Consumer desire: vastly more important than DRM

On December 14 CNN Money published an article on the success of comedian Louis CK’s experiment selling his comedy special DVD from his website direct to consumers. In just three days CK had gross sales of $500,000, a successful venture that should, as the article notes, make media companies nervous. But what starts out as a fact-based story on disintermediation slips into speculation about the role that selling the units DRM-free had in CK’s success:

He was worried about piracy, and he’s been pleading with his fans to not put the video on bittorrent sites. Of course, it was pirated within minutes, which might be cutting into sales a bit. But with a $5 price point, the incentive to download pirated copies is almost nil. True fans will pay it and, given how successful the enterprise has been for all concerned, piracy can be seen as simply a cost of doing business rather than the Armageddon the media industry sees.

As noted, despite CK’s pleas to the contrary the video was immediately pirated. This hurt sales “a bit,” the writer declares, though he does not back this up with any data: how many downloads from torrent sites were there? What percentage of gross income was the actual “cost of doing business”? Since this same video was never offered with DRM, we can never know what effect its absence had on sales. How did these sales compare to other, traditionally produced CK videos that are DRMed and cost in the region of $20.00? Had CK priced the video at the same level, would more copies have been pirated? The writer suggests this might have been so: the price point reduces the incentive to pirate to “almost nil,” he claims, though this statement, too, is not backed up with any data.

When this article was posted on an acquaintance’s Facebook page, commentators remarked on the importance of CK’s “trust” in his fans. This I hear parroted endlessly by anti-DRM proponents in the ebook trade as well: intelligent writers, it is argued, trust their readers to pay for books; writers should not “inconvenience” or “disrespect” their readers by trying to protect copyright with technological means. To do so only annoys fans and hurts sales.

The problem with these statements is that they ignore several fundamental issues. The first is that the absence or inclusion of DRM in digital content as a factor in a consumer’s decision is overstated. CK’s success is as easily attributable to 1) the cost of the download, which CK himself calls “drastically low”; 2) the exclusivity of the product; and 3) the recognizable name of the creator. These all contribute to the main determinant of a consumer’s decision of whether or not to make a purchase: desire.

Take the gaming industry for example. Games are DRMed up the ying-yang but sales of Guitar Hero III: Legends of Rock have so far grossed $830.9 million; Call of Duty: Black Ops has grossed $787.4 million. Wii Sports has sold 76.76 million copies. Why these figures if DRM kills sales? The answer is simple: because people want the games and either accept that stealing is wrong, fear pirated copies will contain viruses, or don’t know how to obtain a stolen copy.

Similarly, in the ebook industry sales of traditionally published big-name authors like Stephen King, Suzanne Collins, or Nora Roberts still dominate the bestseller lists, and these authors’ works are sold with DRM (King’s latest, 11/22/63, even despite its whopping $22.86 ebook price, is today #12 Paid in Kindle Store). Indie author John Locke uses DRM and he was one of the first to reach the million units sold mark on Kindle. You can find these authors’ books on torrent sites but, as with the gaming industry, the volume of legitimate sales illustrates that desire for the content outweighs any inconvenience DRM poses.

This is what I find most annoying about the anti-DRM crusade: it too often ignores the importance of consumer desire and the healthy sales figures of popular DRMed content. Instead we are told that DRM hurts sales of creative content and paradoxically encourages legitimate sales by the viral marketing nature of piracy. Yet there has never been a scientific experiment to support these claims, an experiment that isolates piracy and DRM from other variables. What needs to be done by anti-DRM advocates is this: create a product, a Kindle book for example, something well-written but by an unknown entity, then put it up on torrent sites and do nothing else. Do not advertise the ebook, do not create desire, just let the “viral nature of piracy” do its job and see if this results in legitimate Kindle sales on Amazon. Then get back to me with the results.

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