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Digimarc Launches Social DRM for E-books September 17, 2014

Posted by Bill Rosenblatt in Fingerprinting, Publishing, Technologies.
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Digimarc, the leading supplier of watermarking technology, announced this week the release of Digimarc Guardian Watermarking for Publishing, a transactional watermarking (a/k/a “social DRM”) scheme that complements its Guardian piracy monitoring service. Launch customers include the “big five” trade publisher HarperCollins, a division of News Corp., and the e-book supply chain company LibreDigital, a division of the printing giant RR Donnelley that distributes e-books for HarperCollins in the US.

With this development, Digimarc finally realizes the synergies inherent in its acquisition of Attributor almost two years ago.  Digimarc’s roots are in digital image watermarking, and it has expanded into watermarking technology for music and other media types.  Attributor’s original business was piracy monitoring for publishers via a form of fingerprinting — crawling the web in search of snippets of copyrighted text materials submitted by publisher customers.

One of the shortcomings in Attributor’s piracy monitoring technology was the difficulty in determining whether a piece of text that it found online was legitimately licensed or, if not, if it was likely to be a fair use copy.  Attributor could use certain cues from surrounding text or HTML to help make these determinations, but they are educated guesses and not infallable.

The practical difference between fingerprinting and watermarking is that watermarking requires the publisher to insert something into its material that can be detected later, while fingerprinting doesn’t.  But watermarking has two advantages over fingerprinting.  One is that it provides a virtually unambiguous signal that the content was lifted wholesale from its source; thus a copy of content with a watermark is more likely to be infringing.  The other is that while fingerprinting can be used to determine the identity of the content, watermarking can be used to embed any data at all into it (up to a size limit) — including data about the identity of the user who purchased the file.

The Digimarc Guardian watermark is complementary to the existing Attributor technology; Digimarc has most likely adapted Attributor’s web-crawling system to detect watermarks as well as use fingerprinting pattern-matching techniques to find copyrighted material online.

Digimarc had to develop a new type of watermark for this application, one that’s similar to those of Booxtream and other providers of what Bill McCoy of the International Digital Publishing Forum has called “social DRM.”  Watermarks do not restrict or control use of content; they merely serve as forensic markers, so that watermark detection tools can find content in online places (such as cyberlockers or file-sharing services) where they probably shouldn’t be.

A “watermark” in an e-book can consist of text characters that are either plainly visible or hidden among the actual material.  The type of data most often found in a “social DRM” scheme for e-books likewise can take two forms: personal information about the user who purchased the e-book (such as an email address) or an ID number that the distributor can use to look up the user or transaction in a database and is otherwise meaningless.   (The idea behind the term “social DRM” is that the presence of the watermark is intended to deter users from “oversharing” files if they know that their identities are embedded in them.)  The Digimarc scheme adopted by LibreDigital for HarperCollins uses hidden watermarks containing IDs that don’t reveal personal information by themselves.

In contrast, the tech publisher O’Reilly Media uses users’ email addresses as visible watermarks on its DRM-free e-books. Visible transactional watermarking for e-books dates back to Microsoft’s old Microsoft Reader (.LIT) scheme in the early 2000s, which gave publishers the option of embedding users’ credit card numbers in e-books — information that users surely would rather not “overshare.”

HarperCollins uses watermarks in conjunction with the various DRM schemes in which its e-books are distributed.  The scheme is compatible with EPUB, PDF, and MOBI (Amazon Kindle) e-book formats, meaning that it could possibly work with the DRMs used by all of the leading e-book retailers.

However, it’s unclear which retailers’ e-books will actually include the watermarks.   The scheme requires that LibreDigital feed individual e-book files to retailers for each transaction, rather than single files that the retailers then copy and distribute to end users; and the companies involved haven’t specified which retailers work with LibreDigital in this particular way.  (I’m not betting on Amazon being one of them.)  In any case, HarperCollins intends to use the scheme to gather information about which retailers are “leaky,” i.e., which ones distribute e-books that end up in illegal places online.

Hollywood routinely uses a combination of transactional watermarks and DRM for high-value content, such as high-definition movies in early release windows.  And at least some of the major record labels have used a simpler form of this technique in music downloads for some time: when they send music files to retailers, they embed watermarks that indicate the identity of the retailer, not the end user. HarperCollins is unlikely to be the first publisher to use both “social DRM” watermarks and actual DRM, but it is the first one to be mentioned in a press release.  The two technologies are complementary and have been used separately as well as together.

 

Dispatches from IDPF Digital Book 2014, Pt. 3: DRM June 5, 2014

Posted by Bill Rosenblatt in DRM, Publishing, Standards.
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The final set of interesting developments at last week’s IDPF Digital Book 2014 in NYC has to do with DRM and rights.

Tom Doherty, founder of the science fiction publisher Tor Books, gave a speech about his company’s experimentation with DRM-free e-books and its launch of a line of e-novellas without DRM.  The buildup to this speech (among those of us who were aware of the program in advance) was palpable, but the result fell with a thud.  You had to listen hard to find the tiny morsel about how going DRM-free has barely affected sales; otherwise the speech was standard-issue dogma about DRM with virtually no new insights or data.  And he did not take questions from the audience.

DRM has become something of a taboo subject even at conferences like this, so most of the rest of the discussion about it took the form of hallway buzz.  And the buzz is that many are predicting that DRM will be on its way out for retail trade e-books within the next couple of years.

