The Shatzkin Files


A few thoughts, some near heretical, about DRM

Posted by Mike Shatzkin on March 18, 2009 at 5:08 am · Under eBooks, New Models, Publishing, Supply-Chain


I got a call today from Laura Sydell of NPR in San Francisco to have a conversation about DRM. I found myself telling the story this way.

From the beginning, there were multiple ebook formats, the leading ones being Adobe, Palm, and Microsoft Dot Lit for a time, with Mobi originally intended to be the format that bridged the gap (at that time) between devices. Then Amazon smartly took Mobi out of play, blocking anybody else from peddling a device-agnostic solution. And now we have e-readers…

From the beginning, there has been a reluctance of people to read BOOKS (goodness knows they read many other things) on screens, or at least on the screens that were presented to them for the purpose. This distinctly separates the book business from the music business, which I know I wrote about last week, but which also applies here. Your ears don’t care whether the speakers or headphones got the sound from a download or a record. It all works the same to you. But, as we all know, reading a screen for most people is a sufficiently different experience than reading on paper that they’re likely to have an opinion about it (often whether they’ve actually tried it or not).

From the beginning, some people in the book business (mostly, I suspect, agents for very big authors and their publishers, who have the most at stake) have been concerned that there would be a spread of unauthorized digital copies if they didn’t “protect” them. They were apparentely learning a lesson from the music business. But the music business was “stuck.” The format they sold music in was a “gold master.” They distributed digital copies.

From the beginning, there has been a romantic notion called “interoperability”, which says it is a wonderful thing if the same file can work on lots of different devices. So you should be able to  read the book on your PC, or on your Sony- or Kindle-like device, and on your iPhone and/or Blackberry and your Sony Play Station, for that matter. Believe it or not, there are not only quite a few of the publishing digerati who think this is very important, there are many who actually blame the slow growth of the ebook market on the fact that the industry hasn’t accomplished the ability to deliver it. (Seems preposterous to me.)

The multitude of formats presented costs and hassles to the publishers. They had to do more work to put each book in shape for each format, and they had to do pretty meticulous quality control because a lot could go wrong. With ebooks not selling much at all, the difference between spending $250 to convert to one format, say (starting with a PDF print file), and then adding $50 or $100 more for additional formats created a whole decision-making cascade. This all choked off books from the ebook stream, on one format or another or at all, as publishers needed to “decide” to publish each book in one or more formats.

The multiple systems also prevented interoperability and restrained piracy. The DRM was actually a bit of window dressing; even unprotected files wouldn’t have traveled very far.

But then the industry, through the IDPF (International Digital Publishing Forum) developed the epub standard, which was code that could be read by many different systems and/or converted inexpensively to other systems. So the publishers could provide just one file, the epub file, and the distribution channels could do the conversion to different formats. A giant step toward interoperability (and efficiency.)

So now DRM is the one barrier to interoperability and so the drumbeat to get rid of it gets louder and louder.

Also from the beginning, people have noticed that, in most cases, the more of a book you give away digitally, the more you sell. This would almost certainly not be the right strategy with high-value scientific reference, or a directory, but it is the experience of many people over a long period of time. Tim O’Reilly has famously pointed out that obscurity is a much more prevelant problem for books and authors than theft through piracy. Cory Doctorow is certainly the most vociferous and among the most eloquent expressing contempt for the whole idea of DRM, the insult it constitutes to the audience of book readers, and its self-defeating nature. He has given away huge amounts of digital content and he credits doing so with growing his sales as a novelist.

My officemate and colleague Brian O’Leary of Magellan Media has been doing an ongoing study of the effects of free distribution with O’Reilly Media and Random House. They are documenting both the fact that there is no significant piracy of ebooks and that free distribution, even the limited piracy, seems to have a stimulative effect on sales.

We are at a moment where publishers are noticing this and taking it on board. O’Reilly and Thomas Nelson are the first I’ve noticed to start offering ebooks in multiple formats, with Nelson doing so to any buyer of a print book who registers on their site for it. (A nice way to capture names, too.) Others, noteably Hachette’s unit Orbit, and Random House, have started giving away ebooks (for free or, in Orbit’s case, a buck or near-free)  to promote books and authors. The ROI on these is close to infinity if it sells one more book!

I hope that this is an accurate summary of events so far, except that I left out the Kindle (on purpose). Now I’d like to offer some forward-thinking and observe an enormous irony.

