Profit or Prevention: Which is more important?

[Lemurion]

In a previous thread I mentioned that the most important question (from a business standpoint) regarding whether it was a good idea to remove DRM from products was does removing DRM improve the bottom line? HarryT replied by asking if it would reduce piracy.

The truth is I didn't know then and don't know now if large-scale DRM removal would reduce piracy. However this does bring up a new question:

As a MobileRead member, which do you think is better for the industry? Is it more important to reduce piracy or increase sales.

In a physical environment, where there's a fixed cost associated with every copy each loss costs more than the profit from a single sale; but in a digital environment the loss per copy is lower because you don't have the same cost of goods to worry about.

I think that for digital downloads it's more important to tailor your DRM scheme (or lack thereof) toward building sales than preventing piracy. What do you think?

[pilotbob]

Originally Posted by Lemurion

The truth is I didn't know then and don't know now if large-scale DRM removal would reduce piracy. However this does bring up a new question:

I don't have any links to the exact numbers... but if I remember correctly once iTunes started selling DRM free overall sales went UP! Also, once Amazon opened it's DRM free MP3 store overall sales went UP again. So, there is good reason to think the same will happen with ebooks.

Does "sharing" increase? Perhaps, perhaps not. But, who cares? If sales go up isn't that what is most important to publishers and authors?

BOb

[Lemurion]

Originally Posted by pilotbob

I don't have any links to the exact numbers... but if I remember correctly once iTunes started selling DRM free overall sales went UP! Also, once Amazon opened it's DRM free MP3 store overall sales went UP again. So, there is good reason to think the same will happen with ebooks.

Does "sharing" increase? Perhaps, perhaps not. But, who cares? If sales go up isn't that what is most important to publishers and authors?

BOb

That's where I stand; but I don't know that it's a universally held belief.

[ficbot]

I think you will never reduce piracy---the same way the guy who runs the corner has to budget in a certain amount of losses for punk kids stealing candy bars, there will always be those who are determined. It is part of EVERY business. But I really think that the vast majority of people just want to quickly and easily get their stuff. If you give them the option, they'll buy it---iTunes has proven this. The biggest barriers to e-books taking off are imho not 'pirates' but publishers, who either a) don't offer the books at all b) offer them at too high a price or c) offer them in such a crippled way that nobody will buy them

[ProDigit]

I don't really want to vote on that...
Part of it, because everyone likes to get something for free. Some books for instance are hard(if not impossible) to get sometimes.
A site where I could download them would benefit me into reading those books.

Also, many times I've been disappointed buying something that in the end wasn't what I thought it was going to be, and regretted the purchase.

However, I've been able to download some items, that I did find very good reading/music material,that I would have never known if it wasn't for the download, that after a while I searched and ordered the book/CD online or in a local store!

Fighting piracy in my mind is useless,since there will always be people who will find a way to piracy. 85% of the so called 'pirates',are normal people downloading an MP3 now and then. 10% are those that download lots, and happen to not really do much with it other than store it, occasionally share it on the internet for others.
And only 5% really are making a profit or business from it.
I personally won't mind an old granny that happened to click on a file and downloaded 'the 10 greatest of 1955'.
I do mind people that want to become quickly rich by downloading (illegal) downloads for free and selling them with profit.

Those are the area's where I won't mind a stronger hand of the LAW.

And as for the guy who just wants to download the whole internet because he has an internet connection at home and pays freaking $50 per month, why not?
As long as everything stays in his room,why even bother such a person?

That's my idea about the topic, but if you follow the law, every one of the three (the granny, the quick-rich schemer, and the download the whole internet guy) are in effect breaking the law,and can be arrested and forced to pay a (sometimes ridiculously high) fine.
I'm not really agreeing with everything of the law, but in essence that's the reality...

I'd focus really on marketing, and get more sales,while on the other hand try to fight piracy in trying to capture those who try to make profit from things that are not theirs to sell.

[Over]

Originally Posted by pilotbob

I don't have any links to the exact numbers... but if I remember correctly once iTunes started selling DRM free overall sales went UP! Also, once Amazon opened it's DRM free MP3 store overall sales went UP again. So, there is good reason to think the same will happen with ebooks.

Does "sharing" increase? Perhaps, perhaps not. But, who cares? If sales go up isn't that what is most important to publishers and authors?