That’s the way things are likely to go if technology market forces play out the way they usually do.  Retailers other than Amazon (and possibly Apple) will want to embrace more open standards so that they can offer greater interoperability and thus band together to compete with the dominant player; getting rid of DRM is certainly a step in that direction.  Meanwhile, publishers, getting more and more fed up with or afraid of Amazon, will find common cause with other retailers and agree to license more of their material for distribution without DRM.  (Several retailers in second-tier European countries as well as some retailers for self-publishing authors, such as Lulu, have already dropped DRM entirely.)

Such sentiments will eventually supersede most publishers’ current “faith-based” insistence on DRM.  In other words, publishers and retailers will behave more or less the same way as the major record labels and non-Apple retailers behaved back in 2006-2007.

This course of events seems inevitable… unless publishers get some hard, credible data that tells them that DRM helps prevent piracy and “oversharing” more than it hurts the consumer experience.  That’s the only way (other than outright inertia) that I can see DRM staying in place for trade books over the next couple of years.

The situation for educational, professional, and STM (scientific, technical, medical) books is another story (as are library lending and other non-retail models).  Higher ed publishers in particular have reasons to stick with DRM: for example, e-textbook piracy has been rising dramatically in recent years and is up to 34% of students as of last year.

Adobe recently re-launched its DRM with a focus on these publishing market segments. I’d describe the re-launch as “awkward,” though publishers I’ve spoken to would characterize in it less polite terms.  This has led to openings for other vendors, such as Sony DADC; and the Readium Foundation is still working on the open-source EPUB Lightweight Content Protection scheme.

The hallway buzz at IDPF Digital Book was that DRM for these market segments is here to stay — except that in higher ed, it may become unnecessary in a longer timeframe, when educational materials are delivered dynamically and in a fashion more akin to streaming than to downloads of e-books.

I attended a panel on EDUPUB, a standards initiative aimed at exactly this future for educational publishing.  The effort, led by Pearson Education (the largest of the educational publishers), the IMS Global Learning Consortium, and IDPF, is impressive: it’s based on combining existing open standards (such as IDPF’s EPUB 3) instead of inventing new ones.  It’s meant to be inclusive and beneficial to all players in the higher ed value chain, including Pearson’s competitors.

However, EDUPUB is in danger of making the same mistake as the IDPF did by ignoring DRM and other rights issues.  When asked about DRM, Paul Belfanti, Pearson’s lead executive on EDUPUB, answered that EDUPUB is DRM-agnostic and would leave decisions on DRM to providers of content delivery platforms. This decision was problematic for trade publishers when IDPF made it for EPUB several years ago; it’s even more potentially problematic for higher ed; EDUPUB-based materials could certainly be delivered in e-textbook form.

EDUPUB could also help enable one of the Holy Grails of higher ed publishing, which is to combine materials from multiple publishers into custom textbooks or dynamically delivered digital content.  Unlike most trade books, textbooks often contain hundreds or thousands of content components, each of which may have different rights associated with them.

Clearing rights for higher ed content is a manual, labor-intensive job.  In tomorrow’s world of dynamic digital educational content, it will be more important than ever to make sure that the content being delivered has the proper clearances, in real time.  In reality, this doesn’t necessarily involve DRM; it’s mainly a question of machine-readable rights metadata.

Attempts to standardize this type of rights metadata date back at least to the mid-1990s (when I was involved in such an attempt); none have succeeded.  This is a “last mile” issue that EDUPUB will have to address, sooner rather than later, for it to make good on its very promising start.  DRM and rights are not popular topics for standards bodies to address, but it has become increasingly clear that they must address these issues to be successful.

Dispatches from IDPF Digital Book 2014, Pt. 2: Public Libraries June 3, 2014

Posted by Bill Rosenblatt in Economics, Publishing, United States.
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This is the second of three installments on interesting developments from last week’s IDPF Digital Book conference in NYC.

Another interesting panel at the conference was on public libraries.  I’ve written several times (here’s one example) about the difficulties that public libraries are having in licensing e-books from major trade publishers, given that publishers are not legally obligated to license their e-books for library lending on the same terms as for printed books — or at all.  The major trade publishers have established different licensing models with various restrictions, such as limited durations (measured in years or number of loans), lack of access to frontlist (current) titles, and/or prices that range up to several times those charged to consumers.

The panel presented some research findings that included some hard data about how libraries drive book sales — data that libraries badly need in order to bolster their case that publishers should license material to them on reasonable terms.

As we learned from Rebecca Miller from Library Journal, public libraries in the US currently spend only 9% of their acquisition budgets on e-books — which amounts to about $100 Million, or less than 3% of overall trade e-book revenue in the United States.  Surely that percentage will increase, making e-book acquisition more and more important for the future of public libraries.  And as e-books take up a larger portion of libraries’ acquisition budgets, the fact that libraries have little control over licensing terms will become a bigger and bigger problem for them.

The library community has issued a lot of rhetoric — including during that panel– about how important libraries are for book discovery.  But publishers are ultimately only swayed by measurable revenue from sales of books that were driven by visits to or loans from libraries.  They also want to know to what extent people don’t buy e-books because they can “borrow” them from libraries.

In that light, the library panel had one relevant statistic to offer, courtesy of a study done by my colleague Steve Paxhia for the Book Industry Study Group.  The study found that 22% of library patrons ended up buying a book that they borrowed from the library at least once during the past year.

