When the Smell of Books Becomes the Stench of DRM

By now it should be clear that ebooks are more than just a passing fad. That digital reading revolution we’ve been hearing about for over a decade is finally starting to take shape. Amazon has sold over a half million Kindles, Sony has moved several hundred thousand digital Readers, and Stanza, the free reading app for the iPhone, has been downloaded over 1.3 million times.

As consumer adoption of digital reading devices accelerates, publishers are grappling with the impact that digital distribution will have on existing business models. It’s hard not to feel a certain sense of déjà vu as we witness yet another form of mass media completely remade in the digital era. And it’s hard not to feel just a little bit sad that publishers are making many of the same mistakes we’ve seen made in other industries — most notably by the recording industry.

Predictably, the publishing industry’s transition to digital is being muddled by an irrational fixation on DRM. It’s a surprisingly common form of mass hysteria that probably merits an extensive clinical inquiry. Until psychologists find a cure for DRM-mania, consumers will be left to deal with the fallout — a mind-boggling array of competing and incompatible software and devices.

Since publishers seem dead set on repeating many of the worst mistakes made by the recording industry, it’s worth taking a look at how those mistakes might play out in the ebook era. DRM will undoubtedly impact the development of the ebook marketplace in the same way it shaped the marketplace for digital music.

It’s About Your Customers, Stupid

The recording industry embraced DRM as a tool for fighting piracy, without ever giving much thought to the impact that DRM has on the consumer experience. In retrospect, that was a big mistake. We now know that consumer experience has a huge impact on determining who wins and who loses in the digital marketplace.

In the digital era, companies that place an emphasis on creating a quality user experience win. Companies that ignore user experience design altogether lose. It’s really that simple.

Few companies understand this better than Apple. This is the reason why Apple dominates the marketplace for digital media. Apple was able to offer consumers an incredibly well designed media player that connected seamlessly with the iTunes Music Store, making the whole process of buying and using digital media painless. Furthermore, Apple’s DRM restrictions were much less draconian than other systems, and made an effort to offer consumers the sort of flexibility they had come to expect from physical media.

Amazon has clearly learned a few lessons from Apple. While Kindle 1 was a bit clunky in design, Kindle 2 shows that Amazon is willing to iterate on design and improve on the user experience with each iteration.

Incredible as it may seem, Amazon actually beats Apple in the area of simplifying the process of purchasing media. Buying a book on the Kindle is so easy you’d be forgiven for not realizing you’ve actually made a purchase.

Kindle’s DRM is mostly transparent as well. Of course, the Kindle is so new that most users probably haven’t given much thought to what they’ll do when it’s time to buy their next reading device. But I’m sure Jeff Bezos has, and by the time the first generation of Kindle users are ready to upgrade there will almost certainly be an insanely great new Kindle to tempt them.

DRM Shapes the Marketplace for Digital Content

The recording industry assumed that when consumers fully embraced digital music, a diverse marketplace for music downloads would eventually emerge. It’s not clear how, exactly, that was supposed to happen. The industry had failed miserably in an attempt to create a standard DRM scheme and the market for digital music was fragmented by competing and incompatible formats.

Somehow, consumers were supposed to work through the compatibility issues on their own — presumably by picking one system and sticking with it, or possibly by repurchasing all of their media if they ever changed platforms. In retrospect, it’s not clear what the labels thought consumers were supposed to do. It’s very likely that they didn’t think much about consumers at all. They were too fixated on piracy to give much thought to their paying customers.

The DRM confusion was complicated by the fact that Apple refused to license its FairPlay DRM to third parties, and also refused to license Microsoft’s PlaysForSure DRM for use on the iPod.

Regardless, the labels believed that Microsoft’s DRM would gain significant market share. If, for no other reason, because it was Microsoft. In fact, we now know that the labels thought that iTunes would be a niche service, at best. It was Apple, after all. And back in 2003 few expected Apple to beat Microsoft at anything.

