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Adobe’s Latest E-Book Misstep: This Time, It’s Not the DRM October 10, 2014

Posted by Bill Rosenblatt in DRM, Publishing, Technologies.
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A few days ago, it emerged that the latest version of Adobe’s e-book reading software for PCs and Macs, Adobe Digital Editions 4 (ADE4), collects data about users’ reading activities and sends them to Adobe’s servers in unencrypted cleartext, so that anyone can intercept and use the data, even without NSA-grade snooping tools.

The story was broken by Nate Hoffelder at The Digital Reader on Monday.  The Internet being the Internet, the techblogosphere was soon full of stories about it, mostly half-baked analysis, knee-jerk opinions, jumped-to conclusions, and just plain misinformation.  Even the usually thorough and reliable Ars Technica, the first to publish serious technical analysis, didn’t quite get it right.  At this time of writing, the best summary of it comes from the respected library technologist Eric Hellman.

More actual facts about this sorry case will emerge in the coming days, no doubt, leading to a fully clear picture of what Adobe is doing and why.  My purpose here and now is to address the various accusations that this latest e-book gaffe by Adobe has to do with its DRM.  These include a gun-jumping post by the Electronic Frontier Foundation (EFF) that has inadvertently dragged Sony DADC, the division of Sony that is currently marketing a DRM solution for e-books, into the mess undeservedly.

Let’s start with the basics: ADE4 does collect information about users’ reading activities and transmit it in the clear.  This is just plain unacceptable; no matter what Adobe’s terms and conditions might say, it’s a breach of privacy and trust, and (as I’ll discuss later) it seems like a strange fit to Adobe’s role in the e-book ecosystem.  Whether it’s naivete, sloppiness, or both, it’s redolent of Adobe’s missteps in its release of the latest version of its e-book DRM at the beginning of this year.

But is ADE4’s data reporting part of the DRM, as various people have suggested?  No.

The reporting on this story to date has missed one small but important fact, which I suspected and then confirmed with a well-placed source yesterday: ADE4 reports data on all EPUB format files, whether or not they are DRM-encrypted.  The DRM client (Adobe RMSDK) is completely separate from the reporting scheme.  By analogy, this would be like Apple collecting data on users’ music and movie playing habits from their iTunes software, even though Apple’s music files are DRM-free (though movies are not).

Some savvier writers have pointed out that even though DRM may not be directly involved, this is what happens when users are forced to use media rendering software that’s part of a DRM-based ecosystem.  This is a fair point, but in this particular case it’s not really true.  (It would be more true in the case of Amazon, which forces people to use its e-reading devices and apps, and unquestionably collects data on users’ reading behaviors – although it encrypts the information.)

Unlike the Kindle ecosystem, users aren’t forced to use ADE4; it’s one of several e-reader software packages available that reads EPUB files that are encrypted with Adobe’s Content Server DRM.  None of the major e-book retailers use or require it, at least not in the United States.  Instead, it is most often used to read e-books that are borrowed from public libraries using e-lending platforms such as OverDrive; and in fact such libraries recommend and link to Digital Editions on their websites.

But other e-reader apps, such as the increasingly popular BlueFire Reader for Android, iOS, and Windows, will work just as well in reading e-books encrypted with Adobe’s DRM, as well as DRM-free EPUB files.  BlueFire (who can blame them?) sees the opportunity here and points out that it does not do this type of data collection.  Users of library e-lending systems can use BlueFire or other apps instead of ADE4.  Earlier versions of ADE also don’t collect and report reading data.

A larger question is why Adobe collects this data in the first place.  The usual reason for collecting users’ reading (or listening or viewing) data is for analytics purposes, to help content owners determine what’s popular and hone their marketing strategies.  Yet not only is Adobe not an e-book retailer, but e-book retailers that use its DRM (such as Barnes & Noble) don’t use Digital Editions as their client software.

One possible explanation is that Adobe is expecting to market ADE4 as part of its new DRM ecosystem that’s oriented towards the academic and educational publishing markets, and that it expects the data to be attractive to publishers in those market segments (as opposed to the trade books typically found in public libraries).  Eric Hellman suggests another plausible explanation: that it collects data not for analytics purposes but to support a device-syncing feature that all of the major e-book retailers already offer — so that users can automatically get their e-books on all of their devices and have each device sync to the last page that the user read in each book.

Regardless of the reason, it seems unsettling when a platform software vendor, as opposed to an actual retailer, collects this type of information.  Here’s another analogy: various video websites use Microsoft’s Silverlight web application environment.  Silverlight contains a version of Microsoft’s PlayReady DRM.  Users don’t see the Microsoft brand; instead they see brands like Netflix that use the technology.  Users might expect Netflix to collect information about their viewing habits (provided that Netflix treated the information appropriately), but they would be concerned to hear (in a vacuum) that Microsoft does it; and in fact Microsoft probably does contribute to the collection of viewing information for Netflix and other Silverlight users.

In any case, Adobe can fix the situation easily enough by encrypting the data (e.g., via SSL), providing a user option in Digital Editions to turn off the data collection, and offering better explanations as to why it collects the data in the first place (at least better than the ambiguous, anodyne, PR/legal department-buffed one shown here).  Until then, platform providers like OverDrive can link to other reader apps, like BlueFire, instead of to Adobe Digital Editions.