That’s quite a high number.  Here’s how it works out to revenue for publishers: Given Pew Internet and American Life statistics about library usage (48% of the population visited libraries last year), and only counting people aged 18 years and up, it means that people bought about 25 million books last year after having borrowed them from libraries.  Given that e-books made up 30% of book sales in unit volume last year and figuring an average retail price of $10, that’s $75 million in e-book sales directly attributable to library lending.  The correct figure is probably higher, given that many library patrons discover books in ways other than borrowing them (e.g. browsing through them at the library) — though it may also be lower given that some people buy books in order to own physical objects (and thus the percentage of e-books purchased as a result of exposure in libraries may be lower than the corresponding percentage of print books).

So, in rough numbers, it’s safe to say that for the $100 Million that libraries spend on e-books per year, they deliver a similar amount again in sales through discovery.  It’s just too bad that the study did not also measure how many people refrained from buying e-books because they could get them from public libraries.  This would be an uncomfortable number to measure, but it would help lead to the truth about how public libraries help publishers sell books.

Update: Steve Paxhia found that his 22% number was of library lends leading to purchases during a period of six months, not a year.  And the survey respondents may have purchased books after borrowing them more than once during that period.  His data also shows that half of respondents indicated that they purchased other works from a given author after having borrowed one from the library.  So, using the same rough formula as above, the amount of purchases attributable to library usage is more likely to be north of $150 million.  Yet we still have no indication of the number of times someone did not purchase a book — particularly an e-book — because it was available through a public library system.

Dispatches from IDPF Digital Book 2014, Pt. 1: Wattpad June 1, 2014

Posted by Bill Rosenblatt in Events, Publishing, Services, Uncategorized.
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The International Digital Publishing Forum (IDPF), the standards body in charge of the EPUB standard for digital book publishing, puts on a conference-within-a-conference called IDPF Digital Book inside the gigantic Book Expo America in NYC each year.  Various panels and hallway buzz at this year’s event, which took place last week, showed how book publishing is developing regarding issues we address here.  I’ll cover these in three installments.

First and most remarkable is the emergence of Wattpad as the next step in the disruption of the value chain for authors’ content.  The Toronto-based company’s CEO, Allen Lau, spoke on a panel at the conference that I moderated.  Wattpad can be thought of as a successor to Scribd as “YouTube for writings.”

There are a few important differences between Scribd and Wattpad.  First, whereas Scribd had become a giant, variegated catchall for technical white papers, vendor sales collateral, court decisions, academic papers, resumes, etc., etc., along with more recently acquired content from commercial publishers, Wattpad is focused tightly on text-based “stories.”

Second, Wattpad is optimized for reading and writing on mobile devices, whereas Scribd focuses on uploads of existing documents, many of which are in  not-very-mobile-friendly PDF.  Third and most importantly, Scribd allows contributors to sell their content, either piecemeal or as part of Scribd’s increasingly popular Netflix-like subscription plan; in contrast, Wattpad has no commerce component whatsoever.

In fact, the most remarkable thing about Wattpad is that it has raised over $60 million in venture funding, almost exactly $1 million for each of the company’s current employees.  But like YouTube, Facebook, Tumblr, and various others in their early days, it has no apparent revenue model — other than a recent experiment with crowdfunding a la Kickstarter or Indiegogo.  There’s no way to buy or sell content, and no advertising.

Instead, Wattpad attracts writers on the same rationales by which YouTube attracts video creators (and Huffington Post attracts bloggers, etc.): to give them exposure, either for its own sake or so that they can make money some other way.  For example, Lau touted the fact that one of its authors recently secured a movie deal for her serialized story.

Apparently Wattpad has become a vibrant home for serialized fiction, fan fiction, and stories featuring celebrities as characters (which may be a legal gray area in Canada).  It has also become a haven for unauthorized uploads of copyrighted material, although it has taken some steps to combat this through a filtering scheme developed in cooperation with some of the major trade publishers.  Wattpad has 25 million users and growing — fast.

This all makes me wonder: why isn’t everyone in the traditional publishing value chain — authors, publishers, and retailers — scared to death of Wattpad?  It strikes me as a conduit for tens of millions of dollars in VC funding to create expectations among its youthful audience that content should be free and that authors need not be paid.

There’s a qualitative difference between Wattpad and other social networking services. Copyright infringement aside, TV networks and movie studios didn’t have much to fear from YouTube in its early days  of cat videos.  Facebook and Tumblr started out as venues for youthful self-expression, but little of that was threatening to professional content creators.

In contrast, Wattpad seems to have crossed a line.  Much of the writing on Wattpad — apart from its length — directly substitutes for the material that trade publishers sell.  Wattpad started out as a platform for writers to critique each others’ work — which sounds innocuous (and useful) enough — but it’s clearly moved on to become a place where the readers vastly outnumber the writers.  (How else to explain the fact that despite the myriad usage statistics on its website, Wattpad does not disclose a number of active authors?)

In other words, Wattpad has become a sort of Pied Piper leading young writers away from the idea or expectation of doing it professionally.  Moreover, there are indications that Wattpad expects to make money from publishers looking to use it as a promotional platform for their own authors’ content, even though — unlike Scribd — it can’t be sold on the site.

By the time Wattpad burns through its massive treasure chest and really needs to convert its large and fast-growing audience into revenue from consumers, it may be too late.

