Many publishers miscalculate the importance of Digital Rights Management (DRM), choosing to either overprotect their content or avoid protection all together. In this How-To, we explain the two competing consumer behaviors that threaten any DRM strategy and help you craft a DRM policy that’s customer-friendly and profit-savvy. Discover the five best practices for DRM and how it applies to three major niches — news, entertainment and business information.

In the late 1990s, publishers couldn’t stop talking about digital rights management, and they kept competing to come up with different ways to lock-up their content so that only one user could use it (a concept still propagated by iTunes). As these protection schemes became more byzantine and burdensome, users ultimately began to push back, to the point where some publishers began advertising lack of copy protection as a sales benefit. In recent years, discussions of digital rights management have all but disappeared, replaced by conversations of paywalls, meters, freemium offerings and other code words for the clunky term DRM.

Below we put DRM in perspective by helping you consider your options and delineate the best practices as they relate to various types on content.

There are two competing consumer behaviors that fundamentally make DRM a tricky business:

1. Consumers won’t pay when they can get things for free.
2. Consumers will most likely pay for recommendations made by word-of-mouth.

Behavior #1 had led to steady decline in revenue for multiple types of publishers over the past decade, most notably newspapers, even forcing some to close shop. As the Broken Window theory of public health explains, people will behave as badly as a permissive environment allows them to. Simply fixing “broken windows” online has led to increased revenues from online subscriptions.

But behavior #2 can lead to many more sales than any other type of marketing. For that reason, the ability to share content — with friends, co-workers, household members — is critical for bottom line profits. Consumers hate receiving information or entertainment that they can’t share with people. This type of behavior is closely related to a concept called “experience goods.” Content is an excellent example of experience goods, because quality and value can’t be fully assessed until consumed. Strong word-of-mouth is one of the few proven ways to mitigate the experience goods conundrum.

To balance these competing consumer behaviors, as a publisher you must:

1. Understand how consumers use your content.
2. Understand the threats/ethical considerations of your business.
3. Think of DRM as part of your strategy to maximize revenues.

#1. Understand How Consumers Use Your Content

There is no one-size-fits-all solution to DRM, and anyone who says so doesn’t have a bird’s eye view of the various types of content out there.

In many cases, subscribers will take paid content they receive via email and forward it to non-subscribers. On one hand, this is pilfered content. On the other hand, this is an incredibly powerful word-of-mouth marketing opportunity. Imagine if you received timely content from a manager, a peer or a client. You’d read it carefully and conclude you need to subscribe as well to remain fully in the loop.

Likewise, dual logins can create an organic opportunity for professional publications to upsell group subscriptions or site licenses (instead of locking out users, which is a common DRM strategy). Furthermore, if your subscribers are using your material for “must-haves” (professional information, a beloved cable TV show, making life undeniably easier), they’ll be more willing to pay than if your content is a “nice-to-have” (videos available for free elsewhere, wire stories, press releases, etc.).

And if you’re competing in a niche with lots of free content and resources (e.g., general news or entertainment), focus on converting returning, loyal users who have experienced your good sufficiently rather than obeying strict DRM standards. This can be done through metered paywalls or freemium subscription levels.

#2. Understand the Threats/Ethical Considerations of Your Business

If you are in a market or niche with lots of free resources, it will be harder for you to create and convert on a hard paywall (just look at how The New York Times is able to make substantial revenues from its metered paywall, while The Boston Globe with its hard paywall is struggling — and up for sale).

In addition, there are ethical considerations for fields like journalism. It’s would be pretty much unethical to put news about an impending hurricane behind a paywall — or other information that serves the public good, such as where to go to vote on Election Day. That’s why a metered paywall is a better DRM strategy for general news sites than a hard paywall.

Conversely, membership sites should not publish contact information openly, unless the site has specifically made it clear that the information will be in front of any paywall and/or members can edit their settings (think LinkedIn).

#3. Think of DRM as Part of Your Strategy to Maximize Revenues

When you understand how your consumers use your content, and how valuable word-of-mouth marketing is, you can begin to create a DRM strategy that lets you maximize revenues.

For example, instead of instantly issuing take-down notices to anyone who posts your content (even the free stuff), you can email them an invoice for syndication. (If they don’t pay, then send the legal notice. But make sure your invoice is for a price that keeps you in the black — you can’t really sue for more than what you quote in that first invoice.)

