A working report from a University of Toronto PhD candidate suggests that removing digital rights management (DRM) from digital music provides a 10 per cent sales boost.
There is a catch, though. "Relaxing sharing restrictions does not impact all albums equally; it increases the sales of lower-selling albums (ie. the "long tail") significantly (30 per cent) but does not benefit top-selling albums," Laurina Zhang with the university's Rotman School of Management wrote in her report.
As for why, DRM innately hurts one's ability to share music with others, so DRM could restrict lesser-known bands from being heard by a wider audience. With popular artists, though, listeners have largely already decided whether or not they are interested in the artist's work. The "discovery" aspect is already lower and DRM – or a lack thereof – isn't likely to factor into one's purchasing equation that much.
In her study, Zhang took at a look at music from the "big four" labels: EMI, Sony, Universal, and Warner. She recorded sales figures for a chunk of DRM-protected and non-DRM-protected albums between 1992 and 2011, spanning multiple genres and sales distributions.
"The sample comprises 5,864 albums from 634 artists and is, to my knowledge, the longest and broadest panel constructed to describe music sales. The data includes album-month level data on the number of albums sold through physical and online channels," Zhang writes.
Using a difference-in-differences analysis to help eliminate the effects of the album's popularity on sales figures, Zhang came up with her 10 per cent figure – an average, we presume, based on all of her observations.
"Furthermore, lower-selling albums of less pirated genres like Jazz and Classical disproportionally benefit from relaxed sharing restrictions compared to actively pirated genres like Hip Hop and R&B. I interpret increased sharing as lowering search costs, and as such, my results are consistent with theory that shows lowering search costs can facilitate discovery of niche products in the long tail," Zhang writes.
Of course, it's not as if the effects of DRM on music sales haven't been postulated before. As reported by Consumerist in 2007, even late Apple CEO Steve Jobs himself wasn't too keen on DRM restrictions on music.
"Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat," Jobs wrote.
Image: Flickr (mutsmuts)