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Summary:

Book publishers argue that Amazon is a vicious monopoly that has too much power over them and their content. But they need to realize they gave Amazon much of that power themselves when they agreed to shackle all of their books in DRM chains.

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The Department of Justice’s lawsuit against two major book publishers — for allegedly colluding with Apple to keep the price of e-books artificially high — continues to make its way through the courts, and it has set off a frenzy of finger-pointing about who to blame for the destruction of the book industry at the hands of Amazon’s evil monopoly. I have argued that there’s a little bit of evil on both sides of this issue. But one thing seems fairly certain: If the publishers dislike the power Amazon has over them, they need to recognize they shoulder much of the blame, since they helped to forge the DRM chains that have kept them shackled to the company’s platform. Why not break those chains and try to set their content free instead?

The publishers have tried to argue they were forced to cut a deal with Apple to institute an “agency pricing” model for e-books — which allows them to set the ultimate price for their titles instead of giving that power to the end retailer, the way they did with Amazon until Apple came along — because otherwise Amazon would push prices down to unreasonable levels and take even more control over the industry. But who gave Amazon a lot of that control in the first place? The Big Six publishers themselves, by requiring DRM. As author Charlie Stross argued in a recent post:

By foolishly insisting on DRM, and then selling to Amazon on a wholesale basis, the publishers handed Amazon a monopoly on their customers.

Amazon no doubt wanted to lock up all of that e-book content with digital-rights-management protections just as badly as the publishers did, since that helped tie customers to its Kindle platform and the Amazon ecosystem. But the Big Six enthusiastically embraced the idea, because they believed piracy was a major risk with digital content and the only way to prevent it was to wrap it in Amazon’s proprietary file format. Further, those DRM controls also allowed publishers to set all kinds of restrictions on what e-book owners could do with their books, including how many times (or even if) they could lend them.

Has DRM prevented piracy? That seems unlikely, since it is relatively easy to get around those locks and copy a book if you really want to. What is pretty clear, however, is that those rights-management locks have cemented Amazon’s control over the publishers’ content. In other words, it has given the online retailer a stick with which to beat them, as Stross described it recently. And it has also made it more difficult for some independent e-book sellers, because publishers won’t let them sell their books without DRM.

Those DRM chains are hobbling the industry, not pirates

When it comes to readers and book buyers, meanwhile, DRM has been nothing but a source of pain and frustration, just as it has been in every other content market, including digital music. Books from the Big Six can’t be loaned or borrowed, or they can only be loaned or borrowed a certain number of times. And they can only be used on one platform, with all kinds of restrictions. What these chains and locks do, more than anything else, is to make the simple act of buying and reading a digital book horrendously complicated. Does that make more people want to buy and read e-books? It’s hard to see how. In a very real sense, those locks are hobbling the industry.

I think Christopher Mims of MIT’s Technology Review is right when he says the only option for publishers is to embrace the disruption that digital provides and do their best to disrupt themselves — and Amazon — rather than setting up artificial barriers:

It’s abundantly clear that publishers that survive in an Amazon world will be those who disrupt Amazon itself. If Amazon’s aim is to “cut out the middleman” then the next logical step is for publishers to cut out the middleman that is Amazon.

Some publishers refuse to bow to the god of DRM: O’Reilly Media, for example, sells all of its titles without any digital restrictions whatsoever. Tim O’Reilly has said he isn’t concerned about digital piracy, because most of the people who take his books without paying probably never would have bought a copy anyway. So it’s not as though he has lost a sale, and someone who reads them for free might later decide to pay (musician Neil Young has said that “piracy is the new radio”). And J.K. Rowling sells e-book versions of her massively successful Harry Potter series without DRM, although digital locks are added when a copy is downloaded to a Kindle.

Some, including Financial Times writer John Gapper, are skeptical that giving up DRM would make much of a difference for traditional publishers, since Amazon would presumably just continue to push down prices of e-books regardless, putting pressure on their profit margins and inexorably gaining more market share. And abolishing DRM certainly wouldn’t be some kind of magic wand that would return the book-selling business to the glory days of old. But at least it would give publishers a chance to be more flexible and adaptable, instead of trying to prop up their failing business model with price-fixing.

