META Trend: By 2003, 95% of the G2000 enterprises will deploy XML-based content management infrastructures. They will integrate document management, media asset management, imaging, and electronic output management-to support anonymous authoring, application publishing, and dynamic virtual folders (data extraction, dynamic assembly, process automation, format translation, repository services, rights management, federated search, personalization, etc.) across Internet, extranet, and intranet venues.
Without exploiting digital rights management (DRM) technologies for e-commerce, content publishers can lose 40% or more of revenue due to piracy and illegal use in distributing unprotected content. New DRM technologies are enabling content publishers to tap into new revenue streams and leverage new distribution channels (e.g., Internet, personal digital assistants, MP3). Content owners looking to control (track content usage/assign usage rights) and promote (provide access to a greater audience) are embracing DRM technologies to manage their high-value content (i.e., e-books, educational/reference materials, research reports, music, journals). Recent announcements in the music industry (e.g., Listen.com to buy the assets of Scour Inc., and Bertelsmann AG's partnership with Napster Inc.) provide the most visible examples of an industry facing DRM and seeking new ways to provide secure Web-based music distribution. Although the DRM market is still immature, early adopters (i.e., Bertelsmann, Time Warner Inc., Dow Jones, Barnes & Noble LLC) are integrating DRM strategies to maximize revenues, govern the exercise of specific usage rights, and gain consumer insights for sales/marketing purposes. DRM enables content owners to embrace compelling new business models that provide publishers ways to match content distribution with consumer expectations (per chapter/page/song).
META Groupfindings indicate by 2004, $300 billion of content will be distributed electronically; of that, nearly $100 billion will be digitally downloadable, requiring some form of DRM protection. Although we believe the e-book industry will see significant growth by 2006/07 (only 5% are now distributed electronically), the business and professional publishing industries are positioned to see earlier growth because of greater consumer acceptance of reading high-quality/lower-quantity content online. Of the $60 billion US publishing market, $15 billion was spent on research publishing (research reports, journals), $7 billion on textbooks, and nearly $20 billion on other business-critical documents (e.g., white papers, training material) in 1999. Industry growth in the e-book market will follow consumer demand/acceptance of reading novel-length content on book readers or PCs (this will experience very slow growth through at least 2006/07, except for reference, research, or other short reading materials; digital books on audio will also be a major growth area). Content distribution will grow exponentially because of improvements in DRM technology, growing consumer expectations for multi-channel access to information (print, Internet, readers, Palm), and increasing access to digital content.
Many of the obstacles that hindered expansion in content e-distribution (e.g., copyright infringement, inability to collect royalties on digital content) are being eroded by DRM. Once content leaves the Web server, the publisher loses control of the reuse and redistribution of that content. DRM technology capabilities are enabling content publishers to have greater content control and realize more commercial benefits (i.e., incremental revenues, user management, report generation). DRM, coupled with growth in the amount of digitized content and continuing improvements in network bandwidth, is enabling rapid adoption of digital commerce.
Selling content over the Internet not only reduces physical costs (paper/printing), but also provides new opportunities to improve customer experience and gain incremental revenues, such as increased distribution. Content publishers are seeing reductions in traditional distribution costs (i.e., hardcover books cost about $15 - $25 to produce), plus inventory/shipping/distribution costs. At the same time, DRM offers new ways to package/distribute content to improve overall customer experience, greater availability of high-value content, and ease of usability.
The DRM market is still undeveloped, highly competitive, and evolving quickly. However, numerous vendors are emerging in this space. Although we have yet to see a dominant market leader, InterTrust Technologies Corp. continues to lead in customer acquisition and market recognition. We believe vendors who offer robust/scalable technology, format-agnostic solutions, flexible and dynamic rules, ease of use to consumers/publishers, and support for multiple devices/channels will achieve success in the DRM market.
Although DRM offers a solution to digital e-commerce, users must be cautious of the cost and complexity levels associated with implementing DRM solutions. DRM pricing is generally based on either transaction-based fee or flat-fee licensing agreements. On the marketing side, pricing may also be based on the volume and amount of content. Although licensing technology from traditional DRM vendors may provide a more robust solution over the content marketers, it also can be costly (more than $1 million) and time-consuming (e.g., 6-12 months, depending on company size/amount of content). This complexity increases with the need for customization and systems integrators. Content marketers will typically not build a custom site for users, but will create application-programming interfaces to existing systems (e.g., app server, Web server, content management system). Content publishers must not mislead by the security level offered by DRM providers. Although DRM will not completely eliminate the risk of hackers/illegal content distribution, we believe these solutions will provide 80%-90% content protection.
By 2004, META Groupbelieves content distribution will move away from the traditional brick-and-mortar publishing model to a more hybrid multi-channel model with direct content delivery to all points of interaction (e.g., store, personal digital assistant, Web, e-book reader). We are seeing the greatest near-term impact on research/journals/reference markets, where companies can offer per report/chapter access to information that was traditionally accessible only through expensive subscription/membership fees. Although DRM and digital distribution offer the potential for significant cost savings, content publishers should focus on enhancing consumer experience through personalization/customized delivery, instead of merely providing less-expensive content. Content publishers must diligently embrace DRM technologies to partake in the future potential of digital e-commerce, or risk revenue erosion from competitors.
Business Impact: Content publishers should leverage digital rights management technology to experiment with new business models and look specifically at ease of use to consumers, volume of content viewed/purchased, insights gained through behavior tracking, and return on investment.
Bottom Line: Publishers need to develop clear guidelines for the appropriateness of content digitally distributed and the rights they associate with that content, as well as establish strategies to maximize the flexibility/protection provided by digital rights management.
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EBS 3 January 2001.1024