How they’re innovating: Ariel Napchi and Ronny Golan are trying to put a positive spin on digital rights management (DRM), one of the ideas that can raise hackles among technophiles.
DRM is a system of software “locks” that can prevent a file from being shared — making it hard, for instance, to pass a TV show purchased from Amazon.com’s Unbox service from one person to another, in the same way a DVD is easily swappable.
“We call our approach Positive DRM,” says Napchi, co-founder of Hiro-Media, a startup in Tel Aviv, Israel. “We think you should be able to watch a show as many times as you like, pass it to your friends, and put it on file-sharing networks.”
Instead of selling the download, the content owner would earn money from advertising integrated into it.
Peer-to-peer networks have long been seen as an enemy of media companies. (MGM took two of the networks, Grokster and Morpheus, to the Supreme Court in 2005 — and won.) Golan says that in the company’s early days, floating the idea of using the networks to distribute officially sanctioned content was unfathomable.
“People almost threw us out of their conference rooms,” Golan says.
But more recently, media firms and telcos like NBC and British Telecom have been willing to give Hiro’s system a try, NBC with its short-lived DotComedy video site and BT with a small selection of full-length features.
Hiro’s software, which integrates with media players like Apple’s Quicktime and Windows Media Player, allows users to download a video file and ensures that new ads are dynamically inserted each time the video is viewed — and that the video’s producer can collect information about how many times the video is seen.
Napchi and Golan say that delivering videos as downloads rather than as streams radically reduces a media company’s bandwidth costs.
“You can put the content anywhere you want — including on peer-to-peer networks — and the content owner makes money without incurring much cost,” Napchi explains.
Golan says that “hundreds of thousands of users” have installed Hiro’s software. While the company’s latest deals have been with Australian and Russian digital media companies, Hiro’s founders say U.S. deals are on the way.
“But these are huge companies, and the sales cycle is pretty long,” Napchi adds.
“People aren’t willing to trade real dollars for virtual dimes,” Golan says. “They’re moving slowly and cautiously, because they have a lot to lose if they don’t do it right — but a lot to gain if they do.”