One More Reason Publishers Are Considering Dropping DRM

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

First a bit of background:

The DRM technology used outside Apple and Amazon is Adobe Content Server (ACS), currently in version 4.1.

This DRM technology is used by Barnes & Noble, Kobo (but not in all scenarios, i.e. not for its mobile apps, but it IS used for its ereader devices), Sony and many others. As a result an ebook bought from one vendor can be read on the devices or app of another vendor.

The one major exception is Amazon devices.

Apple does allow 3rd party eboook apps and thus its devices are compatible with Adobe DRM as well, though ebooks purchased through iBooks are not portable to non-Apple devices.

Thus there is an asymmetry today that strongly, very strongly favors Amazon.

Publishers and retailers used to have a direct relationship with Adobe and licensed the technology directly from Adobe.

Related: Bookseller Backed by Big Publishers Advocates Dropping DRM

 

The cost

These licenses cost money. Typically $10,000 upfront with $1,500 in annual maintenance fees and a $0.22 transaction fee per ebook purchase. This is revenue that flows to Adobe, not authors, publishers or retailers. Where the retail price for an ebook is $0.99 or $1.99 this is a very noticeable percentage (12% to 22%) of the retail price.

The DRM technology restricts sharing to a maximum of 6 devices (same applies to Apple and Amazon, so no difference here).

 

Adobe’s changing role

However, ebooks is small fry for Adobe and Adobe recently is forcing most folks to go through resellers and is or will soon also apply to big publishers.

I am now getting to my major point.

Big publisher now have no direct contact to Adobe and have little or no way of influencing the direction of future DRM technology in terms of features, etc. In many ways the development of ebook DRM technology is already stagnant. In other words, publishers are now powerless with regards to the technology that protects their content (and so are authors).

I hypothesize that this is not an insignificant factor in publishers reconsidering their position with regards to DRM. It may not be the central issue, but in light of recent developments it is an issue publisher are paying attention to.

 

Fragmentation

One should not underestimate that the larger the base of installed devices is that can be addressed, the more innovation happens and the bigger economies of scale. Fragmentation dramatically increases distribution cost and moves value to intermediaries who specialize in managing this fragmentation. This means value flows to players outside the traditional value chain. Not a positive sign for publishers either.

 

End of DRM

It is my observation form discussion before and during the London Book fair that no-DRM has suddenly moved from the fringe to the mainstream. The central reason is the DOJ and how the playing field has tilted in Aazon’s favor.

This does not mean that the end of DRM is necessarily imminent, but it now has become a distinct possibility. If 2 or 3 top tier publishing houses were to drop DRM, then every publisher would follow. This is what almost every publisher at London Book fair confirmed to me. In other words the change could be sudden and rapid when it comes.

At Jellybooks, we are already taking into consideration that any investment in Adobe technology could potentially be worthless in 6 months time and assign it a certain probability.

Related: Bookseller Backed by Big Publishers Advocates Dropping DRM

6 thoughts on “One More Reason Publishers Are Considering Dropping DRM

  1. Tom Semple

    Adobe does not get a transaction fee on every sale at the ‘majors’: B&N, Kobo, Google. As long as the content is delivered to and consumed by their respective apps and devices, ACS is not involved, proprietary methods being used instead (for example Nook stores content in a hidden partition). Their customers can enjoy full benefits of the respective ecosystems without getting an Adobe ID. Smaller vendors of course do not have the resources to develop their own ecosystem to this extent, and do pay such transaction fees, but they collectively account for probably less than 5% of total ePub sales (especially if you throw in Apple, which does not provide an Adobe ‘exit’ option).

    The so called ‘lock in’ does not occur on DRM boundaries, or even format boundaries, but on ecosystem boundaries. That will continue to be the case in a DRM-free ebook universe. That could change if there’s demand for open standards for ebook delivery, cloud storage and synchronization, sharing of notes, etc. ‘Ideally’ customers could choose the reading app that best meets their requirements, buy content for it from any store, and use add on services (cloud storage, synchronization, sharing) of their choice. Getting rid of DRM seems like a good first step, but a relatively modest one.

    Furthermore if publishers have concerns about how Adobe implements DRM, or its future, they happen to be some of Adobe’s most valued customers (courtesy of InDesign, Digital Publishing Suite) and can certainly make their requirements known. But again, Adobe DRM is not used as much as one might think, so (I would argue) it is not much of a driver in how the ebook market is developing now.

    Reply
    1. Andrew Rhomberg

      Whether a “major” has to pay a transactioan fee to Adobe depends on two things in this context:

      – is the app based on Adobe’s Reader Mobile Software Development Kit (RMSDK)? if yes, then a royalty is due.

      – is at least one copy of the ebook copy served to a device using RMSDk (typically an eReader). If yes, then an royalty is due.

      The absence of Adobe ID identification doe snot indicate that Adobe isn’t being used. BN long has had a special ID methodology called “pass hash” and more recently BN and many others have used a scheme called “Vendor D” that allows them to identify the user to Adobe’s identification servers without the user entering an Adobe ID. In other words Adobe DRM may be working in the background even if you do not notice!

      Barnes & Nobel, Kobo and Google are all Adobe DRM licensees.

      Book publishers (as opposed to newspaper or magazine) publishers being taken serious by Adobe? Well they all tell me they are not!

      Reply
  2. Rebecca Todd

    Hmm interesting. We lose so much to illegal copying. It is hard to track whether our DRM will help prevent copyright infringement, but unfortunately our end user (students) seem to have little or no respect for intellectual property. I will be interested to see what the more mainstream publishers decide to do. Thought provoking post. Thank you!

    Reply
    1. Andrew Rhomberg

      Unfortunately DRM is here to stay for a while longer in the academic field, because piracy is so rampant among students and in tight knit communities. The solution would be institution-level licensing agreements.

      However, in trade publishing there is a real possibility that the days of DRM are numbered.

      Reply
  3. Joseph

    You forgot to mention that for actually develop an application that can read adobe DRM. Adobe also charge a very large yearly amount for the SDK! [very large!]

    Reply
    1. Andrew Rhomberg

      The Adobe RMSDK used to be $75,000 per year, but does not “hit” the vendor unless the vendor decides to have their OWN ebook reading application. A vendor that relies on 3rd party reading apps (Aldiko, txtr, Bluefire, Readmill, etc.) does not incur this cost.

      Reply

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