Adobe Resurrects E-Book DRM… Again February 10, 2014

Posted by Bill Rosenblatt in DRM, Publishing.
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Over the past couple of weeks, Adobe has made a series of low-key announcements regarding new versions of its DRM for e-books, Adobe Content Server and Rights Management SDK.  The new versions are ACS5 and RMSDK10 respectively, and they are released on major platforms now (iOS, Android, etc.) with more to come next month.

The new releases, though rumored for a while, came as something of a surprise to those of us who understood Adobe to have lost interest in the e-book market… again.  They did so for the first time back in 2006, before the launch of the Kindle kicked the market into high gear.  At that time, Adobe announced that version 3 of ACS would be discontinued.  Then the following year, Adobe reversed course and introduced ACS4.  ACS4 supports the International Digital Publishing Forum (IDPF)’s EPUB standard as well as Adobe’s PDF.

This saga repeated itself, roughly speaking, over the past year.  As the IDPF worked on version 3 of EPUB, Adobe indicated that it would not upgrade its e-reader software to work with it, nor would it guarantee that ACS4 would support it.  The DRM products were transferred to an offshore maintenance group within Adobe, and all indications were that Adobe was not going to develop it any further.  Now that’s all changed.

Adobe had originally positioned ACS in the e-book market as a de facto standard DRM.  It licensed the technology to a large number of makers of e-reader devices and applications, and e-book distributors around the world.  At first this strategy seemed to work: ACS looked like an “everyone but Amazon” de facto standard, and some e-reader vendors (such as Sony) even migrated from proprietary DRMs to the Adobe technology.

But then cracks began to appear: Barnes & Noble “forked” ACS with its own extensions to support features such as user-to-user lending in the Nook system; Apple launched iBooks with a variant of its FairPlay DRM for iTunes content; and independent bookstores’ IndieBound system adopted Kobo, which has its own DRM.  Furthermore, interoperability of e-book files among different RMSDK-based e-readers was not exactly seamless.  As of today, “pure” ACS represents only a minor part of the e-book retail market, at least in the US, including Google Play, SmashWords, and retailers served by OverDrive and other wholesalers.

It’s unclear why Adobe chose to go back into the e-book DRM game, though pressure from publishers must have been a factor.  Adobe can’t do much about interoperability glitches among retailers and readers, but publishers and distributors alike have asked for various features to be added to ACS over the years.  Publishers have mainly been concerned with the relatively easy availability of hacks, while distributors have also expressed the desire for a DRM that facilitates certain content access models that ACS4 does not currently support.

The new ACS5/RMSDK10 platform promises to give both publishers and distributors just about everything they have asked for.  First, Adobe has beefed up the client-side security using (what appear to be) software hardening, key management, and crypto renewability techniques that are commonly used for video and games nowadays.

Adobe has also added support for several interesting content access models. At the top of the list of most requested models is subscriptions.  ACS5 will not only support periodical-style subscriptions but also periodic updates to existing files; the latter is useful in STM (scientific, technical, medical) and various professional publishing markets.

ACS5 also contains two enhancements that are of interest to the educational market.  One is support for collections of content shared among multiple devices, which is useful for institutional libraries.  Another is support for “bulk fulfillment,” such as pre-loading e-reader devices with encrypted books (such as textbooks).  Bulk fulfillment requires a feature called separate license delivery, which is supported in many DRMs but hasn’t been in ACS thus far.  With separate license delivery, DRM-packaged files can be delivered in any way (download, optical disk, device pre-load, etc.), and then the user’s device or app can obtain licenses for them as needed.

Finally, ACS5 will support the Readium Foundation’s open-source EPUB3 e-reader software.  Adobe is “evaluating the feasibility” of supporting the Readium EPUB 3 SDK in its Adobe Reader Mobile SDK; but this means that distributors will now definitely be able to accommodate EPUB3 in their apps.

In all, ACS5 fulfills many of the wish list items that I have heard from publishers over the past couple of years, leaving one with the impression that it could expand its market share again and move towards Adobe’s original goal of de facto standard-hood (except for Amazon and possibly Apple).  ACS5 is backward compatible with older versions of ACS and does not require that e-books be re-packaged; in other words, users can read their older files in RMSDK10-enabled e-readers.

Yet Adobe made a gaffe in its announcements that immediately jeopardized all this potential: it initially gave the impression that it would force upgrades to ACS5/RMSDK10 this July.  (Watch this webinar video from Adobe’s partner Datalogics, starting around the 21-minute mark.)  Distributors would have to upgrade their apps to the latest versions, with the hardened security; and users would have to install the upgrades before being able to read e-books packaged with the new DRM.  Furthermore, if users obtain e-books packaged with the new DRM, they would not be able to read them on e-readers based on the older RMSDK. (Yet another sign that Adobe has acted on pressure from publishers rather than distributors.)  In other words, Adobe wanted to force the entire ACS ecosystem to move to a more secure DRM client in lock-step.

This forced-upgrade routine is similar to what DRM-enabled download services like iTunes (video) do with their client software.  But then Apple doesn’t rely on a network of distributors, almost all of which maintain their own e-reading devices and apps.

In any case, the backlash from distributors and the e-publishing blogosphere was swift and harsh; and Adobe quickly relented.  Now the story is that distributors can decide on their own upgrade timelines.  In other words, publishers will themselves have to put pressure on distributors to upgrade the DRM, at least for the traditional retail and library-lending models; and some less-secure implementations will likely remain out there for some time to come.

