White Knight or Trojan Horse? The Consequences of Digital Rights Management for Consumers, Firms and Society

Abstract

Due to its ability to solve all main problems associated with digital goods, Digital Rights Management is the favorite option used by companies to tackle piracy. The aim of this article is to discuss the consequences of DRM for consumers, firms and society. The rationales of DRM are discussed and the expected benefits for firms are presented. In contrast, consumers are shown to be likely to see few benefits in DRM. This article demonstrates that even a standard DRM system is unlikely to improve social welfare. The article concludes with some public policy recommendations.

Keywords: Digital Rights Management, Digital Goods, Piracy, Excludability, Durability, Sampling

JEL Classification: O34, O38, I30, H53, H42