How Stupid DRM Is Killing E-Books

I will defend the political rights of publishers and resellers to use digital rights management (DRM) for electronic books if they wish. I’m not convinced the practice makes for good business. As it stands, DRM is preventing me from buying an e-reader and e-books.

Meanwhile, with my shelves mostly full and without much room to expand my collection of printed books, I’m planning to be selective in buying paper-and-ink books. We live in a mobile society. People frequently change jobs and move. In some parts of the country lots of people spend considerable time on busses, subways, or trains. The market is ripe for e-books, yet the production and distribution of e-books sucks.

This is not a problem of technology. With modern software it is trivially easy to convert a book to an electronic format. (Indeed, practically all books are printed from a digital file.) While I have not used one of the e-readers, I am convinced that the technology makes the text look quite nice and readable. The good Doctors Hsieh have debated various aspects of the Kindle, but they agree the text looks nice. I imagine that new generations of e-readers will be easier to use and more versatile. (By the way, feel free to peruse my Disclosures Unjustly Compelled by the FTC.)

But compatibility issues are hell on consumers. If I buy a Kindle, I cannot even read Amazon’s e-books on my Mac, though Amazon has released a PC reader and claims a Mac version is on the way. More importantly, if I buy Amazon e-books, I cannot read them on any competing e-reader (except the iPhone or iTouch, which uses the standard backlit screen rather than the cool text-friendly, low-power screen).

I love Amazon, but forbidding customers from reading Amazon e-books on other readers strikes me as pathetically stupid and short-sighted.

Contrast the situation with e-books to digital music. True, iTunes uses unique encoding, and its songs do not work with other players. But it is trivially easy to convert iTunes music to the standard mp3 format. Amazon might consider the fact that I’ve purchased mp3 files from Amazon to play on my iShuffle, but I have purchased exactly zero e-books from Amazon because of the compatibility problem.

Meanwhile, Barnes&Noble’s e-books will only read with that company’s exclusive software. Nook, with an “expected ship date” of February 1, is priced at $259, which is, surprise surprise, exactly what the Kindle is selling for. They are both ridiculously overpriced. The Sony Pocket e-reader costs only $199. It doesn’t have wireless, but I don’t want wireless! [December 19 Update: I changed “wi-fi” to “wireless” for accuracy. The Kindle is wireless but not wi-fi, while the Nook is both.] I would be perfectly content with a USB cable. The problem is that Sony doesn’t sell the e-books I want to buy. So I can get a more-economical reader that won’t read the books I want, or I can get a clunky, overpriced Kindle. My solution is to buy neither.

While Amazon is great at selling books, it sucks at producing e-book readers. So why not sell me e-books that I can read on an inexpensive reader made by somebody else? With a standardized format, I suspect that a number of producers would make a good, inexpensive reader.

I understand that some publishers are whining about e-books. Get over it. Publishers have two options: they can adapt their products to the digital revolution, or they can die. Publishers should insist on a standardized format, or at least sell reasonably priced, DRM-free e-books themselves.

Let’s take an example. I’m interested in buying Karen Armstrong’s The Case for God. Both Amazon and Barnes&Noble sell the e-book for $9.99. But both of those versions have sucky DRM that makes them far less valuable to me. What is the solution of Random House, the publisher (via Knopf)? They will sell you an e-book! The hardback costs $27.95. And the e-book, which does not have to be printed, bound, stored, or shipped, costs… $27.95. Gee, thanks, Random House.

And publishers wonder why people aren’t buying as many books? Do you seriously think I’m going to pay $27.95 for an e-book that has a marginal production cost approaching zero and that I can buy hard-copy elsewhere for $16.34? If Random House sold DRM-free e-books at a reasonable price, I’d be happy to buy them, and the publisher would get a much higher profit margin relative to selling through Amazon or Barnes&Noble.

Some readers may have noticed that my own book, Values of Harry Potter, currently sells only in soft cover. But it will become available in DRM-free digital format soon. (Whether it will sell through Amazon’s Kindle system or other e-systems remains to be seen.)

