The power of DRM – the power to make you less money

drmby Kelsey Wiens (originally published on her personal blog. All content CC-BY unless otherwise noted).

Digital Rights Management, or DRM, is a digital encryption lock that is applied to film, music, video game, and books. The challenge with DRM is that it makes it difficult to share or move books between devices and traps consumers into one device.

The Big 5 Publishers (Hachette Book Group, HarperCollins, Macmillan Publishers, Penguin Random House and Simon and Schuster) all automatically apply DRM to all ebooks on Amazon but if you are a independent publisher or author you can choose to apply DRM or not. Once this choice is applied you cannot change it in either direction.

Author Earning recently studied 120,000 of Amazon’s top selling ebooks to see how often DRM was applied and if DRM had any effect on sales.

Not surprisingly the Big 5 evokes DRM almost 100% of the time. By contrast, independent publishers have about 50% of the titles with DRM.  And the 50% of non-DRM ebooks account for 64% of total unit sales.

“Indie titles without DRM sell twice as many copies each, on average, as those with DRM.”

Author Earnings also ran the numbers to confirm it was not simply a correlation between ebook pricing and DRM election, rather than a consequence of DRM itself. So they compared the average daily earnings of non-DRM titles to DRM titles at each pricing cohort.


*from Author Earning report July 2014 and is reproduced under CC-BY-NC-SA

Possibly, DRM is harming ebook sales, but it is not clear whether consumers are at all aware that they are purchasing DRM free titles or not; and is DRM free indeed a factor in sales? It is possible on Amazon to see if a title has DRM or not on point of purchase. With TOR titles available on Amazon the additional details says “At the publisher’s request, this title is being sold without Digital Rights Management software (DRM) applied.” Other DRM free examples on from independent publishers at Amazon say “Simultaneous Device Usage: Unlimited” which is a fancypants way of saying it is DRM free. My instinct is that if we were to follow the history of events in the music industry you would see similar numbers. The more the music industry refused to listen to its customers the more the customers and eventually the sub-industry (your Rdio, SoundCloud) find ways around them.

What is clear is that DRM is not an effective way to prevent piracy; what it is effective at is annoying your legitimate customer base by punishing those who were so honest that they paid for the book rather than taking it in the first place.