Managing Anti-Circumvention Technology for Digital Content

Abstract

Anti-circumvention technologies offer content providers interesting opportunities to protect and distribute various forms of digital content. This work takes an economic approach to the investigation of the relationships between the legal and technological protections of digital content as well as associated managerial implications that impact the overall profitability of content providers. The resulting findings about optimal pricing are interesting and suggest that the price of digital content does not have a simple linear relationship with levels of protection. Thus, content providers should consider such parameters as legal & technological protection levels, consumer disutility due to anti-circumvention technologies, and composition of consumers with different circumventing attitudes when a content provider sets the price in order to optimize its overall profit. We find that an optimal level of protection exists when consumers start to feel significant disutility at the lower levels of technological protection. This work also demonstrates that content providers may often have to adjust price downward in conjunction with the lower range of technological protection in order to stimulate consumption. Furthermore, we find that setting maximum protection levels may not always be optimal consumers are sensitive to technological protections.