DRM and the cost of content: Oh, if Jim Baen were still alive to speak back!
Here, from Gal Oestreicher-Singer and Arun Sundararajanat of New York Business School.
Excerpt from abstract: “…the threat of piracy limits the extent to which digital rights should be granted: the value of digital rights is determined not only by their direct effect on the quality of legal digital goods, but by a differential piracy effect that can lower a seller’s pricing power.”
Suggestion: Maybe the NYU folks would do well to study the late Jim Baen and see what happens when publishers worry less about “protection” and more about “goodwill” and “community.”
June 30th, 2006 at 12:06 pm
The sad thing is the perceived pricing power by these publishers is actually driving away readers. I had a reader email me this morning that she wanted to buy an ebook but the price deterred her.
June 30th, 2006 at 12:06 pm
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July 5th, 2006 at 3:52 am
I expected to find at least something concrete about the level of piracy the eBooks they used to ‘validate’ their model are subject to — what number of sales *are* actually lost by piracy? As it is, it looks like pricing and and rights grants more likely reflect the publisher’s perception of piracy, than actual piracy levels themselves. (Well, once you’ve built a fence, everyone on the outside automatically become potential intruders.) But do differences in pricing not depend also on other factors?
The crux is, I suspect, under what circumstances ‘the direct quality effect balances the differential piracy effect’ (i.e. profits do not diminish due to piracy). Is there any concrete evidence of piracy effects for eBooks? The threat is always stronger than its execution, it’s said. In the absence of data, publishers seem likely to overestimate the effect. The Baen effect should really have been noted: does the model work for this publisher, too? — I wonder what other things the authors missed.
I probably need a refresher in business-speak (exogeneous prices?), but my immediate impression is that the authors show that publishers set different prices on eBooks largely depending on what digital rights the buyer is granted. (Have the authors written a more digestible version of the paper - an article on ‘DRM for dummies’, say - that could be used to disprove that impression?) But it does not seem to say a thing about what customers want, need or are prepared to pay for — except perhaps that publishers think that people who buy computer books should be prepared to pay more for the privilege. Customers seem absent — it’s clearly not their idea of value that is being examined.
Another thing that would be interesting to know is if any of the titles were sold with different rights for different price? Or are all titles sold with one single set of rights?
“Our paper … aims to guide managers facing piracy and rights management challenges.” Well, let *them* read it and pronounce verdict on the paper.