Apple makes some pretty cool products. If you’ve spent any time stuck in the Microsoft Office world, Apple’s office products—Keynote, Pages, and Numbers—are a revelation. The best part is you can open MS Office files with Apple’s products, and save them into Apple’s format, or many others.
That’s possible because Apple reverse-engineered Microsoft’s products and made tools that can handle Microsoft files—or, more specifically, the files that Microsoft customers created. Those files aren’t Microsoft’s, of course. It would be stupid to assert that merely making a program gave you a stake in all the files created with it... right?
But we’re now entering a world where this kind of interoperability is verboten. Thanks to the 1998 Digital Millennium Copyright Act, it’s illegal to break DRM, even if you’re not violating copyright. Say, for example, you’ve bought a DRM-locked iBook from Apple and you want to switch to a Kindle. Converting the underlying files (going from EPub to Mobi) is a solved problem—a program called Calibre does it with a simple drag-and-drop operation. Of course, it’s illegal, because that conversion involves removing DRM. It is not only illegal to convert lawfully purchased e-books, it’s illegal to make a tool that does so; illegal to tell someone how to make such a tool; and illegal to distribute that tool. Even if you wrote the book and own the copyright, it’s illegal for you to remove DRM to convert your own book.
In practice, this means that once you use DRM, every cent your customers spend on DRM-locked e-books becomes a whip for the retailer to beat you with. Because once your customer is locked into a retailer’s DRM-locked format, your customer becomes the retailer’s customer. This is especially troubling when you consider that the duty cycle of a handheld device like a Kobo, Nook, or Kindle is all of 18 months. Every year or two your customers have the opportunity to switch platforms. If their e-books have no DRM, they can simply switch. But if they are DRM-locked, switching platforms could mean abandoning their e-books.
The tech industry, of course, knows this, and the entire life of the IT industry has consisted of a series of pitched battles over DRM lock-ins. Remember that whole Microsoft antitrust thing? Or think of the insanely awful world of converting your old Quark docs to modern formats for repackaging as e-books and reflect on the keen sense for technology control points that the IT industry has honed over the decades. To seek lock-ins for others while avoiding it themselves is in tech’s DNA.
But now, with e-books, the chickens are coming home to roost. In February, veteran author Jim C. Hines discovered that Amazon had discounted his $2.99 e-books to 99 cents, cutting his royalties in the process. Jim tried in vain to discover why Amazon had done this. One Amazon rep told him that the company reserved the right to re-price their e-books (“...sole and complete discretion to set the retail price at which your Digital Books are sold through the Program”). Jim made a stink, and another rep got in touch with him to say that in his case, they’d lowered the price because they had out-of-date information about how he priced his books in the Kobo store.
This is what DRM enables. Imagine Amazon and other platforms all reserving the right to lower your e-book prices to match a competitor’s lowest advertised price. Imagine if Amazon decided to cut your $3.99 book to 99 cents for a promotion (while paying you royalties on $3.99 for the duration of the promotion). Its competitors would soon notice that Amazon is advertising your book at 99 cents and invoke their right to price match. The upshot: your book is never going back to $3.99, ever. Such baked-in price matching would have the effect of making all price drops permanent.
Jim C. Hines’s e-books are marketed both through a big publisher and solo. The books that were re-priced by Amazon were his solo titles—unagented, and unrepresented by a major publisher. As an individual, Jim has no leverage over Amazon. Not so his publisher, which controls a much larger number of SKUs and has much more leverage.
In 2011, Macmillan made headlines during its tense standoff with Amazon over e-book pricing, but the publisher was able to sway Amazon because it could make a credible threat that it might get up from the negotiating table and take all its books, too—and others might follow. But Macmillan’s edge—its scale—is also its undoing. Every day, Macmillan sells more e-books that have been locked into Amazon’s format. The millions of dollars that Amazon customers spend on Macmillan’s DRM-locked e-books represent millions of dollars of e-books Macmillan customers lose if they wanted to follow Macmillan away from Amazon. Publishers believe DRM protects their books. But DRM has created a world where publishers who walk away from negotiations with a DRM vendor like Amazon leave their customers behind.
