Mass Transit, DRM, And Counting the Cost

5006930947_b2b75c017f[1]DRM is a topic with entrenched positions on both sides, and in all the years I have been watching the debate I have read arguments about whether DRM was necessary, useful, and effective at preventing piracy. But there's one argument that I have not seen debated, and that would be the cost-effectiveness of a small ebookstore maintaining a DRM system. I can't recall that anyone has discussed to what degree DRM can increase the sales of a title in a small ebookstore by limiting piracy, and in particular whether that marginal increase in revenue exceeds the cost of the DRM system. I'm not sure how you would answer this question when it comes to content, but a similar debate has come up before in relation to mass transit systems. It raises some interesting questions.

3239258702_7286255454[1]This past week found me in Phoenix for Flextech 2013 conference, and while I was there I encountered Valley Metro's light rail service. Maricopa County had finally put in the rail line that they'd been debating ever since I lived there 20 years ago (in addition to the extensive bus system).  It's only a single line, and it stretches from the north side of Phoenix, past the convention center, past the airport, through the ASU campus, and east to Tempe.

I'm cheap (and also formerly a huge railfan), so naturally I made sure that my hotel was close enough to a rail station that I could take the train to and from the airport.  As I was standing on the station that first day, I realized that Valley Metro light rail service could be used as a metaphor for DRM on ebookstores.

Phoenix Light Rail StationThe thing is, the rail stations don't have the turnstiles I would expect to see on any major mass transit system (NYC, SF, London, Paris, to name a few). Instead the stations are open and airy, with no walls. There's literally no way to force you to pay before you ride the train.

Like a DRM-free ebookstore, that rail service is operating on the honor system. And like some of the smaller ebookstores, the rail service is on the honor system probably because the cost of guaranteeing payment was probably too high to justify the expense. Building stations which would keep non-paying freeriders out was probably too expensive (possibly in ways other than monetary cost).

My point is that the cost of installing and maintaining turnstiles in a mass transit system could be used as a metaphor for the funds an ebookstore might expend to maintain a DRM system. Like the train service I rode on last week, a small ebookstore needs to consider whether using something like DRM or turnstiles)to try to guarantee payment results in revenue which is greater than the expense of installing and maintaining the DRM or the turnstiles.

Allow me to explain it a different way. Let's say that you would sell X copies in an ebookstore without DRM, and if the ebookstore had DRM you would sell X+Y copies. Do the additional Y copies bring in revenue that is greater than the cost of maintaining the DRM system?

This cost-benefit analysis is a detail that has been raised numerous times in relation to paywalls for newspapers, but I'm not sure anyone has considered how it relates to ebookstores.

And given that there are now multiple services that will help someone set up a small store on their own website and sell their own content, now is the time to ask whether the more expensive services  which include DRM are worth the extra cost.

Take EditionGuard, for example. They have just put out a press release touting a service which lets you sell as few as 1 to 5 ebook titles on your website. The DRM provided is the same Adobe DE DRM found on many Epub and PDF, and the minimum cost is $39 a month (plus $.45 per file download).

If you choose to go the sans-DRM route, you could also set up a store using GumRoad. This service costs little more than credit card processing fees, and all it offers is payment processing and handing the file over to the customer. The cost is a whole lot less but there is no DRM.

Now that we have these 2 options side by side, let me state the question again. Assuming DRM actually does boost sales, will that increase in sales exceed the added cost of the more expensive service?

I don't know for sure, but I will note that the 45 cents per download fee will likely render EditionGuard uneconomical for most authors. In any case, this is a question that everyone who signs up with either service needs to consider.

Thoughts?

images by Phil Sexton, Nick Bastian, by Mrs Logic

About Nate Hoffelder (11376 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader: "I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

8 Comments on Mass Transit, DRM, And Counting the Cost

  1. I’m one of those entrenched in the no-DRM camp. It’s so easy to crack that it won’t stop a book appearing on a pirate site. Adobe DRM is my least favorite because of the device limit and the awful customer service to de-register devices. Amazon, at least, makes it easy to do that. So I’d never consider using Edition Guard. I’m just not convinced that monthly fee plus annoying my audience is worth it.

    I am in favor of watermarking as an anti-piracy strategy, and if I were going to use some form of “DRM,” I’d consider that one. It doesn’t stop the reader yet provides a way to potentially find and punish a pirate. (Yeah, I know, I’m sure they’ve figured out how to remove watermarks as well. Back to the “too easy to crack” line.) I buy watermarked RPG supplements, and I’ve no issues with them.

    DRM just doesn’t do what it’s supposed to do, and it’s an extra step and expense that, in my opinion, just ain’t worth it.

    • Watermarking is perfectly legitimate, and I don’t know of any reasonable argument against it (absent a flourishing second-hand digital goods market). Just something that reads “This book purchased by …” on one of the introductory pages. Sure, it’s pretty easy to remove, but there’s also little incentive to do so, and it servers as a subtle reminder to stay honest.

      To get back to Nate’s point, you must factor in the cost of the system to perform the modifications. In the case of watermarking, the software is so easy that there may already be a few free solutions out there. If there is not, then all it takes is one author with the motivation to share their system to create a benefit for the whole community. It is an additional advantage of working with a system that lacks central structure (unlike most DRM systems).

  2. >>>$.45 per file download

    Forty-five cents to protect what amount of income per book? It doesn’t seem cost effective even if an eBook is priced at $4.50 — you’re bleeding ten percent of your income to a middleman!

    • Well, they’re using Adobe DRM and ADEPT licensing starts at $0.22 per book (in addition to the start-up cost–$10,000–and annual fee–$1500).

  3. You also need to consider that adding DRM might act as deterrent for legit buyers – not everyone likes to mess with Adobe accounts and keeping track of passwords. If they can’t just pay and download the book, they might just go away. So the equation could be X-Y instead of X+Y.

    • Here.
      I signed up for a *free* ebook from the University of Chicago press that sounded like it might be interesting.
      Once I got the d/l link and found I had to set up an ADEPT account I lost all interest in the book.
      I’m not a knee-jerk anti DRM–I’m mostly neutral: I stay up-to-date on DRM removal but since most of my purchases are DRM-free I have yet seen a need to take the time to process the couple dozen DRM’ed freebies I have. I tolerate Kindle and Nook DRM because they’re generally unobtrussive and the encryption is easy to remove if they ever get in my way.

      I do draw the line at ADEPT (and, of course, iBook DRM). It’s too much of a hassle to setup and I have so many toys–with more to come–the unavoidable downstream issues are all the disincentive I need to walk away.

      In my case, any author website that offered up ADEPT-DRM’ed ebooks would get zero business from me.

  4. I won’t buy books with DRM.

    The issue is two-fold to me:

    1) How much will authors lose because they are DRM-crippling books.

    2) What happens when authors start selling DRM-crippled ebooks without expressly explaining that they are DRMd? What happens when miffed customers demand refunds…not just once in a while, but all the freaking time?

    Authors who mess with this micro-DRM system deserve every headache they get.

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