Post and thumbnail images courtesy of Flickr user Christine Zenino and Marcus Hansson

  1. Matt Dotcom, your piece errs on the side of answering big questions by posing them to yourself. Like “has DRM stopped piracy, that seems unlikely” … No proof there, just you posing questions to yourself, and answering them. Hardly journalism, but let’s move on.

    I’ve read many of your articles and know from them that you believe that theft of someone’s product can do no harm. While occasionally you might make a valid point, your work is really of the Op-Ed variety.

    If you had ever been a victim of Internet piracy, you might feel a bit different.

    GigaOm has some great articles, but your constant drool about the great points about piracy are getting old, and just don’t explore the other side…. Like people who have been ripped off and don’t think it’s harmless.

    You are a boring one trick pony – at best, and not really producing journalism… Just mostly opinion.

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    1. CfC, it’s probably worth pointing out that the topic of this column has absolutely nothing to do with whether piracy actually hurts or not. The topic is, Does DRM hurt publishers more by forcing Amazon lock-in than it helps by preventing piracy. By all accounts, it doesn’t prevent piracy at all. Therefore, if it hurts even a tiny bit, maybe publishers should consider doing away with it.

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    2. That’s a great point, Nathan. Thanks very much for coming to my defence :-) And CfC, these posts *are* my opinions — I’ve never claimed otherwise — but they are backed up by facts, if you take the time to follow the links I include.

      As Nathan notes, this isn’t really about piracy — it’s about whether publishers are shooting themselves in the foot by insisting on DRM, and whether they would be better off by trying to do without it. I think they would. You are, of course, entitled to your own opinion.

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      1. Right, I read the article, I understand what it was about.

        I’m talking about your constant belittling of the threat of piracy and how authors feel about it. You seem to always have the answers from your opinion mill.

        Again, the drone of your easily written articles is getting old. Go ahead and take on the “kill the messenger stance” – but once you get over my criticism, do some journalism for a change.

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      2. It’s about your contentions, which seem to be mostly opinion. Lines like “Those DRM chains are hobbling the industry, not pirates”

        I think we all understand the premise of your opinion on DRM, but this point of yours, in caps, reads like nothing more than a big talking point.

        Did you talk to the publishing industry? Was the publishing biz ever anything like the radio biz as the Neil Young quote seems to intimate?

        Please go to J School, or something.

        You are just an OpEd guy, and you don’t want to understand the people who have been hurt from piracy.

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      3. CfC, if you have personal tales about being injured by piracy, please feel free to share them so that everyone can be as enlightened.

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      4. Matt Dotcom, If you were a journalist, you would find and report on those hurt by piracy. I’m not going to do the job got you. You need to do some reporting work, and kick out the soapbox and the megaphone.

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    3. You lost this lay reader when you used the word “theft”. Piracy is not theft, for the crazily simple reason that nothing is stolen. The original “property” remains wholly with its owner. We should have established this fact by now. Vocabulary is important, and yours is a tool used (cynically or ignorantly) by defenders of DRM to try to criminalize their opponents. It is nasty and will win ever fewer supporters. Beyond that point, the author has rehearsed the evidence that DRM is economically superfluous in his previous posts, and always links liberally to sources when making the point. Your irritability and personal attacks only make you look like you are in denial. (PS: For what it is worth, I personally would never pay for DRM content on principle, and neither do I do any “thieving” as you put it. I am literally waiting for DRM to die so that I can get on with paying for the things I want to consume. Crazy but true.)

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      1. Rollo,

        One question, have you ever had digital content you created at great expense cracked and zipped and put on all the pirate sites globally?

        By your words I’m certain that answer is no, and add Matt Dotcom to that list. So lay off the concept that it’s not theft. Stop with the psudo-intellectual redefinitions of your own behavior, you are just a common thief.

        Don’t worry someday you will pay taxes and die like the rest of us. Keep living with your parents as long as you can… it’s still free, we get it.

        BTW, what isn’t Matt posting some of the GigaOm Pro articles right here in the forum. His employer probably wouldn’t mind, if it’s not stealing, and it just promotes other sales… then where is it?

        You guys are a bunch of whiner thief’s pretending you are intellectuals of some sort.

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  2. Don’t forget restricting sales based on region doesn’t work either.
    Why can I buy a paper book and have it shipped to me from anywhere in the world, but not an ebook?
    My current process for buying a new book is, check if its on Kindel, yup, is it in the Asia Pacific store, nope, it is anywhere else DRM free, Nope. Go to Demoniod.com Get it there.