Adobe’s new release balances between divergent effects of DRM.  On the one hand, DRM interoperability is more important than ever for publishers and distributors alike, to counteract the dominance of Amazon in the e-book retail market; and the surest way to achieve DRM interoperability is to do away with DRM altogether.  (There are other ways to inhibit interoperability that have nothing to do with DRM.)  But on the other hand, integrating interoperability with support for content access models that are unsupportable without some form of content access control — such as subscriptions and institutional library access — seems like an attractive idea.  Adobe has survived tugs-of-war with publishers and distributors over DRM restrictions before, so this one probably won’t be fatal.

Judge Dismisses E-Book DRM Antitrust Case December 12, 2013

Posted by Bill Rosenblatt in DRM, Law, Publishing.
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Last week a federal judge in New York dismissed a lawsuit that a group of independent booksellers brought earlier this year against Amazon.com and the (then) Big Six trade publishers.  The suit alleged that the publishers were conspiring with Amazon to use Amazon’s DRM to shut the indie booksellers out of the majority of the e-book market.  The three bookstores sought class action status on behalf of all indie booksellers.

In most cases, independent booksellers can’t sell e-books that can be read on Amazon’s Kindle e-readers; instead they have a program through the Independent Booksellers Association that enables consumers to buy e-books from the stores’ websites via the Kobo e-book platform, which has apps for all major devices (PCs, iOS, Android, etc.) as well as Kobo eReaders.

Let’s get the full disclosure out of the way: I worked with the plaintiffs in this case as an expert witness.  (Which is why I didn’t write about this case when it was brought several months ago.)  I did so because, like others, I read the complaint and found that it reflected various misconceptions about DRM and its place in the e-book market; I thought that perhaps I could help educate the booksellers.

The booksellers asked the court to enjoin (force) Amazon to drop its proprietary DRM, and to enjoin the Big Six to allow independent bookstores to sell their e-books using an interoperable DRM that would presumably work with Kindles as well as iOS and Android devices, PCs, Macs, BlackBerrys, etc.  (The term that the complaint used for the opposite of “interoperable DRM” was “inoperable DRM,” much to the amusement of some anti-DRM folks.)

There were two fundamental problems with the complaint.  One was that it presupposed the existence of an idealized interoperable DRM that would work with any “interoperable or open architecture device,” and that “Amazon could easily, and without significant cost or disruption, eliminate its device specific restrictive [] DRM and instead utilize an available interoperable system.”

There is no such thing, nor is one likely to come into being.  I worked with the International Digital Publishing Form (IDPF), the trade association for e-books, to design a “lightweight” content protection scheme that would be attractive to a large number of retailers through low cost of adoption, but that project is far from fruition, and in any case, no one associated with it is under any illusion that all retailers will adopt the scheme.  The only DRM that is guaranteed to work with all devices and all retailers forever is no DRM at all.

The closest thing there is to an “interoperable” DRM nowadays is Adobe Content Server (ACS) — which isn’t all that close.  Adobe had intended ACS to become an interoperable standard, much like PDF is.  Unlike Amazon’s Mobipocket DRM and Apple’s FairPlay DRM for iBooks, ACS can be licensed and used by makers of e-reader devices and apps.  Several e-book platforms do use it.  But the only retailer with significant market share in the United States that does so is Barnes & Noble, which has modified it and combined it with another DRM that it had acquired years ago.  Kobo has its own DRM and uses ACS only for interoperability with other environments.

More relevantly, I have heard it said that Amazon experimented with ACS before launching the Kindle with the Mobipocket DRM that it acquired back in 2005.  But in any case, ACS’s presence in the US e-book market is on the wane, and Adobe has stopped actively working on the product.

The second misconception in the booksellers’ complaint was the implication that the major publishers had an interest in limiting their opportunities to sell e-books through indie bookstores.  The reality is just the opposite: publishers, from the (now) Big Five on down, would like nothing more than to be able to sell e-books through every possible retailer onto every possible device.  The complaint alleges that publishers “confirmed, affirmed, and/or condoned AMAZON’s use of restrictive DRMs” and thereby conspired to restrain trade in the e-book market.

Publishers have been wary of Amazon’s dominant market position for years, but they have tolerated its proprietary technology ecosystem — at least in part because many of them understand that technology-based media markets always settle down to steady states involving two or three different platforms, protocols, formats, etc.  DRM helps vendors create walls around their ecosystems, but it is far from the only technology that does so.

As I’ve said before, the ideal of an “MP3 for e-books” is highly unlikely and is largely a mirage in any case.  Copyright owners have a constant struggle to create and preserve level playing fields for retailers in the digital age, one that the more savvy among them recognize that they can’t win as much as they would like.

Judge Jed Rakoff picked up on this second point in his opinion dismissing the case. He said, “… nothing about [the] fact [that publishers made agreements with Amazon requiring DRM] suggests that the Publishers also required Amazon to use device-restrictive DRM limiting the devices on which the Publishers’ e-books can be display, or to place restrictions on Kindle devices and apps such that they could only display e-books enabled with Amazon’s proprietary DRM. Indeed, unlike DRM requirements, which clearly serve the Publishers’ economic interests by preventing copyright violations, these latter types of restrictions run counter to the Publishers’ interests …” (emphasis in original).