1. Forward-thinking. This notion of giving away ebooks has a tragedy of the commons built into it. It’s free and it works. So everybody’s going to do it. The choice of ebooks you can legitimately download for free or under a buck will grow by leaps and bounds (it already has.) At just the moment that the ebook market is growing, and lots of new people are coming into it, many people will be able to form the habit of choosing from what is free or near-free. Ultimately, this will have two negative effects. One is that it will depress the pricing across all titles. And the other is that the giveaways will lose their stimulative effect.

I would not suggest that anybody voluntarily try to save the commons. It would not be in their own best interests to do that and they would not succeed. 

2. Because there is going to be a culture of free or almost-free, piracy might well become an issue for the most popular ebooks as takeup of ebooks grows. It clearly has never been a problem, but that doesn’t mean it never will. Things change. (See number 1.)

3. The Kindle. Amazon not only steered clear of the epub collaboration, they are aggressively blocking people from selling content that would be compatible with the Kindle. Everything about what they do is closed. The problem is that they’re defying history so far: growing faster with a closed system than all their competitors for ebook eyeballs combined.

That’s ironic.

But it’s not what’s most ironic.

I personally never got the thing about interoperability until now, when I am reading the great new biography of Abraham Lincoln by by Ronald White on both my Kindle and my iPhone. Whenever I switch over from one to the other, it knows my place and asks me if I want to advance to it. This is great! I love interoperability. I have no use for it between any other two devices, but between my Kindle and my iPhone? Terrific!

Of course, Amazon is probably able to deliver this functionality so seamlessly partially thanks to the fact that they have a closed system and more control.

That’s really ironic.

  Back to blog

  • http://www.fictionmatters.com Bradley Robb

    I think the largest issue pertaining to DRM isn’t what scheme to use, but rather that there has never been a scheme that did what DRM purports to do – stop people from pirating the material.

    Every DRM scheme that has been developed from CSS to Play4Sure to AACS and BD+, DRM is proof that locks only keep an honest man honest. Those who have the desire to pirate have managed to do so with printed books, a digital lock isn’t going to stop them. On the same hand, DRM will continue to irritate and hamper use by the very people who are attempting to play by the rules.

    Yes, these are tried and tired arguments, but that doesn’t make them any less true. I’m a firm believer in pricing-out piracy.

  • http://www.idealog.com/ Mike Shatzkin

    Whether it is DRM, the incompatible formats, the lack of desire to read on a screen, or the tiny market that exists for most books, there is little doubt that piracy has not been a problem for books. Although DRM can reputedly be hacked pretty easily, something I can’t do or confirm but have no reason to doubt, it not only restrains the “honest”, it also restrains the “tech challenged.” I have to believe that if files were as totally unprotected as the files we create ourselves without DRM, we’d see a lot more “sharing” in today’s Facebook world. When would the line get crossed between curing obscurity and cannibalizing sales? I don’t know, but who does?

    I am personally a fan of the idea of social DRM: doing something like printing your name and credit card number on every tenth page of your ebook. Of course, that can be “hacked” too, but it would make the point clearly to people who had files and either wouldn’t or couldn’t hack them that they should only “share” with people that they trust. That, combined with anti-copyright enforcement against industrial-strength thievery — would probably be adequate cannibalization prevention. And it wouldn’t prevent honest people from sharing an ebook with their spouse or parent.

    Pricing out piracy would probably work in the world we’re in, where there are few pirate files in circulation and relatively little public interest in reading on a screen. But we’re collectively trying to make ebook usage more ubiquitous. If we succeed, what works today might not work in the future.

  • http://www.munseys.com dmoynihan

    3 things are very wrong here:

    Amazon does nothing to stop you from selling unsecured Mobipocket for Kindle. NOT ONE THING.

    The “Epub” standard was actually approved two years after Kindle went into development. Neither Amazon, nor Fictionwise, nor Follett, nor Ebrary, nor Ingram, nor just about anyone else is actually using this format in a commercial setting. There are fewer than 5,000 commercially available Epub titles from Adobe/Overdrive/BooksonBoard, 2% of what Amazon’s Kindle store has.

    Despite the promises, Epub files must be modified outside the standard to actually work on devices. It also fails miserably at reducing costs for publishers (effectively requiring InDesign in production, and still not working), and in Epub’s horrific implementation by Adobe cost Sony the European market (where fewer than 8k books are available, less than 20% of Sony’s U.S. tally). Never before Epub did the IDPF attempt to dictate end-user formats, the idea was conversion-to-.lit or whatever.

    Let’s end the myth now.

    Finally, ebook piracy is rampant. While it may not currently be affecting front-list titles, as in the music industry, it will kill the backlist. I don’t use DRM or care. But given our current smut glut and the inevitable crash in that market, watch the erotic romance folks carefully, then decide.