Standard text formats already exist. They’re called HTML and pdf; you may have heard of them. But God forbid that publishers sell books in a format that consumers can easily read.

Update: After reading several comments, I thought I’d further contrast Apple and Amazon.

Apple started life as a computer company that excelled at making great hardware that works seamlessly with good software. On this platform Apple built iTunes, a retail store.

Amazon started life as a book retailer and tried to build an integrated digital book program on top of this. The problem is that the iShuffle and other Apple players work great, while the Kindle is an overpriced technological piece of gossa. I mean, it’s relatively cool, but it’s nothing like the e-reader I’d like to buy. (I certainly don’t want wireless or a tiny keyboard built in.) If Amazon produced the e-reader equivalent of an iShuffle, that would be one thing, but it doesn’t.

Another difference is that, when I buy a song from iTunes, I own that file. I can copy it to disk, back it up, and control the way I use it. If I were to buy a digital book from one of the major sellers, my “library” would be established by the selling company. The seller can alter my library. Thus, it feels a lot more like renting books than buying them, and I don’t like that. If I buy a book, I want to buy it and be in control of the file. Screw online “libraries.” Just send me the file that I pay for. I neither need nor want Amazon or Barnes&Noble to “manage” my library.

The standardized mp3 format works great for music. Practically any modern digital device will play an mp3. I will buy e-books when they are similarly portable and convenient.

December 16 Update: Another obvious difference between iTunes and e-book “libraries” is that I can import all of my music into iTunes. It will import standard CDs as well as mp3s. Try importing a Barnes&Noble e-book into your Amazon library or vice versa. This is forbidden, which again creates a major barrier to buying e-books in the first place.

20 thoughts on “How Stupid DRM Is Killing E-Books”

  1. I had to laugh at the price comparisons you cited, and they totally make your point. Bummer. It sounds like the e-book business is suffering from a partial case of the mind-numbing stupidity with which the music industry faced the digital age.

    It took a technology company (Apple) to eat their lunch last time, and it will probably take a tech company to lead the industry this time. I actually heard rumors of an Apple tablet, but I don’t know if that will happen.

    Adobe PDF is a totally universal format, and it has encryption/security, which should satisfy publishers. I wonder why they don’t just use PDF.

  2. DRM makes smart business sense until one e-book channel reaches a dominant state. This the exact strategy that Apple used, making its format difficult to copy (and illegal since ripping from a burned cd violates copyright) until such time as its iTunes store front became the dominant e-channel. Only then did Jobs advocate for open standards. I wrote about this a while back.

    What you have a standards war going on by channel owners. Nook vs. Kindle, BN vs. Amazon. Open standards destroys value in the channel by making switching costs easy. Amazon could care less if you buy a Kindle if you dont’ then buy books from it’s store. Same for BN. The monetization is in the ongoing revenue stream not in the hardware sale.

    I have an HP inkjet printer. I can’t use the cartridges for it in other brand printers. This has hardly killed the printer market.

    ebooks are hardly dying. I think the claim that DRM is killing them would be hyperbole.

  3. I appreciate your comments, Kendall. However, my point is precisely that the “monetization” is restricted because people like me won’t buy any e-books or e-readers in the current environment.

    I don’t think the comparison to ink cartridges holds up; the ink is a an integral part of the printer’s operation, whereas an e-book is merely a means toward displaying a particular text to a user, where other means are available (mainly paper-on-ink).

    Obviously my language about “killing” is hyperbole; I discuss the current market for e-books in my post, and so far as I’m aware that market is growing. But I do think that the market for e-books is considerably limited due to the hassles I describe, and I don’t think digital books will really explode until the formatting issues are resolved.

  4. Something which you didn’t note was that DRM only punishes honest consumers. Essentially DRM says to paying customers “Prove you aren’t a thief!” while making their experience much more complicated than it has to be. Less scrupulous readers will simply go get DRM-free torrents and not worry about paying the publishers for their intellectual property.

