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This is a relatively interesting situation imo. And it's tragically not unique. Another example is the Keurig machines. The latest model has DRM such that you c

This is a relatively interesting situation imo. And it's tragically not unique. Another example is the Keurig machines. The latest model has DRM such that you can only use officially licensed Keurig cups. Suffice to say people were displeased. A delightful video showing how to get around it has 670,000 views. https://www.youtube.com/watch?v=9e0yCq1AEeY https://www.youtube.com/watch?v=9e0yCq1AEeY So, here's why I think it's interesting. The companies that sell these products likely make the bulk of their profit from the consumables. That makes it economically viable to sell the machine at break even or possibly a loss. Then the money comes from the consumables. This is a pretty attractive business model both to the manufacturer and possibly even the consumer. The downside, of course, is that competitors can swoop in and make consumables as well. So now you're selling hardware for a loss and other people are selling consumables for razor thin margins and you're screwed. I don't think there is an obvious answer here. Some of these markets might not be viable if the hardware has to be sold for a profit. So that kinda sucks. But the DRM also treats consumers like shit, so that really sucks. Is perhaps the issue just that it isn't clearly stated up front? Amazon sells two flavors of Kindle readers. One with ads for less money and one without ads for more ($20). Once upon a time Apple sold DRM mp3s for 99 cents and DRM free mp3s for $1.29. Would you pay an extra $50 for a DRM free kitty litter box? Or an extra $100 (33%) on a fancy coffee maker? Here's my take away. Some products are subsidized by consumables. DRM enables that subsidy. Without DRM that product may not be viable. DRM can be minimally negative (Steam) but can also be maximum hostile (Keurig). Finding the balance is tough and we should talk more about it.