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    1. Excellent point — region-encoding is just as irritating with e-books as it is with DVDs or any other digital content format. Thanks for the comment.

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  3. Mr. Ingram:
    How do you know it wasn’t Amazon that advocated DRM to the big six, who are, by the way, habitually way behind on the technology curve anyway?(okay, O’Reiley is one of the few on the ball). Dropping DRM may be the strategy now that DOJ is forcing the settling firms to hold off Agency pricing for 2 years.
    But a reminder: we’re talking about a product that has been governed by fair use rules for quite awhile now, where there is an elaborate system to pay for copyrights when a professor assigns a portion of a book, and where there volume sales on most titles doesn’t exceed 18k per title. If you loose 15% to piracy it hurts more at that level.Can you blame them for wanting protection? Or for what? Not being technologically hip?
    The online bookseller’s DRM investment was pegged at $10K or so…that’s nothing compared to the investment needed to open a bricks n’morter store for bound books.
    Also, you traffic your own spin with the opening comment about DOJ charging publisher collusion “to keep digital books artificially high.” Absolutely false: the Amazon price of 9.99 was artificially low, in effect a subsidy provided by Amazon. DOJ’s case is about firms collusion to institute the Agency policy, not the policy itself. Random House, for example, was late to the Agency plan and is not one of the firms listed in the suit.

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    1. Thanks, David — as I mentioned in the post, I have no doubt that Amazon pushed for DRM as well, but the publishers went along whole-heartedly, for the reasons I described. As for artificial prices, who is to say that Amazon’s price is artificially low? What makes the publishers’ price artificial is that they needed to collude in order to set and keep it. Amazon is prepared to charge whatever sells the most books.

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      1. One not well known fact about Amazon and DRMs is that in 3 of it’s stores — FR, IT and SP , the 3 most recent ones — there is no DRM status indication at all on the book’s description. No “Unlimited” thing, which can help buyer use DRM status as an indication. This is one of the two major Amazon decision which decided me to boycott them.

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      2. Terms of sale is why it can be said that Amazon’s price was artificially low. On a $24 list price the best Amazon would have gotten from a publisher is a 50% discount, or net $14. They sold the e-book at 9.99, subsidizing the $4.01 to the consumer as a marketing expense for the kindle. The publishers, btw, were quite anxious to be in on the iPad, and rushed to establish the Agency Plan to be in before the release.

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  4. Dropping DRM may be the strategy now that DOJ is forcing the settling firms to hold off Agency pricing for 2 years.
    But a reminder: we’re talking about a product that has been governed by fair use rules for quite awhile now, where there is an elaborate system to pay for copyrights when a professor assigns a portion of a book, and where there volume sales on most titles doesn’t exceed 18k per title. If you loose 15% to piracy it hurts more at that level. Posted by – http://www.canadajobsnew.com/

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  5. Andre Prudhomme Thursday, April 19, 2012

    I agree with many of your conclusions, but I think the major publishing houses are unlikely to ever accept that viewpoint.

    I agree with Mike Shatzkin that the main use of DRM is to prevent casual sharing, which is likely to impact the most popular books the most. Given the reliance of major publishers on blockbuster books for profits, they’re likely to continue supporting it.

    At most, I think they’ll attempt to collaborate on a “Ultraviolet for books”, which will likely fail because Amazon will offer a better experience for consumers.

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  6. yes.

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  7. Peter da Silva Thursday, April 19, 2012

    The biggest problem with DRM is that it keeps me from buying a book from Harper-Collins or Tor and reading it on my handheld, I have to go through Apple or Google or Amazon. I suppose each publisher could create their own book reader, so my handheld would be loaded down with 30 or 40 book reader programs, but that won’t actually happen.

    Publishers should embrace disintermediation instead of just fretting about it.

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  8. It’s almost as if they’re not paying attention the music industry and iTunes. The book publishing industry is providing the sequel to that movie.

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  9. You wrote: “But the Big Six enthusiastically embraced the idea, because they believed piracy was a major risk with digital content and the only way to prevent it was to wrap it in Amazon’s proprietary file format.”