    Essentially, this is a problem with publishers who will only be dragged kicking and screaming into the modern era. As mtrunner2 pointed out, it took Apple capturing a near-monopoly(temporarily) in the music player biz to challenge the music recording industry by putting them in a feast or famine position. They were then required to make what the industry believed to be a bad choice, in the face of an even worse choice, which the music biz has subsequently profited from enormously.

    I don’t think that Amazon wants to have DRM on their Kindle books, or on their Audible books for that matter(though they apparently won’t take it off even if the author doesn’t want it on: see Cory Doctorow), but it is apparent that the publishers are terrified that if they give the average consumer books without DRM that they will be sharing them around all over the place with their friends and acquaintances. Unfortunately, those of us who wouldn’t do such a thing(which I believe is the vast majority of their customers) must be punished in the name of the tiny minority who would.

  5. But the printer ink market is absolutely ridiculous and nearly everyone acknowledges this. Ink sells at a rate more expensive than perfume. There was recently an article that went to the top of Digg which pointed out that for the home consumer that it is actually cheaper to buy cheap new printers for the ink than to buy ink. No offense, but that business model is completely messed up.

    Also… ripping your own CD may or may not violate copyright law, but is it really immoral?

  6. My only point Ari, is that when a market is growing it is not necessary nor does it necessarily make sense to grow it as fast as humanly possible if that growth will be to the detriment of your business and business model. History has shown that with products whose marginal cost approaches zero that there are significant network effects and standard setting, i.e. the fight to make sure that your platform becomes the de facto (such as with the ipod) is absolutely critical.

    Yes, it bothers some people to have to be beholding to a particular channel but then consider that these people are not the early adopters that these companies want to make sure helps their platform become dominant exactly because the things you wish for are, in the early periods, detrimental to their business.

    The printer cartridge example is relevant, but in exactly the aspect we discuss here. Monetization means profit, not revenue or volume. If I sold printer cartridges that fit everyones printers, or if I made my printer so that it accepted competitive cartridges, then I would in very short order still be able to sell a boatload of cartridges, but because I’ve removed a source of competitive differentiation, I would see my profits immediately shrink. In the case of a new market such as ebooks, yes, volume would take off more quickly, but my profit, as a bookseller would plummet, *because* my marginal costs are close to zero. Monteization is about growing the industry so that it remains profitable at every point in the value chain (or at least in my point in it).

    This is common lesson in business schools, and the answer is, do not grow your business at expense of your source of advantage. Otherwise, in the end, everyone will be buying iPods, and not your mp3 player. The iPod is the perfect example of this.

    I’m curious to your evidence that the “market is limited” or is this simply a feeling.

  7. Kendall,

    I haven’t seen any survey data regarding people’s irritation with the current chaos of e-publishing. But, extrapolating from my own experience, it makes sense that things which are a hassle to purchase and use tend not to attract as many customers. How much has this slowed down the expansion of digital publishing? I don’t know, but I’m guessing dramatically.

    In fact third parties do compete with HP in making compatible ink cartridges; see Office Depot.

    But I still think you’re missing some significant differences. Unlike with DVDs, a specific ink cartridge is designed for a specific printer, whoever makes that cartridge. I think it’s more useful to look at the wars between VHS versus Betamax and Blu Ray versus HD DVD.

    With those formats, the digital formatting was inherently tied to a physical product: a tape or disc. The whole point of e-books is that they are downloadable.

    Also, Blu Ray is a format that anybody can build for. Wiki notes that Toshiba abandoned HD DVD and started building Blu Ray machines. But can a third party build an Amazon e-book reader? No. (Except Apple, which doesn’t feature the cool text-friendly screen.)

    Your argument is that Amazon will make money with the sale of e-books more than with the sale of Kindles. But Amazon would sell a lot more e-books if anybody could read an Amazon e-book on any reader. So I just don’t see how your “monetization” argument supports the use of exclusionary formatting.

    Notice that Amazon at least is working on readers that will function on desktops, as iTunes always has.

    Obviously Amazon libraries can import DRM-free books in pdf or html formats. But the key question is this: will Amazon libraries be able to import books purchased elsewhere, as iTunes will import mp3s purchased elsewhere (such as through Amazon)?

