DRM Keeps Amazon in Driver's Seat

The contract tussle between Hachette and Amazon has been all over the news of late, but the problem is more than Amazon’s tactics. It’s the deal with the devil publishers signed up for years ago when they decided proprietary digital rights management (DRM) was the way to go, according to Ben Thompson in a Bloomberg News article.

Thompson, founder of Stratechery.com, a blog about the business and strategy of technology, wrote that since publishers were so worried about allowing free access to their content, they ended up putting Amazon in the negotiating driver’s seat.

“The problem with DRM, as Nook owners now know all too well, is that it ties your books to a single company,” Thompson wrote. “If you start buying Kindle books, you will always buy Kindle books, because your books will only ever work on a Kindle app.”

Thompson said he thinks publishers could change the balance of power by eliminating proprietary DRM.

“To be sure, this digital future would require a new business model,” Thompson wrote. “Publishers would need to rework their businesses from speculative investment to publishing-as-a-service, with upside directly tied to a book’s success.”

Such change might be difficult. In fact, George Packer wrote in an article for The New Yorker that Amazon executives believe publishers are so woefully behind the times that they probably will never catch up.

“I’ve worked with publishers, and here’s the thing: Amazon is largely right,” Thompson said. “Publishers, as currently constructed, simply aren’t prepared to compete in a world based on Internet economics.”

Could Watermark Provide DRM Solution?

Publishers can’t be blamed for trying to safeguard their assets with digital rights management protection on their e-titles, particularly against large-scale file sharing.

The problem is DRM does not really deter anyone determined to share files, which led Dana Robinson, a adjunct professor of law at the University of San Diego School of Law and partner with Techlaw LLP, to propose a solution in an article for Digital Book World. His solution would be to create e-books with a watermark place throughout the book.

The e-book’s buyer would have to provide personal information for the watermark by agreeing to terms and conditions that would prohibit the resale or distribution of the title.

“The point of making a watermark that shows the user’s personal information is to create a disincentive for the user to pass the book along to unknown third parties, deputizing the user to act as a gatekeeper, protecting the book from wrongful distribution,” Robinson wrote, adding that removing the watermark could then be a violation of the Digital Millennium Copyright Act.

Robinson points out that his watermark solution would not prevent people from sharing their book with family or close friends, but that they’ve always done that with printed books. His watermark is aimed at individuals trying to gain financially from someone else’s work.

“What e-book publishers need is a way to distribute e-books with as little hassle as possible, while ensuring that the publisher can sue pirates and stop e-book sales, rental, and large-scale sharing,” he said.

CAMEX questions answered: DRM

Sorry for no posting of store questions last week, it has been a bit hectic here lately. Some exciting announcements are coming though!

This week's question from CAMEX relates to DRM or digital rights management.

Q. When is the contention about DRM going to be over, so more publishers will allow educational books in more digital devices, not just proprietary or computers?

Some publishers are already DRM friendly -- meaning they have done away with DRM. Look at the open source community, or O'Reilly Publishers as two great examples. This move among traditional publishers to "DRM free" is likely to be quite slow.

Some the constraints are not on the publisher side, but the device side, with proprietary content formats -- or expecting content to be optimized for the particular device. Such formats require publishers to put out content in "yet another format" which becomes increasingly difficult to manage, and has a number of costs. The move to common standards, like .epub3, will help with this problem.

Another approach we are seeing is a shift to more interactive content where "screen-scraping" and other approaches to lifting content result in content which is meaningless from the original. Such approaches changes the need for DRM. I have read or seen content and interesting approaches to this type of content distribution going on in Africa and other locations outside the US, so it is only a matter of time we see it here too.

DRM, however, is likely to be part of the landscape for a while. I would not expect the contention to die down much in the next few years. Maybe one day publishers will offer their textbooks for free, and generate revenue from all the value-added components and ancillaries that help with self-assessment, tutoring, or make the content come alive.

Truths for publishers are for retailers too

Last week the Teleread blog had a posting entitled, Three truths that publishers should try to understand about readers. The posting starts with the following observation:

The big shift that ebooks are bringing to the market is not necessarily the paper to pixels one—it’s the shift between the bookstore as customer and the reader as customer. The problem many print publishers seem to have today is that they don’t really understand who the reader is and what they want out of a purchasing experience.

An interesting statement -- for booksellers as much as publishers. The article goes on to discuss three truths for publishers. I will paraphrase those here, and recast for booksellers.

