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DRM is crushing indie booksellers online

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In June of 2011, my friend Emily Gould came up with an idea for a new kind of online bookstore: one that would sell only e-books, but would strive to offer the personalized customer service and curation of a local independent bookshop. I thought it was a great idea and signed on to be the chief operating officer of Emily Books right away. [Here’s more on paidContent about Emily Books and the rise of the independent e-bookseller.]

We both had some well-founded fears about problems we might face. We worried about the dim future of the publishing industry. We worried about money and the logistics of launching a business while keeping our day jobs to make rent. We worried about running a company as best friends and how that would affect our relationship. And we worried that, even if we overcame problems one through three, our taste in books was too esoteric and idiosyncratic — too AWESOME!! — to have the general appeal necessary to sustain our business.

Maybe the only thing we didn’t worry about was major publishers telling us we could not sell their books. But that’s exactly what happened.

Publishers told us that if we did not have digital rights management (DRM) technology, they weren’t interested in letting us promote and sell their products. DRM is the set of technologies that encrypt and prevent the reproduction of e-book files. A new bricks and mortar bookstore, even the tiniest one, could have easily opened accounts with all the major distributors. But to sell electronic versions of those exact same books, publishers told us that you have to be a mega corporation. We were confused, and set about finding out why this counterintuitive business practice has taken root.

DRM is supposed to prevent piracy and illegal file sharing. In order to provide DRM, you need at least $10,000 up front to cover software, server, and administration fees, plus ongoing expenses associated with the software. In other words, much bigger operating expenses than a small business can afford. By requiring retailers to encrypt e-books with DRM, big publishers are essentially banning indie retailers from the online marketplace.

DRM is like the anti-theft sensors by the doors at the drugstore. The sensors go off all the time, but they still can’t stop a crafty teenager who knows how to remove a magnetic tag — nor can they stop criminals who break in and steal directly from the till. Similarly, DRM prevents a lot of legitimate, noncriminal usage while remaining unable to stop actual, intentional piracy, or its crafty teenage equivalent: someone with internet access and the ability to type “remove DRM” into Google.

Our hunch is that publishers know that DRM doesn’t stop piracy. What it does stop — and what they hope it will stop — is casual sharing: people lending books that they love to their friends. But casual sharing has always been a part of the reading experience, and when we think about why publishers are feeling desperate enough to want to take it away, we start to understand what’s really at stake here. Reliable figures on piracy are understandably hard to find, as both high and low numbers make publishers look bad. If piracy is high, then DRM isn’t working. And if piracy statistics are low, well, then piracy isn’t really much of a threat to the marketplace, and time and money spent implementing DRM could be better spent on promotion, marketing, or customer service.

Certainly some sort of system is necessary to prevent unlimited distribution of copyrighted material and to be sure authors are paid a fair price for their intellectual property. But the current approach, which makes piracy E-book Enemy #1, misses the real threat. The real threat is the near-duopoly publishers are imposing on themselves and their customers by making e-book sales easy for Amazon (s AMZN) and Apple (s AAPL) and almost impossible for everyone else.

We’ve all heard about the crucial role that independent bookstores play in supporting young writers and new talent, and we know that supporting small local businesses is good for the long-term health of our economy. But there’s an even more compelling reason that we need indies to exist in the e-book market: The Amazon/Apple near-duopoly on e-book sales is cripplingly destructive for readers, writers, and publishers. Once one of the big “A”s can freely set the price of e-books, they can determine the conditions of the market for everybody. They can charge consumers anything, pay publishers very little (for who will exist to sell their products otherwise?), and leave writers hoping for some small crumb of the pie. Everyone who reads or writes or cares about books has a reason to support the existence of a viable alternative.

While Apple uses the same file format and DRM standards as other major online booksellers, Amazon has its own proprietary file format and DRM scheme. A Kindle will not read other e-book formats. When publishers insist that products be sold with DRM, they are making it impossible for Kindle users (32 percent of e-book readers use a Kindle, according to one recent survey) to buy those publishers’ books from any other retailer.

Given the industry’s fears about Amazon’s increasing monopoly on talent and market share, coupled with its ability to drive prices, you’d think publishers would be hesitant to do anything that would make it easier for Amazon to maintain its dominance. Instead, by insisting that e-booksellers implement DRM, publishers are essentially handcuffing themselves to the train tracks and giving Amazon the key.

Emily Books has gotten around this problem, so far, by selling great books published by smaller companies who either agree with us about DRM’s uselessness or can’t afford to care about it. And we’ve experienced exactly zero problems with piracy so far. We still dream of rescuing neglected books from major publishers’ backlists and using our unique platform to introduce these books to a new audience of eager readers. That major publishers currently can’t allow a small bookstore to do something that’s in their own and in their authors’ best interests means the system is broken.

