Removing DRM can prevent piracy

One of the biggest factors leading to music being pirated is the security software which is used to stop it being… er… pirated.

Economists from Rice and Duke Universities have been using game theory to work out that DRM technologies, which restrict music file copying and moving, encourage illegal file sharing instead.

Dinahy Vernik, assistant professor of marketing at Rice’s Jones Graduate School of Business told Ars Technica that DRM restrictions prevent legal users from doing something as normal as making backup copies of their music. Because DRM makes things inconvenient, punters choose to pirate.

In a paper with the catchy title “Music Downloads and the Flip Side of Digital Rights Management Protection” Vernik found that eliminating DRM restrictions can lead to an increase in sales of legal downloads, a decrease in sales of traditional CDs, and a decrease in piracy

Devavrat Purohit and Preyas Desai of Duke added that this was in stark contrast to the view that removing DRM will unconditionally increase the level of piracy.

They proved their case by setting up an economic game model based on the “Nash equilibrium” created by Nobel laureate economist John Forbes Nash. The game assumed there were several marketing strategies for one product. In the game no one benefits by changing their plans.

The economists created a hypothetical environment in which there exists an album of music which can be bought using “traditional” CDs and “downloadable” (MP3 or AAC files). They built a market timeline through which the music moves, either equipped with DRM or not.

They then worked out an equation for the item based on the joy of listening to that particular album but incorporating their preferences for format, the cost of stealing and the restrictions imposed by DRM.

Faced with the choice of buying or pirating, people  looked at costs differently. A highly ethical consumer or a novice computer user saw a high cost of pirating while a consumer who does not see piracy as stealing had a much lower pirating cost.

People who had the option of buying a DRM free product did so and piracy dropped. Those who didn’t opted to pirate.

DRM-free music downloads were a stronger competitor for traditional CDs, and they forced the prices of CDs to move down, which in turn lowered the legal download price.

This is probably the reason why big content did not like the idea much. But the strategy does encourage piracy which is a no win for them.