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Maximizing Value in the Digital World

April 15, 2002 | Elliot Maltz , Vincent Chiappetta | Strategy

The information age has created a host of digitized products — in the realms of software, databases, music, videos and electronic books — for which the potential for piracy, defined as duplication and distribution of a product without the permission of or payment to the content owner, is extremely high. Up to now, efforts to control piracy have been primarily legal in nature, relying upon the assumption that creators of digital products have absolute ownership rights to the content they create. Under the same assumption, companies have also sought to limit piracy with technological safeguards such as click-wrap contracts, encryption, password-limited access to distribution sites and copy proofing.

However, say the authors, the belief in absolute ownership of digital content is incorrect from a legal standpoint, and antipiracy tactics that rely upon it will ultimately prove ineffective. What’s more, these tactics may even reduce authorized usage by paying customers. A far better solution, the authors suggest, is to recognize the dynamics of the marketplace, segment that market into innovators (potential pirates) and the mainstream (potential paying customers), and address each segment differently to gather information and establish market leadership.

The authors use a variety of cases to illustrate the tactics whereby content creators can coexist with the innovator segment of their audiences while still controlling product price and distribution standards. The key to setting an effective, “priced” value proposition for majority users lies in incorporating the innovator’s technology before it reaches the mainstream. In such a scenario, brand identity encourages the majority to recognize quickly the content provider as the standard source for the product. Brand strength is then enhanced through fair pricing, product enhancement and superior distribution mechanisms.

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