Indie bookstores are great things; it’s a shame that Amazon’s Kindle ecosystem doesn’t play nicely with them. But at the end of the day — as Judge Rakoff also pointed out — Amazon competes with independent booksellers, and “no business has a duty to aid competitors,” even under antitrust law.

In fact, Amazon has repeatedly shown that it will “cooperate” with competitors only as a means of cutting into their markets. Its extension of the Kindle platform to public library e-lending last year is best seen as part of its attempt to invade libraries’ territory. More recently, Amazon has attempted to get indie booksellers interested in selling Kindle devices in their stores, a move that has elicited frosty reactions from the bookstores.

The rest of Judge Rakoff’s opinion dealt with the booksellers’ failure to meet legal criteria under antitrust law.  Independent booksellers might possibly have a case to bring against Amazon for boxing them out of the market as reading goes digital, but Book House of Stuyvesant Plaza et al v. Amazon.com et al wasn’t it.

“Netflix for E-Books” Approaches Reality October 7, 2013

Posted by Bill Rosenblatt in Publishing, Services.
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Back in 2002, a startup company called listen.com had just concluded licensing deals with all of the (then five) major labels.  The result was Rhapsody: the “celestial jukebox” finally brought to life, the first successful subscription on-demand music service.  Rhapsody — whose original focus on classical music must have made it seem like a low-impact experiment to the majors — didn’t get on the map until they closed those deals.*

Eleven years later, something analogous is happening in the world of book publishing.  Last week, the popular document sharing site Scribd obtained licenses to all backlist titles from HarperCollins, one of the Big Five trade book publishers (along with Penguin Random House, Simon & Schuster, Macmillan, and Hachette), for an $8.99/month all-you-can-read subscription service.  It should only be a matter of time before the other four trickle in.  The service had been in “soft launch” mode since January with catalogs from smaller publishers such as RosettaBooks and SourceBooks.

Why Scribd and not Oyster or any of the others?  Because Scribd already has a huge user base — 80 million monthly visitors — making it an attractive existing audience instead of a speculative one.

Scribd started in 2006 as sort of a “YouTube for documents.”  The vast majority of the documents on the site were free; many were individual authors’ writings, corporate whitepapers, court filings, and so on.  Scribd also enabled authors to sell their documents as paid downloads (DRM optional).  Eventually some publishers put e-books up for individual sale on the site, including major publishers in the higher ed and scholarly segments.

The publishing industry has been buzzing about the possibility of a “Netflix for books” for a couple of years now.  A few startups, such as Oyster, have built out the infrastructure but have only gotten licenses from smaller publishers and independent authors.  At least for now, only Scribd has a major publisher deal; that will make all the difference in taking the subscription model for e-books to the mainstream.  Like it or not, major content providers are key to the success of a content retail site.

From a technical standpoint, Scribd’s subscription service has more in common with music apps like Rhapsody and Spotify than with video services like Netflix.  Like those music services, Scribd is mainly a “streaming” service, a/k/a “cloud reading,” in that it retrieves content in small chunks instead of downloading entire e-books but also gives users the option of downloading content to their mobile devices.  (Thereby enabling me to use it on the subways in NYC.)  Files stored on mobile devices are obfuscated or encrypted, so that users will not have access to them anymore if they cancel their subscriptions.  And also analogously to the interactive streaming music services, Scribd uses a simple proprietary “good enough” encryption scheme instead of a heavyweight name-brand DRM technology such as the Adobe DRM used with the Nook, Kobo, Sony Reader, and Bookish systems.

Although Scribd is the first paid subscription service with major-publisher licensing, it’s actually not the first way to read major-publisher trade e-books on a time-limited basis: OverDrive introduced OverDrive Read, an HTML5-based cloud reading app for its public library e-lending service, a year ago.

In fact, OverDrive Read is currently the only (legal) way to read frontlist e-book titles from major publishers through a browser app on a time-limited basis.  And that leads to an important difference between Scribd’s service and interactive streaming music services: HarperCollins is only licensing backlist titles, not frontlist (latest bestsellers).  From the publishers’ point of view, this is a smart move that other Big Five publishers will most likely follow.

In that respect, Scribd could become more like Netflix than Rhapsody or Spotify, in that Netflix only offers movies in the home entertainment window — Hollywood’s rough equivalent of “backlist.”  In contrast, the major music labels licensed virtually their entire catalogs to interactive streaming services from the start, save only for some high-profile artist holdouts such as the Beatles and Led Zeppelin.  Instead, the record labels have had to settle for (hard-won) price differentiation between top new releases and back catalog for paid downloads.  Just as readers who want the latest frontlist titles in print have to pay for hardback, those who want them as e-books will have to buy them.  (Or borrow them from the library.)

*The story of Rhapsody is somewhat sad.  For music geeks like myself, the service was a revelation — a truly new way to listen to and explore music.  But Rhapsody slogged through years of difficulty communicating the value of subscription services to users amid numerous ownership changes.  Subscribership grew gradually and plateaued at about a million paying users; then it suffered unfairly from the tsunami of hype around Spotify’s US launch in 2011.  It didn’t help that Rhapsody took too long to release a halfway decent mobile client; but otherwise Spotify’s functionality was virtually identical to Rhapsody at that time.  Now Rhapsody is struggling yet again as it attempts to expand to markets where Spotify is already established, training its 24 million users to expect free on-demand streaming with ads while losing money hand over fist.  And in the latest insult to its pioneering history, a 6,000-word feature on Spotify in Mashable — a tome by online journalism standards — mentions Rhapsody not once.