    As I noted in an update, Amazon is good at selling stuff but bad at making gadgets. If Amazon were as good as Apple at making gadgets, and if it sold an inexpensive, bare-bones Kindle (without annoying wi-fi and mouse-scale keyboards), I probably already would have purchased one.

    But Amazon is not Apple. iPods rock; Kindles suck. So I don’t think Amazon will successfully follow Apple’s model.

    Indeed, I think Amazon may be setting itself up to lose the formatting war and lock itself out of the e-book market. If, on the other hand, Amazon let any third party build machines that read Amazon e-books, Amazon could “monetize” the e-books without loading people down with the Kindle.

    Amazon’s “source of advantage” is NOT the Kindle. That is the company’s source of pissing off customers like me. Amazon’s “source of advantage” is a great retail network with good search engines and an easy-to-use purchasing interface. If I could use that interface to purchase e-books that worked on an e-reader that I like, I would buy e-books from Amazon today. Instead, I am wavering between buying hardbacks or e-books from Barnes&Noble, which at least will read on my Mac. (I would definitely buy from Barnes&Noble today if their e-books worked on the Sony Pocket reader.)


  8. On the face of it, I would say that the Kindle was way out in front of other readers, and that price combined with DRM kept lots of people out of an unclear market. If Amazon had been able to throw off DRM they would have probably won the ebook reader fight by now and B&N, and Sony, etc.. would simply be left in the dust. The chief advantage that I can see in the Kindle right now is that when I move from device to device my books are sitting there waiting for me bookmarked at exactly where I left off in the previous device. I would very much like to have something like this for a media player as my biggest glitch right now is moving from house to car and not having smooth transitions from one media device(my laptop, or desktop, and my portable media device(s).

  9. Ari, I’m not sure why you feel so compelled to write so much and make such strong claims over something that you admit you don’t use. The Kindle as a device is wonderful. It does not suck.

    The issue you have isn’t with the hardware but their ecosystems. The problem is that your complaints don’t show insight, just impatience. In 1998 my complaints about MP3s players would have been similar. The only exceptions would’ve been storage space on the device. And, this is a big one, there is no MP3 equivalent in publishing. They don’t have standard format.

    The comparisons between the kindle and the iPod are baffling. As I mentioned, there is no industry standard for ePublishing. The MP3 was long established by the time Apple finally entered the market.

    Even when Apple did enter the market, they were severely restricted by the music companies. This is no different today for Amazon. Until that changes, the ecosystem will not be able to grow in the ways we consumers would like it to be.

    It’s perplexing as to why you blame Amazon for these restrictions and for ePublishing’s lack of file formats or for things like DRM.

    I’m also not sure why you call the nook and kindle overpriced. $60 seems a fair valuation for the difference between a device that is nearly always on the internet versus one that isn’t (btw, Kindle does not have wifi; it uses sprint’s 3G). I realize you may think that’s too much but, as you know, the market is larger than just you.

    Think of it this way. Even by 1970s standard for quality, price, and reliability, the model T was absolutely horrible. Yet we don’t speak about the model T the way we do the Pinto even though, given the choice, we’d be far better off with the Pinto.

    Likewise, we don’t point out how worthless the model-T was given at how few driveable roads existed back then. eBooks have just begun. These are the first devices of their kind. It will take some time for that road network to grow and for prices to come down.

  10. Allen, You don’t seem to be tracking the gist of my arguments.

    My problem is with the hardware AND the “ecosystem.” I simply do not wish to buy a machine with a miniature keyboard and wi-fi. The low-end Sony reader, which looks more like something I’d actually want to use, is only $60 less, but my larger point is that few producers are making e-readers precisely because of the compatibility problems. In other words, the market in e-readers has been stunted BECAUSE OF the way that e-books are sold.

    There certainly is an “industry standard” for text: it’s called pdf. (HTML is another industry standard, and any e-reader should have no trouble reading both.) The problem is that sellers of e-books refuse to use the industry standard, and instead sell books that can only be read with proprietary software, which is what makes the e-books unreadable by third-party hardware (unless specifically enabled by the seller).

