DRM (Digital Rights Management) Is Bad For Business

For those of you deciding whether or not to opt into applying DRM, or Digital Rights Management, to your eBook, you may want to see this.

I just took a look at the July 2014 Author Earnings Report put out by AuthorEarnings.com. There is one section of the report that astonished me, and I had to share.

Below is only an excerpt. The entire report can be read here.

DRM – A Bad Idea

In addition to our standard pie charts on sales and earnings, we always like to bring something new and interesting to each report. Last time, we looked at rates of churn on the bestseller lists. We have also previously looked at the vast income difference between tenured and debuting authors. This time, we pulled data for DRM, and what we found was very interesting.

Digital Rights Management, or DRM, is the encryption lock applied to electronic entertainment. The film, music, video game, and book industries all employ DRM. With ebooks, DRM poses little challenge to pirates, who can crack these locks with a few clicks. Meanwhile, for the paying customer, DRM makes it difficult to move ebooks between devices and traps readers into a single retail channel.

DRM is entirely optional on Amazon. Major publishers and self-published authors can opt out of DRM. We pulled DRM info on the 120,000 ebooks currently ranked on Amazon to see how often it was applied and if DRM had any effect on sales.

It wasn’t surprising to see that most Big 5 books employ DRM, but we were shocked to see that it is practically 100% of them. Indies, on the other hand, locked down roughly 50% of their titles. Since there isn’t any variation in the Big 5 books, we are forced to look at the self-published titles for any effect on sales, and indeed there is one. The 50% of non-DRM ebooks account for 64% of total unit sales.

Indie titles without DRM sell twice as many copies each, on average, as those with DRM.

To confirm that this finding didn’t simply reflect a correlation between ebook pricing and DRM election, rather than a consequence of DRM itself, we compared the average daily earnings of non-DRM titles to DRM titles at each pricing cohort.

drm-author-earnings-by-price

At almost every price point, we see the thousands of titles without DRM significantly out-earning the thousands of titles with DRM. In fact, at the only two price points that appear to buck the general trend and which show DRM titles outselling non-DRM ones, we found that the reversal was due to 3 outlier DRM titles published by only two authors.

What our data strongly suggests is that DRM harms ebook sales at any price point. And it backs up a report from Tor, one of the few major publishers that gave up DRM two years ago. It also reinforcesthis report on DRM’s effect on music sales. Interestingly, one of the Big 5 publishers urged authors to push back on Tor’s decision to get rid of DRM. It shows how important data like this is for making sound business decisions. Operating according to myth or fear is far inferior to making decisions based on what’s best for the consumer or on what is proven to increase or decrease sales.

Thank you AuthorEarnings.com for all your number crunching making our business decisions that much easier.


The Tale of Nottingswood cover JR YoungRead the first 28 pages of JR’s latest novelette, The Tale of Nottingswood, for free by visiting Nottingswood.com. Available now in print, or pre-order the eBook for a discount on iBooks, Nook, or Kobo.

Click here to join JR on Goodreads, follow him on Facebook here, and read his interview with Smashwords here.

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