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To Save Indies, Publishers Need to ReConsider DRM

anti-drm5

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.

Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She spends her downtime reading romances and writing about them. Her TBR pile is much larger than the one shown in the picture and not as pretty. You can reach Jane by email at jane @ dearauthor dot com

26 Comments

  1. SAO
    Apr 07, 2013 @ 04:48:31

    I got a Kindle because it was the best e-reader for the price when I got it. I prefer e-books, so I now buy almost all my books from Amazon. I had a B&N membership but so many of their sale flyers focused on selling me a Nook. Sorry, but that horse left the stable some time ago.

    I live in Russia, where there’s plenty of piracy, but all DRM does is make it harder for people to buy legitimate copies of books. For a long time, if you didn’t have a credit card with a US address, it was hard to buy e-books, but exceedingly easy to download them free. Few people feel much duty to uphold a system that denies them access to something that others can freely buy, so needless to say, Russians used the pirate sites. In fact, it’s not hard to find Russians who don’t know that you’re supposed to pay for the books you download, since all the people they know use the “free” sites.

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  2. Meri
    Apr 07, 2013 @ 05:28:49

    Because of Amazon’s Whispernet fee for international buyers, I’m always looking for other (cheaper) options, and I bought a fair number of books from BoB. Sadly, it was obvious for some time that it was not long for this world. I’d love to support retailers other than Amazon, but some of them really don’t make it easy. ARe, for instance, seems to geoblock me from buying anything, and I can’t buy from Google, either. I do use Smashwords whenever possible but that’s obviously quite limited.

    I agree that DRM needs to go, but geo-restrictions also hinder a lot of readers from buying e-books outside of Amazon, and that’s something I’d like to see retailers and publishers address.

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  3. Ladyage
    Apr 07, 2013 @ 05:50:09

    I can only agree with what @SAO and @Meri said. DRM doesn’t bother me – in case of using Calibre it’s just a matter of installing a plug-in and you won’t have to think of it ever again. What really bothers me is geo-restrictions. I live in Central Europe and have a Kindle – Amazon charges me $2.50 on top of every book that I buy for Whispernet delivery – which I don’t need to use (I would gladly sideload books on the Kindle), but am unable to opt out of. Kobo Store either makes books unavailable for me or at exorbitant prices. Of course there are ways around it, and I make do, but should I be forced to look for going around the system only because I want to pay for the things I buy – and let’s be frank, pirated ebooks are available without any such obstacles?

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  4. kara-karina
    Apr 07, 2013 @ 08:32:06

    @SAO:
    I totally agree with Sao as a fellow Russian. My only difference is that I live in UK and can buy books online. However I know people in Russia who had to provide a fake US address and use a non-trackable monetary system to pay for their books just to buy from Amazon US. It’s insane. This kind of system and territorial rights in a world of global internet access shoots epublishing in the foot, enables epiracy and harms everyone.

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  5. Elizabeth McCoy
    Apr 07, 2013 @ 09:03:51

    “One brick and mortar store admits that he doesn’t know why his customers would buy ebooks through him.”

    1: Desire to support a resource/establishment they enjoy.

    2: This is the reason they *should* do it (and in mass numbers!), that I bet no one’s enabling technologically: that the customers can voluntarily let the bookstore access which ebooks they buy (and have not returned!), and give them a steep-to-good discount on the matching physbook. Yeah, so they may be buying for Aunt Edna, Uncle Rodger, and Cousin Lee; they’re in the store, buying physbooks; just make sure the discount is better than break-even. ( Likewise, if the store is allowed to keep records of physical books bought at their bookstore, offering a smaller discount on the matching *ebook* encourages people to do all their physbook shopping there, as well, rather than on “the ‘Zon.”)

    B&N is *perfectly* positioned to offer this sort of service to its members and isn’t doing it. (If they’re not keeping the purchase data from membership card discounts in their stores, they’re… seriously not thinking.) Neither is Amazon; they’re doing that Select thing instead. Kobo is partnered with indie bookstores already? Hopefully Kobo will realize how they can offer a service that can offer lock-in to both their e-store and their affiliated bookstores — even without DRM.

