Brian O’Leary

There is a lot of disagreement about piracy and DRM (digital rights management) among thinkers in the publishing space. This post will express a few thoughts about both but, mainly, this post is a plea not to conflate the two into the same discussion. In fact, whether they are part of the same discussion appears to be as contentious a point as whether piracy is a threat to publishers and whether DRM should be employed at all.

First, let’s define some terms. I make a distinction (which is not universally accepted) between piracy — which I would define as making a copyrighted file available for free access to anybody who comes along — and “casual sharing”. Casual sharing takes place between people who know each other; piracy takes place among strangers.

It has been observed by many for a long time that DRM does very little to prevent piracy, which is usually executed through web sites that host unprotected versions of content. It has been frequently demonstrated that DRM can readily be “broken” (I have two friends who routinely break it for sport: one in the US who isn’t in the publishing business and one in Brazil who is. Neither of them ever sell or transfer the jailbroken files, but they peel off the protection just to prove they can. And they say they always can.) In fact, books which had never existed in digital editions, like the Harry Potter series, are served up on pirate web sites.

You can scan a printed book and create a digital file pretty readily. There’s recently been a gadget introduced that provides a little automation for that capability. But you can buy content conversion commercially that will give you an ebook file from a printed book for low hundreds of dollars per title. So I would emphatically agree that DRM would do little or nothing to deter a pirate who has a minimum of determination to deliver a pirated ebook file, whether there was DRM or not; whether there was an ebook at all or not!

But casual sharing is another matter, or so it seems to me. People share published material all the time through email, usually by forwarding a link to something they want somebody else to see but sometimes by attaching a file or embedding text or images in the body of an email. Some people (my wife among them) maintain mailing lists of people whom they alert about one thing or another. This kind of person-to-person curation is the new automation-assisted word-of-mouth, and it is a critical component of modern communication.

So here’s what I think. I have no idea whether piracy helps sales or hurts them but, whatever it does, I can’t see how DRM prevents it. But I do think DRM prevents “casual sharing” (it sure stops me; and I think most people are more like me than they are like my friends who break DRM for sport) and I believe — based on faith, not on data — that enabling casual sharing would do real damage to ebook sales with the greatest damage to the biggest books.

Big general publishers survive based on the performance of their biggest books. Agents survive based on the sales of their biggest authors. So the biggest publishers and the biggest agents, if they see it the way I do, would be in favor of DRM even if does nothing at all to prevent the kind of piracy they attempt to cure with take-down notices.

There are a lot of good reasons to dislike DRM. It can make purchasing or consuming something harder. It is apparently responsible for the lion’s share of customer service costs for all ebook vendors. It can foil legitimate use by a legitimate purchaser. And it costs money and adds complications. In general, the more comfortable you are with technology, the more likely you are to be annoyed by DRM.

But it drives me a bit nuts when people attribute the belief that DRM protects against piracy to everybody who accepts the sense of using it.

So with this as background, I picked up a link earlier this week to an interview on O’Reilly Radar with my office-mate (but a man who very much runs his own business) Brian O’Leary entitled “What’s the current impact of piracy on the book publishing industry?” Brian has been trying for almost three years to measure the real effect of pirated editions (not casual sharing) on sales. His method is to watch the pirate sites for the appearance of books and then to measure the sales for the weeks before the pirated edition appears and the weeks after. If piracy is cannibalizing sales, one would expect to see a decline following the appearance of the pirate edition. If piracy is stimulating sales through additional word of mouth, one would expect to see sales rise.

Of course, the data to do this analysis can only come from the publishers and publishers, despite their often-professed concern about piracy (and their apparent willingness to spend a lot of money to track and combat it), have mostly not been willing to participate in Brian’s efforts to measure its impact. But what Brian did see (mostly through O’Reilly data, and O’Reilly is a DRM-free publisher) suggested that piracy might lift sales more often than it hurts them.

In the interview, Brian makes some very good points but then I get to this:

“I’m pretty adamant on DRM: It has no impact whatsoever on piracy. Any good pirate can strip DRM in a matter of seconds to minutes. A pirate can scan a print copy easily as well.” (I agree about the “good pirates”, but is the “no impact” statement data-driven? I doubt it.) But then:

“DRM is really only useful for keeping people who otherwise might have shared a copy of a book from doing so.” So, he’s against DRM even though he agrees it prevents casual sharing. And I’m not aware that anybody, including Brian, has ever attempted to measure the impact of casual sharing.

