Overdrive to Cease E-Book Delivery for Fictionwise

Overdrive, the major aggregator and wholesaler of digital publishing content, will no longer be supplying e-book retailer Fictionwise as of the end of January.  This relatively minor business tiff has caused a lot of confusion and misplaced sturm und drang among the e-publishing community, so it bears some explanation.

The e-book market, as I mentioned in my2008 year-end review (and elsewhere), is a mess of fragmented formats, supply chain elements, and DRMs.  Overdrive is one of the linchpins of the industry: it acts as a wholesaler of e-books and other types of digital publications (digital audiobooks and so on) in multiple formats.  Its customers include many types of e-book retailers, such as publishers (for their own storefronts), and public libraries for e-book lending to their members.

There used to be several aggregators of e-publications in multiple formats, but most of them found the logistics too difficult and the cost structure too high, and ceased operations.  Overdrive is virtually the only one left.  

Fictionwise, meanwhile, is both a retail storefront for e-books in multiple formats and — as a result of its acquisition of eReader.com a year ago — the owner of eReader’s proprietary format and DRM.  So, it goes like this: Overdrive has licenses from many publishers to package and distribute content in a multitude of formats; Fictionwise sells e-books fulfilled by Overdrive and other wholesalers; Fictionwise also owns one of the several formats that Overdrive fulfills.  Clear as mud?

Last week Fictionwise posted an FAQ item stating that Overdrive would no longer be supplying it.  The result of this is somewhat like what happened when Microsoft decided to stop supporting its DRM licensing servers for MSN Music last April: it means that DRM licenses that are good now will not be renewable for users whose hard drives crash, who buy new PCs or Macs, and so on.  It also means that if a user purchased or purchases an e-book that happens to be supplied by Overdrive, the user will have until the end of this month to download the actual file.  It is not like the Google Video case in 2007, wherein users’ purchased and downloaded videos just stopped working when Google shut off its DRM servers.

The Overdrive files in question are in multiple formats — Mobipocket and Adobe as well as eReader.  For eReader format files, Fictionwise will simply supply users with new files.  For the other formats, Fictionwise is working with publishers to obtain the rights to package those e-books in eReader format.  The total number of e-books to be affected is said to be about 300,000, or 4% of the roughly 7.5 million e-books that Fictionwise has sold to date.

Overdrive wouldn’t comment, so we suspect that this has happened because of a narrow business dispute between it and Fictionwise rather than some market-level development.  But still, this situation is symptomatic of a very broken e-book market.  

It echoes a conversation I had earlier this week with Mitch Singer, the CTO of Sony Pictures who is also running the Digital Entertainment Content Ecosystem (DECE) standards initiative.  The video industry is in a similar position to the publishing industry regarding digital platforms: there is a leader — Apple in video, Amazon in e-books — and then there’s everybody else.   DECE is (among other things) an attempt by Hollywood to avoid the fate of the music industry, in which one dominant platform provider (Apple) dictates economic terms for digital distribution.  

The Hollywood (and technology) entities behind DECE understand that fragmentation hampers growth, and that choosing between fragmentation and single-vendor domination is truly a choice of the lesser of two evils.    I wonder whether book publishers understand that this is the choice they are going to have to make unless they act soon.

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