Chris Anderson's written a fascinating piece on the economics of "piracy" and whether a little piracy can actually allow for more net revenues to vendors. The argument is fascinating. Chris reiterates that any DRM that's effective at stopping illicit copying will necessarily block legitimate customer activities too, and drive honest users to downloading instead.
The usual price-setting method is to look at the entire potential market, from the many at the economic lower end to the few at the top, and set a price somewhere in between the top and bottom that will maximize total revenues. But if you cede the bottom to piracy, you can set a price between the top and the middle. The result: higher revenues per copy, and potentially higher revenues overall.
The only exception I take to Chris's argument is the idea that some "copy-protection" (DRM) technology can reduce downloading. The thing is, if I want to download a song instead of buying it, then all I require is a search tool and a copy of that song that someone, somewhere has cracked. It doesn't matter how strong or weak the DRM is on the copy that I choose not to buy — all that matters is how much resource one cracker, somewhere in the world, was willing to devote to breaking the DRM. The first copy may be very expensive, but all subsequent copies are free.
The only way that DRM could stop me from downloading is if:
- Every copy of the song circulated, from the recording studio to the record store, had strong DRM on it
- No analog to digital converters were available to anyone, anywhere in world, who might have an interest in breaking the DRM (since you can just avoid the DRM by making taking the analog output off the player and re-digitizing the song in an open format)
- Peer-to-peer networks ceased to exist
- Search engines ceased to index file-sharing sites
- No "small worlds" file-sharing tools were in circulation
Unless all of the above are true, then the amount of DRM on a song is irrelevant to how hard or easy it is to get a copy without DRM on it. There are ways to reduce downloading — for example, offering attractive services to high-downloader populations (like college kids). But DRM can't reduce the amount of downloading that people who want to download will undertake.
(via Waxy)
