Ditching Copy Protection Increases Profits... For Unpopular Artists

from the more-evidence dept

Ernest Miller points to a very interesting study on the impact of copy protection on profits for online music stores selling downloads. The study finds that the optimal (most profits) amount of copy protection is none in cases where a band is not hugely popular. In cases where the musical act is extremely popular and there are "network externalities," then (the study claims) it makes more sense to put in some DRM, basically because people will make an extra effort and deal with that "cost" just to have the music. It's an interesting study and even notes BMG's recent decision to offer tiered CD pricing to support the findings. Questions can be raised, though, over how accurate the results really are, in that it appears there are many other factors that would come into play. In a world where most artists have no copy protection (since most artists, at least as they start out, won't have the popularity levels to make copy protection worth while), suddenly any artist who does go with copy protection is seen as being much less fan-friendly, which is likely to impact those externalities, dropping the artists' popularity, and perhaps making it unwise for them to use copy protection. Either way, copy protection is an offering that is specifically, and purposely consumer unfriendly. It serves no additional value, but makes a product worse, decreasing its value. All this study is showing is that there may be some cases where the overall value of the copy protection outweighs the negative impact of the copy protection itself, but those are likely to be fairly few and far between.
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  1. icon
    Mike (profile), 30 Jul 2004 @ 11:35am

    Re: No Subject Given

    There are plenty of sources out there that explain the economics of the recording industry. Obviously there are *some* artists who make money from CD sales, but it's really not that many due to the structure of most contracts, where the artists won't get back any cash from CD sales until their advance is repaid out of royalties... which means that approximately 3% of all musicians ever make any money from CD sales.

    Here's a good disucssions of the economics of the recording industry.

    Certainly, there are some artists who do get money from CD sales, but, for the vast majority of musicians, the money they make is touring.

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