DRM means missed opportunities for e-books

It’s no surprise that the major traditional publishers are afraid of e-books. Like record labels and movie studios before them, publishers have seen the spectre of disruptive technology on the horizon and have dug in their heels. Where they’ve accepted e-books they’ve done so half-heartedly, neutralizing the benefits of the new medium with opaque DRM schemes that emulate the limitations of print books as closely as possible. As Clay Shirky puts it:

The original promise of the e-book was not a promise to the reader, it was a promise to the publisher: "We will design something that appears on a screen, but it will be as inconvenient as if it were a physical object."

How could inconvenience be a selling point to a publisher? It’s because they fear bundle failure. Publishers have always been able to bundle the text of a book (the "content") with a physical volume (the "container"). When that’s the case, selling books is almost like selling any other physical object, with infrastructure in place for designing, manufacturing, distributing, and selling at retail. Convenient e-books threaten to unsettle that arrangement — they make attractive the idea of consuming just the publisher’s content, and not its container.

The unanswered question that is driving publisher e-book strategy is about the perceived value breakdown of that bundle. How much have people been paying for just the content, and how much were they paying for the nice container? When publishers talk about the need to avoid "devaluing" books with low e-book prices, they’re talking about this question.

One shortsighted answer presumes that the value of an e-book is the value of a hardcover minus the perceived cost of printing. This premise, in fact, informs the e-book pricing strategy of most publishers. But it’s both incorrect and dangerous. It leads to the strategic error of situating e-books as substitute goods, instead of complementary goods, for a publisher’s other offerings.

When there’s a substitute good for something you sell, you’ve got to either work against it or make it as profitable as the good it’s displacing. DRM comes from an effort to do both. It diminishes the advantages of e-books over their printed counterparts and strives to limit their distribution to full-price retail sales. 1Going, of course, one step further than printed books. Publishers haven’t historically been able to control secondary sales or sharing.

If instead publishers recognized the text as a complementary good, they’d be in the much more comfortable position of trying to increase the demand for it. After all, the actual publication and distribution of volumes is already just one step on the end of a long workflow, each step of which is supposed to make the text better and increase demand. It’s crazy to subvert that whole chain to preserve the last link, just because it’s the one at which the actual revenue comes in.

So what are the goods and services for which the text of a book can be a complement? That’s where publishers earn their paycheck. It could be events with authors, merchandise, film rights, beautiful print editions — the point is that it is easier to monetize a popular book than an obscure one, even if you’re not making most of the profits on sales of the book.

DRM renders user innovation difficult at best, and so limits the possibility of runaway demand. And it makes the e-book, the closest thing yet to the content alone, less valuable. Taken together, that means missed opportunities for publishers and authors.

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1. Going, of course, one step further than printed books. Publishers haven’t historically been able to control secondary sales or sharing.