    Don’t confuse DRM and file format. The DRM issue aside, Amazon will only sell ebooks in their proprietary Kindle format, whereas almost every other ebook retailer sells EPUB titles that are more cross-compatible. Publishers opted for DRM in fear of piracy, but wrapping one’s book in Amazon’s proprietary file format has nothing to do with DRM — even non-DRM titles sold by Amazon have to be in their file format, readable only on Amazon devices, whereas non-DRM titles in EPUB can be read on almost every other device.

    Whether DRM is damaging or not is worthy of discussion, but if your point is that publishers should “disrupt Amazon,” then DRM is beside the point; removing DRM but continuing to sell one’s books through Amazon still gives Amazon the same advantages as if the book had DRM applied.

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    1. That’s a good point, John — thanks for the comment.

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    2. It’s true that Amazon’s Kindle uses a different format (.mobi) than B&N’s Nook(.epub. Note, however, that once the DRM has been stripped off either version it is very easy to convert a .mobi book into an .epub book. Calibre — a free program — does it nicely.

      It really is the DRM that keeps readers locked into a proprietary device. Many Kindle and Nook users either don’t realize DRM there; don’t realize how simple it is to strip off; or aren’t tech-savvy enough to find the necessary scripts on line, download them, and use them. As more and more “digital natives” join the ranks of the larger consumer market, that’s not going to last.

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      1. In case it wasn’t clear from my original post, Calibre doesn’t just convert from .mobi to .epub, it also converts from .epub to .mobi. It will convert just about any ebook format, broadly defined, into any other.

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  10. John F. Harnish Thursday, April 19, 2012

    As the author of 18 ebooks, I want them DRM protected. I don’t want to discover some XYZ ebook vendor has “harvested” copies and are selling knock-offs at cut-rate prices and cutting me out of royalties.

    Free apps enable ebooks to be displayed and read on a variety of devices. This feature has helped to increase the popularity of ebooks. The corporate bean-counters finally figured out that selling more ebooks is more profitable than selling the platform. DRM bridges the platform and protects the content.

    The big six are trying in vain to control an industry in the turmoil of change. At the turn of the century they tried to keep POB digitally published books out of the bookstore chains. Now they are attempting to muck-up the evolving ebook branch of publishing with unrealistic pricing schemes. Ebook consumers are wise to the fact that the cost of producing and distributing an ebook is a fraction of the expense of a printed on paper book—that comes with the weight of the publisher’s high overhead.
    Increasingly authors are asking publishers what are they doing to earn their slice of the profit pie. The author is entitled to the higher royalties that are possible with ebooks without resorting to an inflated price established by the publisher. The author needs to be free to set a fair ebook price—not the dominating publisher. Without authors creating content there is no pie.

    In this Digital Age of publishing the author owns and controls what is done with the content they have created. Content rules and DRM helps to protect the content owned by the author.

    Enjoy often… John

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    1. supply,demand and piracy Thursday, April 19, 2012

      John,
      You are wrong. DRM does absolutely nothing to protect your works. The only eBooks I have not found cracked/cleaned/pirated or scanned were sleepers by relatively unknown authors whose cult following doesn’t include pirates and who never offered an eBook version to begin with. You speak of the Digital Age of Publishing but cannot grasp that it is the Digital Age of Piracy, Pirates were on the net before You, Pirates invest more time and effort into breaking encryption efforts, Pirates will always look for ways to get your stuff cheaper and faster than you provide it. Well until it is no longer worth the weeks of sleepless nights to crack a new DRM scheme and invent ways of circumventing idiotic sharing rules because You have wised up. Look at iTunes, 99c a song… for the vast majority of casual pirates that was the price point where pirating was too much effort. And the Piracy focus shifted to something other than pirating single songs, it went to ripping entire albums or discographies because the iTunes price point for those is still above the #effort# threshold.
      The same exact principle is at work in all areas of piracy. If the price point is perceived to be too high or heaven help you, unjust, pirates will be all over your work. DRM and content rules just makes legitimate customers angry and frustrated dealing with it.

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  11. Funny. Why don’t the publishers start their own estores, decide their own prices and sell their own content, in a platform agnostic way (?) Some will be DRMd, some won’t be. The best content and ease of purchase will win. When I didn’t like working for other people, I started my own little design shop and its probably been one of the best decisions of my life.

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