Finally, as for Sony DADC: the EFF’s web page on this situation contains a link, as a “related case,” to material on a previous technical fiasco involving Sony BMG Music, one of the major recording companies in the mid-2000s.  At that time, Sony BMG released some albums on CDs that had been outfitted with a form of DRM.  When a user put the disc in a CD drive on a PC, an “autorun” executable installed a DRM client onto the PC, part of which was a “rootkit” that enabled viruses.  After a firestorm of negative publicity that the EFF spearheaded, Sony BMG abandoned the technology.  (In one of its more savvy gambits, the EFF used momentum from that episode to cause other major labels to drop their CD DRMs as well; the technology was dead in the water by 2008.)  In this case, unlike with Adobe, the problem was most definitely in the DRM.

Apparently some people think that because this incident involved “Sony,” Sony DADC — which is currently marketing an e-book DRM solution based on the Marlin DRM technology — was involved.  Not true; they had nothing whatsoever to do with it.  The DRM in the rootkit debacle came from a British company called First4Internet.  In fact, it is unlikely that Sony DADC even had any DRM technology in the market back in 2005-2007; it was (and continues to be) a company that manufactured and distributed optical discs.  It was not until later that Sony DADC became known for the SecuROM DRM for PC video games — which engendered lots of bad publicity for game publishers, but that’s a whole ‘nother story.

Ghosts in the UltraViolet Machine September 24, 2014

Posted by Bill Rosenblatt in Business models, Music, Publishing, Services, Video.
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A few brief items of interest this week.  First is a reminder about Copyright and Technology London 2014 next Wednesday – there’s still time to register!  We have a great lineup of keynote speakers, including Shira Perlmutter, Maria Martin-Prat, and Dominic Young of the Copyright Hub, as well as panels on hot issues such as ISP responsibility for policing infringement and content protection for “4K” video content.  I look forward to seeing some of you in London next week.

Meanwhile…

Apple and Amazon Add UltraViolet-Style Family Accounts

Amazon and Apple recently announced the addition of “family accounts” for sharing content.  These enable up to six users who share a billing address to link accounts and get access to each other’s content, including e-books, apps, music, and video.  Apple’s Family Share is a feature of the new version of its mobile operating system, iOS 8, while Amazon’s Family Library feature is expected to launch later this Fall.

The primary difference between the two is that Apple Family Share enables the sharing of all videos downloaded from iTunes while Amazon only allows sharing of video streamed via Amazon Prime Instant Video, as opposed to videos purchased by non-members of Amazon Prime.  (In other words, this is yet another gambit to entice more users into Amazon’s US $99/year Prime service.)  Some websites have commented that Amazon’s service does not allow sharing of purchased music, while Apple’s does; but this is a bit silly given that music downloaded from both services is DRM-free.

It’s not particularly surprising that Hollywood studios have given both Amazon and Apple the rights to extend purchases to family accounts.  That’s because the rights are similar to those that the studios already extend for the same types of content under UltraViolet usage rules.  In fact, the availability of family access to video content from two of the biggest digital movie retailers eats into the advantages that UltraViolet offers.  (UltraViolet’s principal retail partners are Nook (Barnes & Noble), Target, and Best Buy).

More surprising is that one of these retailers decided it was worth the development effort to add this feature (causing the other to add it as well); perhaps this is a sign that UltraViolet is catching on?  Either way, this is yet another example of how the mainstreaming of digital content products and services has exposed deficiencies in the rights that users get to digital content compared to physical products such as DVDs (not to mention print books) and has led to innovation.  I would expect a similar announcement from Google Play in time for the holiday shopping season.

Garth Brooks Launches GhostTunes

Finally, a minor hypestorm erupted in the music industry recently over the beta launch of GhostTunes, a new digital music retail site spearheaded by country music superstar — and longtime digital holdout — Garth Brooks.  Contrary to initial reports, GhostTunes does not only sell albums; it also sells single tracks — though only at artists’ or labels’ discretion. Purchased music is available in an online locker and can be streamed or downloaded as DRM-free MP3s.  Some items are multi-album packages that contain multimedia items, in the vein of Apple’s iTunes LP.

Many musical artists will surely like GhostTunes’ willingness to sell single tracks only if the artist permits it.  The recorded music industry has been looking for ways to prop up the sales of albums in the digital age — just as UltraViolet was originally intended to help Hollywood studios prop up sales of movies while all of the growth is in streaming.  According to RIAA statistics, single track sales accounted for about 1% of unit volume when the iTunes Music Store opened in 2003 and have grown to over 80% today.

Yet GhostTunes looks like it is shaping up to be the music industry’s Pluto Nash moment: an expensive undertaking whose primary function is to cater to the whims of a big influential star rather than to be successful as a business.  Although GhostTunes is billed as an “artist-friendly” retail site, there’s little reason for anyone to go there other than the exclusive availability of Garth Brooks’s music in digital form… legally. The music selection comes from all three major labels but is limited: the press release touts “a million tracks” (compared to more than 20 million on iTunes or Spotify), while the site itself appears even more limited to a few dozen releases in each of several genres.  The highlight of the current catalog is a bundle of a dozen albums plus a concert video from Brooks himself for $30.

GhostTunes received a moderate amount of attention two weeks ago, ranging from neutral and factual to critical and skeptical. The press release contains a combination of vague hype (“music fans and artists deserve more”) and either falsehoods or anachronisms (“Just as it seemed fans would be left buying music in an increasingly more restrictive configuration without the ability to take the music they purchase anywhere they please, GhostTunes.com offers a new way.”)

It’s hard to see what GhostTunes can possibly offer that isn’t available on iTunes or Amazon — other than low prices for album bundles — but we’ll see what it does offer when (or if) it goes from beta to full launch.

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.
2 comments

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.

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