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Summary:

The major publishers say they needed to cut an ebook deal with Apple in order to blunt the force of Amazon’s monopoly — but they themselves helped construct that monopoly by insisting on platform-specific DRM.

Lock DRM

After much back-and-forth, a verdict came down on Wednesday in the Apple ebooks case: a judge found the company guilty colluding with five of the big six major book publishers in a scheme designed to inflate prices. The publishers (all of whom settled with the government before the trial) have tried to argue in the past that they were forced to cut a deal with Apple because of Amazon’s monopoly — but when it gets right down to it, the real culprit is the DRM lock-in that the publishers themselves pushed for. In effect, they forged the chains that bound them to Amazon in the first place.

My GigaOM and paidContent colleagues Jeff Roberts and Laura Owen have written about the details of the judgement itself, and also about the potential impact on Apple and the ebook business as a whole, but what really interests me is the broader landscape in which the lawsuit sits, and how much of that has been determined by the digital-rights management infrastructure the Big Five publishers put in place. Without it, there likely wouldn’t have been a trial at all.

Publishers locked themselves in

Tech writer Rob Pegoraro commented on this in a perceptive post last year, in which he noted that DRM locks provided the foundation for the Amazon monopoly that book publishers were complaining about so loudly:

“So long as DRM stays part of the plot, every Kindle reader sold, every Kindle app installed and every Kindle title purchased will strengthen Amazon’s hand… if you could buy an e-book in a standard format that, like an MP3 music file, would be playable on current and imaginable future hardware, it wouldn’t matter which store sold it. There would be no lock-in.”

iBooks apple

That’s not to say Apple and Amazon weren’t willing participants in the DRM game, because of course they were. It was in their interest to adopt measures that would (theoretically at least) prevent copying of content just as much as it was in the publishers’ interest, since that would help keep consumers locked into their respective platforms. And this was particularly important for Amazon because its whole business model is predicated on using the Kindle as a cheap delivery system for content.

But the publishers’ desire for DRM locks was what gave Amazon the bricks and mortar with which to construct that business model. In effect, as author Charlie Stross put it in 2011, by pushing for DRM so strenuously, the publishers gave Amazon the stick it subsequently used to beat them:

“The Big Six’s pig-headed insistence on DRM on ebooks is handing Amazon a stick with which to beat them harder. [Their] insistence on DRM has proven to be a hideous mistake. Rather than reducing piracy, it has locked customers in Amazon’s walled garden, which in turn increases Amazon’s leverage over publishers.”

The Big Six gave Amazon the keys

Paywall

Imagine for a moment if an ebook wasn’t locked to a specific platform, or even to a specific retailer. It may sound far-fetched, but only because we have all come to accept that the way the digital book business works now is the only way it could possibly function. That’s not the way physical books work — we are free to buy them from whatever retailer we wish, and while publishers have exclusive deals with certain chains, that doesn’t prevent us from doing whatever we want with the book after we have bought it.

By contrast, DRM locks — and related restrictions on things like lending or moving ebooks to a different platform — make the whole process of buying ebooks so complicated and unfriendly that many book lovers don’t even bother doing it in the first place. That’s arguably as big a problem as Amazon’s control over prices, if not bigger. How much larger could the ebook market potentially be if publishers hadn’t built those DRM walls around their content and given Amazon and Apple the only keys to unlock them?

Instead of seeing the ebook market as one that could grow their market in different directions, or offer different opportunities for revenue generation, most publishers saw it instead as a threat to their existing business, and did whatever they could to protect themselves from that threat. That’s where the impulse for DRM locks came from, and they have been paying the price ever since. In that sense, the Apple case is more of a sideshow than it is the main attraction.

Post and thumbnail images courtesy of Flickr users Ben Cumming and Giuseppe Bognanni

  1. In terms of this case, and of Amazon being a monopoly, perhaps a few years ago, but not so much today.

    It seems every month the restrictions are disappearing, so that readers can buy from one source and read on various platforms, except perhaps Amazon. Overall, many experts advise authors to go the DRM-free route. After all, in five minutes you can find a dozen different places to easily disable the feature. I don’t use any of them, but knowing how easily that is, the question is “why bother”?

    As far as price fixing goes, if an ebook retailer has an algorithm that sets the price of an ebook at 80% of the retail print book, is that still not price-fixing?

    Frankly, as far as I’m concerned, they should all de-list those books on “supply and demand” because it just ain’t so – never really was.

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  2. The piracy of mp3 music completely negates the central argument of this article. Yes, they could have gone for a more open standard for DRM’ed content that any hardware vendor could have implemented instead of using one (or two) proprietary DRM solutions. But they and authors would not have survived without DRM. Pirate sites would have come up faster than moles in wac-a-mole game.

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    1. Tetracycloide Wednesday, July 10, 2013

      The fact that DRM has no real effect on ‘piracy’ negates the central argument of this comment.

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      1. DRM doesn’t reduce piracy. The dedicated pirates will always find ways around DRM. People won’t necessarily buy content if they couldn’t get it from pirate sites.