While Microsoft’s DRM was widely supported by a range of device manufacturers, the format never gained significant market share. The reasons were many. Off-brand media players never incited quite the same level of consumer gadget lust that iPods did, and PlaysForSure DRM integration was far from seamless. The net was filled with DRM horror stories as frustrated users recounted the gory details involved in trying to authenticate music with various services using PlaysForSure DRM.

There’s a reason why Apple refused to license Microsoft’s DRM, or allow its own DRM to be licensed. It turns out that it’s not easy to support DRM on a wide range of devices. And the process becomes infinitely more complex when the DRM authentication infrastructure is decentralized. By maintaining control over the device and the underlying DRM, Apple was able to minimize consumer frustration and ensure the best possible user experience.

The parallels between digital music and the emerging ebook market couldn’t be clearer. Amazon is maintaining tight control over Kindle DRM, and has so far show no interest in licensing Adobe’s DRM for use on the Kindle. Meanwhile, publishers are turning to Adobe to deliver a standard DRM that will be widely licensed to software developers and device manufacturers.

What, exactly, do publishers expect ebook loving consumers to do? Avoid the Kindle? Embrace Adobe DRM? Stick with print? I’m guessing that most publishers haven’t really thought this one through.

Publishers who believe that Adobe’s DRM will win this battle should consider the fate of PlaysForSure.

After failing to capture a substantial market share, Microsoft determined that the only way to challenge Apple was to provide a similar user experience. The only way to do that was to control the device, the DRM, and the marketplace. And so, Microsoft abandoned PlaysForSure when it launched the Zune. By the time Microsoft came to this realization it was too late. It didn’t matter how good or bad the Zune was, the iPod was already entrenched as the market leader.

All Roads Lead to DRM-Free … Eventually

“We were just grateful that someone was selling online. The problem is, he [Steve Jobs] became the gatekeeper. We make a lot of money from him, and suddenly you’re wearing golden handcuffs.”
- Doug Morris, CEO, Universal Music Group
Wired, December 2007

Ultimately the major labels realized they’d painted themselves into a corner by requiring Apple and others to use DRM. It became clear that DRM-free was the only way to create an open and competitive marketplace for digital content. It was no coincidence that DRM-free also eliminated many of the user experience problems that plagued PlaysForSure.

First the labels offered their catalogs to Amazon for DRM-free distribution, in a move that was intended to curb some of iTunes momentum. Eventually, the labels relented and allowed Apple to begin selling all songs in a DRM-free format.

At that point the cycle was complete. Apple had used DRM to get the labels on board for iTunes, then used that same DRM to build an insurmountable lead over every other digital music retailer. In the end Apple beat the music industry at its own game by giving the labels exactly what they wanted — DRM.

There may still be hope for publishers. It’s not too late to prevent the Kindle from becoming an iTunes for ebooks. Bezos claims that the Kindle is DRM agnostic. Further, he believes that publishers will eventually get used to the idea of selling digital content without DRM, like the music industry did. The question is, will publishers come to that realization before or after Amazon owns the market for ebooks?

8 Responses to “When the Smell of Books Becomes the Stench of DRM”

  1. David Gray says:

    “This is the reason why Apple dominates the marketplace for digital media”

    It should be noted that Apple makes far more money from hardware (iPod) than from content (songs). Apple’s concerns are fundamentally different those of from music publishers who make money only from content.

    Also, Apple did come to dominate the marketplace for digital media *while using DRM*. So it’s possible that flawed DRM (and other factors) caused the failure of other digital music retailers, not merely the existance of DRM.

  2. Kirk says:

    @David

    To your first point. That’s an issue that should be of the concern to book publishers as they consider their digital future. I’ve heard a few people speculate that Amazon isn’t all that interested in selling books. Whatever their motivation, the parallels between Amazon and Apple are pretty clear.

    Regarding DRM, my contention in this post is that Apple won because it offered DRM that the labels were demanding, while providing a superior user experience. Other DRM schemes lost because they couldn’t compete with Apple on usability. The fact that the major labels were requiring *everyone* selling digital music to use DRM meant that consumers had to pick a format. In the end, they chose the format that provided the best user experience. I believe that the same thing will happen in the market for ebooks, and that Amazon will be the clear winner.

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