  • http://www.idealog.com/ Mike Shatzkin

    First of all, thanks for this.

    As I understand it, the epub format was not originally intended to be used “as is”; it was an intermediary step from which, theoretically, other formats could be readily generated. There has definitely been a stampede to epub fostered by the notion that it “works” to reduce conversion costs. I hope some of the publishers, wholesalers, and retailers who have been using it can confirm or refute your contention that it, effectively, doesn’t do what it is supposed to. Then maybe we can “end the myth”, if it is one.

    While I’m not skeptical about your epub contentions, I am skeptical about the suggestion that there is rampant ebook piracy. First of all, ebook use is so limited that nothing about it can be said to be “rampant.” If you have some evidence to prove your contention about extensive ebook piracy, I’d refer you to Brian O’Leary and the work he’s doing with O’Reilly and Random House. They’re really looking for this rampant piracy, and they aren’t finding it.

    However, if you told me that used books are really hurting the backlist, then I’d believe you!

  • http://www.fictionmatters.com Bradley Robb

    @dmoynihan Piracy isn’t want killed the music industry, nor was it the switch from compact disc to digital media. What killed the music industry was addiction to chasing trends and churning out compact disc with a smattering of singles sandwiched between a great deal of filler. When people began to adjust to digital music, consumers returned to purchasing singles, which was the music industry’s business plan in the era before the cassette tape. Basically, digital music largely returned or corrected the music market.

    When eBooks are largely accepted by the mainstream, certain high-profit publishing markets, such as text-books will likely suffer.

    However, with regards to a publisher’s backlist, how easy are those to purchase now? One could easily make the claim that a well-priced, easily procured eBook version of a backlist book selling would be preferable to a backlist which is not available to the reader at all.

  • http://www.idealog.com/ Mike Shatzkin

    I diverge from this a bit.

    I think the music industry was “killed” by the end of format-change resales. It was kept alive by being able to re-sell content a second time on cassettes (thank you, Walkman) and then a third time on CDs. They can’t do that anymore. And newer music has been losing market share to older music since The Beatles, if not since Elvis.

    And ebooks coming into the mainstream has little to do with college texts. Ebooks can gain acceptance as college texts and still not penetrate the mainstream. Or vice-versa, but probably not vice-versa.

    I’d be skeptical that there is much publisher’s backlist NOT available from the publisher in e-form but yet available from somebody else as an ebook. That’s not piracy; that’s WORK!

  • http://www.fictionmatters.com Bradley Robb

    @Mike

    While college text books going electronic might seem like a roundabout means of gaining mainstream exposure, from a marketing standpoint, I think it’s a rather good idea. As you noted, people have no problem reading a wealth of knowledge on their computer screens, but for some reason are opposed to the concept of reading a book there. However, by introducing that concept to students, you can breed a habit out of the process while linking the concept of a book to that of a computer. And, save college students hundreds of dollars each semester.

    Is Brian O’Leary’s piracy findings public knowledge yet? I would love to see that study.

    Jumping back to the epub-as-format-for-all topic, I don’t understand why a universal XML format isn’t being more readily adopted. It already forms the underpinnings of both RSS and the majority of word processors that most books are created on.

  • http://twitter.com/chapmanchapman Ryan Chapman

    Mike, when reading your point #1 I was reminded of something Doctorow wrote. Curious to hear your thoughts –

    “David Blackburn, a Harvard PhD candidate in economics, published a paper in 2004 in which he calculated that, for music, “piracy” results in a net increase in sales for all titles in the 75th percentile and lower; negligible change in sales for the “middle class” of titles between the 75th percentile and the 97th percentile; and a small drag on the “super-rich” in the 97th percentile and higher. Publisher Tim O’Reilly describes this as “piracy’s progressive taxation,” apportioning a small wealth-redistribution to the vast majority of works, no net change to the middle, and a small cost on the richest few.”

    From http://www.locusmag.com/Features/2007/09/cory-doctorow-freekonomic-e-books.html

  • http://www.idealog.com/ Mike Shatzkin

    Blackburn’s research confirms my conjecture. It makes sense to me. And, looked at that way, across the board there should be little concern. However, if you’re in the 3% at the top, you might not look at it that way.

  • http://www.idealog.com/ Mike Shatzkin

    Completely agreed that getting young people used to e-reading is a sensible way to build adoption over time. My original thought about ebook uptake (c. 2000) was that it would happen through the job. People would be given ereaders for work and would “discover” they could do leisure reading on them as well (this was back in the Rocketbook days…) Of course, ereaders haven’t made it into the workplace, except in the book business pretty recently.

