July AUTHOR EARNINGS report brings focus on DRM

[fjtorres]

As expected, the third Author Earnings report is out.

http://authorearnings.com/july-2014-...rnings-report/
Among the expected focus on publishing path data, this time they looked at the prevalence and effect of DRM on Kindle ebooks:

DRM – A Bad Idea

In addition to our standard pie charts on sales and earnings, we always like to bring something new and interesting to each report. Last time, we looked at rates of churn on the bestseller lists. We have also previously looked at the vast income difference between tenured and debuting authors. This time, we pulled data for DRM, and what we found was very interesting.

Digital Rights Management, or DRM, is the encryption lock applied to electronic entertainment. The film, music, video game, and book industries all employ DRM. With ebooks, DRM poses little challenge to pirates, who can crack these locks with a few clicks. Meanwhile, for the paying customer, DRM makes it difficult to move ebooks between devices and traps readers into a single retail channel.

DRM is entirely optional on Amazon. Major publishers and self-published authors can opt out of DRM. We pulled DRM info on the 120,000 ebooks currently ranked on Amazon to see how often it was applied and if DRM had any effect on sales.

It wasn’t surprising to see that most Big 5 books employ DRM, but we were shocked to see that it is practically 100% of them. Indies, on the other hand, locked down roughly 50% of their titles. Since there isn’t any variation in the Big 5 books, we are forced to look at the self-published titles for any effect on sales, and indeed there is one. 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.

At almost every price point, we see the thousands of titles without DRM significantly out-earning the thousands of titles with DRM. In fact, at the only two price points that appear to buck the general trend and which show DRM titles outselling non-DRM ones, we found that the reversal was due to 3 outlier DRM titles published by only two authors.

What our data strongly suggests is that DRM harms ebook sales at any price point. And it backs up a report from Tor, one of the few major publishers that gave up DRM two years ago. It also reinforces this report on DRM’s effect on music sales. Interestingly, one of the Big 5 publishers urged authors to push back on Tor’s decision to get rid of DRM.

For those with short memories, this two year old column discusses the "pushback" campaign referenced in the extract:

http://www.publishersweekly.com/pw/b...wn-on-drm.html

There is way, way more at the source, highlighting how BPH ebooks constitute only 16% of Kindle's top 120K sellers, and how it turns out indie publishing works fine for less popular genres like litfic and non-fiction.

Reach for the muchies; plenty of fireworks incoming in the next few days.

[stormcloude]

Thanks for sharing this. It's not something I'd have come across otherwise.

[Catlady]

I'm not sure I see what this proves or disproves about DRM. I've only read what was quoted here, and it's interesting, but books aren't interchangeable commodities. There are so many variables beyond the presence or absence of DRM that affect a purchase decision.

[DrNefario]

I'm kind of surprised anyone really notices DRM on the kindle store. If indeed they do, and it isn't just down to the fact that the good indies don't use DRM, or something. ("Not Using DRM Improves the Quality of Your Writing.")

[fjtorres]

They're only claiming correlation, not actual causation.

DRM-free titles earning twice as much as the DRM'ed ones could simply be an indication that business-savvy publishers, the ones who know how to promote their titles effectively, also know that DRM does nothing meaningful for them. It does, however, allow for TTS, simultaneous reading on unlimited multiple devices, and easy conversion to non-Kindle devices. All of which add marginal value to consumers.

So it says nothing about the quality of the book itself but it says a bit about the publisher.
In any industry, there is a body of knowledge of "best business practices" that correlate with success even when they don't always cause it or guarantee it. DRM-free might be in that category, not a guarantee of quality or success but it clearly doesn't hurt.

[theducks]

Could part of the better earnings be that there is no per book DRM License fee being paid?

[fjtorres]

Originally Posted by theducks

Could part of the better earnings be that there is no per book DRM License fee being paid?

There is no DRM tax on Kindle.
Amazon owns their tech lock, stock, and barrels.
The better earnings are coming from better sales.

Makes the correlation interesting...

[Fbone]

How do they know if a Kindle book has DRM or not?

[crossi]

Originally Posted by Catlady

I'm not sure I see what this proves or disproves about DRM. I've only read what was quoted here, and it's interesting, but books aren't interchangeable commodities. There are so many variables beyond the presence or absence of DRM that affect a purchase decision.

If you are comparing two books, one with DRM and one without, better sales for the non-DRM'd book would not tell you if the better sales were due to the lack of DRM, a better book, more publicity or other cause. Comparing 120,000 books whose only difference is the presence or lack of DRM the other variables tend to average out. Maybe all the non-DRM'd books all had something else in common that none of the DRM'd books did that was increasing their sales but that seems unlikely. In any case have you heard of any individual choosing not to buy a book because it didn't have DRM? I have heard of the opposite case.

[fjtorres]

Originally Posted by Fbone

How do they know if a Kindle book has DRM or not?

Amazon tells you.

"Simultaneous Device Usage: Unlimited"

Like here: http://www.amazon.com/gp/product/B00...rd_i=154606011

[gmw]

It is interesting to have some actual numbers around the DRM issue for a change. Obviously there's lots of stuff we'd all like to know that doesn't exist in this data, but they are still reassuring results for all not using DRM.

[wizwor]

It wasn’t surprising to see that most Big 5 books employ DRM, but we were shocked to see that it is practically 100% of them. Indies, on the other hand, locked down roughly 50% of their titles. Since there isn’t any variation in the Big 5 books, we are forced to look at the self-published titles for any effect on sales, and indeed there is one. The 50% of non-DRM ebooks account for 64% of total unit sales.

I believe the term is cherry picking. Whether the titles are Big 5 or not is not a factor. The fact is that DRM has not impeded their sales -- which dwarf indie sales -- and overall DRM does not impact sales.

[fjtorres]

Originally Posted by wizwor

Whether the titles are Big 5 or not is not a factor. The fact is that DRM has not impeded their sales -- which dwarf indie sales -- and overall DRM does not impact sales.

1- Yes, it is a factor. BPH titles normally sell in a different pricing band ($8-15) than indies and small/mid presses ($3-10. And if DRM were not an issue, why did Hachette throw the hissy fit when Tor went DRM-free?

2- The only metric where the BPHs "dwarf" indie ebook sales is reader spend. Unit sales are comparable and author income favors indie over BPH.

Again, they aren't claiming DRM has a causal link with sales, just that it correlates with it.

Edit: http://en.m.wikipedia.org/wiki/Corre...mply_causation

[gmw]

Originally Posted by wizwor

I believe the term is cherry picking. Whether the titles are Big 5 or not is not a factor. The fact is that DRM has not impeded their sales -- which dwarf indie sales -- and overall DRM does not impact sales.

I am willing to believe that DRM is not a significant factor in sales overall, there may be other factors influencing the results when isolated by indie. But that in itself is interesting, don't you think?

[fjtorres]

Originally Posted by gmw

But that in itself is an interesting, don't you think?

To some of us, apparently.

My read is that indie publishers that are effective in driving sales of their titles tend to go DRM-free. And that, like Tor, going DRM-free doesn't seem to be hurting them.

Absent any actual direct pro or con causal data, a rational publisher would take this report as a hint to go DRM-free.