Stay on Top of Enterprise Technology Trends
Get updates impacting your industry from our GigaOm Research Community
Digital music is now mainstream, thanks in part to the MP3. Will the e-book market be next to produce a one-size-fits-all format-a format that is universally readable, freely sharable, and with a reasonably good reproduction quality?
The answer to this question, for at least in the foreseeable future, is: not bloody likely.
Let’s start with the fact that MP3 itself is not all that it’s cracked up to be. It’s the lingua franca of ripped CDs and copyright infringement, but not of legitimate commercial music distribution. Apple (NSDQ: AAPL) supports MP3 with iTunes/iPod/iPhone, but not as its actual distribution format: Apple uses MPEG-4 AAC as its primary codec. AAC has better sound quality than MP3 at a given bit rate but doesn’t play seamlessly on some portables. Streaming services like Spotify and Rhapsody use different codecs altogether. The biggest MP3 retailer in the U.S. is Amazon (NSDQ: AMZN), with only 10 percent of the downloaded music market as of April 2011. It’s fair to say that none of the current growth in commercial digital music distribution is MP3-based, and it’s likely to stay that way. If you’re talking about paid content in music, you aren’t really talking about MP3s.
With that out of the way, let’s look at digital book content. It’s readable in plain ASCII text format, which is decades old and completely interoperable across devices. Yet there is no market for ASCII book content (in spite of attempts since the mid-90s), for various reasons but mainly because of its poor reproduction quality. And Adobe’s ubiquitous PDF is not well suited for today’s wide variety of digital devices because of its orientation towards printed pages and facsimiles thereof.
Right now, two e-book content formats vie for supremacy: Amazon’s proprietary markup format and EPUB, an open standard created by the International Digital Publishing Forum (IDPF), formerly known as the Open e-Book Forum. Both of these are straightforward markup languages with tags for paragraph, chapter heading, bold, italics, etc. It’s possible to translate from one to the other with minimal loss of fidelity, but they are different formats. And in most cases, they are both encrypted using different DRM schemes: Amazon uses its own, while most other e-books are marked up in EPUB and encrypted using Adobe’s DRM.
From the consumer’s perspective, the ideal would be a format that: preserves the look and feel of print typography; is readable (“reflowable”) on all types of devices; imposes no restrictions on copying or sharing; and is available from a variety of retailers. Well, it’s even more unlikely to exist (legally) for e-books than it does for music. EPUB was designed to be for e-books what MP3 is for music. But first of all, the MP3 codec pre-existed the digital music market by several years, while EPUB came out in 2007, the same year that Amazon launched the Kindle and several years after the first wave of e-readers hit the market. Secondly, EPUB does not have any serious technological advantages over other contemporaneous formats such as Amazon’s MOBI format, whereas MP3 had the advantage of compressing music files so that they could be sent to and from Internet sites over the then-prevalent dialup connections. In other words, there was no standard on which the e-book industry could build. Finally, recall that there isn’t really a significant commercial market for MP3s anyway.
Thus the legitimate e-book market will develop as any other technology market does: through competition. Competition results in one of two things: a dominant vendor with great customer acceptance, or vibrant competition with sub-optimal interoperability. Techies who have been around for a while know this to be true.
Many tech markets settle down to a long-term state of two or three players. In operating systems, there’s Windows and Mac OS (desktops and laptops); Android, iOS and BlackBerry OS (portables); and Linux and Windows (servers). The web browser market has the triumvirate of Microsoft (NSDQ: MSFT) (Internet Explorer), Google (NSDQ: GOOG) (Chrome), and Mozilla (Firefox). Other markets settle down to a single player whose dominance is tempered by a combination of legal constraints and consumer annoyance: currently Microsoft in office applications; Facebook in social networking; Intuit in personal finance software; and Apple in digital music.
Right now, the e-book industry is nearing a tipping point. Amazon has a marketshare of 58 percent (as of February 2011), while the Adobe/EPUB axis (Barnes & Noble (NYSE: BKS), Sony (NYSE: SNE), and others) claim a total of about 33 percent. (Apple’s iBooks is a distant third at 9 percent.) That’s not bad for Amazon, but it’s not like Apple’s digital music market share. Two things could happen: Amazon could pick up steam and move into Apple/music territory, or Barnes & Noble – or someone else – could gather momentum and reduce Amazon to perpetual-competitor status.
