Tuesday, April 24, 2012

Ebook Pricing Lawsuit & Tor Announces DRM Free eboooks: Why they are related?

I have avoided talking about the Department of Justice lawsuit against Apple and the Big Six publishers as I did not feel it was relevant to this blog.  I view this blog as a "book" blog and not an "industry" blog as first and foremost I am a fan of books.  But, today's announcement from Tor that their catalog is going DRM free by July 2012 is a watershed moment for fans and industry alike.  I do not think it can be overstated how important this is.  I think Tor will simply be the first of many publishers taking this path.  I fully expect in the next few years that DRM free books will be as prevalent as DRM free music.  Also, why are these two topics related?

I will not go into the backstory as it is well covered by outlets emminently more qualified to discuss this than I am.  I would recommend you start with Charlie Stross' critique and then hop over to GigaOm and PandoDaily for other salient points of view.  If you follow me on Google+ or Twitter, you will undoubtedly have read some of my opinions as I felt those forms more appropriate than this blog.

What I find relevant in all of this mess is how it has impacted the average reader.  My frustration with publishers is simple, I think they squandered a golden opportunity with ebooks.  One that they will have to fight to regain.  I think when facing the classic "Innovator's Dilemma", the publishers lacked courage.  Instead of risking their existing physical sales channel by pushing ebooks, the publishers doubled down on physical.  So, when Amazon came knocking asking for rights to publish ebooks, publishers gave Amazon everything and the kitchen sink.  Ebooks were unimportant, a non-existent revenue stream.  Amazon was going to foot all of the risk in their wild goose chase.  After all, Sony had been slogging away at ebooks for years without any success.  It was a niche market.  Readers wanted books.  No one would ever want an ebook.  Full Disclosure, I am an unabashed Amazon fan.

It is this event that frustrates me to no end with publishers.  Publishers for the first time had a chance to connect more directly with their readers, to take control of the relationship.  Up until this point, that relationship was controlled by bookstores and more recently by Amazon.  Yet, with digital distribution, lets ignore the economics, publishers could sell direct to the consumer.  They could have fostered a relationship that would help drive book sales.  EBooks are tiny files, setting up a store front would have been trivial.

But, instead, publishers gave everything to Amazon.  They let Amazon build an eco-system that flourished.  More importantly, they gave Amazon complete control over the customer relationship.  This control existed both up front and more importantly behind the scenes.  Amazon had already become the go to place to purchase physical books.  People equate books with Amazon.  So now, a trusted source selling ebooks was a reasonable proposition.  So between the trusted brand, the awesome Kindle eco-system and great pricing...readers bought in hook line and sinker.  The ugly truth however is the Kindle DRM.  This is why I resisted purchasing a Kindle for so long, I kept hoping that ebooks would go the way of mp3, meaning that they would be DRM free.  But, it never happened and I ran out of patience.

Kindle's DRM is insidious.  It prevents you from owning your books and it prevents you from moving to another service.  So, even if for some reason, you decided you didn't like Amazon, their great pricing, their great website their great Kindle service, etc...how do you leave?  You can't without breaking the law.  But why would you want to leave anyways?  The Kindle eco-system frankly gives you little reason to leave.  In this way, Amazon OWNED, in all capitals, the customer relationship.  Not only that, but Amazon sank the capital into the ebook market that no one else was willing to sink.  Capital with with a Capital meaning both money, mind-share and technology.  The Kindle as a product was a total company effort by Amazon.  Its success is telling, a near monopoly.  Not only was it a success for Amazon, it was a success for readers and publishers.    Why? Books were easier to find and read than ever and people started buying MORE books and reading MORE.  The problem was that Amazon was in the driver's seat and not the publishers.

Publishers realized this too late.  Publishers honestly did have a lot of time to realize it either.  Ebooks went from a non-existent market-share a few years ago to a project 40% of all book sales by the end 2012.  If that is not pulling the rug out from under the publishers, I don't know what it.  In the mean time, Google was proving a half-hearted attempt to compete w/ Google Books and its independent re-seller program.  Barnes & Noble's was mounting a good effort with the Nook but was barely putting dent into Amazon's Kindle juggernaut.  Worse, all of these options also had DRM that locked you into the respective eco-systems.  The publisher's savior was Apple.  A company with the resources and brand recognition to compete head to head with Apple.  But Apple had one pesky problem, they had no interest in being a wholesaler and had zero interest to sell books at a loss like Amazon.  Enter the "collusion" over the agency model.

It is at this point the story that I become completely exasperated with the publishers.  They OWN the content.  They could get out from Amazon's thumb by offering DRM free books direct to its readers or forcing its agents, Amazon et al., to do so.  DRM-free books that would work with any device.  Instead, they partner with Apple and yet again, force DRM onto the reader, locking the reader into Apple's eco-system.  So instead, the publishers repeated the mistakes of the past and in the process, get themselves entangled into a nasty lawsuit that does little to help their public image.  Worse, they make Amazon look like the readers best friend.

I do not like the current marketplace for books.  Because of DRM it is basically three walled gardens: Amazon, B&N and Apple.  I am pretty confident that this isn't the best for the industry or readers.  It is also completely the fault of publishers.  But, I do not want publishers to go away.  I think that would honestly be terrible for the industry in general.  While Amazon has many sterling qualities, I do not think they are "book" people.  Publishers, at least the rank and file of people, are book people.  Just follow them on Twitter and you will see their love of books.  I think the worst they are guilty of is being snobby, hence their distaste for ebooks.  But, it is their love of books and their dedication that is in the best long term interests of the industry.   At the end of the day, publishers want to put the best book they can in front of you.  That is their business.

That is precisely why the announcement by Tor is so important.  Tor is a publisher of consequence.  It can empower change.  I hope this is a sign that publishing is waking up.  But, it is the first of many steps that publishers will have to take.  It is not good enough to simply sell DRM free books.  You have to foster a relationship with you customers.  You have to give them a reason to purchase your books.  Publishers will largely have to start from square one as they have squandered away their advantages at every turn.  They have given Amazon, Apple and Barnes and Noble's a colossal lead.  Each has built impressive eco-systems around their respective devices.  Readers have very little reason to look up from their Kindles, Nooks and iPads with their built in book stores.

But, I will buy DRM free books.  If the publishers offer them direct, I will buy from them first.  If the publishers let author's sell their books direct, I will buy them that way.  If publishers empower local book stores to sell ebooks, I will buy them that way.  The point is, I would prefer to buy books directly from publishers DRM free.  As much as I love Amazon, I love books more.  I am very excited about this news.

Image Source: Scanned Cover

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