    I don’t know whether the retailers or the publishers are more to blame for the current state of affairs. I don’t really care who is most to blame; if they want an expanded market, they should figure it out jointly.

    If Amazon would enable all third parties to produce gadgets that read Amazon’s e-books — a move that may require publishers’ approval (I’m not sure) — then, I believe, Amazon would vastly expand its e-book market.

    As it stands, if all I can get is proprietary e-reader software, I’m leaning toward the Nook, which means that I’ll buy zero e-books from Amazon, rather than many. Or I may buy an iTouch, which can read both Amazon and Barnes&Noble e-books, in which case Amazon will get either all or none of my e-book business. Or I might just stick with ink-and-paper books until the e-book market improves.

    No critic has written anything to cast doubt on my major claim: incompatibility issues have significantly stunted the e-book market and made e-books dramatically less useful to many existing and potential customers.


  11. Ari,

    I do get the jist of your arguments. I just don’t agree that the reason are very good.

    Minor point -> Kindle doesn’t have WiFi.

    Major point -> PDF is not an industry standard for publishing text. It doesn’t much more and really is different. It’s really no more different than claiming that MS Word is an industry standard for publishing text.

    As for HTML, that too is not an industry standard for eBooks. It’s a derivative of SGML that was created for http requests and the internet.

    At best one could argue that today their exist standards that the publishing industry should use. Unfortunately these standards are about as good as .wav. It wasn’t until the mp3 standard came around that digital music started to grow. Wav files were ill suited for life beyond a single albumn burned onto a CD.

    I agree that more needs to be done to bring about cross devices. I just feel that you’re picking on a toddler for knowing how to walk but being incapable of out sprinting a 12 year old. eBook readers are only a year or three old. Give them time to grow.

  12. Allen,

    1. Amazon advertises the Kindle as a “wireless reading device.” You cannot buy a kindle without the wireless function, which no doubt adds considerably to its cost.

    2. PDF certainly is an industry standard for publishing text. My wife is a graphic designer, and pdfs are common for printing text. The Kindle, Nook, Sony, and iTouch will all display pdf files.

    3. HTML too is an industry standard. In fact, Amazon states to publishers, “We suggest that you upload your content in HTML format, as Amazon DTP converts all uploaded content into HTML first.” In other words, Amazon is working from straight HTML files, then converting these files to a proprietary format.

    4. I’m not “picking on a toddler… incapable of sprinting.” I’m picking on a teenager still wearing diapers.


  13. The PDF format is great, but I don’t see it working for e-books. PDFs give you a hard layout for each page: that’s precisely what makes the format valuable is that the layout doesn’t vary from one computer to another. Yet in reading e-books you want exactly the opposite: you want to be able to adjust the layout to the screen and the font size to your preference. The point of an e-reader is not to mimic what you would print on an 8.5 x 11 piece of paper, but that’s what PDF does and does well.

    More particularly, the PDF format doesn’t seem to differentiate between line breaks from wrapped text and line breaks due to new paragraphs. It also doesn’t differentiate between the main text and headers, footers, sidebars, etc. That’s fine for what it does — namely, make a standard printable document. It’s not good for an e-reader. That’s why reading PDFs on the e-reader is a sub-optimal experience — and why converting them to an e-reader-friendly format often creates something totally unreadable.

    Unless some substantial changes are made to the PDF format, that’s not the right format for e-readers. I’m doubtful that HTML is the solution either: it has its own strengths and weaknesses that wouldn’t suit an e-reader.

    As for the claim that Amazon is harming its business by DRM, I can’t see that. In an interview I recently blogged, Jeff Bezos said that half of all their book sales are Kindle versions. (I’m sure they could do better if the hardware-and-interface on the Kindle were better, but I don’t think that most people care about the DRM. Heck, most people don’t even know what DRM is!) I do think that Amazon will be the winner in the e-book market, partly because they’re such a huge bookseller and partly because they’ve already captured a significant chunk of the e-book market share. (That doesn’t mean that the Kindle will survive, however.)

