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People Would Pay A Hell Of A Lot More If DRM Were Gone


An argument that we've made for years is that for all the whining about how the legacy entertainment industry insists it needs DRM, adding DRM takes away value. It limits the content/games/software/etc. that people purchase a license to and therefore limits the value. You don't need an economics degree to recognize that providing less value decreases how much people are willing to pay (and how many people are willing to pay). Thus, there's at least some economic force when using DRM that decreases the potential market for DRM'd offerings. Supporters of DRM will likely counter with some version of the argument that this decrease in value/addressable market is okay, because it's less than the expected decrease in the potential market that happens when "OMG I CAN GET A PIRATED VERSION FOR FREE!?!?!?!??" enters the market. I'm not entirely convinced that's true -- as time and time again, we've seen that people are more than happy to pay for (1) official versions in order to support creators they know, appreciate and trust and (2) especially when it comes with other benefits beyond just the content.

But, one thing that hasn't really ever been made clear is just how much DRM depresses markets. Until now. Some researchers at the University of Glasgow have just released some preliminary research (found via Cory Doctorow and EFF) specifically looking at the market for DVD players -- and how things work when they come with built in DRM and without it. The findings are pretty spectacular. People are much more willing to spend more money to be able to avoid DRM.

Overall we find that interoperability has a significant positive effect on the price that consumers are willing to pay for DVD players. The average price that they are willing to pay increases by $19 USD for players with any interoperability features present. The average price increases by $30 USD for players with the specific ability to play content in open file formats like Xvid. This feature has the strongest impact on price in our study. The lack of region locks also has a moderately significant effect on price. Backwards compatibility with legacy formats live VCD had no significant impact on price in any of our models, likely because VCD is a very legacy format, indeed, having been popular in the late 1990s. Backwards compatibility might have a bigger impact for products that are released at closer time intervals.

These are -- again -- preliminary findings, and specific to DVD hardware. It's possible that there are confounding factors here as well, but as a starting point, it's quite interesting to see that people seem willing to spend much more for greater interoperability and less DRM. And, once again, it goes against the claims of Hollywood that people are always just looking for the cheapest overall option.


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