    (Heck, if they’ll do the “buy a physbook at *any* affiliated store, using your Kobo Membership data, and get an e-book discount”… That would certainly encourage shopping at affiliated bookstores for split-format buyers like myself, and if the Kobo Membership data will quietly give the ebook’s affiliate fee to the store that sold the physbook, even if the ebook purchase is made through Kobo’s main site… Stars know, I get physical books gleefully, zip through my Read Right Now purchases, then wind up wanting to read something in the bathroom and having… my phone or my iPad, with my physical Read Later purchases downstairs in the To Be Read pile. Or I finish one and am away from home. Oops. Now, imagine I could get on Kobo’s website, access my list of bought physbooks, and click “buy ebook” for the one that intrigues me, with a discount…)

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  6. SAO
    Apr 07, 2013 @ 09:19:08

    @Ladyage
    When you are in the US, change your Kindle address to the US. You may have to have an Amazon US account, although mine migrated over from the UK pretty well, although I think Amazon.com still addresses letters to me as, “Dear Mrs.” which I figure is a function of Amazon.co.uk asking for titles and Amazon.com not.

    This is somewhere deep in the Manage Your Kindle menu tree. It gets you out of the whispersync fee. I never get charged it and I live and buy books in E. Europe.

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  7. Darlynne
    Apr 07, 2013 @ 10:02:30

    Interestingly, MacMillan is offering Carrie Vaughn’s full-length Kitty Rocks the House at Amazon without DRM and for only $3.99 (same price for audio). I fully expect a knife-wielding clown to jump out if I choose “Buy now with 1-Click,” even though I’d like to think MacMillan is testing the waters for future decisions on price and security.

    It’s all so nuts and so unnecessary as publishing heads at full speed toward obsolescence. Their siege mentality isn’t keeping out the pirates at all; it’s starving all the bookstores and sellers trapped behind the walls with them.

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  8. Ladyage
    Apr 07, 2013 @ 10:07:51

    @SAO: Thank you for your advice. I tried that about two years ago and it worked for a few weeks, but then Amazon sent me an e-mail asking for proof of living in the US (they must have been checking IPs). Now I manage by having a VPN account with US IP address – this way I can also use Netflix. All this trouble, however, just for wanting to pay for what you buy. I’m not really surprised that so many people here download pirated stuff.

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  9. Ellen
    Apr 07, 2013 @ 10:35:29

    I don’t think the publishers care about the indies so why should htey change their model.

    Any change at a publishing house takes money, effort, and inconvenience to the publishing house. If they uptick in sales doesn’t far exceed the hassle, they have no incentive.

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  10. Liz H.
    Apr 07, 2013 @ 12:13:05

    More bookstores are better for the publishing industry, no matter which way you look at it. And especially when they are so unhappy with Amazon (and often B&N), having another option would be fantastic. DRM and geo-restrictions are two examples of knee-jerk reactions to preventing piracy. Any smart business would base such a decision on things like research and evidence, but as publishers have demonstrated again and again, smart is an adjective that need not apply.

    You can count me as one reader who would immediately increse my ebook purchases (and likely my overall purchases) if I could *easily and conveniently* purchase from my local indie.
    In addition, although I still buy my auto-buy authors, increasingly when I try new authors, I am buying from online publishers and those that don’t use DRM. In fact, looking at my purchases for January and February, I bought 15 books. 6 were new to me authors, and all but one were DRM free. (Of the other 9, 4 were DRM free.) Obviously I am far from the most prolific buyer out there, but I can’t imagine that I’m all that unusual moving in this direction with my purchasing practices. (There’s also the issue of discoverability through libraries, but I won’t go there…)

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  11. Moriah Jovan
    Apr 07, 2013 @ 12:34:09

    I see all these common sense solutions to, well, every problem in publishing, but I have come to the conclusion that because publishing exists in its own little bubble, it will NEVER listen, much less implement anything like it.

