How Publishers Are Cutting Their Own Throats With eBook DRM

An anonymous reader writes "Sci-fi author Charlie Stross has written a post about how the Big Six book publishing companies have painted themselves into a corner in the rapidly growing ebook industry. Between user-unfriendly DRM and the Amazon juggernaut, they're slowly pushing themselves out of business. Quoting: 'Until 2008, ebooks were a tiny market segment, under 1% and easily overlooked; but in 2009 ebook sales began to rise exponentially, and ebooks now account for over 20% of all fiction sales. In some areas ebooks are up to 40% of the market and rising rapidly. (I am not making that last figure up: I'm speaking from my own sales figures.) And Amazon have got 80% of the ebook retail market. ... the Big Six's pig-headed insistence on DRM on ebooks is handing Amazon a stick with which to beat them harder. DRM on ebooks gives Amazon a great tool for locking ebook customers into the Kindle platform.'"

Comments

I hate DRM.

[Firethorn]

DRM on ebooks gives Amazon a great tool for locking ebook customers into the Kindle platform.'"

Which is why I'm not buying books from Amazon or B&N at this point. Either it's without DRM, or I'm not buying it. Baen's Webscriptions for me, at least at the moment.

Re:I hate DRM.

[inflex]

At least a lot of non-Big6 writers are publishing without DRM on Amazon (and other platforms).

There's a new thread almost weekly on places like Kindleboards.com about DRM and it still always goes the same way though, lots of arguing on either side. In the end at least, more and more writers are explicitly choosing NOT to DRM.

We have several books out under a few pen-names, none of them are DRM'd and we're not the only ones ( http://elitadaniels.com/ ).

Re:I hate DRM.

[Guspaz]

Most of my eBook purchases are from Baen. Cheap prices, free books, any format you could want, and no DRM? What's not to like?

For those who are curious about the "free books" part, Jim Baen and his authors discovered that giving away the first book or two in a series actually increased sales, and ended up putting a huge number of their books up for free download. And by "free" I mean "just like ones you pay for, DRM-free in all formats." Their free library's site can be found here:

http://www.baen.com/library/default.asp

And the books themselves can be downloaded from here (and also indirectly at the above link):

http://www.webscription.net/c-1-free-library.aspx

This sort of behaviour from content creators and publishers should be rewarded, so go check out some of the free books. There's so many to choose from, from so many authors, you're bound to find something you like! And if this post reads like an advertisement, well, I think they deserve it.

Re:I hate DRM.

[LordLucless]

Seconding that.

I got onto the 1632/Ring of Fire series, and the Honor Harrington series through the Baen free library.

As validation of their model, I've since bought all of both series as ebooks from them (actually under the webscription model: 5-6 books, including the one I was looking for, for $15). I've also bought half of the Honor Harrington series as audio books through Audible, all through a couple of $5 loss-leaders.

Re:I hate DRM.

[Anonymous Coward]

industry standard DRM

Meaning Adobe's proprietary DRM, instead of Amazon's?

Re:I hate DRM.

[0123456]

You do realize that B&N uses the industry standard DRM, right? No lock involved, in fact you can open the books on any computer that supports Adobe Editions

In other words, they tie you into using one of the worst pieces of crap software since Adobe Flash Player.

I just don't buy e-books with DRM, it's much simpler.

Re:I hate DRM.

[megafag]

I read nothing but Amazon eBooks on my Nook Color because, ironically, i can't download books from the Nook app, due to them being unavailable in Australia.

Re:I hate DRM.

[RMingin]

Since you're familiar with Calibre, why aren't you familiar with Unswindle? There's even a plugin for Calibre to link the two.

I rarely *buy* my ebooks. There's just too much good stuff out there that's price-free, DRM-free, or both.

When I *do* buy an ebook, I buy from Amazon, run it through unswindle+Calibre, and have the text, formatted, with pictures, table of contents, etc, exactly as purchased, in the format(s) I choose, with no DRM.

It's entirely possible to work within the system and still get an officially forbidden result.

Re:I hate DRM.

[wvmarle]

There is no such thing as industry-wide-standard DRM that has any use. It's self-defeating. Well DRM is in itself self-defeating anyway.

