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Is DRM More Costly Than Piracy? Thoughts on leveraging marketing strategy and DRM-free content

Thumbnail image for av.jpgRecently, I’ve been thinking a lot about building better (read: strategic) eBooks. The more that I’ve tried to wrap my head around what would work and what wouldn’t, I keep coming back to the idea of reversing self-imposed constraints and searching for opportunity in areas from which we’ve closed off opportunity. One such area is DRM.
 
As a practice, wrapping content in DRM finds its justification in the fact that digital content is being pirated across the internet and distributed to people who we presume could be customers. These lost customers are choosing to not purchase our content but to download this content for free.
 
Before we continue, let’s address a few myths:

  1. DRM will eliminate piracy. This is completely false. Pirated content is always going to be available, whether we allow it or not.
  2. Pirates are stealing our customers. Most likely, the person who is downloading pirated content wouldn’t consider buying it in the first place. Piracy is not an alternative to retail, it is a parallel eco-system.
  3. Publishers will make more money by enforcing stricter DRM. I argue that this, too, is false. In fact, I think if we leverage the marketing possibilities of DRM-free content, we would end up making more money in the long run.

So, we start with a DRM-free eBook. Now what? What if we flat out encouraged sharing?
 
Let’s say a customer purchases an eBooks and they want to share it with a friend who would enjoy the book. In the development phase, the publisher could easily include a ‘share’ button or option. This would set off a mechanism for transferring the content purchased by one customer on her device to someone else’s device.
 
If we can get past the ‘piracy,’ unpaid content aspect, this simple act is incredibly powerful. Here’s how:
 
What if we asked the customer who is sharing the content she’s purchased to input her friend’s email address in order to deliver a download link? Now we’ve collected a second customer’s contact information. To use lead gen-speak, this customer is a “qualified lead.” Another way to look at it is that this represents a sort of passive word of mouth system whereby we let our customers tell us with whom they are sharing their content.
 
Then, we can engage the recipient of said content, because they’ve already been identified as an interested party by one of our customers. If done properly, the follow up to these new customers can not only lead to a sale, but to something much greater. It could be a vehicle for presenting your company as tech-savvy and engaging.
 
Now, let’s go a step further: what if, after a certain number of shares, we rewarded the customer for passing along their content and helping us to identify future customers? Say after a customer shares their content with 10 other people, the publisher can set up a mechanism which would send an invitation to receive a free eBook for all their effort. (Let’s not fool ourselves, they would be doing work for us.)
 
Not only does this give customers incentive to spread the word about our books, but it creates heightened brand loyalty. We cannot expect our customers to simply become loyal to our brands based on the laws of inertia and chance. Brand loyalty is an active pursuit which can be fostered by putting more products into the hands of people who use them. The more we can actively identify those customers who are not only reading our books, but those who are evangelizing for us, the more we are able to keep this momentum going by providing additional fodder to share.
 
In the publicity world, we send books to ‘influencers’ or ‘big mouths’ in the hope that they’ll initiate their own word of mouth campaigns. The only difference here is that we are using the available technology of eBooks in our favor to identify who the influencers are and who they are influencing.
 
File share points online such as SendSpace do something very similar to this already. Anyone can email anyone else with a file that is too large to send via email. The recipient receives an email notification and a download link. People are used to receiving a download link, to allowing their email address to be disclosed in order to receive something they feel is valuable or important.
 
The point: it is not unreasonable to ask for email addresses in order to provide a free service.
 
Let’s go back to our three myths about DRM:

  • DRM will eliminate piracy. We already know that DRM is not going to stop piracy because people want to share content. Response: avoid piracy by actively promoting user-to-user content sharing and make it worth it for the publisher by creating a win-win situation for both publisher and consumer.
  • Pirates are stealing our customers. Pirates will not be able to ‘steal’ our customers if we can provide them with a better, more valuable experience.
  • Publishers will make more money by enforcing stricter DRM. Publishers will make more money, in the long run, by growing their customer bases, collecting consumer data, engaging with their customers directly, actively fostering brand loyalty, and providing a superior user experience that exploits technology in a smart way.

Keeping content on ‘lock down’ is not good for anybody. We are in an age of digital sharing, of online exploration, boundaryless personal expression, and high engagement expectations. Wouldn’t it be counterintuitive to go against these trends and make it increasingly difficult for our customers to tell their friends about our products? At a time when every publisher must be concerned with search and discoverability of digital products, encouraging sharing in order to learn more about our consumer base and their behaviors seems like a natural course of action.