BOb

The problem is the greed (or efficiency). I mean, as long as pople think that one pirated copy = one less sale, they will always perceive that as a waste, a leak. Plus, there is no evidence that mo DRM would raise sales in the long term. It even enhance the piracy problem: more casual piracy would certainly happen.

I understand your logic:

1 - 1000 mp3s: 400 bought, 600 pirated
2 - 10000 mp3s: 800 bought, 9200 pirated.

Well, selling 800 is better than 400... BUt would it be fair to increase the number of people hearing the mp3s for free, making the buyers the exception to the rule. The ones that will be mocked for spending money in something "everyone" is enjoying for free? It might even make buyers decide to pirate it, and scenario 2 turn to 3:

3- 10000 mp3s: 45 bought, 9955 pirated.

[bill_mchale]

Companies as individuals should focus on building sales. The industry as a whole should work on combatting piracy; pretty much the way the music industry and the movie industry are doing it.

--
Bill

[DMcCunney]

Originally Posted by Lemurion

I think that for digital downloads it's more important to tailor your DRM scheme (or lack thereof) toward building sales than preventing piracy. What do you think?

The unanswered question is just how big a problem piracy actually is.

For physical objects, you can tell what the losses are to theft (called "shrinkage" in the retail trade.) You subtract the number sold from the total number ordered, then you compare the result with how many you actually still have. If you stocked 100 units, sold 20, and have 70 still on hand, 10 of them went somewhere...

For electronic downloads, there may be piracy, but you can't know for certain, and there is no way to tell how much or what effect it actually has on sales.

The RIAA and the MPAA cry the blues about it, and lobby for more laws and stricter punishments, but all they can point to is declining sales of CDs and DVDs. There's no real proof that sales are down because people who might otherwise have bought pirated instead. (Nor does there seem to be any awareness among RIAA and MPAA members that sales efforts, quality of product, and pricing might be a factor in whether people buy.)

My personal feeling is that piracy exists, but the majority of the market is basically honest and willing to pay for value. You simply need to provide value, and make it as simple as possible for the customer to give you money.

To that end, I'd say drop DRM and concentrate on increasing sales. DRM is at best an annoyance to the customer, and at worst a disincentive to buy. The last thing you want to do is is provide any impediment to the customer giving you money.
______
Dennis

[Lemurion]

Originally Posted by Over

The problem is the greed (or efficiency). I mean, as long as pople think that one pirated copy = one less sale, they will always perceive that as a waste, a leak. Plus, there is no evidence that mo DRM would raise sales in the long term. It even enhance the piracy problem: more casual piracy would certainly happen.

I understand your logic:

1 - 1000 mp3s: 400 bought, 600 pirated
2 - 10000 mp3s: 800 bought, 9200 pirated.

Well, selling 800 is better than 400... BUt would it be fair to increase the number of people hearing the mp3s for free, making the buyers the exception to the rule. The ones that will be mocked for spending money in something "everyone" is enjoying for free? It might even make buyers decide to pirate it, and scenario 2 turn to 3:

3- 10000 mp3s: 45 bought, 9955 pirated.

I think your numbers are suspect. There isn't a lot of hard data on piracy, partly because it's extremely difficult to measure, but I find it hard to believe that going DRM-Free would lead to a 10-fold increase in piracy.

What evidence I do have is largely inferential but it doesn't support those numbers. Baen books has been their entire list in DRM-free electronic formats since 1999. If DRM-free releases led to an increase in casual piracy by a factor of 10, then we could expect Baen to have a much greater presence on the darknet than their market share would otherwise indicate.

That doesn't appear to be the case, in fact anecdotal evidence indicates the opposite: Baen books are apparently less common on the darknet than books from other publishers.

Fictionwise is the only major e-Bookstore I'm aware of that sells both DRM and DRM-free books, and they have gone on record as saying DRM-free (multi-format in their terminology) e-Books do sell better.

So currently there is no evidence that the removal of DRM leads to more piracy, and at least some that it may help sales. Most pirated e-Books are pirated from scans of the paper edition.

People have always been willing to pay more for convenience. Most DRM adds a layer of inconvenience, and that drives people to the darknet. Apple succeeded with iTunes because of ease, style and convenience, not DRM. The availability of DRM-free tracks on iTunes has not hurt their sales.

Focus on success not losses.