E-Book Watermarking Gains Traction in Europe October 3, 2013

Posted by Bill Rosenblatt in DRM, Europe, Publishing, United States, Watermarking.
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The firm Rüdiger Wischenbart Content and Consulting has just released the latest version of Global eBook, its overview of the worldwide ebook market.  This sweeping, highly informative report is available for free during the month of October.

The report contains lots of information about piracy and rights worldwide — attitudes, public policy initiatives, and technologies.  A few conclusions in particular stand out.  First, while growth of e-book reading appears to be slowing down, it has reached a level of 20% of book sales in the U.S. market (and even higher by unit volume).  This puts e-books firmly in the mainstream of media consumption.

Accordingly, e-book piracy has become a mainstream concern.  Publishers — and their trade associations, such as the Börsenverein des Deutschen Buchhandels in Germany, which is the most active on this issue — had been less involved in the online infringement issue than their counterparts in the music and film industries, but that’s changing now.  Several studies have been done that generally show e-book piracy levels rising rapidly, but there’s wide disagreement on its volume.  And virtually no data at all is available about the promotional vs. detrimental effects of unauthorized file-sharing on legitimate sales.  Part of the problem is that e-book files are much smaller than music MP3s or (especially) digital video or games; therefore e-book files are more likely to be shared through email (which can’t be tracked) and less likely to be available through torrent sites.

The lack of quantitative understanding of infringement and its impact has led different countries to pursue different paths, in terms of both legal actions and the use of antipiracy technologies.  Perhaps the most surprising of the latter trend — at least to those of us on this side of the Atlantic — is the rapid ascendancy of watermarking (a/k/a “social DRM”) in some European countries.  For example:

  • Netherlands: Arbeiderspers/Bruna, the country’s largest book publisher, switched from traditional DRM to watermarking for its entire catalog at the beginning of this year.
  • Austria: 65% of the e-books available in the country have watermarks embedded, compared to only 35% with DRM.
  • Hungary: Watermarking is now the preferred method of content protection.
  • Sweden: Virtually all trade ebooks are DRM-free.  The e-book distributor eLib (owned by the Swedish media giant Bonnier), uses watermarking for 80% of its titles.
  • Italy: watermarking has grown from 15% to 42% of all e-books, overtaking the 35% that use DRM.

(Note that these are, with all due respect to them, second-tier European countries.  I have anecdotal evidence that e-book watermarking is on the rise in the UK, but not much evidence of it in France or Germany.  At the same time, the above countries are often test beds for technologies that, if successful, spread to larger markets — whether by design or market forces.)

Meanwhile, there’s still a total absence of data on the effects of both DRM and watermarking on users’ e-book behavior — which is why I have been discussing with the Book Industry Study Group the possibility of doing a study on this.

The prevailing attitude among authors is that DRM should still be used.  An interesting data point on this came back in January when Lulu, one of the prominent online self-publishing services, decided to stop offering authors the option of DRM protection (using Adobe Content Server, the de facto standard DRM for ebooks outside of the Amazon and Apple ecosystems) for ebooks sold on the Lulu site.  Lulu authors would still be able to distribute their titles through Amazon and other services that use DRM.

Lulu announced this in a blog post which elicited large numbers of comments, largely from authors.  My pseudo-scientific tally of the authors’ comments showed that they are in favor of DRM — and unhappy with Lulu’s decision to drop it — by more than a two-to-one margin.  Many said that they would drop Lulu and move to its competitor Smashwords, which continues to support DRM as an option.  Remember that these are independent authors of mostly “long tail” titles in need of exposure, not bestselling authors or major publishers.

One reason for Lulu’s decision to drop DRM was undoubtedly the operational expense.  Smashwords’ CEO, Mark Coker, expressed the attitudes of ebook distributors succintly in a Publishers Weekly article covering Lulu’s move when he said, “What’s relevant is whether the cost of DRM (measured by fees to Adobe, [and for consumers] increased complexity, decreased availability, decreased sharing and word of mouth, decreased customer satisfaction) outweigh the benefits[.]”  As we used to say over here, that’s the $64,000 question.

Copyright and Accessibility June 19, 2013

Posted by Bill Rosenblatt in Events, Law, Publishing, Standards, Uncategorized.
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Last week I received an education in the world of publishing for print-disabled people, including the blind and dyslexic.  I was in Copenhagen to speak at Future Publishing and Accessibility, a conference produced by Nota, an organization within the Danish Ministry of Culture that provides materials for the print-disabled, and the DAISY Consortium, the promoter of global standards for talking books.  The conference brought together speakers from the accessibility and mainstream publishing fields.

Before the conference, I had been wondering what the attitude of the accessibility community would be towards copyright.  Would they view it as a restrictive construct that limits the spread of accessible information, allowing it to remain in the hands of publishers that put profit first?

As it turns out, the answer is no.  The accessibility community, generally speaking, has a balanced view of copyright that reflects the growing importance of the print disabled to publishers as a business matter.

Digital publishing technology might be a convenience for normally sighted people, but for the print disabled, it’s a huge revelation.  The same e-publishing standards that promote ease of production, distribution, and interoperability for mainstream consumers make it possible to automate and thus drastically lower the cost and time to produce content in Braille, large print, or spoken-word formats.

