Why e-book DRM will die, and why this will make no difference to Amazon and Apple
The U.S. Department of Justice's decision to investigate Apple and five publishers over alleged collusion in e-book prices and sales models has sparked off an interesting side-debate on the subject of DRM and hardware lock-in.
Without DRM, the argument goes, more people would steal content rather than pay for it, pushing up the price for everyone. The truth is though, DRM has little, if anything, to do with curbing piracy.
In fact, DRM is probably the most ineffective way of combating piracy there is.
Instead, DRM exists primarily as a way to control how consumers access purchased content. A side effect of this is that DRM can be used to lock people into a particular platform or service. And the really insidious thing about this is that people are unaware that they are being locked into a platform or service.
The other day I carried out an impromptu survey of seven people with Kindles on a train on which I was traveling. Of the seven people, six were completely oblivious to any DRM at all (the subject hadn't seemed to entered their consciousness). The one person who was aware of DRM saw it as nothing more with content being tied to a platform. "It's no different to needing a DVD player to be able to watch a DVD, or an Xbox 360 to play an Xbox game," he said.
Consumers, it would appear, are quite happy with the idea of content tied to a particular platform or service. To the masses, it's normal. It's business as usual.
If that's the case, then why will e-book DRM die? Its death will have nothing to do with companies wanting to be more consumer friendly, but instead because publishers fear creating a monopoly and monopsony more than they fear piracy or annoying a minority of their customers.
Author Charles Stross does a good job of explaining the situation in a recent blog post. He outlines how, in a headlong rush to move from an analog product to a digital one, publishers "outsourced the DRM to the e-book resellers" such as Amazon. He goes on to say that by "foolishly insisting on DRM, and then selling to Amazon on a wholesale basis, the publishers handed Amazon a monopoly on their customers-and thereby empowered a predatory monopsony."
This, claims Stross, has put the publishers in a dangerous position. While DRM was seen as a way to control the consumer -- and perhaps curb casual piracy -- Amazon, with its "revenue of $48 billion in 2011," a company that has "expressed its intention to 'disrupt' them [the publishers]," is a far bigger threat. DRM is no longer just a mechanism for controlling what users do, it's now being leveraged to control the publishers themselves.
So far we've been talking almost exclusively about Amazon, but Apple also uses DRM on e-books in much the same way that Amazon. In fact, as far as the consumer is concerned, the DRM on Apple's iBooks content is far more limiting, only allowing the book to be read on iOS devices. Compare this to Amazon that has a reader for all the popular platforms, including the PC, Mac, and iOS.
And if Stross is right and Amazon with revenues of $48 billion in 2011 and a desire to disrupt the industry is scaring the publishers, Apple, with its revenues of over $100 billion and profits of almost $26 billion in 2011 - not to mention the company's track record of industry disruptions - must scare them rigid.
This is why DRM on e-books will die. Frightened publishers will make sure it happens.
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.
On the whole, consumers don't care about DRM, and removing DRM from e-books won't open up the market in the way that publishers hope it will. What Amazon and Apple has done with Kindle and iBooks respectively was not invent e-books, but refine how the content was consumed. Devices such as the Kindle and iPad make it easy to buy and read e-books, and these benefits are what draw people to these platforms. I said earlier that DRM was probably the most ineffective way of combating piracy. Want to know what one of the best ways to get people to pay for content is? Make it easy to find and purchase, and people will buy it.
Unless the publishers can come up with their own one-stop shop for e-books, make this as easy to use as Amazon or Apple's offering, get this outlet onto devices that people use, and then come up with compelling reasons why people should choose to use it over other outlets (the hard part), nothing will change.
Image credit: Amazon.
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