Ruth Curry and Emily Gould are the founders of Emily Books.

Image courtesy of Flickr user quinn.anya.

37 Responses to “DRM is crushing indie booksellers online”

  1. At BEA 2 years ago, I spoke with a guy who claimed to be the next wave of ebook publishing. He was selling ebooks from mainstream publishers for 0.50 cents from a server he kept in his closet. Which of course begs the questions. How did he get the rights to publish these books, how was he paying out royalties, or was he just like most new tech internet folk, looking for free content, so they don’t have to pay someone to make it.

    While I have my issues with DRM — frankly I hate it. Let’s start at the beginning of your assumptions. First of all $10,000 is a pathetically small amount of money to start up a even a small business. And even if you do happen to spend this money, you then have to think about things like server bandwidth costs, web design, updates, staffing and other costs which will easily equal or exceed that ten grand.

    Secondly there are options available to you should you choose to sell ebooks legitimately online. Sign up for a membership to the ABA, get their web package deal which includes not only ebooks, but the ability to sell traditional books too. This will set you back around $300 bucks a month, which is pricy but not nearly as pricy as going it alone.

    Frankly the ABA is the reason why indies aren’t being crushed by DRM. They have a legitimate way to sell ebooks.

  2. Peter Turner

    Simply put, piracy has nothing to do with DRM. That’s not to say that piracy isn’t an issue, it is and it’s getting worse. DRM relates to the publishers contractual obligation–on behalf of the copyright owner, usually the author–to protect copyright. One of the ways that legally protects copyright, actually, is acting to protect it. If you don’t you run some risk of loosing copyright as well, allowing someone else to claim ownership. It’s an abstraction, to a large extent, but it’s one of the issues in the background of the DRM/piracy debate.

  3. This article is as self-serving as Amazon and Apple whom they are detracting (envying). And for the exact same reason — money. Business 101: all businesses are in business to make money. If they don’t, they’re out of business — simple. Thus, it’s common sense business’ machinate vociferously to gain and maintain the competitive edge.

    Too bad Emily Books, the little guy, stand on the sidelines (coveting all of what Amazon and Apple has) throwing rocks because they are not in the big leagues.

    If Emily Books feels so strongly about this, put your money where your mouth is — raise the money for DRM technology and sue under anti-monopoly laws — that would really say Emily Books cares and are people of integrity, and not just trying to foment hostilities and ill-will against those they envy. Hence, sitting around whining is simply the familiar refrain of a losers’ sour grapes song.

    Simply put, you could just have easily said:

    a) You don’t have $10K for DRM, but

    b) You are coveting backlisted books from publishers who require DRM.

    c) The DRM issue upsets you because it interferes with your making $ — simple.

    Next time try being as honest about your money motives as Amazon and Apple are. Otherwise, this article is an insult to intelligence to read.

  4. Kelly Peterson

    I have very mixed feelings about DRM. As one of the first people reading eBooks (I bought the very first Sony Reader when it first came out at Borders, before the Kindle was born,) I hated DRM. I wanted to be able to drag & drop from anywhere, and I still like that freedom. However, it’s not fair to say that you’ve never had a problem; you can’t tell whether anyone has shared one of your titles online. The bricks-and-mortar store you mentioned would have to deal with shoplifting; as a former Borders manager, I can tell you that people steal somewhere between 1-4% of your net sales in a year. I am guessing that theft is worse online, and it’s multiplied because when you share a file, you aren’t actually giving it away. One stolen eBook can go to thousands. Watermarking seems like a very viable alternative, but will still require some setup; it might be worth investigating.

  5. my friend who owns an independent bookstore says this:

    We use a backend for our website that is shared by about 400 indies (provided by ABA) that handles all DRM issues and has minimal cost to us all. Emily Books could get an ABA website and be doing the same thing.

  6. I have a friend who owns an independent bookstore and he says this:

    We use a backend for our website that is shared by about 400 indies (provided by ABA) that handles all DRM issues and has minimal cost to us all. Emily Books could get an ABA website and be doing the same thing.

  7. If DRM is such a great idea, and if it saves publishers money they why don’t THEY pay for it? With DRM they are giving Amazon a stick to beat them with.
    But there is hope. Just as the music industry got bored of losing money the publishing industry will do too. I have just bought the Harry Potter books DRM free,at a reasonable price, discretely watermarked. This is definitely the way to go.

  8. dancingnancy

    The flaw with this Chicken Little scenario is that Amazon and Apple don’t set ebook prices, so the chances that they will abuse that ability are ZERO.

