I read, from the July pages of www.StarNewsOnline.com that “The Pirate Bay, which is based in Sweden, presents a devilishly fearless challenge to American textbook publishers. It describes itself as an “anticopyright organization” and offers music, movies, television shows and software, as well as e-books like textbooks — not a single item of which, it boasts, has ever been removed at the request of a copyright owner.”  Hmm.  Sounds like Pirates?

But how many economic analyses have you read that actually examined the effects of piracy on product markets?  Probably very few.

Big hitters like the music, TV and film people complain about losses in their industries.  Designer label clothes and perfume producers complain.  Software manufacturers also complain.

But if you make a careful analysis, piracy always occurs when there are serious market pricing inequalities that are not addressed by regulation.  Or to try to be a bit clearer, when you can buy a product in one country for x, and in another country for a half of x, there is a serious price inequality.  If no action is taken to correct a price inequality, this creates the vacuum that pirates, being, at heart, just as serious capitalists as any industrialist, will naturally seek to fill.

This is not some vague modern theory.  Rather it is a statement that has stood the test of time.  When in the UK in the 1800s, it was decided by government to raise the tax on alcohol and tobacco to be significantly above that of France, somewhere only 14 miles away, pirates were handed a market second only to the government forcing you buy your postal service from them (and they did do that). 

There are many more recent examples.  Designer jeans manufacturers and perfume manufacturers won global legal battles that enabled them to enforce per country pricing for their products, and to be able to prevent countries purchasing at lower prices from reselling to other, higher priced countries.

The same has been true in the information world.

I cannot understand how it is that the same information can possibly have a different value in a different country.  I agree, that, if translation into a different language from the source is necessary, then that might introduce a cost that has to be paid for, but I also assume that the seller will have thought about the effects of price on market before launching their wares, and will have worried about what price to set in order to make a viable return (please see economists for the math behind price/market/demand models, I don’t have the desire to write a book on it).  To give you a practical example, the other day I paid over $350 for a book that it was essential I could read right now, was out of print, and only one supplier could deliver a copy next day.

The bottom line, as they say, is that any DRM controls built by man can be removed by man.  It all depends on cost/effort/desire.  Risk analysis.  DRM controls over things that can be seen or heard can be ‘removed’ using a camera and a microphone.  That cannot be prevented.  There will be loss of quality, and, if your product has high embedded functionality (ability to search on information, links to other objects, embedded information) there may be critical loss of functionality that renders a copy of little or no value in the market place.  You may also be using features such as dynamic watermarking, that significantly reduce the desire of legitimate users to allow pirates access to their materials because they may be personally identified as the source of piracy.  Hopefully, in your DRM system, you are using features such as encryption, that can prevent trivial ways of accessing and copying your work(s). 

But do please always remember that to a greater or lesser extent, if the cost and effort are low enough, and the desire is high enough, then copies of the basic information can be made.  What can be stopped is stealing embedded functionality that the DRM controls also protect. 

The greatest effector you can face is desire.  If your market is students and your strategy is to charge premium price then you can expect a high ‘desire’ to break your controls.  If you choose a lower price because you can sell year on year the same product, then you lower desire.

We sell our products at exactly the same price globally.  There are no exceptions.  There are no premiums.  There are no discounts.  At one level it’s a rough deal because poor economies have to pay ‘relatively’ more.  But there is a level playing field.  There is no market price fixing.  We do not demand a different price in Chile from Canada, or in the United States from the United Kingdom.  And maybe that’s part of the equation?  Part of the equation of persuading people it’s not worth the bother of pirating information is to set prices that are both globally consistent and do not overly increase the desire to find a way to bypass them.

That’s not part of the choice of a DRM product supplier, although you might prefer to choose one that is realistic about what can be achieved and clear about being a DRM provider and nothing else.