First of all, remember that the R has to do with Restrictions, no more no less. Just that, restrictions in what you can do with a file. Now if all devices all over the industry use the exact same DRM, that means all these devices can decode all materials just fine. All resellers incorporate it in their media, all reader software and devices incorporate it, and the end user basically never sees any restrictions. So why add it to begin with? If DRM doesn't get in the way of the end user, it's not doing anything, and you'd just as well not have it at all and save money in the process (as in: the work to implement the restriction scheme on both the media and the reader sides).

Of course it's used to prevent copying, including making backups for oneself. But with all those devices out there it will be cracked, and cracked fast. There may also be devices that simply ignore the DRM - to make it industry standard it means you need wide adoption, and control of who has the keys is getting more and more difficult.

It won't prevent copying either: one would just copy the complete file DRM and all. It's an industry-wide standard so anyone can read it anyway, DRMed or not. If it works on device A it works on device B. For books requiring on-line verification is troublesome as books are often read off-line and out of reach of a network, e.g. on the bus or on the train.

And by restricting your DRM to a single vendor, that's self-defeating. Amazon has now something like 80% of the e-book market, so if you want to use DRM on your book media you're kinda obliged to at least use Amazon's system. Otherwise you lose out on most of the market. This gives Amazon a huge market power: it can dictate prices, refund policies, their commissions, being exclusive reseller of the book, whatnot. They are in control of the whole process, and by the publisher's decision to require DRM the publisher also completely locks out any competition between resellers.

And to see a classic example on how that works out: iTunes. Music industry demands DRM on music sales, Apple owns well 80-90% of the market or so (not just the retail side, but also the player side) and offers DRM, and as a result Apple has enormous power to set prices - like the $0.99 per song demand. And this DRMed iTunes music is restricted to Apple's devices only to boot. The only way for the music industry to get back their pricing power and control over the sales of their music, was to drop DRM, which in the end they did.

Re:I hate DRM.

[hairyfeet]

What I don't understand about the whole DRM mess is this: Why hasn't somebody brought up the bigger question which is why force a tech THAT DOES NOT WORK and ONLY pisses off the people PAYING you?

Look at all the DRM bullshit they put on video, has that stopped a SINGLE video from showing up on TPB before it was even released? NO! yet they expect me to jump through hoops and either take DRM that doesn't work on my system or buy a DVD, rip said DVD, transcode said DVD into a format I can use.......or I can just go to TPB, see where this is heading friends?

Frankly the ONLY DRM I've seen done "right" is Steam, just give me my game Valve and get the fuck out of the way, thanks. They give you value for your money, have a nice little chat client that makes it easy to get everyone together for a match, have the easy gift thing for dealing with my boys, don't bitch if I need to back up or move the folder, its all easy peasy. Why the fuck can't the other bunches learn?

I agree with Gabe from Valve, piracy is a classic case of you not serving the customers. Just like in TFA the stupid publishers are so hung up on piling on the DRM which has NEVER worked, will NEVER work, not in a bazillion years, because the pirates are ALWAYS smarter than them, so in the end the only one the DRM bites in the ass is the guy actually trying to pay them. It is like the media companies are all run by the PHB from Dilbert...argh!

Re:I hate DRM.

[dbitter1]

What I don't understand about the whole DRM mess is this: Why hasn't somebody brought up the bigger question which is why force a tech THAT DOES NOT WORK and ONLY pisses off the people PAYING you?

You must be new here. Some of us have been saying it for 30 years, going back to "copy protected" floppy disks... and our voices are hoarse by now.

Now get off my lawn...

Not sure DRM is the biggest issue at the moment...

[MarcoAtWork]

... pricing an e-book $13 when the paperback is $6 is a much more visible issue for the average e-book buyer, at least judging from the various comments on amazon's message boards.

Re:Not sure DRM is the biggest issue at the moment

[Daniel Dvorkin]

It all ties together. Booksellers, whether retail outlets like Amazon or the publishers themselves, want to charge paper-book prices for e-books. They see DRM as a mechanism to enable them to do that. The alternative, which is to sell e-books for reasonable prices (i.e., prices which reflect the fact that printing and distribution costs for e-books are effectively zero) and thereby sell more books, is so far mostly the domain of the self-publishing and small-press world.