Not just Macmillan. Any publisher that sees a substantial portion of its income from DRM vendors becomes little more than a commodity supplier to those vendors. If Hachette or HarperCollins decided to bite the bullet and pull their titles from Amazon during a dispute, how many of their authors would stay with them, knowing that the world’s largest bookseller and most popular e-book platform no longer carried their titles?
To appreciate this vulnerability, just look at what happened in February with the Independent Publishers Group, a distributor that asked Amazon to hold the line on its discount. They weren’t able to reach an agreement, and Amazon removed all IPG’s e-books from the Kindle store. The day that happened, IPG sent out a communique describing the situation and asking its readers to avoid the Kindle store in future.
Well, solidarity, that’s nice—but what about all the readers who’ve already bought a Kindle and a bunch of DRM-locked e-books from IPG? Are they supposed to buy a new device, and re-buy their books? On the other hand, if IPG had insisted that all its books be sold by all its retailers without DRM, this is the communique they could have sent out:
“IPG is saddened to announce that we have been unable to reach an agreement on the terms of sale for our e-books with Amazon, and as a result, our titles are no longer available in Amazon’s Kindle store. However, all our books are still available in the Nook store. Also, here’s a link to a special edition of Calibre that we’re sponsoring to automate buying our books from BN.com, converts your e-books to Amazon format, and installs them on your Kindle. If you ever decide to switch devices, with IPG you’ll always be able to take your e-books with you. You bought them, you own them, and we’ll always make sure that you have a way to convert your e-books to the latest and greatest devices. Changing devices and platforms shouldn’t mean throwing away your library.”
Now that’s leverage.
I’m proud to say IPG distributes some of my books, a pair of handsome little essay collections from Tachyon. But if I ever do a successor volume and include this essay, it seems that it will be ineligible for sale in the Apple iBooks store. Because, as Seth Godin discovered in February, Apple refused to sell his book Stop Stealing Dreams unless he removed all links to Amazon from its pages.
Apple knows exactly how valuable the ability to interoperate with a competitor’s products is—and they know exactly how invaluable it is to be able to prevent competitors from interoperating with them. Apple has also refused to let Macmillan sell my e-books without DRM, and told Audible that it wouldn’t carry my Random House audiobooks without DRM.
In January, Apple released its iBooks 2 app for authoring e-books to be displayed on the iPad. The fine print on the licensing agreement says that any book created with the iBooks authoring app can only be sold in the Apple store, because the program’s proprietary design elements give Apple a stake in the product, and thus the right to tell you what to do with the book you create using it. This is tantamount to Quark insisting that QuarkXPress files can only be sold in the Quark Store, or Adobe creating an InDesign store with exclusive rights to sell InDesign books.
Demanding editorial control over books to prevent readers from discovering a competing product is valuable, but beyond the pale. Imagine if Wal-Mart only agreed to sell street atlases that omitted roads on which Sam’s Club could be found.
Apple’s management has had a few high-profile moments of publicly decrying DRM—but in reality, when rights holders ask for a DRM-free life, Apple runs in the other direction. Anyone who thinks that Apple’s use of licensing terms, DRM, and editorial oversight is because it wants to protect its “elegance” rather than its market capitalization hasn’t been watching the company’s stock price.
Lest you think this is limited to Apple and Amazon, PayPal has tried to assert editorial approval over the titles it processes payment for, supposedly to protect us from reading about rape, bestiality, or incest. Smashwords agreed in February not to sell files that PayPal objects to. Last week, PayPal backed down and says it is now limiting its disapproval only to e-books with “potentially illegal images.”
On the surface, this is still an act of censorship—but more than that. It’s a tech company that serves as a mere intermediary exerting its lock-in to relegate creators and their investors to mere commodity suppliers. Any time an intermediary can lock in your customers, they’re not your customers any more.
For too long, publishers have been worrying about the wrong thing, chasing pie-in-the-sky DRM that has never worked at stopping piracy, and will never work. In the process, they’ve fashioned a scourge for their own industry—a multimillion-dollar liability that their customers will have to absorb in order for publishers to get back any leverage at the bargaining table. And every book you allow a tech company to sell with DRM only increases that liability.