DRM Is Not A Binary Decision

Consumer rights with respect of ebooks continue to be up in the air.

Only last week, Sony, the prime driver for Adobe’s ACS4 adoption back in 2006 said that they were coming back into the Digital Rights Management (DRM) market.

This week the Electronic Frontier Foundation announced they have commissioned the vocal DRM opponent, Cory Doctorow, to take on DRM technologies that they believe threaten security, privacy, and undermine public rights and innovation. The objective of their Apollo 1201 Project, is claimed to be "a mission to eradicate DRM in our lifetime."

Named after the US Apollo space prograame which took some 10 years to achieve what on its creation was viewed by many as an impossible mission.

What is certain is that the DRM that today inhibits consumers ability to transfer files between the various ‘walled gardens’, is going to either change radically, or be unilaterally be removed. It is hard to envisage what we have today as being sustainable over the next decade. The EFF mission goes past ebooks and is aimed at games, apps, video and all cases when DRM inhibits interoperability.

EFF raise the issue of Section 1201 of the Digital Millennium Copyright Act (DMCA) which outlaws the circumvention of copy controls. They agrue, ‘That ban was meant to deter illegal copying of software, but many companies have misused the law to chill competition, free speech, and fair use. Software is in all kinds of devices, from cars to coffee-makers to alarm clocks. If that software is locked down by DRM, tinkering, repairing, and re-using those devices can lead to legal risk.’

However as we have argued many times DRM is not and should not be a binary decision, where DRM is either on or off. We should look hard at the whole issue not just one element and we look at opportunities as well as threats.

One issue that must be addressed is provenance of ownership. In ebook terms look at this as an’ex libris’ stamp that can be traced back to the sale. It doesn’t have to be invisible and it may be open to abuse but if validated could revolutionise the ownership versus licence position and enable the first sale doctrine and resale of ebooks. This may be apporant to many in the trade but if watermarking soft DRM is not adopted then this door shuts whilst the stable door of DRM is potentially flung wide open. Some would say a very stupid situation.

The resale of ebooks is currently being fought out in the Dutch courts where Tom Kabinet is being challenged by the Dutch trade. Tom Kabinet which to resell ebooks and offer a service similar to ReDigi is try to establish in the music market. The court has instructed Tom Kabinet to close temporarily as not all titles can be proven to have full provenance of ownership. So the courts may take a different position if such a position could be established. The door is half open to the trade to create an opportunity, or to blindly slam shut and rejoice in potentially a false victory.

Judith Mariën, a Tom Kabinet’s founder, said that she believes that despite the court verdict, it is ‘good news’ in that the court ruled that the site’s basic business model is essentially legal.

What is important that the trade start to think consumer, think service, think and avoid closed doctrine and protectionism for the sake of protectionism.

Hear, See and Speak - No Used eBooks?

How do industry bodies and major players respond to new entrants who offer something different? Do they go out to squash them in order to maintain the status quo? Do they attempt to reign them in and restrict their influence and impact? Do they invest in them and work with them to create new channels, new markets and new revenues? Some believe that many stick their head in the dark and wish them to go away?

This last week we have all read the Amazon Press Release over their ongoing battles with Hachette and one of the most relevant statements came right at the beginning in their reflections of the current consumer offer.  

A key objective is lower e-book prices. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market -- e-books cannot be resold as used books. E-books can be and should be less expensive.

The somewhat throwaway line that caught our attention was that, ‘there is no secondary market ebooks cannot be resold as used books.’ With the revelations earlier this year about Amazon’s used ebook patent, we know that it has had its eye on this opportunity, but that the first sale doctrine is maybe a battle too far today. But used ebooks are almost certainly to happen and the change will be either driven by consumer demand or other start-ups who are prepared to push the envelope. It took the likes of Waterstones, Dillons and others some three years from starting to discount in 1991, to the collapse of the Net Book Agreement in 1994. It took years of patient lobbying for the B&Q and other large UK retailers to open up Sunday trading. It took years to change UK licencing laws. Things change in time and they change in favour of public demand.

Last month a judge for the District Court of Amsterdam ruled that Dutch used ebook reseller, Tom Kabinet can continue to operate while it is being sued in court by the Dutch Trade Publishers Association. Tom Kabinet enables users to resell DRM free and digital watermarked ebooks.

The Tom Kabinet site takes a 10% commission on all ebooks sold and have offered to pay a 5% royalty on all sales to authors for each ebook sold on their marketplace.

However, Tom Kabinet like the used l digital music service ReDigi are also up against EU legislators and a strong lobby. Although ReDigi is still in operation today, and have been awarded a patent earlier this year for their marketplace platform they have had to adapt their service in light of losing legal battles.

When Napster first threatened the music production business, the industry fought back through the courts and set out to shut down the new file sharers. The propaganda PR and lobby machines were wound up and the sound bites and messages broadcast. The political lobbing started as the industry  set out to shut down the new file sharers before they could establish themselves. The problem was Napster was free and consumers made it go viral.

The music industry won its battle with Napster, but then had others to deal with who had watched the Napster battle and learned new tactics. Although the music business kept winning they also kept losing and by the time they tried to get the Napster brand under their umbrella it was too late and the stable door was wide open.

The music streamers came next. First there was Spiral Frog who failed to deliver, but they were followed by Spotify and Pandora who did. The big music producers had learned some lessons and bought into the service but also tried to tame it and minimise the risk to their model. However they failed to understand that the threat wasn’t free, nor was it sharing, but it was about the whole ownership ethos that they had profited from for decades. The streaming services asked why you needed to buy when you could access on demand, from anywhere at anytime. Spotify with its 24 million users, of which 6 million are subscribers and the other services started to redefined ownership and how we paid for and listened to music.

It’s amazing how long the music industry took to include downloads into its charts and that they have only just opened the door to include streamed music. Today 228 million downloads happen across the various services every week in the UK and that is up from 142 million in 2013 and 67 million in 2012 (Official Charts Company). The maths of how many tracks on average people download a week, is not hard to calculate and is significant. Some 41.5% of singles are streamed and 12% of the current top ten are streamed. The UK alone has delivered a staggering 18.5 billion streams and in 2013 overall market revenues from streaming pasted the $1 billion mark for the first time. Interestingly, while streaming has experienced explosive growth the overall revenues of the global music market have only increased by a mere 4.3% (IFPY and Spotify).

We wonder how long it will be before they fully recognise the impact YouTube has made and that some suggest that more kids now watch their music today than listen to it. Interestingly, the success of streaming is negating the demand for used digital sales and in a market where growth is clearly in a new ownership model enabling secondary sales makes sense and will generate further income for artists.

Change will happen and denying used digital media a second life and sale will increasingly be seen as wrong and an untenable position by the people that matter the consumers. Denying a second income opportunity also impact creators at a time when their own first sale income is increasingly not meeting their expectations and the pool is being shared with even more fish.

Unlike music, ebook consumption is relatively low and prices relatively high and this will reduce some of the appeal of on demand ebook subscription services. The book market will remain a mixed economy for the foreseeable future with physical, digital, see through and subscription offers.  Perhaps it time that publishers work with new stat-ups to create and support a thought through and complimentary used ebook market and not wait for the collapse of the restrictions they have today and the chance that the result may not be favourable.