Can they invent a new model now?

[RobinEggs]

I really hope publishers cave in and figure out a way of pricing things better.

I think I should be spending more on entertainment; I'm starting to feel much guiltier about stealing everything but comic books, occasional paperbacks, and the three video games per decade I like enough to buy a collector's edition.

At the same time, the release prices for entertainment are completely batshit crazy. Games are $60, books are $35, and movies are $12? Who can afford that crap? Those prices all fall pretty quickly, but can't they come up with a better model than fleecing their most eager customers and then doling it out one step at a time to the next most impressive or convenient formats?

I don't know; maybe they can't. I just know I laugh when I see those numbers breakdowns, and I've seen them from official sources multiple times, in which publishers swear to God they only make a 1% profit.

Re:Can they invent a new model now?

[graymocker]

At the same time, the release prices for entertainment are completely batshit crazy. Games are $60, books are $35, and movies are $12? Who can afford that crap? Those prices all fall pretty quickly, but can't they come up with a better model than fleecing their most eager customers and then doling it out one step at a time to the next most impressive or convenient formats?

This is actually the whole point: Market Segmentation. Your goal with any product is to extract maximum sales revenue from it, which means finding the optimum point on the price/demand curve. But if you sell at only one price point, you actually leave money on the table from individuals who were willing to pay you more for that product. For example, suppose I've figured out that maximum revenue for my widget is at $10/widget. However, I also know that there are people who are willing to pay $20/widget; there simply aren't enough of them to make the $20/widget price more profitable than the $10/widget price. Wouldn't it be great if I could get the best of both price points? If I could sell the product for $10/widget to those customers who would only be willing to buy at $10, but also turn around and sell it at $20/widget to those customers willing to pay more? Wouldn't it be great if I could do this in such a way so that the $20 customer actually is pleased with his purchase, and doesn't feel ripped off, by providing some kind of extra value to that $20 customer?

The solution to this problem is to segment your market. With some goods this means coming out with slightly different products for each market segment. (eg, Mercedes has a C-series, an E-series, etc. etc. etc.). The solution in other products is to segment by time, so your most ardent customers pay extra to get the product right away, while more value-conscious customers wait for price drops or sales.

This is in fact the solution used for most entertainment products, and honestly I don't think there's anything wrong with it. The brand new game may start at $60, for those fans that are very interested in the product and want it right away. (Market segementation also goes higher, with special and collector's editions with extra doodads for superfans). Then the price gradually drops until it covers every level of enthusiasm/budget for the product, until it shows up in a Steam sale for $5 and even those people who say "meh, looks interesting, guess I can try it" become customers. This system nicely balances multiple interests - it makes the same product accessible to a wide range of consumers, with each consumer paying what they think that product is worth to them (and the ones paying more getting some benefit from that higher price).

Re:Not sure DRM is the biggest issue at the moment

[slashmydots]

I think you're looking at used book prices. People will let those go for absurdly cheap for some reason. Have you seen some popular top seller/NYT top books? They're $30-50! Printing material can't cost that much! In fact, I've done covers for books and I know what they cost to print and they're exaggerating it. The ebooks tend to be a lot cheaper for big titles.

...very few ways to deviate?

[nurb432]

Umm any non DRM book + calibre = kindle e-book.. pretty easy process.

As far as the publishers 'becoming more aware', they really don't care. If you want the books they own the rights to, soon you will either do as you are told, or pirate it.

Re:...very few ways to deviate?

[tkrotchko]

No it does not. Only Amazon's books. You are free to load whatever books you want, and Calibre is a great tool to do it.

Re:Not sure DRM is the biggest issue at the moment

[whoop]

This pricing system is nothing new. All the modern Call of Duty games stay at $60 on Steam. The latest version rarely goes on sale, if so it's only like $10 off. Publishers of any sort only want to be paid what they think customers should pay.

Then, some indie mucky-muck makes something like Minecraft, Angry Birds, etc, charges so little, and sells millions. It's not fair!

Why I don't have a kindle (yet)

[miles zarathustra]

"Here's a great book I just read. Let me lend it to you..."

