Why DRM is a Toothless Boogeyman, Ebooks are like Video Games, and Amazon is the Winner

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Kindle 3 by kodomut

Kindle 3 by kodomut, via Flickr

“Problem is, this is too little, too late and will have almost no effect on Amazon and Apple. These companies are far too popular (and, by the majority of customers, well loved) for the removal of DRM to make a difference. Did Apple’s removal of DRM from songs on iTunes have much of an impact on either Apple or the competition? No. Did the fact that Amazon came into the MP3 market with DRM-free music right from the start torpedo iTunes? No.”

Adrian Kingsley-Hughes, ZDNet

Repeat after me: DRM will not save publishers; neither using it, nor dropping it.

Based on the steady increase in ebook sales over the past few years, it’s reasonable to conclude that the average reader doesn’t really care too much about DRM. They’re apparently bigger fans of the platforms Amazon, B&N, and to a lesser degree, Apple, have built to purchase and read ebooks, and the ebooks themselves don’t have the same emotional connection as those they buy in print to keep on bookshelves. As such, legitimately or not, from the consumers’ perspective, “lock-in” isn’t the factor many think it is, or desire it to be.

More importantly, though, beyond the shiny gadgets and apps, readers are fans of authors and genres (and, sometimes, even publishers), and while selection varies amongst the major e-tailers (especially Apple), there’s an interesting comparison to video games that I’ve been mulling over for a while now. It’s an imperfect but workable analogy, where the big hits are almost always cross-platform (including PC and, increasingly, mobile), while the exclusives tend to align with each platform’s respective strengths and core audiences (especially mobile).

In console gaming, exclusive first-party titles are often among the perennial best-sellers (especially on Nintendo’s platforms),  while third-party games fight it out for gamers’ limited time, attention, and disposable income. The biggest sellers often spawn successful franchises and spin-offs, but even more frequently, a ton of copycat, rip-off shovelware, similar to the mobile space where, pre-KDP, Apple successfully leveled the playing field for independent game developers and the app store has been flooded with me-too apps.

In PC gaming there’s a bit of a twist, where Valve’s Steam platform is effectively the Kindle, DRM included, though, as I understand it, lacking Amazon’s strongarm tactics, perhaps because Valve was first a successful “traditional” game publisher, including some extremely popular franchises like Half-Life and Portal.

I think that you either embrace the new approaches or you go away. I mean Sega and Atari and lots of other, you know, Vectrex, Commodore, you either figure out how to move forward or you get left behind and I don’t think it’s any different. As soon as Valve stops doing interesting, innovative work we’re gonna be left behind and we’ve all been around long enough in the game industry to know that and you have to be pretty myopic not to realize that just because something used to work a certain way there’s absolutely no reason for them to expect that that’s going to be the tickets to being successful in subsequent iterations.

Gabe Newell, co-founder and managing director, Valve

ACHIEVEMENT UNLOCKED: AMAZON WINS?

In publishing, Amazon’s Kindle is the only “platform” currently in a position to challenge its “third party developers” (aka, traditional publishers) for content in any significant way, adding their own imprints to the flood of “independent” self-publishers who arguably helped drive the Kindle platform to its current dominant position. B&N doesn’t have the resources to compete on that front, and Apple clearly lacks the interest.

It’s not a huge stretch to posit Amazon as the reverse-Valve of the ebook world, constantly pushing the envelope in unexpected ways, aggressively experimenting with pricing, developing a core of popular franchises, while staying focused on delivering and optimizing the best consumer experience.

[NOTE: All of those links go to examples of what Valve is doing, and each one has an Amazon equivalent, to varying degrees, as well as offering lessons to traditional publishers on how to compete. I'll leave the "What Publishers Can Learn From Valve..." post to someone else.]

Amazon has a potent mix in its diversified arsenal that presents an unenviable challenge to traditional publishers who don’t have their own platform to compete with them (a la Steam), and who have yet to figure out how to balance the digital needs of their brick-and-mortar partners (independent booksellers and libraries) with the powerful demands Amazon feels entitled to put forward.

At least three major publishers seem to be banking on the still-delayed launch of Bookish, but if it doesn’t include a robust inventory of content, competitively priced, with a user-friendly, cross-platform distribution strategy AT LAUNCH, it’s likely as DOA as I predicted last summer.

Now, the $100,000 question is: If Amazon has truly won this round (and I think they have), does that automatically mean traditional publishers have lost the fight? I don’t think so, but how they choose to get off the mat this time can’t be related to DRM, pricing schemes, or rope-a-doping the “traditional” business model.

Bookish might ultimately be a wild roundhouse that misses and leaves them open for a body blow, but I believe the underlying desire to connect directly with readers and provide them with a valuable service is the right strategy. Finding the combination that works, though, is going to be the tricky part, and the recent charges of collusion, legitimate or not, are only going to make the need to move towards aggressive co-opetition even harder to pull off.

Guy LeCharles Gonzalez

As in guillotine. Old/new media pragmatist. Sometimes loud, sometimes poet, always opinionated. Beer, bourbon, books, games, running.

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12 thoughts on “Why DRM is a Toothless Boogeyman, Ebooks are like Video Games, and Amazon is the Winner

  1. Peter Turner

    My big question about Bookish is what value will it deliver that will allow it to compete with Amazon? I can’t image what that would be. Bookish looking like less selection, more expensive, less marketing reach via affiliates, with some social dimension.