TRUTH 1: READERS DON’T REALLY CARE HOW PUBLISHING WORKS This is true, and the bookstore corollary is that the reader does not really care how the bookstore works either. Whether it is financial return which covers their financial aid, a book that is out-of-stock because the faculty member ordered it the day before class began, or a shortage of used texts because the publisher changed editions -- student consumers often do not care about your problems. They want their problem solved -- getting course materials required for a course in a usable format at the lowest cost. They do not want explanations or to be educated on difficulties with DRM, or publisher pricing models. To quote another passage:

When you find yourself seeing a reader comment and thinking ‘but there is actually a really good explanation for that!’ your response, publishers, should not be to try and educate this customer on why this baffling situation is actually just and right. It should be to recognize that you have a customer giving you input on what you need to fix in order to get their money.

That last line is particularly true of student consumers.

TRUTH 2: ‘FAIR PRICE’ IS A RELATIVE CONCEPT

We have yet to settle on what is a fair price for digital, and this is particularly true in the textbook space. Is it half the cost of new? Is it the same price as print? Are you buying the book, or just "digitally renting" it for a semester (publishers call this a subscription). Reader perception is that the digital should be much less than print because they believe the cost is in the paper and distribution, not in the content creation, editing, formatting, storage, etc.

Whereas education on what they are buying is mostly unnecessary with print books, with digital books the purchase is less clearly an easy option. Differing DRM which changes from one publisher, book, or platform to the next creates confusion. Differing definitions of what you can do with your digital book purchase can also vary, particularly with digital textbooks. What was once a simple purchase where you knew what you could do with the book, is now a complicated and often inferior acquisition experience from the point of the consumer.

With expectations set for a lower price and the experience being less than optimal, who would blame students for expecting ebooks to cost less?

TRUTH 3: DRM IS A RED HERRING

Again, a quote from the article is helpful here:

I get that piracy is an issue for you guys. Loss prevention is something that every business deals with. I understand trying to keep such losses minimal—you will always have a margin for this because every business does. But the best way to minimize these losses is to solve the problems that are causing actual, potential customers to turn away. And in that respect, DRM has become a bit of a red herring.

As the Teleread article goes on to note, there are other factors that are impacting sales of digital more than piracy, but publishers are so focused on illegal downloading that they miss the big picture. This is one of the big errors that the music industry made. They were so caught up in trying to define the business to consumers, that consumers turned to piracy to get what they wanted that the music industry was not providing. In the same way, by making DRM cumbersome, but not conquerable by those who really want to pirate content, they are driving students not to adopt digital options -- and in likely encouraging the piracy they hope to prevent.

Many years ago I was involved with a project where we observed that a number of individuals were more likely to break a particular law and pay the fine than adhere to the requirement. This is because adhering to the law was so complicated and costly. We used technology to make it easier and more cost effective for indviduals to comply, and surprise, surprise, legal compliance went way up.

The same is true with DRM -- if it is too difficult for students to acquire and use the content legally, then they will find other options from the legal (e.g., choosing not to purchase, going with print, etc.) to the illegal (e.g., piracy). Ignoring the problems with DRM drives away good customers who are willing to pay, and fosters more digital theft. It also encourages more faculty to consider open source solutions, which can have a price tag, yet still be DRM free. It is time we rethink content protection and business models, and retailers have as much stake in that outcome as publishers do.

Some final guiding thoughts... The truths and lessons for Publishers in the TeleRead piece have implications for retailers too. I have said it before, but do we really know what business we are in? Beyond that, do we know what our customers really want? Successful businesses solve problems for their customers. Do we know what our customers problems are, and are we trying to solve those problems? How could we solve those problems more efficiently or effectively? If we fail to do so, someone else will, and at that point it is not really fair on our part to complain about the competition. If the competition is viable, it is because they are providing something that the customer values, and their value proposition is greater than the one we offer. Just something to think about.

E-Books and DRM

Electronic books are easy to use and to buy, but problems arise from incompatible formats in digital rights management technologies and the difficulty in organizing purchased titles. Converting titles to PDF files are often clumsy and the popular ePub format really doesn’t yet allow for seemless cross-platform support to go from one manufacturer’s electronic reader to another. Many devices have versions of ePub files "optimized" for their device. Furthermore, the challenges of understanding the varying forms of DRM is a current weakness of much of the digital course materials market, and further complicates the purchase process for students.

A new study from ABI Research points out that being able to buy content from any source, regardless of the device being used, will drive the digital publishing industry. It could become a concern for the college store trying to provide its customers with a variety of devices for sale. Even the apps created to allow readers to buy on different devices require the appropriate software to read the what they bought.

The ABI Research study suggests consumers need the flexibility to shop at different e-bookstores, just like they do at any other retailer. It also points to the need for consumers to be able to see the titles they’ve purchased in unified fashion on a phone, tablet, a laptop, or PC.

