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Commentary: Digital rights belong in business plan

Digital copyright protection must be balanced by the need to avoid causing frustration for legitimate customers.

While digital copyright protection is important to all creative artists and owners of intellectual property, security must be balanced by the need to avoid causing frustration for legitimate customers.

See news story:
Big Blue touts new Napster-proof music locks
Moreover, companies must focus on services that surround the raw content so that the complete value equation in the mind of the consumer is based on the total package of value-added elements and not simply the content. Digital rights management should be considered in the context of a complete business plan built around the advantages as well as the disadvantages of digital access to music and other entertainment.

Ultimately, people want to share their music and books, and they will likely reject technologies such as hardware-based solutions that prevent sharing. Furthermore, complex copy protection schemes often attract hackers to the challenge, while frustrating and discouraging legitimate buyers.

Digital rights management needs to be viewed in the context of the complete business plan. This should include a review of content pricing and consideration of the marketing value of gathering customer information that cannot be gathered through indirect retail distribution.

Low cost, low theft
One way to discourage copyright violations is to price the music so low that few people will bother to try to break relatively weak security levels. Music distributors and artists need to look at the real reduction in costs they can achieve by eliminating middlemen and physical distribution costs, including the very large cost of handling returns. Companies should examine the trade-off between making high profits on relatively few sales and possibly reaching large extra markets by slashing prices on digital music.

Companies should also factor in the tremendous value of the information they can gather online about their customers. Fans who download or buy one Britney Spears recording are prime candidates for other interactions. They may wish to join a fan club or buy T-shirts and posters. They may also be interested in purchasing concert tickets or music from related artists. Developing a customer base to target for related sales is valuable.

Another way to reduce rampant music sharing is to build additional services around the content that are unavailable to customers who have not purchased the music/service combination. We expect various forms of content to increasingly be offered using a subscription model. For example, a music subscriber might receive earlier access and lower prices on future releases, copies of interviews with the artists, first chance at concert tickets, and other benefits not available to nonsubscribers who simply listen to free copies of a song.

By focusing on services that surround the pure content, companies can in effect turn the ability to distribute free copies of individual songs into a marketing advantage. These copies may simply be "digital loss leaders" that create greater market interest in the artist and attract new customers who will want the entire package.

In some ways, this parallels issues faced by vendors in the PC software industry for many years. Software is often easily copied--and some vendors perversely benefited by becoming a "standard" via software piracy. However, users of pirate software do not have access to documentation, support services or the add-on services available via a vendor's Web site.

Missing the point
In effect, companies like Sony and IBM trying to stop MP3 are missing the point: It's not the CD, tape or memory image that is illegally copied--it's the artist's intellectual copyright. Trying to stop the spread of MP3 will fail; too many computer users and MP3 devices exist for Sony and IBM to restrict the content. New ways for artists to gain license revenue, not restrictions on distribution, must be sought.

Despite the difficulties inherent in creating a secure and "consumer friendly" mechanism for digital rights management, content distributors do need some security to protect digital copyrights. However, content creators and distributors should avoid fixating only on this aspect of the digital distribution equation. They must see digital rights and copying issues in the context of an entire business plan designed to maximize the advantages of digital distribution and turn what appear to be disadvantages into opportunities wherever possible.

Content distributors also need to remember that, long before the Internet appeared, users were lending records to each other, making tapes of recordings and sharing them, sharing good books, and borrowing books and recordings from libraries. Some level of sharing is inherent in the process and must simply be accepted.

Digital rights management should encompass media including audio, video, music and text files. It should be part of the asset management system of the enterprise where the digital asset is stored and archived. More than 80 percent of content is reused in a media company. Digital rights management will increasingly become a critical issue in the enterprise as digital commerce becomes more of a reality.

Digital rights issues extend beyond music and book distribution to include all electronic content and will increasingly extend beyond the public Internet to include the corporate intranet.

Enterprises that are content producers or distributors must look to develop overall distribution strategies that include services surrounding the content to add value as well as digital rights management to control access. Enterprises that are content consumers will increasingly be bringing electronic content into the organization from many sources and will need to manage legal access to this content.

Meta Group analysts Jack Gold, Val Sribar, Dale Kutnick, Philip Dawson, David Yockelson, Elizabeth Sun, David Cearley and William Zachmann contributed to this article.

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