Want to boost your sales 10%? Remove all DRM
December 17, 2013 | 1:15 pm
Coverage courtesy of Ron Miller in Computerworld has brought to light a research paper published last month which brings fresh data points to the anti-DRM debate. Put simply: All DRM does is kill your sales. That’s all. It doesn’t protect you against piracy; it doesn’t preserve your revenues. The only thing it does is drive customers away. And if you want an easy sales hike – all you have to do is remove it.
The paper “Intellectual Property Strategy and the Long Tail: Evidence from the Recorded Music Industry,” by Laurina Zhang, a PhD Candidate in Strategic Management at the Rotman School of Management at the University of Toronto, compared “sales of similar albums with and without DRM before and after DRM removal. Using a large sample of albums from all four major record labels that includes multiple genres as well as hits and niche albums, I find that removing DRM increases digital music sales by 10 percent.” Zhang’s paper, with all its detailed statistical backing, is available online, and I recommend interested readers to study it.
And lest anyone carp that the music industry is not publishing, and that conclusions drawn from it don’t apply to ebooks, then Zhang includes a reminder that: “Perhaps no industry is as visibly affected by digitization as the recorded music industry,” and that “the recording industry has been vocal in blaming sales reductions on file sharing technology.” And, she continues, “DRM’s sharing restrictions have countervailing effects on sales. While it has the potential to combat piracy, it may also hinder product discovery, both of which are salient issues in many digital markets.” And the effect, she finds, is “most pronounced for albums at the long tail of the music sales distribution, providing support for the long tail hypothesis that lowering search costs can facilitate product discovery of non-mainstream fare.” So if you’re working outside the mainstream, in niche products or minority interests, you will benefit proportionately more from removal of DRM.
Miller quotes Kevin Spacey, executive producer of Netflix Internet-only show House of Cards, on their show: “Give people what they want, when they want it, in the form they want it in, at a reasonable price and they’ll more likely pay for it, rather than steal it. Well, some will still steal it, but I think we can take a bite out of piracy.”
That hardly sounds like a file sharers’ charter. But it does sound like good sense. And, as Miller points out, DRM actually acts as a perverse incentive to increase illegal behavior. “The people it hurts most are the entertainment giants’ paying customers. It says in effect, ‘If you play by our rules and buy our content, you will be limited to a single copy, and you had better hope it never gets damaged or lost, because we’ve made it impossible for you to save a backup copy. But if you steal our content, you can use it on an unlimited number of devices and share it with all of your family members and friends’.” Don’t you suspect that some of the people who bought their copies of Disney Christmas fare legally via Amazon are now wishing that they had pirated it instead?