Once you understand this, it makes perfect sense that the IDPF (promoter of the EPUB standards for e-books) and DAISY Consortium share several key members.  It was also pointed out at the conference that the print disabled constitute an audience that expands the market for publishers by roughly 10%.  All this adds up to a market for accessible content that’s just too big to ignore.

As a result, the interests of the publishing industry and the accessibility community are aligning.  Accessibility experts respect copyright because it helps preserve incentives for publishers to convert their products into versions for the print disabled.  Although more and more accessibility conversion processes can be automated, manual effort is still necessary — particularly for complex works such as textbooks and scientific materials.

Publishers, for their part, view making content accessible to the print disabled as part of the value that they can add to content — value that still can’t exist without financial support and investment.

One example is Elsevier, the world’s largest scientific publisher.  Elsevier has undertaken a broad, ambitious program to optimize its ability to produce versions of its titles for the print disabled.  One speaker from the accessibility community called the program “the gold standard” for digital publishing.  Not bad for a company that some in the academic community refer to as the Evil Empire.

This is not by any means to suggest that publishers and the accessibility community coexist in perfect harmony.  There is still a long way to go to reach the state articulated at the conference by George Kerscher, who is both Secretary General of DAISY and President of IDPF: to make all materials available to the print disabled at the same time, and for the same price, as mainstream content.

The Future Publishing and Accessibility conference was timed to take place just before negotiations begin over a proposed WIPO treaty that would facilitate the production of accessible materials and distribution of them across borders.  The negotiations are taking place this and next week in Marrakech, Morocco.  This proposed treaty is already laden with concerns from the copyright industries that its provisions will create opportunities for abuse, and reciprocal concerns from the open Internet camp that the treaty will be overburdened with restrictions designed to limit such abuse.  But as I found out in Denmark last week, there is enough practical common ground to hope that accessibility of content for the print disabled will continue to improve.

The Coming Two-Tiered World of Libary E-book Lending June 4, 2013

Posted by Bill Rosenblatt in Libraries, Publishing, Services, United States.
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A group of public libraries in California recently launched a beta version of EnkiLibrary, an e-book lending system that the libraries run themselves.  EnkiLibrary is modeled on the Douglas County Libraries system in Colorado.  It enables libraries to acquire e-book titles for lending in a model that approximates print book acquisition more closely than the existing model.

Small independent publishers are making their catalogs available to these library-owned systems on liberal terms, including low prices and a package of rights that emulates ownership.  In contrast, major trade publishers license content to white-label service providers such as OverDrive under a varied, changing, and often confusing array of conditions — including limited catalog, higher prices than those charged to consumers, and limitations on the number of loans.  The vast majority of public libraries in the United States use these systems: they choose which titles to license and offer those to their patrons.

Welcome to the coming two-tiered world of library e-book lending.  E-lending systems like EnkiLibrary may well proliferate, but they are unlikely to take over; instead they will coexist with — or, in EnkiLibrary’s own words, “complement” — those used by the major publishers.

The reason for this is simple: indie publishers — and authors, working through publisher/aggregators like Smashwords — prioritize exposure over revenue, while for major publishers it’s the other way around.  If more liberal rights granted to libraries means that borrowers “overshare” e-books, then so be it: some of that oversharing has promotional value that could translate into incremental, cost-free sales.

In some ways, the emerging dichotomy in library e-lending is like the dichotomy between major and indie labels regarding Internet music sales.  Before 2009, the world of (legal) music downloads was divided into two camps: iTunes sold both major and indie music and used DRM that tied files to the Apple ecosystem; smaller services like eMusic sold only indie music, but the files were DRM-free MP3s that could be played on any device and copied freely.  That year, iTunes dropped DRM, Amazon expanded its DRM-free MP3 download service to major-label music, and eventually eMusic tapered off into irrelevance.

Yet it would be a mistake to stretch the analogy too far.  Major publishers are unlikely to license e-books for library lending on the liberal terms of a system like EnkiLibrary or Douglas County’s in the foreseeable future; the market dynamics are just not the same.

In 2008, iTunes had an inordinately large share of the music download market; the major labels had no leverage to negotiate more favorable licensing terms, such as the ability to charge variable prices for music.  The majors had tried and failed to nurture viable competitors to iTunes.  Amazon was their last and best hope.  iTunes already had an easy-to-use system that was tightly integrated with Apple’s own highly popular devices.  It became clear that the only meaningful advantage that another retailer could have over iTunes was lack of DRM.  So the major labels were compelled to give up DRM in order to get Amazon on board.  By 2009, DRM-free music from all labels became available through all major retailers.

No such competitive pressures exist in the library market.  On the contrary, libraries themselves are under competition from the private sector, including Amazon.  Furthermore, arguments that e-book lending under liberal terms leads to increased sales for small publishers won’t apply very much to major publishers, for reasons given above.

Therefore, unless libraries get e-lending rights under copyright law instead of relying on “publishers’ good graces” (as I put it at the recent IDPF Digital Book 2013 conference) for e-lending permission, it’s likely that libraries will have to labor under a two-tiered system for the foreseeable future.  Douglas County Libraries director Jamie LaRue — increasingly seen as a revolutionary force in the library community — captured the attitude of many when he said, “It isn’t the job of libraries to keep publishers in business.”  He’s right.  Ergo the stalemate should continue for some time to come.

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