    Publishing will do what it will do because it thinks it can because, as Jane’s pointed out countless times, readers are not its customers. Readers are irritations, if they’re acknowledged at all. None of the big publishers can put up a shopping cart that serves readers, which means they don’t understand the marketplace. But little guys like me can. Why is that? They can all weep and wail and gnash their teeth at the Big Bad Amazon, but they’ve demonstrated countless times that they don’t understand how people run their lives and they do not care.

    Whether publishing will die, I couldn’t say. It might morph. Or something. I’m not really interested in Death of Traditional Publishing conversations because traditional publishing is irrelevant to my life (and I say this as an author, publisher, and provider of author services). In fact, it’s irrelevant to my clients’ lives. It’s irrelevant to most of the readers I know. Will traditional publishing die? Does it matter? Will readers miss it?

    Then there are indie bookstores, which do not function in a normal wholesale/retail fashion. They have no frame of reference for doing so. The indie bookstore closest to me is openly (and, I might say abusively) dismissive of anyone who a) shops at Amazon and b) reads ebooks and c) makes unfortunate choices in reading material. They don’t even function in a normal consignment fashion, because what person goes to a consignment shop expecting their stuff to be destroyed if it doesn’t sell?

    So any person with common sense (or who’s worked in retail) knows what needs to be done, but I’ve been at this six years now and all I see are publishers and indie bookstores plugging their ears and going, “La la la I can’t hear you!”

    Foresight is not one of publishing’s strengths. Please reference the goose that laid the golden egg.

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  12. JenM
    Apr 07, 2013 @ 13:39:15

    @Darlynne: I’m pretty sure that Kitty Rocks the House is being sold without DRM because it is published through Macmillan’s TOR division, which is their SciFi division. All of the TOR books are published without DRM. This is an experiment that has been going on for a year or so now. TOR’s management is far more progressive than Macmillan as a whole and has been trying to nudge the rest of the company in that direction for awhile now (unfortunately without too much obvious success).

    It would be nice if large publishers and Indie booksellers would stop vilifying Amazon and instead concentrate on steps they can take that are within their own power to remedy the current market imbalance. I guess they find it easier to just keep screaming and pointing fingers at Amazon rather than deal with their own missteps and mistakes.

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  13. Darlynne
    Apr 07, 2013 @ 14:36:14

    @JenM: When I first saw this particular title, I checked the others in the series. They’re all listed as Hachette Book Group and while the prices are slightly discounted, they aren’t (at least obviously) marked as DRM-free. But I will check for Tor books with purpose now.

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  14. hapalochaena
    Apr 07, 2013 @ 14:56:58

    Carrie Vaughn moved to TOR a couple of Kitty titles (and several standalone novels) ago.

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  15. CC Dery
    Apr 07, 2013 @ 18:19:36

    I’m not surprised that BoB is closed. I have a kindle, an ipad, a MacBook and a non-Apple laptop. I bought a book from an advertisement from BoB: this was my first purchase from them. I’ve bought DRM books before and been able to read them on all of my devices except for the kindle. (Previous DRM books opened with an Adobe program that was already installed) BoB’s ebook required me to download only their specific reader, which would only install on my ipad – and it wasn’t easy. (What if I hadn’t had an ipad?)

    I learned my lesson and never bought another book from BoB deleting their emails before even reading them. I’m sure I’m not the only one with problems downloading and reading a legally purchased ebook from Books on Board; how many others made the same “never again” decision after trying to get to their ebook!

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  16. Lynnd
    Apr 07, 2013 @ 21:03:01

    @Moriah Jovan: I agree that until publishers figure out that their real customers are those who buy the books, not the the bookstores, they will do nothing to change their business model. Unfortunately, by the time they get around to getting a clue, Amazon will be the only game in town and they will then have no power at all. I really don’t think that the big publishers “hate” Amazon or “love” indies as much as they claim. For the accountants who run the multi-nationals who own the traditional publishers, Indies would be seen as a PITA – Amazon (and to some extent, the other big companies) place huge orders, pay their bills and, except on rare occasions, do nothing to shake things up. Why would they do anything sensible, like getting rid of DRM, when it’s just going to annoy their biggest customer?