This is interesting, because he and I have exactly the same opinion about what DRM can and can’t do, but we don’t have the same opinion about whether it should be applied or not!

The point that Brian makes which I take to heart, though, is about trying to base opinions on data whenever possible rather than on conjecture. Many of his colleagues-in-arms against DRM attribute its continuance with ignorant and wrong-headed thinking: publishers and agents who somehow are deluded into thinking that by using DRM they restrain piracy. At the same time, concern about casual sharing is either ignored or elided.

And while gathering data about the true effect of piracy is difficult and gathering data about the potential true effect of unfettered sharing of commercial books is impossible, I am in a good position to gather data about what senior publishing executives and powerful agents believe about piracy, casual sharing, and DRM. So I created an informal survey to find out.

I asked three questions.

1. Do you think DRM is necessary to protect the sales of ebooks for popular titles?

2. Do you think DRM is an effective check against piracy?

3. Do you think the main benefit of DRM is that it prevents casual sharing?

I asked top executives in major houses and agents who handle major authors.

Nine executives and four agents (more than half the number I asked) were kind enough to come back to me with answers (so far). I’ll report on the findings in my next post.

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Kindle is certainly engendering a lot of confusion by billboarding the downloads of free ebooks as “sales.” That paradoxical scorekeeping was the lead for an article by Motoko Rich in The New York Times on Saturday that quoted a lot of people, some apparently disagreeing with each other, but none of them necessarily wrong.

There really are three separate questions to consider, which get elided in these conversations.

1. What is the impact of giving away ebooks as a promotional device, either to boost the word of mouth on the book being given away or to promote an author’s other titles?

2. What is the potential impact on the industry overall of ubiquitous giveaways of ebooks that would apparently have commercial value?

3. When ebooks are given away, how should that sale be “scored” in any measurement of the book’s popularity?

The answer to the first question appears, anecdotally but just about universally, to be that giving ebooks away boosts sales of that title and related titles. Rich’s piece sites numerous publishers attesting to that. She apparently found no publisher that is skeptical about whether giveaway promotions work or has seen the tactic fail. And that would confirm my experience: I don’t know of one.

But as we’ve noted before, this effect could change over time. We’re still in a period where ebooks are not an acceptable format to most book readers. That means the benefits of giving them away is not confined to the word-of-mouth from the recipients, it can result in a print book purchase by the very person you gave it to! As ebook reading becomes more popular, particularly if we go to a DRM-free universe, the impact of cannibalization from giveaways could grow dramatically from what it is now.

The second question is what is apparently paramount to David Young of Hachette (as quoted in the Rich piece) and is influencing the policies described at Penguin. As more and more ebooks are given away, it offers a wider array of choice to people who prefer to select from the free offerings and just never pay. For the last 15 years of his life, my father, Len Shatzkin, refused to buy anything except remainders. He shopped from several mail order catalogs and, if he was in a bookstore, shopped at the bargain tables. His position was that if publishers were going to be dumb enough to reliably give the books away six months or a year later, he’d just wait and choose his reading from among what had been marked down. With free ebook marketing the way it is today, sometimes you don’t even have to wait!

And that’s obviously what was on Young’s mind when he said the tactic was “illogical.” It is illogical if you take a long-term, industry-health view of the situation. It is totally logical if you’re trying for short-term advantage to break a new book or build a particular author, as most of the other authors and publishers were trying to say.

There was a long comment string on the HarperStudio blog about this question six or eight months ago. I said at the time that I figured that if these giveaways kept spreading, one of our more industrious web entrepreneurs would create an ebooksforfree.com site which would be a consumer directory to “free” offers at various publishers and web retailers, title by title.

It’s a classic Tragedy of the Commons. Each person giving away ebooks succeeds in their intentions to boost their sales, but everybody will pay for the overgrazing in the end.