    Reply
    1. Guy LeCharles Gonzalez Post author

      Last I heard, the “value” is supposedly in improving the discovery process, but if it’s limited to their own books, it’s hobbled right of the gate. Same if there’s no direct ecommerce option and cross-platform reader that offers competitive pricing and portability. I’d love to see their SWOT analysis!

      Honestly, I don’t see a viable angle for them, especially since the major publishers haven’t shown the stomach for playing the long game with initiatives like this. I see it being shuttered (eg: Book Army) or sold to a competitor (eg: InkPop) within two years.

      Reply
  2. Baldur Bjarnason

    Like you, I’ve been kind of annoyed by the ‘DRM-free will solve it’ hand-waving that is popular at the moment.

    It’s one thing to argue, like I did, that publishers should aggressively build a modular ecosystem to enable easy and efficient collaboration with retailers and ereader vendors, and a distribution system like that is a lot easier to do without DRM than with, unless they create an open DRM standard like movie studios did with DVDs.

    But DRM-free on its own doesn’t solve anything. It’s only valuable if it is done specifically to enable things that cannot be done today. You can argue that it would let Kobo sell to Kindle hardware owners, but hardware lock-in is becoming less and less effective, anyway, as screens for tablets and phones improve. IMO, if Kobo can’t sell epubs, adding another format to their repertoire will just let them do a crap job of selling two formats instead of one.

    Rather than giving Kobo another way to flop, why don’t publishers more effectively support new efforts—startups? Imagine how much more traction Readmill would have if it had launched selling books from all of the big six. And why are there still major publishers who haven’t signed an agreement with Feedbooks? Publishers have got to be one of the most passive-aggressive, dysfunctional, partners available in the business world. Always moaning about being the victim and never taking any action that will break their spiral of doom.

    Also, there is one major difference between Amazon and Valve’s Steam: it’s a lot easier to build a games business without Steam than it is to build a publishing business without Amazon. Games businesses have other outlets with scale as well as a much longer and greater tradition for selling direct to players.

    Reply
    1. Guy LeCharles Gonzalez Post author

      I think publishers experiment and partner more than they get credit for, and while they may not jump on every single new shiny opportunity, passive-aggressiveness is a two-way street. Far too many start-ups seem to feel entitled to partnerships despite having a combination of no track record, vague monetization plans, and/or an antagonistic attitude towards the “broken” industry they think they can “save.”

      Reply
  3. Andrew Rhomberg

    I hear Bookish will be using Openlamp’s algorithm, in other words a “pandora-like” process based on content similarity between books. This is still an unproven concept, though it will certainly make for an interesting experiment.

    However, I don;t agree that dropping DRM doe snot matter. Amazon may remain the dominant player in a DRM-free world, but what matters is to enable retail competitors to be viable even at the margin. Only with real and credible competition will Amazon keep its game up, innovate and continue offering lowest prices and highest royalties.

    Reply
    1. Guy LeCharles Gonzalez Post author

      Are Openlamp and Booklamp the same thing? Either way, an algorithm is worthless if you don’t have an audience to take advantage of it, and Bookish is launching into a very competitive space with zero brand recognition, a vague value proposition, and no audience to speak of.

      As for Amazon, competition doesn’t get anymore “real and credible” than B&N, Apple and Google, plus the sad posse of wannabes like BLIO, Copia, et al. What additional competition do you see jumping into the fray in a DRM-free world?

      Reply
  4. Andrew Rhomberg

    As for Readmill:

    Their true problem is that players like Kindle, Kobo, Barnes & Noble, Bluefire, Aldiko and others are not integrating their API into reading apps and platforms. That is not the fault of publishers and off course every API integration takes time and effort. Can’t blame small companies like Bluefire for not having the time and resources.

    Reply
    1. Baldur Bjarnason

      They wouldn’t need API integration if people could read their books in the Readmill app. That is something publishers can change through a variety of means.

      And the time and effort excuse implies that Kobo, Kindle, B&N, et al. are even trying to build an open API for people to sync their notes elsewhere. I seriously doubt any of them see their notes/highlights/bookmarking systems as anything other than another reader lock-in device.

      (My biggest problem with Amazon’s competitors is that most of them are trying to beat Amazon by mimicking its tactics. Which is foolish.)

      Since Bluefire don’t sync their bookmarks/notes to the cloud, expecting them to offer an API for that data is a bit unreasonable.

      I’d love for Bluefire to add easy export for notes, but that’s a different issue.

      Reply
  5. Peter Turner

    I totally agree (with Baldur) that there’s no point in trying to compete with what Amazon does so well and (with Guy) that algorithms require customer traffic. And, start-ups may not be justified in feeling that publishers should take them more seriously without customer data or ROI to support their model, but we all are justified in expecting more experimentation and innovation on the part of traditional publishers.

    Reply
  6. Thad McIlroy

    Guy: I am repeating after you: “DRM will not save publishers; neither using it, nor dropping it” and finding that I like the sound very, very much!

    One of the most under-rated tools for understanding technology trends is “Try to develop a compelling argument that supports a position diametrically opposed to the prevailing wisdom.”

    If you can’t develop one, the prevailing wisdom is most likely (more or less) correct. If you can develop one, you learn that, for example, DRM is not as important an issue as it has been made out to be, in part because books are not the same ‘content objects’ as videogames, songs, movies, etc.

    Thanks.

    Reply
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