Brett Sandusky is Digital Marketing Manager at Kaplan Publishing. He is also the founder of Publishr, an ever-growing collection of essays that explores the world of digital publishing through both theory and practice. He lives in Brooklyn.

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  • http://www.pensodromo.com/21/ Henry Odell

    I completly agree with DRM free ebooks. But one is the decision of publishers, and a different one the decision of other distribution resources. Amazon has DRM, iPad has DRM, etc.

    Which is the O’Reilly experience and position about this?

    Thx,

  • http://www.manfredmacx.com Jon Renaut

    Important to remember: asking for me for my email address in return for something is very different than one of my friends giving you my email address in return for something.

    Otherwise, right on.

  • http://www.booksontheradio.ca Sean Cranbury

    Great article, Brett.

    I’m not sure that tracking is going to work quite the way that you’ve posited necessarily but it’s an excellent point for publishers & writers to start thinking along those lines.

    Torrents are going to be powerful distribution tools, too. Though they obviously will provide a messier and far more powerful – in my mind – discoverability channel.

    Thanks for writing this. I have spoken on this topic many times in the past year.

    I called the talk DRM vs the Inevitability of Free Content.

    Link to slide show is here: http://www.slideshare.net/cranbury/digital-rights-managment-vs-the-inevitability-of-free-content

    Have a great weekend.

    S

  • http://www.huc.edu/libblog/librariantalk.html Sheryl Stahl

    Great article Brett.
    As a librarian and compulsive buyer of books, I think that being able to share a great book makes perfect sense.

    I find much of the talk about piracy to be laughable. Most people do not know or understand (or want to understand) the difference between buying a book (or recording) and licensing a book. They know that their friends and family can borrow books or CDs off their shelves and assume that they can do the same with a book on their reader or mp3 player.

    The music and publishing companies came up with a new model (we’re not selling you a product, we’re just letting you use it) without explaining it well, and then get upset when people didn’t comply with the new policies.

    I do know there are some people out there trying hard to exploit the system by stealing and profiting off other people’s work, but I think that they are in the minority.

    just my 2 electronic cents.

  • http://toc.oreily.com Kat Meyer

    Hi Henry:
    O’Reilly has a history of being anti-DRM. You might enjoy this Cory Doctorow post on BoingBoing re: the matter. http://www.boingboing.net/2010/01/22/oreilly-drops-ebook.html

  • http://wordpost.org Andrew Swenson

    As we go forward, I think we’ll have to adapt our business models to leverage what computers do well (copy and transfer bits) and what humans do naturally (share stuff the like) rather than trying to buck both with the lock-in of DRM.

    The concept of eliminating DRM isn’t new, but the results are consistent. I think this from Cory Doctorow’s content does well to illustrate the point (published 2008):

    “David Blackburn, a Harvard PhD candidate in economics, published a paper in 2004 in which he calculated that, for music, “piracy” [music downloaded for free] results in a net increase in sales for all titles in the 75th percentile and lower; negligible change in sales for the “middle class” of titles between the 75th percentile and the 97th percentile; and a small drag on the “super-rich” in the 97th percentile and higher. Publisher Tim O’Reilly describes this as “piracy’s progressive taxation,” apportioning a small wealth-redistribution to the vast majority of works, no net change to the middle, and a small cost on the richest few…

    “Speaking of Tim O’Reilly, he has just published a detailed, quantitative study of the effect of free downloads on a single title. O’Reilly Media published Asterisk: The Future of Telephony, in November 2005, simultaneously releasing the book as a free download. By March 2007, they had a pretty detailed picture of the sales-cycle of this book — and, thanks to industry standard metrics like those provided by Bookscan, they could compare it, apples-to-apples style, against the performance of competing books treating with the same subject. O’Reilly’s conclusion: downloads didn’t cause a decline in sales, and appears to have resulted in a lift in sales. This is particularly noteworthy because the book in question is a technical reference work, exclusively consumed by computer programmers who are by definition disposed to read off screens. Also, this is a reference work and therefore is more likely to be useful in electronic form, where it can be easily searched.”

    http://craphound.com/content/download/

  • Victor Bottacco

    I am not a publisher but I work as an Apple consultant in Spain and I am an avid reader of technical books, magazines, novels, etc… accustomed to read on screen, but also a paper book lover, so here is my experience as a customer/consumer.

