuming the price is right, the DRM system only needs to be more of a hassle to break than the hassle required to find the content for free. This level of DRM protection is clearly possible today.