Derek Slater has been giving a lot of thought to the issues discussed below, and evidently got there first. If you haven't already, do check out Welfare Economics of FairPlay and DRM Lock-in.

Writes Derek: "[It] is oversimplified and misleading to call...the current digital music standards situation 'the market at work.' Indeed, given how the DMCA steps into the market to limit competition, this is hardly just the market functioning 'normally.' It is a market born out of a particular legal framework that rejects the careful balancing we would typically employ, and the balance we had struck to allow reverse engineering and decryption for [interoperability]."