leeoniya 12y ago
Then offer me a +33%, DRM-free Keurig and let me decide what to buy. I would have much less aversion to the company if the choice existed. Except things are not that easy, for them to make up what they would lose in branded refills, they'd have to jack up the price not by 33%, but by >= 1000%. If they did this, you could extrapolate how long a tail they expect from each sold unit. The problem is, it's not simply selling the machine at a good profit; they are not selling you a machine, they are inexpensively buying your ability to choose...and that is worth a whole lot of money.
- colinbartlett 12y ago
  This seems somewhat analogous to the cell phone market here in the US. Customers have a choice to either buy their phone upfront and then choose from any number of much cheaper "consumables" (prepaid mobile plans) or to get a huge discount on the device in exchange for vendor-lock in and a higher cost in the long term. Consumers, here in the US at least, widely prefer the latter either out of preference for lower upfront cost or because they are unaware of long-term savings.
  - skuhn 12y ago
    It may also be analogous in that the game is rigged. Off-brand K-cups seem to sell for around $1.50-$1.70 each in a quick search. Official K-cups seem to sell for around $1.50-$1.80 each. Obviously there may be a non-price advantage to buying off-brand cups, but it's clear that they know who they are competing against. A 5lb bag of coffee from somewhere fancy is also between $1.60-$1.70 per cup. Coincidence? Likewise, my post-paid phone bill is $60/mo and I buy a phone every so often for $199 subsidized. $1670 over the course of the two year contract. If I switch to a pre-paid plan, it's still $60/mo (for less) and the phone is now $599, for a total of $2040. Other carriers are in the same range ($50-80), most offer substantially less for that money, and basically everyone operates right around in the same price region +/- a few hundred dollars over two years. It may be that they're all running their businesses perfectly optimized and this is what it costs to provide cell phone service and make a profit. I'm more inclined to think that this is the cost that the market will bear, and the minor variations that exist in service prices simply serve to keep a minority of the customers churning through the market in search of a better deal that doesn't exist in any significant sense.
    - Zak 12y ago
      It doesn't include much talk time, but T-Mobile has a $30 prepaid plan that's definitely a better deal for data-heavy users than their (or anybody else's) postpaid plans. My Nexus 5 cost me $350 and was competitive with other flagship phones available at the time. Over 2 years, I pay $1070, assuming I buy a new $350 phone every 2 years. I might stretch the Nexus 5 to 3 years. If a specific phone that costs $600 is important to you, you'd pay $1320. The plan is light on airtime: 100 minutes with additional time for 9 cents per minute, but Google Hangouts can dial US phone numbers free of charge now. So you can save a lot if you skip the subsitdy and fit a specific usage pattern.
vilhelm_s 12y ago
Yes, it is subsidized by the consumables. But for the consumer, there doesn't seem to be any benefit---one way or another the hardware will get payed for, so in expectation you pay as much either way. (Perhaps you could argue that it benefits the consumer by offering a kind of insurance against not finding the product useful, but mostly I think it just prays on some imperfection in human psychology). Given that this kind of business scheme naturally leads to DRM, I would like to see it banned. Pass a law saying that litter boxes must accept third-party litter. (And phones must be portable between different contracts, and cellphones and Xboxes must be able to run arbitrary software). Then the companies would have to charge the full price up front, and there would be no reason for them to add DRM.
- forrestthewoods 12y ago
  Passing a law seems wildly unnecessary. The market is handling it just fine. People are pissed and buying competitors products instead. There is no shortage of competition. I think you're crazy on mandating Xbox hardware to run arbitrary software. If you want to do that then just build a PC. Which is something you can do this instant. Demanding fewer options for consumers rather than more requires a spectacular argument which I don't think can be made here.
  - bigiain 12y ago
    And passing laws about "kitty litter" just because today's ranting blog post is about kitty litter is a _spectacularly_ bad idea. The law shouldn't be about specific individual products, but about consumer rights and vendor obligations. I'd be happy to discuss a law requiring vendors to disclose at point-of-sale any measure taken in a product's design that artificially limits replacing consumables with 3rd party alternatives. Cat litter machines, ink jet printers, coffee makers, razors, cell phones, soda streams - if there's a reasonable assumption that you could buy kitty litter, ink, coffee beans, blades, airtime, or carbon dioxide gas - and _not_ have to buy those from one specific company who sell it at significantly above market rates, vendors should be required to clearly disclose that before the sale takes place. Laws should solve _classes_ of problems, not instances.
  - 12y ago
realharo 12y ago
I think the bigger issue is not just the lack of choice "right now", but the continued dependence on a manufacturer's support of the product. What happens when they come up with a newer model and decide that they're going to stop making the product for the older one? Or if they happen to go out of business? Your perfectly working machine becomes completely useless overnight. Even if there are still people willing to make the product for it. Or if you could somehow make it yourself. Nope, screw you, throw out your perfectly fine machine and go get the new one. It feels wrong because these barriers are completely artificial.
bigiain 12y ago
DRM attempts (in a better or worse implementation) to enforce a consumables-subsidized business model. And it's not just cat poop machines or coffee makers - it's the same "trick" as network locked subsidized phones. Just because that's the only business model you thought of, it doesn't make it "right", or even make it something that shouldn't be perfectly legal to circumvent. If you claim to "sell" a coffee maker or cat poop machine, a reasonable person doesn't expect to be tying themselves to your company's future revenue stream. If you angrily discover this _after_ someone's taken your money without having made that clear beforehand - you should have every moral and legal right to _not_ participate in the DRM enforced consumables purchases, and still your the goods you "bought". Car dealers and real estate developers don't think "Hey, no-one would buy our product if it was $x thousand dollars, therefore it's an uneconomically viable market!". They arrange partnerships with finance companies to ensure you can drive away with only $x hundred dollars down, and a contract (usually with someone else) to pay $y per month until it (and the interest) is paid off. If you can't sell your cat poop machine (or coffee maker) for a price that covers the cost (and your required margin) because the up front costs sound too high - perhaps getting into or partnering with a business who specializes in providing credit and offering it for "$Z up front, and $Z/10 monthly payments for a year!" - instead of pissing off customers and creating a market opportunity for 3rd party electronics to drive your hardware? (Of course, I'm probably completely wrong about consumer buying habits here. Most people still talk about the "free phone" they get when they sign up for a 2 year $80/month cell phone plan, and think they're getting a great deal... If you're happy enough to mislead your customers and deal with the blowback like this blog post, I suspect you'll make more money that I do...)
