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Reciprocal cuts staff by two-thirds

The digital rights management company lays off at least 40 employees in an effort to conserve resources.

Reciprocal, a pioneer in digital rights management, said Tuesday that it has laid off two-thirds of its staff in an effort to conserve resources.

The New York-based company said it reduced its work force from between 110 and 120 employees to between 40 and 50. The layoffs were across the board and included members of the company's management team.

The Reciprocal layoffs underscore small companies' struggle to stay standing in the David-and-Goliath battle for control of digital rights management (DRM), technology that protects songs, videos and other digital files from being copied or distributed without permission.

As software giant Microsoft moves to dominate anti-piracy technology, smaller companies are having trouble just staying in the market. For example, Preview Systems sold its assets and closed its doors in May.

Now, despite "fairly substantial revenue growth" this year, Reciprocal is cutting back in the face of slower-than-expected adoption of copy-protection technologies, said Howard Singer, senior vice president of marketing and product strategy for the company. Although major record companies and the once-popular Napster are preparing music-subscription services with built-in copy protection, these have yet to launch.

"Conserving resources is what makes the most sense for us," Singer said. "The digital distribution market is...not growing as fast as we had projected, but we need to ensure that the company can take advantage of the more rapid growth that we're convinced will come in the future."

Like other DRM companies, Reciprocal lets copyright holders and content owners block illegal copying. It also provides back-end services, giving content providers a way to track customer usage and manage operations such as administering royalty payments.

The company made aggressive moves last year to sign up key clients, including major labels Sony Music Entertainment and BMG Entertainment. Reciprocal also signed a deal to provide e-commerce services for Zomba, a record label representing artists including Britney Spears, 'N Sync and the Backstreet Boys.

Reciprocal said the layoffs affected employees in its three U.S. offices in New York City; Buffalo, N.Y.; and Raleigh, N.C. Employees were notified Monday and received severance packages, according to the company.