    Digital publication is here and it is here to stay and probably to dominate the market in some time. This is something nobody can ignore. For me digital books and magazines are a blessing, first because they don ‘t take physical space, second because I can carry all of them with me in my Mac/iPhone/iPad anytime, anywhere, and third because they are searchable.

    Right now I try to buy just technical books and magazines in digital formats (PDF o ePUB), mostly because many of those books and magazines will be read today but get obsolete soon. I may refer to them in the future, but just for a short reference, not to re-read them again. I keep all the books and most of the magazines I am subscribed to, but they take so much space that in my small apartment I am about to start throwing away some of the (I tried to donate them to my local library but to my surprise they don’t want them).

    I still buy physical books, but only when it is hardcover o coffee table book (photography, architecture, collectible, etc…).

    O’Reilly has an incredible track record of good quality books, but when they started releasing them as electronic downloads and with no DRM I started buying even more books. Right now if I need any type of technical book I first come to O’Reilly to check what they have and if I can’t find it then I try somewhere else. All this is a consequence of their good practice.

    Will I buy more eBooks from O’Reilly? Of course and preferably from them than from a DRM publisher. Will I try to find those books in torrents? No, I don’t have time to search for a recently published book, so it is easier to go to O’Reilly and buy it right away… and I also feel good thinking that I am contributing to the publishing world to live in this new digital world.

    All this said, DRM has a way in eBooks. One example is very specialized books with few sales but a hefty price. Another example would be different prices: if an O’Reilly eBook costs $40 I could consider buying a DRMed eBook from a competing publisher if it costs $15.

    This is just my point of view, but I am an active customer that appreciates O’Reilly’s efforts.

  • bowerbird

    ok, first, brett, i like you. on twitter, you say good funny stuff,
    and you’re most definitely in the smart half of the twitter circle.
    so this isn’t about you.

    and kat, you know that i like you too…
    so this isn’t about you either, not really.

    but seriously, guys.

    this blog’s entries used to be out somewhere _near_ the edge.
    and when they weren’t (i.e., usually andrew), i would complain.

    but it has quickly disintegrated into a clone of people magazine;
    any technical focus that used to be here has now been sacrificed.

    take the opinion pieces and nice-story stories back to your blogs
    where they belong. here they’re fluff where there should be meat.

    even better, boil them down to tweet-size, so they’re concise,
    so they pack a signal-to-noise ratio that makes ‘em worthwhile.

    but here, on the o’reilly blog? well, it’s just the wrong venue.

    for instance, the 3 straw-man myths pummeled in this post
    had been scattered by the winds of this blog a long time ago.
    yes, i know, the corporate masters of publishing still worship
    the ridiculous; but tell me, do you really believe that if you just
    say it _one_more_time_ that they will come to their senses and
    change their mind? i mean, sincerely, how can you believe that?
    it’s just a sign of your own stupidity that you are continuing to
    bang your head against the brick wall of the corporate mentality.

    i’m not gonna say that they will _never_ abandon their d.r.m.
    – after all, even the ignorant music guys finally gave it up –
    but why waste your time and energy trying to save their asses?

    who cares if they live or die?

    the best thing about the revolutionary miracle of cyberspace is
    that authors have finally been freed of the need for middlemen.

    so as far as i’m concerned, those middlemen _need_ to die!
    the sooner the better; they’ve already stalled us out enough.

    anyway, rather than importing twitter’s “save publishing” circle
    over to this blog, why not just make a big “follow friday” list and
    post it so that people who want to play at this retarded level can
    do it over there?

    -bowerbird

  • http://toc.oreily.com Kat Meyer

    Hi Bowerbird:
    Thanks for the comment. No, really. You know, I agree. Sort of – well, more or less. I think you’re definitely right that O’Reilly should be a place for closer to the edge. But, I also think it’s worthwhile — dare I say necessary? — for the cutting edge folks to hear from people who are working at making the transition from old school to new world media. And vice versa.

    So, I’m gonna make an effort to get the TOC blog back to a more frequent focus on cutting edge type publishing things, and hopefully you’ll be able to put up with those occasional posts that are on the People magazine end of the publishing spectrum. Or – you won’t, and you can complain. That’s okay too. :)

    ~ K