- forrestthewoods 12y ago
  I'm still undecided but I'm leaning towards the only issue here being that the DRM isn't up front. If people know what they are getting into then I see no reason why such a deal between two private parties should be prevented. Tricking someone into a deal and then jumping out "gotcha!" is of course shitty behavior. I'm sympathetic towards the cell phone issue but I think it's being brought up far too often here. In the United States you have three, maybe four, choices. It's easy for them to collude and price fix. The fuckers certainly did when charging $20 a month for text messages. It costs billions of dollars to enter that market so they could this easily. Pretty much anyone can enter the kitty litter box or coffee maker marketplace. Dozens of companies already have. I'm all about consumer choice and as long as there is choice if someone wants to offer a shitty deal then I'm perfectly fine with that.
redwall_hp 12y ago
AACs, actually. (MPEG's superior successor to the obsolete MP3 format.) It fixes some artifacting issues and produces higher quality audio at lower bitrates.
mikeash 12y ago
I think the failure to be clear on the limitations up-front is central. If everyone knows what they're getting into, then you can just let the market figure things out. The problem is that people have expectations for consumables, namely that the difference between a name brand consumable and a generic version is at most quality, and these companies are taking advantage of that expectation. You don't even have to sell two flavors. Let Keurig do their silly DRM stuff. Just make sure it's absolutely clear on the packaging that you have no choice in who you buy the consumables from. If people prefer to pay more to avoid DRM, a competitor will surely arise if Keurig doesn't go for that market themselves. Ultimately, these companies need to be reminded that you catch more flies with honey than with vinegar. The model where you sell up-front cheaply and then make it up on consumables doesn't require DRM. All it needs is brand loyalty, preferably backed by a reputation for quality. For a real-world example, car dealerships make most of their money on service, not sales, even though everyone is free to take their car to any unaffiliated mechanic they like.
- forrestthewoods 12y ago
  For Keurig the front of the box literally says "Works only with Keurig brand packs". http://familyfoodandtravel.com/wp-content/uploads/2014/09/Keurig-2.0-box.jpg http://familyfoodandtravel.com/wp-content/uploads/2014/09/Ke...
  - mikeash 12y ago
    I feel a little dirty defending non-readers, but I don't think that's sufficiently clear or prominent. In the context of a product description, it's ambiguous as to whether that's simply a recommendation or a hard statement of fact. For example, in the world of cars it's common to see the phrase, "Always use genuine $BRAND parts." Of course, other parts work fine, it's just a recommendation. The Keurig statement is a bit stronger, but still not clear. I'd want something more like, "This device uses technological measures to prevent compatibility with third-party packs." And a bit more front and center.
zanny 12y ago
Steam is incredibly intrusive as soon as you actually want to own your games. For example, Rage runs perfectly on Linux through Wine because the engine is OpenGL. Too bad you cannot actually download it on the Linux steam client because its not platform native and supported in client. And because the game has the Steam DRM, you could not run it on Linux anyway without running it through Steam in Wine. So Rage has a festering tumor of the Windows Steam attached to it for no reason but to force down my throat how I don't actually own this game. Same applies to every game on Steam that runs fine in Wine but that you cannot download, and often cannot run, without running Steam through Wine as well.
Shivetya 12y ago
I was under the impression Keurig made that move after the patent on the cups expired. I use an Eko Brew refillable k-cup replacement and will not be buying the 2.0 should this old one fail. I never thought they sold the coffee makers at a loss, I do remember rumors of a seven cent fee per k-cup. I do not mind DRM on items I am renting and am expected to return, however if I make a purchase where there is no understanding it is to be returned for refund of deposit or the like it should not have DRM.
adam-a 12y ago
Nestle, who have been selling the same kind of device very successfully in Europe, last year had a patent for their pods revoked across Europe[0]. Their main defence against third-party pods was suing for IP infringement apparently. Those coffee machines are super convenient so it's nice that we're starting to see a variety of coffees available for them. If nothing else because who wants to drink one brand of coffee all their life? They recently released the technical specifications for the pods too. Hopefully the other manufacturers will decide or be forced to follow suit. 0: http://www.wsj.com/articles/SB10001424052702304066404579129103462582822 http://www.wsj.com/articles/SB100014240527023040664045791291...
javajosh 12y ago
Some products are subsidized by consumables. DRM enables that subsidy. Without DRM that product may not be viable. I think there is a useful distinction to be made between Xbox DRM and Keurig DRM. The key difference is that people know what their in for with an Xbox - they know that they will be buying a few very expensive games a year for a few years. They may even know that this "subsidizes" the machine itself. But there's no other experience to have with the Xbox. With Keurig (or cat boxes or ink cartridges), the situation is different because it's a refill problem that ordinary consumers can address themselves, and often want to. There is no equivalent experience with Xbox! (Well, you might argue that "programming a new game" is something like it, but it's still not "refilling" an existing game ( although that does give me an interesting idea for those systems that you could buy a "refillable" SD card that you can load with whatever code you want...)

