Study shows removing DRM increased music sales

Intellectual Property Strategy and the Long Tail: Evidence from the Recorded Music Industry [PDF], a new working paper from University of Toronto Strategic Management PhD candidate Laurina Zhang documents the rise in sales experienced by the music industry following the abandonment of DRM in digital music offerings.

The paper compares sales of 5,864 albums from 634 artists from before and after the music industry eliminated DRM, and finds an average rise of 10 percent in overall sales (though back-catalog experienced more of a lift compared to front-list titles). As TorrentFreak reports, "This effect holds up after controlling for factors such as album release dates, music genre and regular sales variations over time."

“Relaxing sharing restrictions does not impact all albums equally; it increases the sales of lower-selling albums (the “long tail”) significantly by 30% but does not benefit top-selling albums. My results are consistent with theory that shows lowering search costs can facilitate the discovery of niche products.”

According to Zhang, the 30% sales increase for lower-selling albums can be explained by the fact that DRM-free music makes it easier for consumers to share files and discover new music. The finding that removing DRM from top-selling albums has no effect on sales makes sense in this regard, since the discovery element is less important for well promoted musicians.

While DRM is still prevalent in the book industry and elsewhere, most of the major labels are now in agreement that it’s not a good fit for music.

What Piracy? Removing DRM Boosts Music Sales by 10 Percent [Ernesto/TorrentFreak]

Notable Replies

  1. Those crazy consumers... Placing more value on a less defective product. What will they think of next?

  2. Actually the study seems to show that removing DRM makes almost no difference overall. Just look at figure 1 - you can see there is almost no trend in the data, possibly a 0.1% increase, but there is a constant line at 0.3% that will go through all the error bars.

    Suppose you have two albums and DRM. Album A sells 1,000,000 copies a month, and album B sells 10 copies a month. Then you remove DRM and find you sell 1,000,000 copies of album A, and 13 copies of album B. This is the 30% increase being claimed.

  3. miasm says:

    Seems to me that the point was that the lawyers of the Copyright Cabals could leverage the impetuous greed of the record company executives and get them to spend huge amounts of their profits on fighting a cultural trend that loses them between Zero and negative 10%.

    That reads kinda weird but means that piracy takes either nothing from their profits, or might actually add slightly (up to 10%) to their profits.

    Even taking the more conservative figure, it turns out that the only real outlay the record company executives are making here is to the lawyers.

    I think eventually the innate greed of the Record Company Executives will over-ride the state of victim hood they have been manipulated into by the lawyers of the Copyright Cabals and everything will return to the days of radio. When you could just record a mix tape from the broadcast if the DJ would keep their damn mouth shut between songs.

  4. pyalot says:

    While DRM is still prevalent in the book industry and elsewhere, most of the major labels are now in agreement that it’s not a good fit for music.

    I think Tim Berners Lee didn't get the memo. Could somebody get the memo to him? I think his logic processor is broken and he doesn't get any memos. Thanks so much.

  5. Exactly my first reaction. Seems to me that this article shows that there is no statistically significant difference in sales when DRM is removed, since all of the error bars overlap.

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