Google Editions versus DRM

One of our interns, Nic, has been researching DRM and the issues surrounding it. Here is another one of his posts:

As we have mentioned in the past few posts, DRM is currently a major issue in the ebook industry, with many proponents pushing for different models with the aspiration of balancing between the publisher’s protection from piracy and the consumer’s experience and desires. Currently, there is very little interoperability between e-reading devices, which is problematic and somewhat disorienting for the consumer. Buyers want the freedom to read their e-books on other devices; this is especially a concern due to there being so many different e-readers currently on the market, so many companies working on producing the next generation round of devices, and the indeterminable question of which products will consumers want to be using in the future.

A recent article from FutureBook makes the bold claim that, thanks to its upcoming Google Editions, Google may have already won the eBook war due to circumventing these issues. The article draws comparisons to the music industry, and it goes on to predict a trend towards device agnostic reading. Books purchased through Google Editions are stored in the cloud, allowing users to access their books through any device capable of connecting to the internet, and, due to this, Google will be in a great position to seize market share in the industry if other companies continue with their DRM policies of limited-to-no device interoperability,

“The industry needs to grow digitally to last, and we need to start thinking uncomfortable thoughts about how we help readers access books in the way they want before companies like Google lock up the market.”

Gentler Digital Rights Management

A recently formed IEEE Working Group (P1817) will be looking to change the way DRM affects users of e-books and other digital media. DRM currently prevents users from having real control over their ‘digital property,’ as it prevents individuals from sharing digital products, in addition to other limitations imposed by the provider.

The goal of this IEEE working group is to return control of digital property to the consumer by establishing standards such that “consumers may enjoy all of the digital conveniences and ownership privileges of the movies, music, books, games, and other digital products that they purchase, while honoring copyright and respecting the rights of authors and artists to profit from their creative works.”

A recent Ars Technia article delves deeper into this subject. The intent is to make digital property more similar to physical property with respect to product ownership. As we stated in one of our recent blog posts, the nature of DRM and licensing at this time effectively cause e-book buyers to pay for the right to access digital media for as long as the provider is willing to allow access. As we saw in July last year, when Amazon recalled two books by forcibly deleting them from their customers’ Kindles, the rights of the consumer at this point are somewhat ambiguous. One goal of the P1817 working group is to ensure that product ownership is perpetual, allowing owners of digital personal property to be free of restrictions on private use or sharing.

“The 'digital personal property' idea involves two major pieces: a title folder and a playkey. The title folder contains the content in question. It's encrypted, and it can be copied and passed around freely. To access the content inside, however, you'll need the playkey, which is delivered to the buyer of a digital media file and lives within a 'tamper-protected circuit' inside some device (computer, cell phone, router) or online at a playkey bank account."

The playkey cannot be moved or copied, but an e-book or other digital property can be shared with a friend by linking them the playkey along with a copy of the product. Users need to be careful, though, because just as with physical property, "controlling the playkey means that you control the media, and you truly own it.” Read here for more information on the process.

P1817’s first meeting is on July 14, and interested parties are invited to join and participate.

DRM and content ownership

As e-readers and e-books become increasingly popular and pervasive, the rights surrounding e-books and issues of DRM are at the forefront of industry concerns. An article from Mainstreet.com takes a look at digital books, noting that “for the most part there is no real distinction between an e-book and a piece of software. When you buy either, what you are really paying for is a license to use the product, not to own it.” The interesting title for this article is "Do we own the e-books we buy?" An interesting phrase choice, as most of the options for students to buy digital textbooks fit this concept of paying for a use license for a period of time -- more like a digital rental than a digital purchase.

Publishers and e-book sellers rely on DRM software to prevent piracy, and it is used by all major e-book readers with the exception of the iPad.

“Amazon took a big step and allowed publishers to decide whether they wanted a particular book to use DRM. While this is definitely a step toward allowing consumers more control over the books they buy, Nieman Lab points out that most publishers will likely choose DRM for fear of piracy.”

With Google Editions expected to be launched later this summer, which will not be focused on proprietary devices and software, and with publishers pushing for a standardized e-book format, perhaps DRM restrictions will be at least somewhat reduced in the not-too-distant future.

DRM video

Thanks to our friends North of the border for sharing the following short video on DRM. It would be interesting to see an update in the context of Amazon's recent efforts on the Kindle that keeps tracks of what people highlight in texts and allows them to be shared. What's next? Our private notes that we put in the margins? Absent of context, how could this information be used against consumers of digital media. The advantage is all to the individuals or organizations that control the delivery platform and the DRM -- As the video below notes, it kind of makes for a scary future in an Orwellian kind of way.

terms&conditions from mediamold on Vimeo.

iTunes becomes DRM-free

On Tuesday, at Apple’s annual MacWorld Expo it was announced that the entire iTunes catalog will become DRM free, meaning that users can now move their songs among Apple and non-Apple computers, phones, and music devices as they wish. As of today, 8 million of the iTunes songs are available without DRM and by the end of the quarter the remaining 2 million songs will be added. This news comes two years after Steve Jobs posted an open letter on Apple’s website encouraging the music industry to drop DRM.