Re:Not sure DRM is the biggest issue at the moment

[Anonymous Coward]

Courtesy of the author of the original post is this nifty article. Note especially the comments in point one:

In particular, about 80-90% of the cover price of a book has nothing to do with the paper and ink object you buy in a shop; indeed, using current production standards, ebook production requires nearly as much work as paper book production. (Paper and ink are dirt cheap; proofreaders and marketing teams aren't.)

Now, you might argue that lower prices would lead to more sales and hence greater overall profit - but that's a very different thing to arguing that "printing and distribution costs for e-books are effectively zero", and hence implying that they're a significant chunk of the cost for the dead tree version ...

Re:Not sure DRM is the biggest issue at the moment

[Anonymous Coward]

Valve gets it because they've seen the data to back it up: 10% drop in price? Expect a 35% increase in revenue. Not sales, revenue. 25% discount, 245% increase. 50% discount, 320% increase. Crazy 75% discount? 1450% increase in revenue. Valve's own record, AFAIK, was when they dropped L4D by half and saw a THREE THOUSAND PERCENT increase in sales. And apparently the best sales bump ever was a third party game that went on discount and saw a 36,000% increase in sales over the weekend. These are numbers that bean counters would drag their dicks through a mile of broken glass just to LOOK at, much less claim. Yet out there in digital land the average product is priced equal to (if not more than) it's meatspace counterpart.
Insanity.

My book

[Sasayaki]

Disclaimer: I'm currently finalizing a book for the Amazon store. Shameless linkwhore here.

This guy hit the nail right on the head. The reason the publishers are pushing for DRM is fear of piracy, but...

Bleck. First up I don't like the term "piracy". Bleh. But language is fluid and you all know what I mean, so let's go with it.

Real pirates, like these guys, are evil. They're not Jack Sparrow, they're not Captain Hook, they're murderers and rapists and kidnappers and deserved to eat a Tomahawk missile in their sleep. They're scum. They're villains. They're evil. They're not some kid who just wants to read the next (awesome, awesome, aweeeesome) Harry Potter book for free or whatever.

I've never understood musicians, writers and artists who get all messed up about digital piracy. It just strikes me as entirely retarded, especially if they're not in full compliance with every piece of software, hardware, music and movies they've ever seen or owned. I'm sure their $2,000 copy of Adobe Photoshop is fully legitimate now and was when they were 14, and I'm sure they've never downloaded an MP3 in their life.

I see this crap everywhere. I see rap artists thumbing their nose at society, waxing lyrical about sticking it to the man, pimping hoes, glorifying robbery, murder and pushing drugs, while at the same time appearing bereaved that their latest forgettable album appeared on The Pirate Bay the day after it appeared in iTunes. I see armies of cocaine huffing, hooker bashing, Harvard educated RIAA trust-fund babies who've never wanted for anything in their life but a full head of hair, going on about how Limewire costs them the GDP of the entire world ($75,000,000,000,000 dollars) in lost revenue and also, simultaneously, claiming to have had one of their most profitable years ever. How do you even rationalize that kind of blatant, intrinsic wrongness?

Fuck those guys.

I don't give a shit if you got my book from The Pirate Bay. It costs $2 to buy and is available in DRM free PDFs, or even DRM free plaintext if you really want it and you're Richard Stallman (I met you once, by the way, and you were cool. You hated my iPhone though. Sorry bro). I don't want to DRM my book(s). I want people to read them.

DRM pisses me off and ultimately hurts the consumer and then, eventually, the publisher too. Hell if someone made a torrent on The Pirate Bay of my work I'd probably just feel proud that I'd made a book people really want to read.

Re:My book

[lexman098]

- They emerged originally as a replacement for a national navy, keeping garbage from being dumped in Somali waters?

Irrelevant

- They generally let people go unharmed after receiving a ransom?

They kidnap innocent people at gunpoint for money. Fuck them.

Re:My book

[Anonymous Coward]

I bet you change your tune when it's your mother/sister/girlfriend/wife who gets kidnapped and raped, and then killed because you can't come up with what they want fast enough, or if she gets returned, seeing her live with the aftermath. You'll be just as miserable as she is, unless you shut her out of your life afterwards.

Yeah, think about that. That Tomahawk sound a little better now?