[ProDigit]

Originally Posted by Over

1 - 1000 mp3s: 400 bought, 600 pirated
2 - 10000 mp3s: 800 bought, 9200 pirated.

But following that logic, in case 1, imagine the 1000 books come from 400 authors.
Each author writes about 2,5 books,and get payed $10 per book they sell.
400 books sold,400 authors, Meaning each author would get $10.

In scenario 2, each author of the 400 authors have created 25 books to get 10000 books in the shop.
800 got sold, for 400 authors,meaning they'd only get $10 more for 10x more effort ($20 for 25 books)...

Or,scenario 3, same as scenario 2, only there now are 4000 authors (instead of 400) creating a total of 10000 books.
Each author would create 2,5 books to get 10000 books in the shop.
800 sales for 4000 authors, meaning on average that each author ends up getting $2 for their 2,5 books.

this is the basics of marketing (demand and offer)...

Authors are also people, with the majority of them being more salespeople than authors. If they see the market is too bad they just stop writing.
Only few 'true' authors continue despite; whether they get payed $20 per book,or $2 does not matter to them.
It's not always upto the marketing guys to 'publish'... It's also depending on the people that write..
And with more and more people opening the internet,more and more of these writers write small parts of their story on the internet, so that there's less and less need to read the book!

[DMcCunney]

Originally Posted by ProDigit

this is the basics of marketing (demand and offer)...

Authors are also people, with the majority of them being more salespeople than authors. If they see the market is too bad they just stop writing.
Only few 'true' authors continue despite; whether they get payed $20 per book,or $2 does not matter to them.

Er, no. Most writers write as a sideline, and make their living doing other things. Many would like to write full time, but the economics don't permit it. The first advice normally given to an aspiring author is "Don't give up your day job!"

One of the problems newer authors have is that they need to be sales people, and usually aren't. Publishers reserve promotional dollars for established authors with potential best sellers. The intent is to let that author's following know a new book exists from the author. But first, the author has to have that following.

Promotion for a new writer is largely on the writer. The publisher is unlikely to do much. They just throw it against the wall and see whether it sticks.

It's not always up to the marketing guys to 'publish'... It's also depending on the people that write..

Well, yes, the publisher does have to have something to publish.

And with more and more people opening the internet,more and more of these writers write small parts of their story on the internet, so that there's less and less need to read the book!

Name an example. I can't think of any. Some authors do publish snippets as teasers, but I have yet to see one publish enough to remove the need to write the book.
______
Dennis

[ProDigit]

well,the story is different with fiction books, but for instance science books.
More and more can be found on the internet,so less people need to go to the library to get their information.

[DaleDe]

Originally Posted by Lemurion

In a previous thread I mentioned that the most important question (from a business standpoint) regarding whether it was a good idea to remove DRM from products was does removing DRM improve the bottom line? HarryT replied by asking if it would reduce piracy.

The truth is I didn't know then and don't know now if large-scale DRM removal would reduce piracy. However this does bring up a new question:

As a MobileRead member, which do you think is better for the industry? Is it more important to reduce piracy or increase sales.

In a physical environment, where there's a fixed cost associated with every copy each loss costs more than the profit from a single sale; but in a digital environment the loss per copy is lower because you don't have the same cost of goods to worry about.

I think that for digital downloads it's more important to tailor your DRM scheme (or lack thereof) toward building sales than preventing piracy. What do you think?

I would say that particular model works well for Microsoft LIT format eBooks, at least around here at MobileRead.

Dale

[HarryT]

Originally Posted by ProDigit

well,the story is different with fiction books, but for instance science books.
More and more can be found on the internet,so less people need to go to the library to get their information.

Don't forget Sturgeon's Law, which says that "90% of everything is crap". The problem with information found on the web is that it's difficult to assess its accuracy. With a science book from a reputable publisher, you know that the contents of the book will have been peer-reviewed, and will be trustworthy.

[axel77]

About this DRM I will always rember the 90ies situation. During my childhood (the floppydisk age) we were always told PC software is so expensive, because they calculate that for every sale, 10 people pirate it. Then came the CDROM, and for a few years burnable CDROMs were not at sight at all, so computer piracy almost stopped effectively. Did prices drop? No. Assumed they actually had more sales (which in hypothesis of this thread might have as well not been) did they lower the price, because piracy was stopped? Not all, if they made more sales they greedly filled it all in their pockets.