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  17. Kaetrin
    Apr 07, 2013 @ 22:11:37

    @CC Dery: The point is moot now as BoB is dead. But I’ve been shopping there for years and never had a problem. I have a Sony reader and mostly download ePub and pdf books, so maybe it was different with mobi/books formatted for kindles.

    The digital presses with no geo restrictions (1st) and no DRM (2nd) are more likely to get my money now. Carina, Samhain, Momentum, Destiny, Entangled, Loose ID, Dreamspinner, Riptide etc. The traditional publishers will lose more of my money from BoB’s demise.

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  18. Estara
    Apr 08, 2013 @ 13:23:04

    @CC Dery: That’s interesting, I’ve bought from them for years – before agency they were my go-to store because there was a work around (buying via gift certificates) to buy major US and UK titles as a German.

    All the drm titles always opened without problem in ADOBE Editions software and all the non-drm titles just offered me the .epub to save. Like Kaetrin I have a Sony Reader, so maybe that was a consideration, too.

    Their rewards system (before agency pricing) enabled me to buy a lot of books without going through the hoops of rebates, etc.

    But admittedly after agency pricing disabled rewards on most of those books and being able to use Kobo coupon codes, I’ve been moving my major agency purchasing to Kobo.

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  19. Content ownership and resale - Tools of Change for Publishing
    Apr 08, 2013 @ 16:06:10

    [...] P.S. – Here’s a related article on Dear Author on how DRM also prevents independent bookstores from c… [...]

  20. Lori Toland
    Apr 08, 2013 @ 22:10:53

    All DRM ever did was make me not want to buy books from publishers that insist on using it. It’s accusing me of a crime before the fact.

    Oh yeah and it stole 2 hours of my life trying to read a DRM book that i still havent read. My time is valuable. I’d like to contact the publisher and bill them for those hours.

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  21. Lori James
    Apr 09, 2013 @ 09:20:37

    @Meri and others…- AllRomance.com doesn’t apply any geo restrictions to anyone. We sell in over 220 countries. Our direct contract with publishers require world-wide distribution and non-DRM. So, all of the non-DRM books on our site can be purchased by anyone. The Agency publishers come into us on a feed, we are not the seller for those titles, but acting as the Agent and as such must comply with their terms of sale. When the territory rights are restricted for a book, it’s normally done so because of contractual terms between the author and the publisher. You shouldn’t experience being able to purchase a book from Smashwords for instance that is geo-blocked at ARe. It’s normally the contract arrangement between the publisher and author, that drives the markets a book can be sold in would be the same. If there’s a title you can’t add to your cart on AllRomance.com that you can purchase elsewhere, please let us know by using the contact us form at the bottom of the website. We would want to urgently communicate such an inconsistency to the publisher and get it resolved. As Jane alluded to, all of a publisher’s Agents are supposed to be subject to the same terms and restrictions.

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  22. Can Indie Bookstores Be Saved? | Digital Book World
    Apr 09, 2013 @ 10:20:13

    [...] a nice post that sythesizes some of these problems and looks about bricks-and-mortar and online indies, lawyer, [...]

  23. A.M.K.
    Apr 09, 2013 @ 16:40:00

    @Lori James: Does that include Amazon? In my experience, many books are sold on Amazon while being restricted in other stores (including ARE). They usually cost more BUT it’s supposedly Amazon’s extra charge, not the publishers’.
    As for BoB, sometimes books were available to me there when they were restriced on ARE, one example being Ruthie Knox’s books, published by Random House.

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  24. Lori James
    Apr 11, 2013 @ 18:40:21

    @A.M.K. If you email me some examples [lori (dot) james (at) allromance.com], I can explore any territory/rights inconsistencies further.

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  25. Mark D'Antoni
    Apr 13, 2013 @ 11:56:42

    DRM has got to go.

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  26. Thirsty Thursday Blog Round-Up | Writing, Reading, and Life
    May 23, 2013 @ 05:05:36

    [...] To Save Indies, Publishers Need to ReConsider DRM [...]

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