To evaluate what’s likely to happen in each of these scenarios, it’s important to look at how these services try to lock in consumers. The obvious feature that gets blamed for lock-in is DRM, but it’s not the only way. One of the reasons why Apple dropped DRM for music (though not the only one) is because it no longer needed DRM for lock-in; it could resort to more subtle means, such as the hassle of taking iTunes tracks and moving them to, say, your Android phone; or certain tricks Apple plays with its codecs to make them not play well with others.
If Amazon ends up with a more dominant market share, look for it to do similar things. Amazon is already experimenting with DRM-free distribution: Amazon’s Cloud Reader doesn’t use DRM, yet it also doesn’t offer copy-to-clipboard or print. Amazon will jettison DRM in most book market segments if and when it is sure that it no longer needs the technology to keep consumers on the farm. (Textbooks are likely to keep DRM indefinitely, at publishers’ insistence, given that students are not exactly willing buyers of textbooks.)
Yet even without DRM, an Amazon with 70 percent+ market share will be called a closed, proprietary monopolist. It may face antitrust inquiries in certain geographies, perhaps in Europe. Amazon will think of many ways to continue to lock consumers in, including continuing to use its proprietary markup language. Consumers and members of the techblogorati will complain about Amazon’s monopolistic behavior even as they praise its products’ design and gobble them up by the millions. Other e-book platform vendors will make their technologies as free, open, and interoperable as they can, but it will be too late – at least until the next major technological shift. In other words, this scenario will resemble Apple and the digital music market.
Now consider an Amazon with, say, 50 percent market share. The other e-book platform vendors will already have an infrastructure in place to interoperate among themselves while leaving Amazon out of the loop: EPUB plus Adobe’s DRM. They’ll keep DRM to help ensure that users stay on their collective farm and don’t wander over to Amazon-land, and they’ll offer interoperability among all Adobe-based reading devices (Nooks, Sony Readers, Kobo Readers, etc.) – not to mention apps for every major general-purpose platform. Amazon will also be likely to hang on to DRM so that it loses fewer customers to its competitors.
In that case, there will be no complaints about monopolistic behavior and no antitrust inquiries, but there will be more DRM. Some pundits will praise the vibrancy of a competitive market in which vendors constantly try to outdo each other with features and low prices, especially since the entire market must (like music) compete with free and illegal e-books. But the punditry will also complain about consumer confusion and lack of interoperability. In other words, this scenario will resemble Apple and Google in the current smartphone market (where a recent study shows Google’s Android leading with 53 percent share).
But wait: what happens if Amazon loses the plot and ceases to own even a plurality of the market? One way this could happen is if Amazon flubs its expansion into the tablet market – which, judging by the initial mixed reactions to the Kindle Fire, is not out of the question. There is some question as to whether e-readers as a device class will survive the inevitable onslaught of cheap tablets from vendors looking to cut into the iPad’s market share. It could be that e-reader devices shrink into irrelevance as a device class and consumers will do their e-reading on tablets, phones, and other devices.
In that scenario, Amazon will continue to succeed as an e-book retailer, if for no other reason than its enormous overall online retail presence. But then just take whichever company becomes the new market leader and apply one of the two scenarios above to it. (For example, if Apple’s dominance in tablets continues, then Apple’s iBooks may dominate e-reading after all; and they know how to play that hand very well.)
The point is that in none of these scenarios do we get all three attributes: ease of use, interoperability, and choice – the way we do with print books. Technology markets like this do not exist. They are mirages. Just like the commercial market for MP3s.
Bill Rosenblatt (@copyrightandtec) is president of GiantSteps Media Technology Strategies, a consulting firm, author of the Copyright and Technology blog, and chair of the Copyright and Technology conferences. Email him at [email protected]
This article originally appeared in GiantSteps Media Technology Strategies.