According to an article from The New York Times, the decision to go DRM-free is actually a compromise between Apple and the major music labels – Sony Music Entertainment, Universal Music Group, and Warner Music Group. In order to remove the DRM restrictions, Apple had to agree to let the record companies set a range of prices for songs in the iTunes store. By allowing a range, the companies hope to make more money on the best sellers and draw attention to the older hits. However, it is not clear why the record labels and Apple suddenly agreed to the compromise. Some speculate that the record companies held out the past few years in an effort to help strengthen competitors but now with the tough economy and declining music sales, it was time to compromise.

What does this mean for Apple’s competitors? And perhaps more importantly, what does it mean for education? Higher education institutions have been grappling with content piracy, including music, for some time now. Will DRM-free content reduce or increase this challenge? How will this shift ultimately affect movies and other content with DRM? A posting on Teleread says it best, “Well, if Apple can do it with the music industry, how long will it take publishers to wake up and notice that the playing field has changed? If past history is any example, too long, I’m afraid.”

The DMCA turns 10

Yesterday was the 10th anniversary of the passing of the Digital Millennium Copyright Act (DMCA). In commemoration of the event, the Electronic Frontier Foundation (EFF) released a new report titled, “Unintended Consequences: Ten Years Under the DMCA”. DMCA has not always been well received by higher education, and as the EFF notes in their report, there have been a number of specific instances where the Digital Millennium Copyright Act (DMCA) was not used against copyright pirates but instead against legitimate activities conducted by consumers, scientists, and businesses. Over the years, EFF has fought against many DCMA suits in the name of free speech, privacy, innovation, and consumer rights. However, a posting on the Wired Blog provides a different perspective on the DCMA saying that it is often misunderstood and although it has caused problems and abuses, the internet would not be where it is today if it were not for the law. The posting notes,

“Blogs, search engines, e-commerce sites, video, and social-networking portals are thriving today thanks in large part to the notice-and-takedown regime ushered in by the much-maligned copyright overhaul.”

The posting goes on to say that even Google which also owns You Tube credits the DMCA for its success.

In the future, Congress could reopen the DMCA which will create an opportunity for reform but also an opportunity for the MPAA and RIAA to influence the law. We have already seen instances where the RIAA has influenced recent legislation, such as the reauthorization of the higher education act, which will now require institutions to perform some of the policing function for content providers that they have previously avoided. A reopening of the DMCA could have significant implications for DRM, and digital course materials. This presents both opportunities and challenges for the college store community, as well as much of the rest of higher education related to digital content and intellectual property.

Information on the basics of the DMCA, as well as links to the DMCA itself, are available through the UCLA Online Institute for Cyberspace Law and Policy, as well as other sources.

Audio e-books DRM free

Overdrive announced this week in a press release that they would be increasing their inventory and capability to distribute mp3 audio books to booksellers and libraries. Borders will be one of the first stores to have this capability added to their repetoire at the concept stores. Overdrive is already an interesting player in the digital content space, perhaps best known for their works with libraries and the IDPF standards group. In this latest announcement it is not the ability to download the content onto the iPod/iPhone, or thousands of other MP3 players that is of interest (although that is interesting). Instead, the most interesting aspect of this press release is their indication that they will allow these downloads without DRM. This is a great move forward, as others have noted the problems and complexity DRM creates in the marketplace. We have seen similar movement in the past few months in the music industry as well. Chalk up one for the consumer!



OverDrive to Distribute MP3 Audiobooks to Booksellers and Libraries
Download audiobooks compatible with iPod, Zune, and thousands of MP3 players

The Future of DRM

DRM -- that is Digital Rights Management for the lay person. DRM captures the set of technologies and business models for protecting intellectual property and that controls the uses and distribution of digital content.

There is an interesting article from the Wharton Business School today on the future of DRM from a business model perspective. It is an interesting read, along with some of the commentary offered by readers. The Wharton experts conclude that DRM is not going away, despite recent developments in the music industry. Instead, the DRM components will likely just become less intrusive. This is good or interesting news for those of us interested in digital course materials, where students have reported that current DRM approaches represent an obstacle to adoption.

The article can be found at: http://knowledge.wharton.upenn.edu/article.cfm?articleid=1882