The economics of DRM - Why DRM doesn't work

DRM can't protect your work from being copied by anyone technically literate or anyone with a reasonable monetary incentive to copy it. In other words, the people commercial copying for resale, those you'd most like to protect your work from, it won't stop them from doing whatever they want with your work. This is because DRM as a technical concept has a built in flaw. You can't create a system that is designed to let someone view to contents of your work, while at the same time prevent them from copying the contents of it. Not even if you completely control all the hardware and software the DRM'd work is going to run on, although that allows you to place more obstacles in their way.

Two Examples:
1. Audio file DRM has been circumvented by creating an audio driver that can be used as "speakers", when it really makes a perfect digital copy of the audio. You can't ultimately stop that sort of attack while still making it possible to hear the audio by the end user.
2. Any sort of DRM applied to a written work must allow someone to read that work. Take a legitimate copy and pay someone on mechanical turk a dollar an hour to transcribe it to a DRM-free format. Pay someone else to validate it. Total cost, <$25.

Those are extreme examples. Really, you can sometimes "print" a DRM'd to another format, similar to the audio hole above. Or download a simple converter to strip the DRM off, or if worse comes to worse, pull the information straight from your computer's memory or a device's memory. If you control the hardware or software environment the digital work runs on, you can always get a non-DRM copy of the work.

I'm technically literate, but I don't make commercial copies of work for profit or for a living. Believe me when I tell you that the guys that do have an assortment of tools that make it just as easy for them to strip off all the common DRM formats as it is for you to download the book in the first place.

So who does DRM "protect" your work from? From "regular" people who just want to take your work and view it where it is most convenient for them. From people who want to loan a book to a friend. From people who want to market your book for you and help you build your personal brand. From people who are going to give you free publicity. Essentially, from casual copiers who don't have enough of a financial interest in your book to bother with it.

Let's talk economics. Over time, you can get paid for your books their value to the person who buys them. By using DRM, you are reducing the value, the utility, of your book to the person who is buying it. Maybe to one person who only owns a kindle, you're not reducing it by a noticeable amount, while to someone else who wants to read something on a device your DRM doesn't support you've cost them most of the value. If on average, the loss of utility to your purchasers is 10%, then over time you're going to get 10% less revenue from your book.

I could insert a few paragraphs of math and economics references here to prove the above, but in the interests of space, if you doubt it, please consult any basic economics textbook or introductory book and look for the efficient markets hypothesis and economic equilibrium. The basic idea is that you will ultimately only get paid for how much the consumer benefits from your product.

Now let's talk about marketing. I believe most authors are ultimately selling a brand. To get the most out of your fiction, you want fans who like your work and are going to buy as much of it as they can get. You want more sales in the long run. Sure, you could sell a book to some people that was horrible and unreadable, but in the process you are going to burn that brand and never be able to sell anything under that name or in that series again. Probably be a big negative impact on whatever publisher name the book was put out under as well. To get the most out of non-fiction, the same applies, as well as speaking fees, appointments, consulting jobs, etc... all either improved or damaged by your brand, which is a result of the value you are delivering to your customers as well as the positive publicity they create for you.

There are "experts" out there that make a lot of money by sometimes literally giving their books away for the publicity and recognition, then making it up in speaking and consulting.

For most new or midlist authors, any publicity, anyone being exposed to your work, assuming it's good and they like it, will only increase your overall sales in the long run. If they don't like it, you won't be selling to them anyway. Someone who reads your book for free is someone who may buy the rest of the series, or the rest of your books. That's one reason Baen has been so successful with giving away e-books, to the point where you can go online and download all the ones they ever gave away from various sites. They know they are selling a brand, both their publishing brand and that author's brand. Once people decide they like the brand, they're willing to give up value in the form of cash in return for more of it.

People can be suspicious of something free being worth what they pay for it. Otherwise, your best bet would be to give away the first two books of a trilogy and just charge 3x as much for the third book. You want people to read library copies, free short stories, to see positive reviews, etc... and not only buy your books, but tell others they should buy your books.

So if you aren't stopping commercial copiers, but you are reducing the utility of your book to your readers, and you are stopping people from giving you free publicity, the bottom line is you are going to ultimately make less money by adding DRM to your work.

If you prefer to make less and damage your brand in order to give yourself a false sense of security about preventing copying of your work, then that's a value decision only you can make, but don't go into it thinking you are somehow protecting your book from a determined copier. Really, you're just inconveniencing your customers. The people you depend on to want to buy your next book.