  9. the issue as i understand it is not as simple as this article suggests. to start with, it is fair to expect a new business to have start-up costs, including what drm would cost in this case. it is part of why we go to banks with a business plan to borrow money to start a business. also, adobe pdf is also a common means of ebook distribution and kindles can read pdf well. now on to piracy: you will never know how many books you sell are pirated because you have no means to tell. one of the most common piracy methods amazon is currently dealing with is that hackers get hold of a bunch of ebooks, usually sold in bundles on bit torrent and other sites, some of them ‘classic’ works without drm and others recent, pirated titles, change the title and author name, then resell them on amazon as ‘new’ works. that’s part of the reason why the popularity ratings and sudden price reductions on amazon seem so wonky – pirates competing against each other to sell their bundles cheaper than other pirates. before whining about how everyone is out to get you, learn more about the business you want to get into.

    • Ruth Curry

      I don’t say that businesses shouldn’t expect to have start-up costs. I’m saying that requiring this one in particular hasn’t been thought through and has some serious consequences.

  10. Reynard H

    u guys shd think abt being a publisher as well, solely for indie titles. No sense praying for change if u can do it yourselves. And since ur an online biz, put up the book contents(partially) online for crowdsourced reader approval, much like how people thumbs-up or down a news article they just read.

  11. gregorylent

    in just a couple of decades, as collective consciousness becomes obvious, such things as copyright, ipr, drm, will be laughed at as an artifact of a more primitive time, and simply protection rackets.

  12. thomas.krafft

    Most of my book and music purchases have happened after someone shared a book with me, or having heard the song somewhere. I bought all 5 CDs produced by one artist after hearing one song played in the background of a performance. In the UK and many smaller countries today, that little performance troupe would be breaking the law by playing that song without having paid steep royalties first. As for books – I was involved in one of the earliest ebook efforts. Our approach would have helped publishers and independent authors alike to reach a global audience at a fraction of the traditional costs. It’s been almost 15 years since that first effort, and the major publishers are still doing what they did back then – which is to load up the effort with so many restrictions, digital locking that renders the books essentially useless, and absolutely no desire to change retail pricing even though production costs for digital books is almost zero, and more. The major publishers have lost out on more than a decade’s worth of revenues from hundreds of millions of avid readers, all to prevent some fraction of said revenues from being lost to theft. Maybe one day, publishers will realize that 100% of $0 still equals $0. On a related note, I buy literally a hundred times more software today, because Apple made it easy for (software) publishers to distribute it electronically, and those new publishers also understood they could sell significantly more reasonably priced apps, than overpriced apps. Book publishers: Let people share and browse new titles without restriction, price ebooks fairly, and people will eventually buy – and they will buy a lot. Sure, some kids and unethical types might steal your content, but these people would never have paid you anyway, regardless of DRM and legal restrictions. But out of fear of losing revenue to people who aren’t going to ever buy anything, publishers have put themselves in the interesting and losing position of making authors’ works almost completely inaccessible – like closing the ice cream store and shutting out thousands of potential paying customers, just because one kid stole a sugar cone.

  13. annie o

    I think the danger is that the voice of the bookseller is lost. The seller curates a collection, and in so doing conveys a message, which is itself a creative contribution,
    a tremendously useful progress that must also be promoted.

  14. Joseph Andro

    Why do you assume they have made a mistake and are “shooting themselves in the foot”?

    Why not assume it is a planned monopoly business ploy to ensure that all the money stays in that circle of companies?

    Anyone ever look into the corporate boards of Amazon, Apple, and the publishers to see if the same people are on the board of directors of any of them? Maybe their cousins or family members are directors?

  15. Ed Renehan

    Wonderful piece. This is an example of the major publishers continuing to shoot themselves in the feet; – at once alienating wonderful new eBook sales operations and readers, while at the same time creating a terrific opening for their new, small upstart competitors. I’m glad Emily’s Books is striding bravely into the future, even without the “Big Six.” They are not destined to be very big much longer.

    • Karen, this article is referring to the file type sold encrypted with DRM through the Kindle store, NOT the type of file Kindle can actually read. I’m afraid YOU need to get your facts straight!

  16. Dave Dillard

    I think there’s a problem with the transition from physical books to digital in that I used to be able to recoup some of the cost of buying a new book by selling it used after I read it, or I could buy a used book if I couldn’t afford a new copy. All of that has gone out the window, and now publishers set the choke-hold prices and I just sit on my $10 book that I am done with… It’s really frustrating for me, and I am not willing to do anything as shady as re-sell digital content until there is a legit system for doing so- one that is similar to how things are bought and sold used now- as a product that changes hands, (not that duplicates and gets sold multiple times) – when i sell something I transfer the item and all of my rights to it. It’s frustrating the way it currently stands.