Re:Not sure DRM is the biggest issue at the moment

[plover]

in that case ebooks should cost 10% less than the paperback edition when it comes out, and 10% less than the hardcover before the paperback comes out.

And maybe they do "cost" 10% less. However, that's their cost. Their price to you, on the other hand, should be whatever they think you'll pay that gives them the most profit. It's how capitalism works: buy low, sell high. It really is that simple.

If they think you'll pay an extra $3 for the convenience of sitting on your butt while having the book whisked over the aether to your Kindle, then they'll happily collect it from you. If they think you'll pay an extra $5 for the smell of a dead tree, they'll be even more happy to collect that. And if they think you'll pay $79 for a Kindle today that will lock you into an investment of $15 DRM'd books, they're ecstatic.

The only part of the equation that matters is what the largest number of consumers are willing to pay in order to maximize profits to the stockholders. Nothing else, not fairness, not reasonableness, not public opinion, not whiny authors, not abusive commenters in the Amazon reviews, nor the public good, matters. Never forget that.

Ahh the Australia Effect

[elexis]

...except in Australia, where buying almost anything at all digitally/overseas and having it Fedex'd over here is still significantly cheaper than buying retail. I will definitely buy that $13 ebook since the paperback is $40+

Re:Not sure DRM is the biggest issue at the moment

[Elder Entropist]

In particular, about 80-90% of the cover price of a book has nothing to do with the paper and ink object you buy in a shop; indeed, using current production standards, ebook production requires nearly as much work as paper book production. (Paper and ink are dirt cheap; proofreaders and marketing teams aren't.)

Didn't the publishing industry nearly double paperback prices just a few years ago citing increases in paper costs?

Re:Large free selection if you look for it

[Guspaz]

And to clarify the "can then be redistributed freely" bit, the license on the CDs specifically says that they can be copied and distributed freely so long as they're not sold. Hence why the Fifth Imperium site has all the CDs available for download.

In actual fact, a large percentage of Baen's catalog is available legally for free download because of those CDs. Almost all of the Baen books by David Weber, Eric Flint, Mercedes Lackey, Lois McMaster Bujold, John Ringo, and David Drake, and then various other books and stories by other authors. Except books published since the respective CDs were...

Re:Not sure DRM is the biggest issue at the moment

[0123456]

And weren't they saying recently that profits are up despite a decline in sales because e-books are far more profitable than paper books?

Re:Not sure DRM is the biggest issue at the moment

[Jafafa Hots]

Not just insanity. Immorality. Especially when they get laws passed as an end-run around your rights, making it illegal to space-shift what you already bought (something that's supposed to be legal).

Re:Not sure DRM is the biggest issue at the moment

[BLKMGK]

Let me correct you on this - Amazon does NOT want to do this. In fact you will note that almost all of their book prices specifically state that they were set by the PUBLISHER and not by Amazon. Why? Because Amazon WAS selling books at pretty reasonable prices aka under $9.99 for even new best sellers and then Apple released the iPad and gave the publishers the ability to set pricing - which they then demanded from Amazon. Amazon tried to fight this but in the end knuckled under and we have the Agency Pricing Model that we have now - and we have Amazon acting as a publisher for many smart writers. Amazon doesn't like this but they have no choice, in fact someone is suing Apple and the publishers for this now.

End result? I no longer buy many books and I think this industry will be learning a very hard lesson just as the music industry did. In fact it will be WAY worse since books are WAY smaller (say 4megs with multiple formats) and because books aren't read over and over quite like music is. A real shame too since I and many I know were buying books more and more frequently prior to this truly stupid move by the publishing industry.

P.S. MacMillen was one of the big publishers leading the charge and on their blog, I shit you not, they actually tried to defend their pricing by stating how expensive PRINTING presses were! The mind boggles - these dinosaurs aren't long for this world...

DRM Isn't the Driving Factor, it's the Kindle

[bdam]

I work for a small publisher. I don't particularly agree with our pricing scheme nor DRM but that's not my department. If you want your books on the millions of Kindles out there then you had better have it available via Amazon. It's a simple as that. We will sell our books to practically any retailer and we have a growing number that sell ebooks. In terms of Amazon using their monopoly ... they already had one with physical books and all the arm twisting and discounts stuff applies equally there.