leeoniya 12y ago

Then offer me a +33%, DRM-free Keurig and let me decide what to buy. I would have much less aversion to the company if the choice existed. Except things are not that easy, for them to make up what they would lose in branded refills, they'd have to jack up the price not by 33%, but by >= 1000%. If they did this, you could extrapolate how long a tail they expect from each sold unit. The problem is, it's not simply selling the machine at a good profit; they are not selling you a machine, they are inexpensively buying your ability to choose...and that is worth a whole lot of money.

colinbartlett 12y ago
This seems somewhat analogous to the cell phone market here in the US. Customers have a choice to either buy their phone upfront and then choose from any number of much cheaper "consumables" (prepaid mobile plans) or to get a huge discount on the device in exchange for vendor-lock in and a higher cost in the long term. Consumers, here in the US at least, widely prefer the latter either out of preference for lower upfront cost or because they are unaware of long-term savings.
- skuhn 12y ago
  It may also be analogous in that the game is rigged. Off-brand K-cups seem to sell for around $1.50-$1.70 each in a quick search. Official K-cups seem to sell for around $1.50-$1.80 each. Obviously there may be a non-price advantage to buying off-brand cups, but it's clear that they know who they are competing against. A 5lb bag of coffee from somewhere fancy is also between $1.60-$1.70 per cup. Coincidence? Likewise, my post-paid phone bill is $60/mo and I buy a phone every so often for $199 subsidized. $1670 over the course of the two year contract. If I switch to a pre-paid plan, it's still $60/mo (for less) and the phone is now $599, for a total of $2040. Other carriers are in the same range ($50-80), most offer substantially less for that money, and basically everyone operates right around in the same price region +/- a few hundred dollars over two years. It may be that they're all running their businesses perfectly optimized and this is what it costs to provide cell phone service and make a profit. I'm more inclined to think that this is the cost that the market will bear, and the minor variations that exist in service prices simply serve to keep a minority of the customers churning through the market in search of a better deal that doesn't exist in any significant sense.
  - Zak 12y ago
    It doesn't include much talk time, but T-Mobile has a $30 prepaid plan that's definitely a better deal for data-heavy users than their (or anybody else's) postpaid plans. My Nexus 5 cost me $350 and was competitive with other flagship phones available at the time. Over 2 years, I pay $1070, assuming I buy a new $350 phone every 2 years. I might stretch the Nexus 5 to 3 years. If a specific phone that costs $600 is important to you, you'd pay $1320. The plan is light on airtime: 100 minutes with additional time for 9 cents per minute, but Google Hangouts can dial US phone numbers free of charge now. So you can save a lot if you skip the subsitdy and fit a specific usage pattern.

vilhelm_s 12y ago

Yes, it is subsidized by the consumables. But for the consumer, there doesn't seem to be any benefit---one way or another the hardware will get payed for, so in expectation you pay as much either way. (Perhaps you could argue that it benefits the consumer by offering a kind of insurance against not finding the product useful, but mostly I think it just prays on some imperfection in human psychology). Given that this kind of business scheme naturally leads to DRM, I would like to see it banned. Pass a law saying that litter boxes must accept third-party litter. (And phones must be portable between different contracts, and cellphones and Xboxes must be able to run arbitrary software). Then the companies would have to charge the full price up front, and there would be no reason for them to add DRM.

