To Save Indies, Publishers Need to ReConsider DRM
Yesterday Books on Board posted a notice that it was “temporarily” shuttering the retail portion of its site. Consumers could still access titles that they had previously purchased but no new purchases could be made. This leaves some readers who had gift cards without recourse for now.
One of the arguments made by publishers when Agency Pricing was instituted was that independent stores would benefit but possibly the only indie stores that were helped by Agency Pricing were physical brick and mortar retail stores.
Independent book retailers have struggled, both before, during and after Agency Pricing. There were the initials struggles of getting the mainstream publishers to sign contracts with independent etailers when the Agency Pricing model was implemented. It took several months for places like Books on Board, Diesel, and All Romance to start carrying the major publishers’ ebooks. Further, the reduction of margin from 50% to 30% and the elimination of any kind of discounting meant that independent etailers could not differentiate themselves from Amazon or other major retailers through buying clubs or coupons.
Fictionwise’s buying club membership held me hostage there for longer than I’m willing to admit. It wasn’t until that program shut down that I ended up buying nearly 100% of my purchases at Amazon.
Books on Board was an early supporter of Agency Pricing. He received a standing ovation at a book conference where he exhorted all of us to come together to put a stop to Amazon’s predatory pricing. But BoB went from #3 ebook retailer to a non player after Agency was introduced.
His store, which sells mostly DRM titles, rose to the #3 spot in e-book retail, then sank back in 2010, when the agency model was introduced. As a result of the transition, BooksOnBoard lost a significant part of its book catalogue—and customer base. “Kobo, Sony, and Apple overtook us“ says LiVolsi, who spent the next six to 10 months restoring his inventory.
“The agency model fundamentally shut us off from a capital standpoint,” says LiVolsi. “It was a pretty ugly thing and pretty insensitive to the channel.”
Independent brick and mortar stores that have tried to implement a digital book component to their stores have struggled as well. Because of the technological barriers to entry, the American Booksellers Association worked to have Google provide a white label ebookstore for its member brick and mortar stores. It was nothing more than an affiliate scheme and the money earned from the Google Bookstore partnership was quite small. Google shut its affiliate doors in 2012.
Enter Kobo. Kobo provides essentially the same service for independent bookstores through an arrangement with the ABA but even though sales are more than through Google, the profit the brick and mortar stores is still small.
The Harvard Book Store in Cambridge, Mass. has sold “a couple hundred” ebooks since Nov. when the store first started, according to Carole Horne, the store’s general manager. Main Street Books in Lander, Wyo. has sold “maybe 20,” said the owner Amanda Winchester. Greenlight Bookstore in Brooklyn has sold about 100, according to the store’s co-owner Jessica Bagnulo. The Green Apple bookstore in San Francisco is selling about 75 ebooks a month, said its co-owner Kevin Hunsanger.
One brick and mortar store admits that he doesn’t know why his customers would buy ebooks through him.
Ebook retailing is not for the faint of heart. Digital rights management which can eat up to 6% of any retail margin also causes the biggest headaches. For independent ebookstore, All Romance eBooks, the majority of their technical support is directed toward helping readers with DRM issues even though those sales represent a tiny fraction of overall book sales. Ruth Curry of Emily Books blogged at PaidContent last year about how crippling DRM is for her independent ebook retail store.
DRM is supposed to prevent piracy and illegal file sharing. In order to provide DRM, you need at least $10,000 up front to cover software, server, and administration fees, plus ongoing expenses associated with the software. In other words, much bigger operating expenses than a small business can afford. By requiring retailers to encrypt e-books with DRM, big publishers are essentially banning indie retailers from the online marketplace.
Goodreads, despite having the perfect audience for ebook selling, never sold DRM’ed books and only occasionally dabbled in selling non DRMed ebooks. Now that it has been acquired by Amazon, all its bookselling needs will be provided by entity with the biggest proprietary software lock in the book universe. One needs to look no further than the publishers’ own book community site, Bookish, a multi-million dollar venture backed by three of the big five publishing players, to see how challenging DRMed ebook sales are. When it first lauched, ebooks were “out of stock.” Now Bookish sells ebooks through a Reader app available for mobile users. No one with a laptop only, an eink device or a walled garden tablet (such as Nook or Kindle Fire) would be able to make purchases.
I’m not saying that DRM killed Books on Board. That etailer has been floundering for years now. Samhain cut off direct ties 18 months ago. But DRM is one tool that is keeping independent bookstores from competing in the retail space of digital books. As digital book purchases increase from 30% to 40% and higher, it behooves publishers and others to equip independent booksellers with the ability to compete.
Otherwise Amazon’s quest for dominance will be unchecked. It doesn’t have to be, but right now, it is.