Re:Large free selection if you look for it

[AdamWill]

Weber's a skilful writer of page-turners (though a horrible, horrible, horrible writer of dialogue), whatever you think of his politics. Bujold is just flat out a great writer; I don't know why she gets so much love and so little respect, but by any reasonable measure she's one of the great writers of the last 50 years. And that's coming from someone who reads a hell of a wide range of fiction.

"Industry Standard DRM"

[Anonymous Coward]

"Industry standard DRM" is an oxymoron. If you can't implement it, then it's not a standard. You're locked into the sole supplier of the trade secret. When you mentioned that everyone has to run Wine just to be able to read the book, didn't that clue you into how ridiculous you must have sounded? How about the part when you mentioned a .. I don't know what to call it .. a "spec"(?!) that has one particular companies' name in it. Seriously, you might as well say the XBox is an industry standard; that wouldn't be any sillier.

You know what's an industry standard? You're reading it right now. HTML. (And that's a fragmented and contentious one!) You would never even be able to guess which browser I'm using because it doesn't matter. HTML just works, with more programs than you can shake a stick at. And if you don't like any of them, you can even write your own. Text. RTF. Even PDF -- it's hard to say this with a straight face -- but even PDF is standard compared to that other Adobe thing you just mention that nobody else in the world has ever heard of, which probably explains why nobody ever makes readers for it.

Re:Not sure DRM is the biggest issue at the moment

[DinDaddy]

Along with paper and ink, shipping cartons, shipping costs, inventory management, retail floor space costs (IOW retail markup), damaged and unsold merchandise, etc. All essentially zero cost. Just like digital. That's why the pricing is the same.

Sure.

The Story of DRM

[Anonymous Coward]

Reader: I'd like to buy your book please.

Publisher: Buy a Kindle first.

Reader: No, I don't want a Kindle. Sell me a book?

Publisher: Buy a Kindle.

Reader: If I buy a Kindle, can I read the book without it?

Publisher: No. But buy a Kindle. I don't even care if you buy my book. Just please, buy a Kindle.

Reader: What is this, a MLM scheme? Do you get paid for Kindle sales?

Publisher: No. I just want you to buy a Kindle.

Reader: Whatever. Anyway: money. Here is some money. Want my money? Sell me book. Book. File. No Kindle. Not any particular Kindle competitor. Data, not tool. Book. Sell me book. Money. Money. Here is some money. Money.

Publisher: Fuck off.

Reader: [blink] I think we had a misunderstanding. Let's try this one more time: money. Money. Here, please take my money.

Publisher: Fuck you and your fucking money. I don't want money.

Publisher Stockholders: la la la I am blissfully unaware. The management is trying to increase revenue. The management is trying to serve my interests. I will not sue them, or even fire them. la la la la.

Publisher: Fuck money. Money is bad. I hate stockholders. Die, stockholder. Die, author. Die, customer. Everybody die. Fuck you all! RAAAA! Buy Kindle. *drool* *ramble* *rant*

Reader: Hey, this torrent site is pretty nice. And everything just works!

Amazon: You know what else just works? Reading those pirated books on a Kindle.

Reader: ok. Here, have some money.

Amazon: Moooney! Woohoo! Here you go. Enjoy your Kindle. Wanna buy some books?

Reader: No thanks, but I gotta admit, this Kindle is actually pretty cool. And thanks for pointing me at those torrent sites.

B&N: Wanna buy some books?

Reader: I didn't know anyone was still trying to sell books. No thanks.

Borders: please, money .. i need money.

Publisher: Money baaaad!! No money.

That is what DRM is all about. Saying no to money, in order to advance someone else's interests at your own expense. DRM means "Fuck you and your fucking money." That's about as rational as DRM gets, if your business is content. If your business is selling the one legal implementation of that DRM, though, it's reasonably sane.

Re:Not sure DRM is the biggest issue at the moment

[Jafafa Hots]

It's a crime to defeat DRM due to the DMCA. That's the end-around. Space-shifting was guaranteed under fair-use, USa Inc. didn't like that, so they made space-shifting impossible without breaking DRM, and then made breaking DRM illegal.

May not get me sued, but still shows you how things work around these here parts... what the motivation is, and who gets listened to.

Immoral. Whether they sue or not.