If you’re a B2B publication, contact companies to offer a group subscription discount when a dual login occurs. Make sure that your message is super friendly and welcoming, such as “We see two different users have logged in. While this is a violation of our terms of service, we hope you’ve enjoyed the preview and would be happy to set you up with a multi-user account.”  Initiate a lock-out only after a certain number of dual logins and failed attempts to convert those accounts to group subscriptions.

So to a large extent, DRM — the process of protecting access to paid content — is in the eye of the beholder. The marketplace has made clear to publishers that they will not tolerate or support content that is too locked-down. At the same time, without some protection, publishers could jeopardize their revenues. So a balance must be struck, and that balance has to be reflective of the type of content you publish, and the nature of your audience. Further, since “leakage” (free re-distribution of paid content) can’t be fully eliminated, the challenge and opportunity is to turn it to marketing advantage.

Below are a list of best practices and when to apply them.

1. The Cloud and Multiple Devices — When YouTube launched its premium movie sales, it allowed consumers to watch their purchases online or through “previously authorized devices” (i.e., Android devices). By keeping subscriber access “in the cloud,” YouTube and similar subscription content sites are making it possible for users to consumer anywhere, anytime (which is a major selling point for consumers). However, some precautions need to be taken. In YouTube’s case, they will allow a device that was de-authorized to be re-authorized once in a 12 month time period. And they will allow three users to view content on three different devices, but not the same content/movie. These exceptions speaks to best practice #2.
2. Multiple User Access — No one ever bought a magazine, newspaper or DVD and prevented their family from joining them in consumption. Digital publishers have to get past their idea of one-to-one sales and allow their content to be viewed by multiple eyeballs by default. Microsoft is introducing a subscription-based version of Office that allows five users to have access to the subscription — although they all have different access codes.
3. Format for Multiple Devices — Just as your content is available to multiple users, it should be available through multiple devices. As our Benchmark Report found, most Americans have between two to three digital devices, so it’s better to have Internet-enabled content that’s not device dependent. The Financial Times is seeing great success with its Web-enabled mobile and tablet apps (which also conveniently allows them to bypass the 30% cut Apple would normally take for a native app sold through their App store — see our How-To on Mobile Apps for the difference between native and Web apps). And by dropping Adobe’s expensive DRM program on its digital books, Lulu is letting users access eBooks without having to create an Adobe account, authorize the purchase or install third-party software — all barriers to conversion and sales.
4. Expire Content — News, entertainment, data — most of these things have an expiration date. Freemium sites that entice with timely content (great for SEO), should “expire” their content after a certain date and put it behind a paywall (check out Hulu for how this is done). Consumers will pay for archives in many instances, or at least convert to a trial for the archived material — once again, creating more marketing opportunities for you.
5. When to Not Care — Sometimes, it behooves a paid content site to shrug its shoulders at DRM infractions. That was HBO’s reaction when users started using friend’s and family member’s login credentials to view HBO’s premium programming on HBO GO. By doing so, HBO is allowing non-subscribers (i.e., prospects) check out their shows. Since many cable companies are exploring ways to convert cord cutters, not caring about DRM right now is the best way for them to test how many people will watch their shows online and monitor consumer behavior. Other legacy content publishers would be wise to take note.

General News
Create a metered paywall that allows 10 or fewer free articles per month (per week or every 60 days, as Andrew Sullivan is doing, is too confusing a schedule). Allow visitors to exceed their meter count if they come in through social media or if it’s a big event (e.g., terrorist threat, hurricanes, famous people obits). Use re-posting by other sites as an opportunity to sell syndication rights. The key driver here is that news is heavily commoditized and short-lived. Since you can’t control access to news events, you need to show the market the quality, depth and insight of your coverage as a way to create a value proposition, and thus address the experience goods issue.

Entertainment
For television, movies, and video, create a freemium site that allows viewing of some full-length content. For television shows in particular, make sure to “expire” the content, e.g., afterfour weeks, episodes are put behind a paywall along with previous seasons. The key driver here is that most entertainment content has evergreen characteristics, so it grows in value over time.

Business (B2B, Trade Pubs, Directory and Databases)
Differentiate between free content and premium content by type. For example, all blog posts and brief reports are free, but databases and in-depth information are premium. Use PDFs and ad-supported content for lead generation. Do not use metered access. Use dual-logins as an opportunity to upsell group subscriptions. The drivers here are that the information you publish is likely to be more valuable and more exclusive than other forms of content. This allows stricter and stronger paywalls, but not to the point of eliminating all your word of mouth marketing opportunities.

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