forrestthewoods 12y ago
Passing a law seems wildly unnecessary. The market is handling it just fine. People are pissed and buying competitors products instead. There is no shortage of competition. I think you're crazy on mandating Xbox hardware to run arbitrary software. If you want to do that then just build a PC. Which is something you can do this instant. Demanding fewer options for consumers rather than more requires a spectacular argument which I don't think can be made here.
- bigiain 12y ago
  And passing laws about "kitty litter" just because today's ranting blog post is about kitty litter is a _spectacularly_ bad idea. The law shouldn't be about specific individual products, but about consumer rights and vendor obligations. I'd be happy to discuss a law requiring vendors to disclose at point-of-sale any measure taken in a product's design that artificially limits replacing consumables with 3rd party alternatives. Cat litter machines, ink jet printers, coffee makers, razors, cell phones, soda streams - if there's a reasonable assumption that you could buy kitty litter, ink, coffee beans, blades, airtime, or carbon dioxide gas - and _not_ have to buy those from one specific company who sell it at significantly above market rates, vendors should be required to clearly disclose that before the sale takes place. Laws should solve _classes_ of problems, not instances.
- 12y ago

realharo 12y ago

I think the bigger issue is not just the lack of choice "right now", but the continued dependence on a manufacturer's support of the product. What happens when they come up with a newer model and decide that they're going to stop making the product for the older one? Or if they happen to go out of business? Your perfectly working machine becomes completely useless overnight. Even if there are still people willing to make the product for it. Or if you could somehow make it yourself. Nope, screw you, throw out your perfectly fine machine and go get the new one. It feels wrong because these barriers are completely artificial.

bigiain 12y ago

DRM attempts (in a better or worse implementation) to enforce a consumables-subsidized business model. And it's not just cat poop machines or coffee makers - it's the same "trick" as network locked subsidized phones. Just because that's the only business model you thought of, it doesn't make it "right", or even make it something that shouldn't be perfectly legal to circumvent. If you claim to "sell" a coffee maker or cat poop machine, a reasonable person doesn't expect to be tying themselves to your company's future revenue stream. If you angrily discover this _after_ someone's taken your money without having made that clear beforehand - you should have every moral and legal right to _not_ participate in the DRM enforced consumables purchases, and still your the goods you "bought". Car dealers and real estate developers don't think "Hey, no-one would buy our product if it was $x thousand dollars, therefore it's an uneconomically viable market!". They arrange partnerships with finance companies to ensure you can drive away with only $x hundred dollars down, and a contract (usually with someone else) to pay $y per month until it (and the interest) is paid off. If you can't sell your cat poop machine (or coffee maker) for a price that covers the cost (and your required margin) because the up front costs sound too high - perhaps getting into or partnering with a business who specializes in providing credit and offering it for "$Z up front, and $Z/10 monthly payments for a year!" - instead of pissing off customers and creating a market opportunity for 3rd party electronics to drive your hardware? (Of course, I'm probably completely wrong about consumer buying habits here. Most people still talk about the "free phone" they get when they sign up for a 2 year $80/month cell phone plan, and think they're getting a great deal... If you're happy enough to mislead your customers and deal with the blowback like this blog post, I suspect you'll make more money that I do...)

forrestthewoods 12y ago
I'm still undecided but I'm leaning towards the only issue here being that the DRM isn't up front. If people know what they are getting into then I see no reason why such a deal between two private parties should be prevented. Tricking someone into a deal and then jumping out "gotcha!" is of course shitty behavior. I'm sympathetic towards the cell phone issue but I think it's being brought up far too often here. In the United States you have three, maybe four, choices. It's easy for them to collude and price fix. The fuckers certainly did when charging $20 a month for text messages. It costs billions of dollars to enter that market so they could this easily. Pretty much anyone can enter the kitty litter box or coffee maker marketplace. Dozens of companies already have. I'm all about consumer choice and as long as there is choice if someone wants to offer a shitty deal then I'm perfectly fine with that.

redwall_hp 12y ago

AACs, actually. (MPEG's superior successor to the obsolete MP3 format.) It fixes some artifacting issues and produces higher quality audio at lower bitrates.

