The real villain in the ebooks case isn’t Apple or Amazon — it’s publishers’ addiction to DRM

28 Comments

After much back-and-forth, a verdict came down on Wednesday in the Apple (s aapl) 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 (s amzn) 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

28 Comments

Lisa Nanamaker

Micah is correct, the Kindle file format is proprietary which, in addition to the Amazon-enforced DRM, keeps their e-books from being shared on other devices (whether popped open by Calibre or not.) Most other devices (if not all) use the open source epub format. Hackers who want to break DRM usually do it to get at embedded stuff like photos, etc–not to be able to share files.

The difference between sharing an e-book and a printed book is that an e-book can be copied many times over, and a printed book can really only be shared one person at a time.

And just to be clear, DRM exists to protect the author’s interests as well as the publisher’s and book vendor’s. Publishers pay royalties to authors with each copy sold–printed or e-book–so piracy hurts everyone in the process. Intellectual property protection is quickly evaporating as the expectation for free information and creative expression continues to persist. I doubt if we’ll even be talking about this a year or two from now.

Micah Bowers

Peter,
This post posits that the common requirement of DRM dramatically benefited Amazon’s market share. I don’t see any evidence that is true, and in fact believe the inverse is true – e.g. any ecosystem-wide increase in consumer convenience benefits the market leader as much if not more than competitors. Perhaps some indies might in fact see increased sales short term due to ease of use. However, I believe that such a move, in isolation, would foster only an incremental increase in most cases rather than the orders of magnitude necessary to shift the scales. TOR went DRM free, and this did not appear to significantly increase sales beyond market and company trends – indicating to me that the use of it was not previously a significant suppressor of sales. The requirement of DRM does incur costs and requires infrastructural and technology investments, so long term, that capital could hypothetically have been put to use for other competitive investments – which would be true for Amazon as well (on a much larger scale.) I certainly want there to be a robust and diverse marketplace for ebooks, and my company is 100% focused on enabling that with technology and services to publishers and retailers. But I believe the topic of this article is largely a red herring (the alleged benefit to Amazon). Creating compelling and diverse retail platforms, with great user experiences, that are strongly differentiated from the market leaders is possible today. Publishers would certainly be wise to foster this in any way they can through partnerships, investments in technology, infrastructure, and business practices – and I see this occurring – though would love to see more.

David Thomas

I want to resist the thought that MI is calling publisher’s a bunch of pinheads for adhering to drm. DRM was, for publishers, a false solution to the fear of massive pirating and who can blame them for that fear? It was inbred into the thinking — look, there is no abandonment of passwords even though they’re basically useless, create more barriers and ultimately employ more work from users than abusers. Is the false security of passwords any different from the false security of DRM? So while the premise may be correct, that DRM is the real culprit, the culpability is evenly distributed between publishers, dealers, consumers and theives.

Peter Turner

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.

bob

I don’t want to have a lock on my house, but people are dishonest and so it’s only practical. I don’t want to have one on my car or bike either, but people are dishonest.

The free riders don’t just steal from the publishers, they steal from the legitimate purchasers because they force the legit purchasers to shoulder more of the development costs. The prices need to be higher to break even and that means the “sharing culture” steals from everyone who plays by the rules.

Until that culture disappears, we’re stuck with DRM. But it won’t go slowly because there are some folks at blogs like BoingBoing that profit from selling the idea that piracy is okay and even laudable.

Eric L.

“I don’t want to have a lock on my house, but people are dishonest and so it’s only practical. I don’t want to have one on my car or bike either, but people are dishonest.”

A complete non-sequitur which has nothing to do with copyright or file sharing. You are just trying to push the tired old “copyright infringement is stealing nonsense”. If I steal your bike, you have a loss of property, you have been deprived of something substantial. Also, in both your bike and house example, you are using locks to protect your own property. DRM is about controlling *other* people’s property (their readers and the data that they have purchased). Would you be ok if I was the manufacturer of your bike and dictated what you could and couldn’t do with it? What if I put functionality where your bike would lock up after 50 km of travel?

“The free riders don’t just steal from the publishers, they steal from the legitimate purchasers because they force the legit purchasers to shoulder more of the development costs. The prices need to be higher to break even and that means the “sharing culture” steals from everyone who plays by the rules. Until that culture disappears, we’re stuck with DRM.”

Wow, so much BS in one paragraph.

1) It isn’t stealing for reasons that I’ve already detailed.
2) Breaking even implies some fixed or defined loss, which doesn’t exist in the case of file sharing, as file sharing may actually buy more than non file-sharers. See:

http://torrentfreak.com/0-more-on-content-than-honest-consumers-130510/
http://torrentfreak.com/file-sharers-buy-30-more-music-than-non-p2p-peers-121015/
http://torrentfreak.com/file-sharers-are-well-educated-and-earn-more-money-130615/
http://torrentfreak.com/file-sharers-buy-more-movies-121018/

http://torrentfreak.com/study-maps-the-emerging-ethics-of-file-sharing-and-enforcement-130115/

3) So your justification as to why DRM must exist and why “freeloaders” are “stealing” from legit customers is that the legit customers must fork the development costs for DRM to prevent the “freeloaders” from “stealing” from the publishers. That DRM then doesn’t work obviously because the “freeloaders” simply bypass it, so… more money spent on ineffective DRM is justified which doesn’t effect the freeloaders but makes the experience worse for paying customers. Right, what a very cogent circular logic point there Bob. Gee, since as I pointed out the “monetary loss” surrounding file sharing is anything but defined, why not simply rid of the DRM that punishes paying customers and instantly provide a higher quality experience? Nah, that’s just crazy talk.
4) Funny how you only mention the “publishers” and not authors. I guess the publishers are just the great bastions here? Oh wait, https://torrentfreak.com/record-labels-to-pay-45-million-for-pirating-artists-music-110110/
5) What “rules” are you citing here exactly? If you mean Canadian copyright laws, well by that logic any paying customer who has bought a DVD and then used VLC to play it would be “breaking the rules”.

“But it won’t go slowly because there are some folks at blogs like BoingBoing that profit from selling the idea that piracy is okay and even laudable.”
Wow, just wow. You’ve just hung the poor straw-man. Any more great “evidence” bob, or should I call you bobmail perhaps? https://startpage.com/do/search?q=host%3Atorrentfreak.com+bobmail

Kindroid

No…Apple is one of the villains. It saw a chance to use it’s huge walled garden of iOS users to its advantage….and they pulled the trigger. They didn’t care that they were scalping iTune users. And they drug other platforms along with them….thereby scalping the users of those platforms. Courts need to make a “real” statement on this kind of anti-competitive abuse.

Micah Bowers

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.

Peter Turner

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.

Peter Turner

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?

Open Publishing

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.

Dennis D. McDonald

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

Peter

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.

Tetracycloide

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?

yahoo

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

robpegoraro

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

Peter Turner

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

Den Kennedy

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.

Tetracycloide

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

Virtuous

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.

MEP

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).

Lawrence Grodecki

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.

Comments are closed.