  17. Tina, would you be upset if your work had been printed on paper and subsequently appeared in a used book store?

    The real issue here is ownership: property rights have been severely eroded by our adoption path for digital books. Until I can resell any book I buy, this will continue to be a problem.
    Emily Books is taking the right path, and I hope your runway is long enough to make ‘takeoff’. The other market opportunity here is to start to solicit some of the self-published books, partnering with a self-publishing platform that is not amazon, and tame the new wilderness of the great unsung-yet-published authors that our situation has created. According to NISO, in 2010 there were 1.7 MILLION self-published (and therefore uncataloged-though-possessing-an-ISBN) volumes…

  18. David Thomas

    This is truly a murky issue. While I empathize with the sense of publisher’s DRM inhibiting a start up’s opportunity, the digital book is quite a different animal than music, video, or video games. The focus needs to be on fair compensation to the creator. DRM is an imperfect means to that end. The $10k+ is, in economic terms, a sunk cost and is at the very least comparable to the cost of borrowing, rent, renovation, bookshelves and other equipment necessary for opening up a physical bookstore. In fact, the cost of entry for an online only digital bookstore is comparatively cheaper. Ms. Folsom’s comments reinforce what was plainly evident in the early Kindle-only period. A reading circle of employed, middle class suburbanites had figured out how to share the same copy between all their devices with the same email address. The quoted (NYT) comment from one of them referred to it as “cheating”. That is very different from stealing, and they clearly didn’t give a whit about the author’s compensation.

    • It’s a cost that makes bookstore overhead higher, either driving prices up or lowers how much money authors get from a transaction. It also inconveniences many legitimate uses for e-books, as the article states Kindle only supports Amazon’s DRM, Nook only supports B&N’s DRM. So it supports a closed ecosystem where your “library” is tied to one company’s viewing devices. And if that company goes bankrupt or gets bored, you lose access to all your content. It is happened before with music (see MSN Music).

      Filesharers don’t have to do deal with any of this. There is no DRM. So if you download a book from a illegitimate source, you can view that book on any device, anywhere. It’s a much better product, even excluding the fact that it is free of charge.

      • David Thomas

        The ideal business has no fixed costs? The prices of ebooks are significantly less than bound books already. The inconveniences stated are ameliorated with a tablet device supporting iBookstore app, Kindle app, etc. File conversion is also generally available. The DRM solution to a consumer who needs greater flexibility – and in general that is a small percentage of consumers — is to pay a little extra for the privilege. A better product is the illegitimate one? Really? If it were a drug, you’d prefer to buy on the street rather than a pharmacy? The source counts for something here and there is a definable value to that.

  19. anonymouse

    >>And we’ve experienced exactly zero problems with piracy so far.

    Uhm, how did you come to this conclusion? If there’s no DRM a customer could have shared any e-book a thousand times over without you knowing, couldn’t they?

  20. Rick Gordon

    Apple does not use the same DRM as any other vendor; it uses its own version, FairPlay, which until a couple months ago had never been successfully cracked, though it recently has been.

  21. Tina Folsom

    You’re right about piracy – today, I hear any 5-year old can remove DRM from your files and upload it onto a file sharing site. My books have been pirated hundreds if not thousands of times. As soon as I have a new release, it’s already available on one of the pirating sites. But piracy isn’t really the issue, is it? Personally, I don’t think I’d lose a single sale due to piracy: people who download pirated files wouldn’t have bought my books anyway. What ticks me off is when readers “resell” my digital books: they upload the file to ebay or any other second-hand online bookstore and sell the same file numerous times. That’s the only reason I still keep DRM on my books, to make it harder for the non-professional pirates to resell my books illegally (and more than once).

    • If any five-year-old can remove the DRM, then how does it discourage pirates– four-year-old pirates aside– who are actually have a fairly good motivation ($$) to spend twenty minutes cracking it?

      Even if it did discourage them, I’d guess that most pirates aren’t removing the DRM themselves. They’re just probably getting an already-cracked version from torrent– which any five-year-old can also do– and then selling that. Once one version is cracked they’re effectively all cracked, so why bother, especially when there are so many downsides to it?

    • mezzak

      How is that different to me selling my used paper book which is completely in line with my user rights under copyright law? I should say before you start calling me names that I haven’t ever done this. As I buy ebooks almost exclusively these days I am interested in the rights issue.

      • Because it is a copy that was already produced (in theory) with the consent of the author (ie. the author got paid AT least once).

        Little subtly about copyright, it is the right of copying (hence, copy-right). Not the right of sale. Anyone can sell a book, and the original author can not restrict this (whole bunch of case law on this fact). But not everyone is allowed to copy a book, that the “copy” “right” belongs to the author.