The Perils of DRM Overkill For Large Publishers

by Jon Noring

Right now many book pirates are laboriously scanning copyrighted paper books, running the scans through OCR, proofing the texts, and then creating digital versions in various formats. The digital versions are then distributed via several newsgroups, IRC, and P2P systems. Many are of very high production quality. If any paper book was or is a recent best-seller, you will find it online somewhere in a fairly high quality digital format. For the really major blockbusters, such as Harry Potter, the turn-around time from first release to pirated ebook is usually just a few days!¹

This demonstrates that if the major book publishers insist only on distributing their best-selling ebook editions using onerous “Fort Knox level” DRM, or only on closed proprietary hardware, the books will be pirated, if need be, using the old-fashioned brute force method. So what good is DRM anyway, especially the onerous types of DRM?

What can we therefore conclude? Here are my listed comments:

1. When publishers employ DRM for ebook versions of their best-sellers, that DRM cannot protect the work itself from immediate piracy and distribution. It will happen, even if the ebook version was sold for use only on closed, proprietary hardware. That is, no matter how secure the ebook is made, the best-seller will be pirated in high-quality ebook form, derived from the paper version!

2. When onerous DRM is used, or closed proprietary devices required, this will create substantial consumer resistance, driving customers away, some of whom will gravitate towards pirated editions. That is, they will learn how to find what they want via pirate channels. Right now many people don’t know how to find the pirated works and don’t care to know; why give them the incentive to learn how?

   Even worse, your customers may choose instead to buy ebook titles from your competitor who does not use onerous DRM. After all, customers will do business with publishers who respect and treat them as the loyal and honest customers they are, rather than assuming they are criminals. Using onerous DRM is like hiring security guards to visibly follow each and every customer who enters your bookstore; if I were followed like that in a bookstore, I would immediately leave without spending a penny, never to return. There is a well-known principle in physics which seems to apply here: For every action, there is an equal and opposite reaction. The use of onerous DRM, instead of increasing revenue and profits, has the very opposite effect of what is intended.

   Customer satisfaction is very important in selling anything, and books, music and video is no exception to the rule. Remember, treating your customers as criminals, unless they prove to you otherwise, is not a good way to run a business, and it will eventually catch up with you. After all, where do the publishers’ profits come from? Why bite the hand which feeds you?

3. If the work is not a best-seller, why the need for DRM, or a closed proprietary system? It is likely the book will not be pirated. If someone wants it in ebook form, they will buy it even if they have access to the pirate channels.²

4. One can logically conclude from the above points that the best ebook DRM policy all publishers (large and small) should follow for maximizing net revenue and product control is the following:

   1. If you use DRM, use only “DRM-Lite,” with few restrictions and essentially invisible to the end-user, respecting their privacy and not requiring them to jump through any annoying hoops after the sale is complete. The DRM should strive only to assist honest people in staying honest, and no more. After all, dishonest people will find a way to acquire the ebooks for free no matter what you do. So why penalize your honest and loyal customers? Worry more about your paying customers, not those who download pirated versions, many of whom probably would not buy your book if piracy were to magically disappear. Focus on real sales to real people who want to buy your books, not on “lost phantom revenue.”

   2. Do not distribute your ebook versions only for specialized dedicated and closed ebook hardware similar to the defunct Gemstar system. For best-sellers, that will guarantee they will be immediately pirated in some open ebook format, and for non-best-sellers will create negativity among those who may wish to buy a particular book as an ebook for viewing on their own open hardware, but do not wish to buy the closed hardware device for whatever reason. So why, as a book publisher, tie yourself down to the vacuous promises of some proprietary ebook hardware system vendor?

   3. If using DRM, do not use any of the “advanced” DRM features such as geographic restrictions, restrictions on printing, speaking (TTS), copying and pasting of excerpts, lending, etc. This will only result in faster piracy, and create negativity among your loyal customers.

      Don’t disallow, via technical means, your customers from lending a copy of an ebook to a friend. Don’t encourage it either and note to everyone it is illegal, but beyond that look the other way; it’s a chance to acquire new customers. Note that any DRM which technically restricts the ebook to be read only on particular registered machines is onerous DRM by real-world experience. It is anti-consumer, and your customers know you are doing this because you don’t trust them. Isn’t this just a wonderful way to build customer loyalty?

      If you wish to restrict some things, such as geographic distribution, do so outside of DRM so as to fulfill your contractual obligations as best you can. After all, what’s to guarantee that a paper book sold only in one country won’t find its way to another country where contractual obligations did not allow selling it there? And again note that placing geographic restrictions via DRM on ebooks is futile; and for better-sellers it will instantly result in piracy, and for non-best-sellers is overkill and superfluous: it is unnecessary.

   4. Consider not using any DRM, especially for works that are not best-sellers. The hassle people have in finding some obscure work on the Internet is not worth the effort. They will simply buy it if the price is reasonable, the presentation quality is high, and in some cases when value-added incentives are given. See later note.

   5. Keep the price of ebooks reasonable, no higher than the comparable print editions, and preferably less.

   6. Provide “value added” incentives to encourage people to legitimately buy your ebooks. The sky’s the limit as to what marketing incentives are possible. (It may even be possible in a few situations to give your ebook away, and from the associated value-added services you offer derive more revenue than you would have received had you sold the ebook.)

