Say the name Goldilocks to most people and you evoke happy childhood memories of a favorite bedtime story about a young girl who samples many items seeking that perfect fit; neither too big, nor too small, and that is instead “just right.”
The term Goldilocks has since grown beyond the original story of three bears and a sociopathic juvenile delinquent who commits multiple crimes. Astronomers, economists, and others now use the term to describe a zone where situations are “just right” to sustain life, stimulate economic growth, etc.
So what is the Goldilocks zone for software DRM?
Too much of the wrong DRM and you could bring hassles to your end users who will respond by not buying your software. Too little DRM (or easily defeated DRM) and pirates will use your product without paying you which means fewer jobs for programmers and less features in the next release of your software.
I offer this simple formula to achieve a level of DRM that is “just right” - invest only up to the amount of extra profit you can gain by reducing piracy. Here is an illustration: an ISV sells a solution for $1,000 that yields and incremental net profit of 20%. This means that for each license sold there is $200 profit. The last time we measured it, our average ISV recorded a 19% increase in revenue when they started using DRM to protect their software. 19% of the $200 profit is $38, and that is the maximum amount that the ISV should invest in software DRM per license. Fortunately, most effective DRM solutions cost far less and the difference is extra gain for the ISV.
Your number one goal is increased sales of your product. It has to remain easy to use and still stop piracy. Do this right and you can grow sales, even in a down economy, and invest more into making a better solution. This is the simple reason Microsoft invests so many millions in their fight against piracy.
In the original version of the story, the three bears practice some quick street justice and dispatch the little forest pirate after they catch her. Short of the emotional satisfaction this approach would bring many ISVs, proper use of DRM can reduce piracy and deliver a big increase in revenue.
