What if DRM Goes Away?

TOC Latin America was held last Friday in the beautiful city of Buenos Aires. Kat Meyer, my O'Reilly colleague, and Holger Volland did a terrific job producing the event. As is so often the case with great conferences, part of the value is spending time with speakers and other attendees in between sessions and at dinner gatherings

Last Thursday night I was fortunate enough to have dinner with Kat, Holger and a number of other TOC Latin America speakers. We discussed a number of interesting topics but my favorite one was asking each person this question: What happens if DRM goes away tomorrow?

The DoJ suit against Apple and five of the big six has led to a lot of speculation. One of the most interesting scenarios raised is that if the government is intent on limiting the capabilities of the agency model, publishers need to figure out what other tools they can use to combat the growing dominance of Amazon.

Charlie Stross is right. DRM is a club publishers gave to Amazon and then insisted that Amazon beat them over their heads with it. So what if we woke up tomorrow and DRM for books disappeared, just like it has (for the most part) with music?

I was unable to reach a consensus at that dinner, but here's what I think would happen: Initially, not much. After all, Amazon has a lot of momentum. If current U.S. estimates are accurate, Amazon controls about 60-65% of the ebook market and B&N is second with about 25-28%. That only leaves 7-13% for everyone else. And if you've been buying ebooks from Amazon up to now, you're not likely to immediately switch to buying from B&N just because they both offer books without DRM. On the surface Amazon's and B&N's ebooks use incompatible formats, mobi for the former and EPUB for the latter. But that's where it gets interesting.

Converting from mobi to EPUB (or vice versa) is pretty simple with a free tool like Calibre. I've played around with it a bit, converting some of the DRM-free ebooks we sell on oreilly.com. I didn't do those conversions to get our books in other formats. After all, when you buy a book from oreilly.com you're buying access to all the popular formats (mobi, EPUB and PDF, as well as others), not just the one format a device-maker wants to lock you into. I did the conversions because I wanted to see what's involved in the process.

If you've ever used Microsoft Word to save or convert a .doc file to PDF you'd find it's just as easy to go from mobi to EPUB in Calibre, for example. But just because the tool is available does that mean if DRM goes away we'd suddenly see a lot of Kindle owners buying EPUBs from B&N and converting them to mobi with Calibre? I doubt it. Those Kindle owners are used to a seamless buying experience from Amazon, so unless there's a compelling reason to do so, they're not likely to switch ebook retailers. And that leads me to the most important point...

Creating the best buying and reading experience is one way any ebook retailer can steal market share from the competition. Amazon has a pretty darned good one, that's for sure, but there's plenty of room for improvement, IMHO. I'm not convinced any ebook retailer has pushed the envelope on innovation and exciting new features in their devices or reader apps. In fact, these enhancements seem to move at a glacial pace. So what if B&N (or anyone else, for that matter) suddenly invested heavily in reader app functionality that puts them well ahead of the competition? And what if some of those features were so unique and innovative that they couldn't be copied by others? I'd much rather see a competitive marketplace based on this approach than the one we currently have where the retailer with the deepest pockets wins.

Innovation is better than predatory pricing. What a concept. The iPod revolutionized music, an industry that was highly fragmented and looking for a way forward in the pre-iPod days. The iPhone turned the cellular market on its head. Think about how significantly different the original iPod and iPhone were when compared to the clumsy MP3 players and flip phones that preceded them. I believe today's crop of ebook readers and apps are, in many ways, as clumsy and simplistic as those MP3 players and flip phones. IOW, we haven't experienced a radical tranformative moment in the ebook devices and app world yet.

Of course all of this innovation I'm dreaming of could happen today. We don't need to wait for a DRM-free world. Or do we? Amazon has no incentive to innovate like this. They already have a majority market share and it's only going to get larger when the DoJ dust settles.

This is more of a rallying cry for B&N, Kobo and every other device and ebook retailer. If DRM goes away tomorrow nothing much changes unless these other players force it to. But why wait till DRM disappears? It might not happen for a long time. Meanwhile, the opportunity to innovate and create a path to market share gain exists today. I hope one or more of the minority market share players wakes up and takes action.

Comments

[Chris Rechtsteiner]

The question isn't what if.

The question is when it does go away, will it have any material impact on Amazon and Apple's ability to dominate the trade ebook sector?

The answer, based upon the quality of the device, commerce and consumption experiences is no, it won't.

[Joe Wikert]

You might be right, Chris. Then again, I'm hoping maybe Google would reconsider their investment in ebooks. They've been the biggest disappointment to me but their lackluster performance shouldn't be too surprising. After all, unlike most other retailers, they offer a variety of formats...except for the most important one: mobi for Kindle! If DRM goes away maybe Google would reconsider, start offering mobi's and therefore be able to tap into the largest installed base of devices and readers.

[Bill Seitz]

If publishers adopt ePub and dump DRM, then they can become their *own* retailers and create direct relationships with their readers/buyers.

Recommendation engines could be de-coupled from transaction processing, though you'd need an affiliate system to pay back to those commercial sources of traffic.

http://webseitz.fluxent.com/wiki/BookPublishing

[Curt Matthews]

I understand the argument that DRM just gives Amazon a stick to beat publishers with, but I can tell you that no DRM is a hard sell to most independent publishers.

My company, IPG, distributes some hundreds of them, and when you say that the music business has given up on DRM, they say that's right and look at what a mess the music business is in.

I think the DRM issue is important but much less important than the issue of who gets what when an eBook is sold by a reseller, Amazon or any other outfit. Anything like 50% of the action is obsurd.

If a bricks and mortar store can servive on a 50% margin, with all the overhead it has to cover, how can it be that an eBook reseller needs anything like that margin to prosper.

When IPG sells eBooks from its website, or through the shopping cart it provides its client publishers, it takes 20% and makes a little profit. How does a reseller earn another 30%? This is why IPG said no to Amazon's desire for even more margin.

Curt Matthews
CEO, IPG/Chicago Review Press, Incorporated

[Edward Bear]

From my standpoint, what's missing from eBook publishing is a good "book is available" notification system. Right now, whether I want to wade through Amazon or B&N, I have to track authors and upcoming books I'm interested in by checking very specifically for THAT author or THAT book.

It would be much better to be able to build a "Buy on Sight" list of books and authors where I could request theme to please email me when:

1. Any new book by [author name] becomes available for purchase and download(P&D).

2. Book [title or ISBN#] becomes available (P&D).

3. Ditto for 1 & 2 above for people who might want to preorder. (Personal note, a preorder I had paid for at $8 disappeared from the site I had ordered from (got a refund) only to reappear at $12 on Amazon during the Great War. I will never preorder an eBook again. And no, I didn't buy the book as a result.)

These emails might also include "people who buy X also bought Y" the way Amazon does.

Note to marketers: using the above to send "extra" emails because "you might be interested in" will defeat the purpose of the system, which is to let the CUSTOMER choose the books/authors of interest.
You do NOT want to end up on my spam blocking list the way B&N's "buy the latest blockbuster-wannabe" mails have.

[Savage_onion]

Maybe you are right and people are lazy and just want to press "one click" and don't care about the rest, but I personally shop for the lowest price and "DRM free" when I buy now. I have quite a few "DRM free" books on my Kindle Touch.