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    2. Pirate sites do spring up faster than wac-a-mole. DRM hasn’t stopped them (or even slowed them down slightly). When will you people get that DRM doesn’t actually work? It’s trivial to bypass for people who want to. The only (and truly only) people who are effected by it even in the slightest degree are the honest customers who don’t want to break it.

      DRM has nothing to do with preventing piracy or any other kind of illegal distribution. It has everything to do with trying to control the legal distribution of content in different markets. As a tool for piracy prevention it does exactly nothing. If you don’t believe that, just download Calibre and unlock every single ebook you’ve ever purchased with a few mouse clicks (yes, it’s really that easy).

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  3. Peter H Pottinger Wednesday, July 10, 2013

    no the villain was apple :)

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  4. ePUB already exists.

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  5. I for one, refuse to believe the fairy tale that publishers “insist” on DRM.

    I think Apple and Amazon make ‘em use it. And they stick terms in the contracts that force them to do so everywhere else too.

    Of course, Apple and Amazon like to PRETEND they don’t do that for PR purposes. Independent authors are given the non-default option of selling with no DRM. But those contracts are not individually negotiated and the terms are publicly viewable.

    The secret contracts with publishers are negotiated behind closed doors, so use your brain and follow the money.

    Apple/ Amazon inserts the DRM clause in the first draft of the contract, and says it is a standard request, Individual publishers see that there is no benefit to dropping DRM if customers are still locked in by all of their competitors books, so they don’t bother to negotiate it away.

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    1. Tetracycloide Wednesday, July 10, 2013

      So Apple is insisting on something they basically forced music labels to drop? Why do you think their track on DRM for ebooks would be so different from their track on digital music?

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      1. How did Apple force anything? Apple had DRMed music until the music publishers allowed non-DRMed music.

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    2. Apple and Amazon aren’t the only e-bookstores out there. But Barnes & Noble and Kobo include DRM too; you’d think that if publishers didn’t want DRM, a tiny competitor like Kobo would jump on that opportunity.

      Meanwhile, Tor Books–a MacMillan imprint!–got rid of DRM last year, as you can see by looking for its titles in the iBookstore or the Kindle Store.

      The real problem is finding these non-DRMed titles. The query “drmfree” can surface some of them on Amazon, but it doesn’t seem to work in iBooks.

      (BTW, thanks for the link!)

      – RP

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      1. My pleasure, Rob — thanks for your thoughtful post.

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    3. Many publishers do publish DRM-free while also sell via Kindle. See O’Reilly, O/R Books, Avon, etc.

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  6. You have been the basis of my technology education. As always, I enjoyed your insightful article.

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    1. Thanks, Becca :-)

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  7. As addicted as I am to Kindle devices and Kindle software, the inability to share titles I’ve bought electronically is a real bummer. The other problem is the mess that public libraries have to put up with when they start making ebooks available for lending. I wrote about these topics here but did not mention DRM directly, which I agree is one of the major culprits here: “A Progress Report on Reading Electronic Books, Especially Kindle” http://www.ddmcd.com/eb.html

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  8. The solution is new, but it’s viable. It’s call “micro-licensing” and it is already being used by magazine publishers for their digitally distributed article reprints. Publishers could use this innovation if they weren’t so fixated on the past.

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  9. I think the real question here is why do (most, not all) publishers lock themselves into DRM if it gives so much clout to Amazon. Piracy isn’t the issue, though fear of casual file sharing might be. I’ve never actually heard a coherent answer to this question. Anyone?

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  10. If ebooks were all DRM free it would likely not hurt Amazon at all and might just help it build greater market share as their apps/devices just become that much more useful. It is not platform lock-in via DRM that keeps users buying from Amazon, it is price, service, features, and convenience. If a consumer buys a Kindle, the store is right there on the device. Also, Kindle uses its own format for ebooks, so it is not just DRM that keeps those books on those devices. A DRM free ecosystem might help indie retailers some – by lowering their costs and enabling owners of bookseller branded reading systems to read content bought elsewhere. But this would likely not be at the expense of Kindle market share, more likely at the expense of their competitor’s shares. Long term it might have positive effects for publishers in terms of retail channel diversity, but whether those positive effects would be offset by revenue reductions due to large-scale social sharing of files is an unknown – though clearly publishers believe that to be the case. Reasonable arguments can be made for a DRM free approach, but reducing Amazon’s market position does not seem to me to be one of them.

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    1. Micah, I don’t quite follow you. The focus of the post is on the question of DRM and if it is hurting publishers not helping them. If DRM-free ecosystem improved indie eCommerce retailers’ prospects, as you suggest, wouldn’t that have to eat into Kindle’s market share, too, reducing their leverage on publishers? Retailers like Powells.com, Christianbook.com, etc. all lose a lot of transactions because of their eBook sales are limited by file format. And publishers like O’Reilly, O/R, and others all see DRM-free sales as key to their business. I suspect that if major publishers see a future in direct sales, DRM will go by the boards.

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