    Personally, I have no problem with DRM per se. I don’t mind being locked in with Amazon. I like Amazon; I buy 95% of my books from them already. What I dislike about the Kindle is the focus on wireless rather than USB transfers, the inability to view and annotate books on my computer, the location ranges rather than definitive locations, the crappy keyboard and interface, etc. In other words, I just wish Amazon could make an Apple-quality hardware/interface. But for that, I’ll wait for Apple.

  14. I agree that pdf is, for most things, not ideal for e-readers. But what’s wrong with HTML? In fact, Amazon asks publishers to submit books in HTML, which Amazon then converts to a DRM format. So Amazon e-books are essentially HTML documents already. If an HTML document cannot accommodate everything an e-reader needs, I am not aware of it.

  15. Problem with DRM:

    It’s all well and good to say.. “I’m happy with Amazon,” but if Amazon dies you suddenly don’t have any ebooks anymore while having invested in them substantially. This is additionally true if they decide to discontinue their service and shut down their DRM servers. Also… one can be temporarily locked out of their ebooks if Amazon’s servers go down(wouldn’t mention this, but they happen to be down at this immediate moment so I couldn’t quite help it.)

    It’s short-sighted to expect in modern business environments that these businesses will last indefinitely. For all one knows they could buy in to Amazon’s service for the next 3 years only to discover that Amazon has been financially mis-managed, gone bankrupt, and sold off piecemeal while their DRM servers are permanently shut down b/c there is no longer money to pay for their maintenance.

    This by itself should be sufficient reason to be wary of DRM.

  16. I’m not sure why you’re saying servers down would affect DRM on my Kindle. It would prevent me from getting new content but it does not prevent me from accessing what I already have. I only need software, which I already have, that can read them.

  17. Allen’s point is valid, but only to a certain point. What if Amazon disappears, and the software does not function on my new computer? What if my Kindle breaks and I can then only read the e-books on my desktop? People who bought Beta or HD DVD can still play those movies on their Beta or HD DVD players, but it sucks to lose the support network.

    But my major concern is not that Amazon will go away, but simply that Amazon may lose the formatting war. Even if I can still read all my Amazon e-books, if they won’t work with my new system, they’re pretty worthless to me.

    What I want is an integrated library that will access all my e-books. I don’t want to deal with different libraries for different readers.

  18. Sorry.. I was thinking of subscription-based models where you must continually renew your Digital Rights to use the materials. It would appear that this doesn’t apply to ebooks in the same way, but Ari makes the point well that there are many circumstances short of the destruction of Amazon that would leave one having spent loads of cash for something which might no longer be practical.

    If I actually own the ebook outright I can transfer it to whatever device that I like without having to worry about any future technological advances that might leave me holding an inferior product only fit for use on an inferior device.

    One of the other problems with DRM is that it creates problems for honest users while doing nothing to stop those who are determined to steal. Honest users run into all sorts of problems such as being unable to reload books onto various devices (this has happened even though Amazon claims in ads that you can reload books indefinitely apparently there are secret holds on some books restricting how many times you get to do this). While the thieves kick up their feet and enjoy a good book, the honest get to spend hours on the phone with customer service with no idea whether they will receive a just resolution to their problems.

    There are, or have been in the past, related issues with other companies such as Apple wrt to older DRM-laden music, and now with movies, tv, etc… where if you moved the files to a new system too may times suddenly you lose the right to make use of the video (b/c you DO NOT own it).

  19. Your information about iTunes is a bit out of date. There’s no unique encoding or DRM on the music iTunes sells. It’s in AAC/MP4 format, which is basically a technologically updated version of the MP3 standard and can be easily played on a lot of hardware and software.

  20. Thanks Sam; I import everything into iTunes, so I haven’t checked into going the other way.

    But your point does strengthen my argument about ebooks. The music industry has agreed on standard formatting, and the consumer can purchase a song and use it at will (consistent with copyright). As I just pointed out on my blog — — Amazon licenses ebooks, which severely restricts how they may be used.

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