      For example, consider issuing “My Pages” (akin to Delta “Sky Miles”), redeemable for goods and services. Whenever a customer buys one of your ebooks, they receive so many “My Pages”. Sky Miles appears to work very well for Delta — lots of people try to fly Delta to get their Sky Miles; I usually do even if I can find a slightly cheaper ticket with another carrier. There’s an important lesson to publishers here.

      Or how about an incentive such as: “Buy two, and get the third for free?” If restaurants do this, why not publishers?

      In addition, there are alternative business models to consider as well, such as the very intriguing TeleRead. Again, the sky’s the limit once one starts thinking creatively — to think outside the box.

      DRM can never create new sales and thus increase revenue, but innovative marketing will. Focus on increasing sales, taking advantage of what motivates people to spend money for what you have to offer — why inflict on them onerous DRM, which only works to drive them away and towards pirated ebooks? It borders on the surreal to use technologies, such as onerous DRM, which only work to decrease your sales!

   7. Remember, the goal of a commercial publisher to its shareholders is to maximize both revenue and profits over a long period of time. That’s the number one duty.

      Many publishers of books, audio and movies believe in the religious mantra that having iron-fisted control of their content — making certain that the buying public “feels” their total control — is always necessary to achieve maximum revenue and profits. However, reality shows differently, and exercising such control using onerous DRM actually works against this goal. A reasoned balance is necessary, and I believe the recommendations in this essay provides just such a reasonable balance.

Examples of DRM following the spirit of the above recommendations:

1. The Palm Digital Media (now eReader) system of writing the purchaser’s credit card info into the title. Otherwise, the ebook is freely readable on any system running PDM/eReader software.

2. Microsoft LIT “Inscribed” level, where the purchaser’s info is written into the title page. Inscribed LIT documents are freely readable on all installations of MS Reader.³

3. Simple password entry to have full access to the ebook and all the reading system’s features. A password can be tailored and registered specific to a person, possibly even including the buyer’s personal information. Whenever a password is entered to access an ebook, the system must not send any information back to the publisher or other party.

(I would appreciate readers supplying more examples of “good” DRM.)

Examples of DRM not following the spirit of the above recommendations:

1. Any proprietary, closed, dedicated hardware ebook reading system such as the now defunct Gemstar system. Allowing personal content to be read on the device is not a sufficient improvement.

2. Microsoft LIT “Owner-Exclusive” level which only allows the ebook to be read on a small number of authorized and registered installations of MS Reader. The customer hassles with LIT “Owner-Exclusive” are now becoming very well known.

3. Adobe PDF when invoking customer usage restrictions on the document, such as not allowing reading back (TTS), not allowing printing or copying of excerpts, etc., etc. For particular purposes such restrictions are fine, but for general commercial ebook distribution, invoking such annoying restrictions should be avoided — do you not trust your paying customer?

4. Any DRM system which tries to restrict use to specific, registered hardware devices.

5. Any DRM system which, without the knowledge and approval of the end-user, attempts to send any information back to the publisher or other party whenever the ebook is accessed.

6. Any DRM which uses biometric identification such as iris scans, fingerprints, and facial recognition. Using biometric id systems is negatively perceived by customers as an undue invasion of their person — a gross invasion of their privacy. There will be substantial consumer resistance to such systems, especially when used for reading books — clearly a civil liberties issue.

About the Author

Jon Noring is the main cofounder of the OpenReader Consortium, as well as an invited expert and acting Vice Chair for the Publication Structure Working Group of the Open eBook Forum, and one of the authors of the OEBPS 1.2 Specification. In addition, he is the author of OEBPS: The Universal Consumer eBook Format?, which appeared on eBookWeb. He also owns and operates Blue Glass Publishing, a small ebook publishing house, allowing him to better observe first-hand the various real-world challenges of ebook publishing.

Endnotes

1. I recall being told a few years ago by a book publishing insider that the best-selling paper books were being pirated worldwide as paper books, and very effectively; but the publishers, for whatever reason, prefer not to talk about it. When a long-awaited paper book first hits the bookstands in New York City, where it usually first appears, a copy is bought, hand-carried by flight back to some third-world country, typically India, where it is immediately torn apart and the pages photocopied. Each page is transcribed by double key entry by a room full of minimally paid typists. Then the whole work is digitally assembled, retypeset to look like the original, and printed. In some cases, the time from picking up the book in NYC until the pirated paper copies appear on the streets in India is less than 48 hours! Of course, I have not verified this information, and some of the details may be off, but the person I talked with was a high-level insider in the book publishing industry who would know. [return to note reference]

2. The best-selling ebook of my publishing business, and quite popular, has yet to be pirated, even though it is non-DRM protected and priced on the high side for typical ebooks. [return to note reference]

3. When my published LIT-formatted ebooks were distributed through Content Reserve, I chose to use the “Inscribed” DRM level rather than the more onerous “Owner-Exclusive.” I believe in treating my customers with full respect. Currently, I sell my titles through several retailers with no DRM, as I prefer to do. [return to note reference]