mikeash 12y ago

I think the failure to be clear on the limitations up-front is central. If everyone knows what they're getting into, then you can just let the market figure things out. The problem is that people have expectations for consumables, namely that the difference between a name brand consumable and a generic version is at most quality, and these companies are taking advantage of that expectation. You don't even have to sell two flavors. Let Keurig do their silly DRM stuff. Just make sure it's absolutely clear on the packaging that you have no choice in who you buy the consumables from. If people prefer to pay more to avoid DRM, a competitor will surely arise if Keurig doesn't go for that market themselves. Ultimately, these companies need to be reminded that you catch more flies with honey than with vinegar. The model where you sell up-front cheaply and then make it up on consumables doesn't require DRM. All it needs is brand loyalty, preferably backed by a reputation for quality. For a real-world example, car dealerships make most of their money on service, not sales, even though everyone is free to take their car to any unaffiliated mechanic they like.

forrestthewoods 12y ago
For Keurig the front of the box literally says "Works only with Keurig brand packs". http://familyfoodandtravel.com/wp-content/uploads/2014/09/Keurig-2.0-box.jpg http://familyfoodandtravel.com/wp-content/uploads/2014/09/Ke...
- mikeash 12y ago
  I feel a little dirty defending non-readers, but I don't think that's sufficiently clear or prominent. In the context of a product description, it's ambiguous as to whether that's simply a recommendation or a hard statement of fact. For example, in the world of cars it's common to see the phrase, "Always use genuine $BRAND parts." Of course, other parts work fine, it's just a recommendation. The Keurig statement is a bit stronger, but still not clear. I'd want something more like, "This device uses technological measures to prevent compatibility with third-party packs." And a bit more front and center.

zanny 12y ago

Steam is incredibly intrusive as soon as you actually want to own your games. For example, Rage runs perfectly on Linux through Wine because the engine is OpenGL. Too bad you cannot actually download it on the Linux steam client because its not platform native and supported in client. And because the game has the Steam DRM, you could not run it on Linux anyway without running it through Steam in Wine. So Rage has a festering tumor of the Windows Steam attached to it for no reason but to force down my throat how I don't actually own this game. Same applies to every game on Steam that runs fine in Wine but that you cannot download, and often cannot run, without running Steam through Wine as well.

Shivetya 12y ago

I was under the impression Keurig made that move after the patent on the cups expired. I use an Eko Brew refillable k-cup replacement and will not be buying the 2.0 should this old one fail. I never thought they sold the coffee makers at a loss, I do remember rumors of a seven cent fee per k-cup. I do not mind DRM on items I am renting and am expected to return, however if I make a purchase where there is no understanding it is to be returned for refund of deposit or the like it should not have DRM.

adam-a 12y ago

Nestle, who have been selling the same kind of device very successfully in Europe, last year had a patent for their pods revoked across Europe[0]. Their main defence against third-party pods was suing for IP infringement apparently. Those coffee machines are super convenient so it's nice that we're starting to see a variety of coffees available for them. If nothing else because who wants to drink one brand of coffee all their life? They recently released the technical specifications for the pods too. Hopefully the other manufacturers will decide or be forced to follow suit. 0: http://www.wsj.com/articles/SB10001424052702304066404579129103462582822 http://www.wsj.com/articles/SB100014240527023040664045791291...

javajosh 12y ago

Some products are subsidized by consumables. DRM enables that subsidy. Without DRM that product may not be viable. I think there is a useful distinction to be made between Xbox DRM and Keurig DRM. The key difference is that people know what their in for with an Xbox - they know that they will be buying a few very expensive games a year for a few years. They may even know that this "subsidizes" the machine itself. But there's no other experience to have with the Xbox. With Keurig (or cat boxes or ink cartridges), the situation is different because it's a refill problem that ordinary consumers can address themselves, and often want to. There is no equivalent experience with Xbox! (Well, you might argue that "programming a new game" is something like it, but it's still not "refilling" an existing game ( although that does give me an interesting idea for those systems that you could buy a "refillable" SD card that you can load with whatever code you want...)