The third question is a tricky one. It is worth noting that the App Store makes it very easy to for the consumer to decide whether to shop the free apps or the priced apps. I think Amazon is hurting themselves by not at least sorting their bestseller pages that way. And they don’t. Amazon says the Kindle bestseller listings change every hour: I just checked the Top 10 and found one 25 cent book, one book at a substantial price (higher than $9.99), and eight free. Some of the eight free were self-promoters like the lead in Rich’s story; some were public domain; some were multi-book authors from established publishers. But only one of the Top 10 was elected with votes paid for with dollars from the Kindle clientele, which is what I think most people looking at “best sellers” would be looking for.

This raises a question I don’t know the answer to and my way to do the research will be to see if somebody with knowledge posts a comment. Kindle reports to the USA Today Bestseller List. This is, as far as I know, the only reflection of ebook popularity in the public domain. It would be interesting to know if USA Today has a standard for that reporting. Of course, most of the “weight” of the USA Today list, quite properly, would be print sales so whatever Kindle reports might not move the needle much. Most sales today are still print sales. But we’re headed for a crazy world if the concept of what “sold best” is expanded to include what people were willing to take for free.

On the other hand, if you try to separate free from paid, you will still face the question of where to draw the line. If publishers sell a $20 hardcover as a $5 ebook, should those units count equally in determining bestseller status? How about a dollar? How about a penny?

A tip of the hat here to my sometimes colleague Brian O’Leary of Magellan Media, who hinted at what I have said at length in this piece in his brief turn in Rich’s article. Brian has done extensive research that tends to confirm what Rich’s interviews and my anecdotal information suggest: that giving away ebooks boost sales in the present marketplace. But Brian managed to bridge the enthusiasm of the giveaway marketers and the incredulity expressed by David Young with his observation that there was a risk that free reading could eventually “supplant paid reading.”

And that wouldn’t really be good for anybody.

This is absolutely the last post you will see promoting Digital Book World 2010, which is on this Tuesday and Wednesday at the New York Sheraton and which is turning out to exceed my fondest hopes when we started out planning it this summer. But we have a panel on the very subject of this post called “Ebook challenges: competing with free and getting the timing right.” Brian O’Leary is moderating, and the panelists include agent Robert Gottlieb of the Trident Group; marketing director Mindy Stockfield of Hyperion (which published Chris Anderson’s book “Free”); ebook retailer Kobo’s VP Michael Tamblyn, and Steve Ross, who has been a publisher at both Random House and HarperCollins. There’s another panel on “Ebook pricing: what should they cost and why?” which includes the head of Penguin’s ebook publishing efforts, Tim McCall.  I enjoy having The New York Times stamp the topics we selected last August as “current” 72 hours before our show begins, even if just implicitly.

If you like this blog, I know you’ll enjoy Digital Book World. I hope to see you there.

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I did a panel yesterday at NYU as part of the summer publishing program on “New Visions” for publishing. The group was put together by Leslie Schnur. I shared the stage with four very articulate co-presenters who gave very diverse views of the future. Our audience was a full room of about 50-100 (I wasn’t counting; I didn’t know I’d be writing this piece) very attentive 20-somethings with a serious interest in publishing.

Dan Simon of Seven Stories Press spoke optimistically of a revival of book reading, as in printed ones, and he spoke passionately about the importance of editorial selection and advocacy as part of a social mission publishers have to bring good writing to readers.

Carol Hoenig, a writer and consultant who works with Author Solutions, told about her own experience successfully self-publishing a novel (she thinks selling 1500 copies is successful, and I agree with her) and explaining how Author Solutions helps aspiring writers “get past the gatekeepers.”

Brian O’Leary of Magellan explained the new business models enabled by print-on-demand and how to think about them. Brian pointed out that POD models make sense for books that sell as many as 500 or 1000 copies a year, and that caught Dan’s attention, because, as he put it, “a book that sells 500 or 1000 a year is solid backlist for us.” Dan has been comfortable printing a 3 year supply; Brian’s math suggests reconsidering that formula.

Will Schwalbe, who had a 21-year career as one of New York’s top commercial editors at Morrow and Hyperion, explained his new web business, Cookstr.com, which aggregates recipes from more than 300 of the top chefs and cookbook authors in the world. Since, as any reader of this blog knows without my having to report, I used my presentation time to talk about the shift from horizontal to vertical, Will’s presentation had the great virtue of reinforcing the message I had delivered three presentations before.