    You’ll find a lot of O’Leary’s work at the link in the post. He’s spoken about it at Tools of Change and last week at Booknet Canada’s tech conference.

    I think the adoption of epub as been pretty rapid, actually. You saw this morning that one respondent to this blog questions whether it “works”. But otherwise, the holdout is Amazon for the Kindle. There may be technical reasons for that, but there are good and sound commercial reasons for it too, if you take an Amazon-centric, rather than publisher-centric, other bookseller-centric view of the world. I don’t think it is harming the public (yet) since a) Amazon is providing a better interoperability experience than anybody else and b) because of their market power and the success of Kindle, almost all books that make to ebooks at all make into the Kindle format. From the public standpoint, they have therefore accomplished for themselves what epub is trying to accomplish for everybody (except the 1-setup-for-all piece.)

  • cerement

    So far, I think the best bet for publishers if they plan to offer free ebooks should be along the lines of what Tor did when they ramped up to their new website. Release the first book in a series or a handpicked backlist by an author. Author gets publicity, publisher gets publicity, buyers feel good getting something free, and buyers get hooked. (Would also recommend package deals for “Complete the Series”, or “Best of” collections.)

  • http://www.idealog.com/ Mike Shatzkin

    I think your suggestion is spot on as a tactic for publishers to use free ebooks to create sales for themselves. But my concern is that the proliferation of offers of this kind will create a very large selection of free and near-free ebooks, and that will make it hard to charge closer to real book prices for everything else. In the forum for the AAR I spoke at last night, John Sargent of Macmillan said he saw the problem of keeping ebook prices high enough to be economic for publishers was one of the great challenges he saw going forward. This is part of the reason why.

  • cerement

    As far as charging “closer to real book prices”, publishers are going to have an uphill battle. With the lack of paper, ink, printing, warehousing, delivery, overstock, returns, the perception already exists among the ebook community that publishers are drastically overpricing ebooks. And, for better or worse the closest metaphor anyone can draw is looking at the music industry where Apple sells a $20 CD for $10 on iTunes. Since the files used to generate paper books are already in electronic form thrown into a template within the typesetting program of choice, we are still in that early phase of ebook history of trying to figure out how publishers justify the costs of taking that same electronic file and throwing it into an ePub template (or a Mobi template, or a PDF template, etc.)

    - Complaints when one publisher tried to defend pricing
    - Complaints of errors introduced when producing electronic files

  • http://www.idealog.com/ Mike Shatzkin

    Your links are interesting, but they make the points I was going to make back to you. It is clearly not as simple as you suggest to make a quality ebook. Right now, no trade publisher is earning margin on their ebook program; they’re still investing heavily in digitizing and reengineering their practices so that they can make ebooks efficiently. The marginal cost of an additional ebook is near zero, but publishers are a long way from a marginal-cost picture for their ebook sales. They’re still investing.

    The “throwing the file into a template” idea is a good one; it’s called StartWithXML. But very few publishers can do it. It’s complicated and difficult to change the way a whole company does things, which is what is required.

  • cerement

    Has anybody decided which XML anyone’s going to start with? “StartWithXML” is about as precise as telling a traditional publisher to “StartWithPaper”. O’Reilly likes DocBook, humanities likes TEI, Project Gutenberg has apparently taken up ePub after flirting with TEI back in 2005, not to mention DITA, DTBook, and a host of others. ePub is good as an ending format but it’s not stringent enough for a “StartWith” format.

  • http://www.idealog.com/ Mike Shatzkin

    StartWithXML isn’t meant to be precise.There are a lot of publishers who only deliver XML post-production and we believe they miss a lot of opportunity by doing that. Maybe we can agree if I put it this way: “StartWithXML” is a philosophy, not a prescription. And though it seems like it is pretty obvious to you, take my word for the fact that it is not obvious to everybody. Although it has gotten a lot more so, even in the year since we started the StartWithXML project.

  • http://www.fictionmatters.com/2009/03/26/npr-ebooks-and-drm/ NPR, eBooks, and DRM | Fiction Matters

    [...] wrote up his take on the interview last week. In his blog post, Mike goes into great detail about the rise of eBooks [...]

  • http://www.fictionmatters.com Bradley Robb

    Caught the NPR story last night, they basically painted a fairly black and white picture of what DRM is. Oddly, between your quote about Cory and the author they interviewed, it seemed NPR put authors on one side (anti-DRM) while painting publishers on the other.

    While the piece was neither thorough, nor good, it was at least a start of talk outside the publishing world about eBooks, and DRM on eBooks more so.



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