Will made good use of the audience. He asked, by a show of hands, how many people liked Italian food. Just about everybody. How many cooked? Almost everybody. How many people got recipes on the Internet? A lot. How many baked more than cooked? A good chunk. How many vegans? About none. How many vegetarians? A handful. How many would prefer a recipe with fewer than five ingredients? Quite a few.

He used that device to show how the tagging he invests in on his web site delivers a better user experience for somebody looking for precisely the right great recipe. What it triggered in my mind is “what an interesting way to collect information from an audience.”

After we all presented, there were lots of interested questions. What’s the business model of Cookstr? How does Seven Stories go about finding those great books Dan wants to publish? Does Author Solutions do publicity for books?

As the conversation evolved to a close, I realized I had a precious opportunity. Though I’m considered to be wildly (crazily?) forward-thinking in some circles, expecting print runs of books to nearly disappear in 20 years, for example, I am unabashedly conservative in others. For example, the idea of books as collaborative or social experiences leaves me cold and it really leaves me cold to think of interrupting good narrative reading to explore links and, particularly, to see video. Some people think storytelling will be reinvented to take advantage of things like this, which makes me scratch my head. But maybe it’s generational, I always think. Maybe today’s generation would find it boring not to have a video interlude interrupt unbroken text. Well, with all these very smart Born Digitals in one room, I’d use Schwalbe’s technique and ask!

So, with time running out, I got the indulgence of the organizers to ask the crowd a couple of questions. The first one was: “how many of you read ebooks.”

Two hands went up. Two.

The next question was not worth asking. But I sure got a dose of new information to ponder.

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Michael Cairns has a really good post today that distills a lot of thoughts I have had over the last several years into a clear formulation: that the publisher needs to serve as a “digital concierge” for its author.

Three years ago, Brian O’Leary, Ted Hill, and I did a study of marketing spend for a mid-sized trade house. At that time we articulated the notion of a “new marketing partnership” between publishers and authors. We urged then that publishers do what is necessary to make it easy for authors to promote themselves on the web because, in the modern world, that marketing energy would be indispensible.

What was a fairly forward-thinking suggestion in 2006 has become a common understanding by 2009. Harper has launched several author-centric initiatives. Sourcebooks just unveiled a suite of tools and advice for authors to promote themselves effectively. And, of course, I’m a co-founder of Filedby, Inc., and the filedby web site is all about delivering web promotion capabilities to book authors, photographers, and illustrators at scale.

I guess it won’t surprise any frequent readers to hear that I believe that the success of this concept depends on…verticalization!

The swingeing volume of detail that Michael points out is impossible for authors to navigate (Twitter, Facebook, and Friendfeed are just the start, really) is also really impossible for publishers to navigate as well. I believe that is becoming increasingly obvious in many houses. The web worlds of knitting and beading are quite distinct, even if books on either subject would go into the crafts section at Barnes & Noble. The web world of parenting is one thing; the web world of parenting an autistic child would be quite another. Publishers who don’t specialize, focus their specialization, and learn the web world for the fields they are in are trapped in marketing that is massively labor-intensive and yielding no advantages of scale.

Publishers (anybody, really…) gains expertise by repeated use, involvement, familiarity. Publishers have had credibility telling authors what will work with a B&N buyer, a NY Times book critic, or the booker for Oprah or Today. They’ve worked with these outlets many times before and the author hasn’t. The digital concierge, in order to really help me, has to be able to tell me which of the sites for my book on summer night stargazing will take my posts, link to my blog, generate followers on Twitter. Otherwise they’re just giving me general advice a bit more easily, but no more personalized, than I could get from a web site dispensing advice. Or a book.

This is very much a transitional need. Ten years from now, most authors will have arisen from the ranks of the digital community for their subject. We’re very much in a transitional time (one very important point that will be made in my “Stay Ahead of the Shift” talk next Thursday), and the concierge will be characteristic of the transition.

I’m working hard at BEA. Please join me. “Stay Ahead of the Shift”: Thursday 5/28 at Javits Center at 11. “StartWithXML for Editors”: Thursday at 3. And “Digital Debut Tool Time” Friday morning 5/29 at 9:30.

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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.

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