Blockchain Comes to E-Books, DRM Included

Blockchain technology has reached e-books. The CEOs of two startups with e-book distribution platforms based on blockchains, Scenarex and Publica, are going to appear with me on a panel at the Digital Book World conference in Nashville in early October. The similarities of their technologies indicate a direction for blockchains in the e-book world. The question is whether readers, authors, or publishers will be interested.

As I’ve described previously, blockchain applications for media fall into two categories: B2B and B2C. B2B applications focus on rights management and royalty processing. The paradigmatic example of a B2B blockchain application is this: when a user buys a piece of content from a service, the service deposits a transaction on a blockchain; then all of the holders of rights in the content use that information with smart contract rules to kick off all of the necessary royalty payments. This all takes place behind the scenes and has no effect on the user experience.

B2C applications focus on the user experience, by using blockchain technology to help emulate consumer ownership of digital content. The idea is this: a user buys a digital content file. A record of the purchase is put on a blockchain, which establishes the user’s ownership of the file. The user gets a token — a small digital file — signifying ownership. The user can alienate (sell, lend, rent, or give away) the file to someone else. When that happens, a record of the new ownership is put on the blockchain, and the token moves from the user to the new owner.

The question of whether you own a digital file you’ve obtained legally has been a controversial one for a long time. If you own a copyrighted work, you get a set of rights under copyright law. But if you get a digital file that takes up space on your device (as opposed to a digital physical object such as a CD or DVD), the law says that you don’t get that bundle of rights; instead you get whatever rights the distributor decides to give you in a license agreement, which is a contract. Often those rights are narrower than the copyright rights bundle. For example, typical license agreements of this type forbid you from alienating the file — which you have the legal right to do for physical objects. The law also says that such restrictions in license agreements are enforceable, despite the fact that they curtail the rights in the copyright bundle.

But legal constraints on use are not the same as practical, technical constraints, which may be tighter or looser than the legal constraints. Broadly speaking, there are two current paradigms for this. In one, users are technically able to do anything they want with their files, including sending copies to their million best friends, posting them online for anyone to download, selling copies and keeping the revenue, and extracting samples to create derivative works — as long as they don’t get caught, because the license agreement with the retailer probably forbids those activities.

In the other paradigm, technical constraints make it difficult or impossible to alienate content, share it with others, create derivative works, and so on — regardless of whether the license agreement forbids or allows such activities. This is the case with movies and TV shows; it’s also the case with most e-books in the U.S. and some other countries.

Of course, I’m talking about files that are DRM-free (downloaded music) vs. files with DRM (video and e-books).

The basic concept behind today’s e-book/blockchain startups is to emulate ownership — as a practical, technical matter — more closely than existing digital content distribution systems do. The idea is to use two properties of blockchains that help facilitate digital ownership. First, blockchains are ownerless, so that a record of file ownership on a blockchain is not controlled by a central distributor such as Amazon or Apple. Second, blockchains are immutable, so that if a system puts an entry on a blockchain that you own an e-book, that entry is there to stay forever, even if the vendor whose technology you used to buy the e-book goes out of business. And if you sell the e-book to someone else, another entry goes onto the blockchain that also stays there, unaltered, in perpetuity.

In other words, blockchains enable transfers of ownership that are secure and not controllable by a third party after the fact. But there are other aspects to emulating ownership, such as not being able to send copies to your million best friends or keep your own copy after you’ve alienated it. For this, DRM is necessary. Files must be encrypted, and tokens are really glorified DRM license files that contain encryption keys and information about usage rules.

I’ve seen a few media/blockchain startups that purport to emulate “ownership” without imposing technical constraints, mainly in music. I view such ideas as pointless. Consumer behavior and the market over the past fifteen years or so have brought us to a place where music downloads are DRM-free and users haven’t gotten an experience of owning digital music files; so users have gravitated to licensed streaming services where paying is optional and ownership is beside the point — or, to a lesser extent, to physical objects like vinyl LPs where ownership is assumed.

But e-books are a different matter. Most e-books still have DRM, at least in the United States, UK, France, South Korea, and elsewhere. Most users expect it, even if some don’t like it. Furthermore, explicitly non-ownership models for e-books have been held at bay, mainly by major trade publishers that won’t license their titles to monthly-subscription services such as Scribd and Amazon Kindle Unlimited. Therefore, a B2C blockchain scheme could possibly work for e-book distribution.

Sure enough, both of the startups I’m talking about here use DRM, even though neither of them likes to talk about it. One is Bookchain, from Montreal-based Scenarex, which the company expects to launch next month; the other is Publica, based in Gibraltar and Latvia, which is up and running. Publica calls its Token Key Protocol (TKP) a “successor” to DRM.

Both of these schemes are targeted towards independent authors who want to sell their books outside of the mainstream e-book platforms. Both use the Ethereum blockchain, which supports smart contracts. Smart contracts are constructs that enable rules to be encoded and enforced across all copies of a blockchain. In this case, smart contracts embody rules about e-book ownership. They ensure, for example, that when you sell your e-book to someone else, they get rights to the e-book and you don’t anymore. Or if you bought two copies of the e-book and you give one copy away, you only have one left for yourself.

Bookchain and Publica both enable resale and other forms of alienation. Bookchain allows sellers (authors or publishers) to place constraints on resale, such as minimum or maximum prices, or whether a portion of resale revenue goes to the original seller; whereas Publica doesn’t enable such constraints. Both make their money by taking commissions on all transactions (first sale or resale). Both use the standard EPUB format and have their own e-reader apps: Bookchain’s will be web browser based while Publica’s are mobile apps for iOS and Android.

(An important difference between the two platforms is that Publica currently only takes payments for e-books in Ether, the Ethereum blockchain’s cryptocurrency, or Bitcoin, and requires conversion into its own PBL (“pebble”) cryptocurrency. After an entire week of trying, including having to create accounts on three different cryptocurrency systems and being asked for transaction processing fees that far exceed the price of the e-book I wanted to buy, I still haven’t gotten Publica’s utterly Byzantine purchase process to work. Although people who deal with cryptocurrencies habitually will presumably find it easier, this process is far from being accessible to mainstream users. Meanwhile, Scenarex’s Bookchain will take payments through various standard means, using the Stripe payment system — a much more sensible approach at this stage.)

These platforms raise two questions: How closely can a scheme like this really emulate ownership? And will their feature sets be attractive enough to wean readers and authors alike off existing e-book platforms?

Let’s take these questions in order. My view is that ownership and pure digital files are apples and oranges. While you can get close to a true simulacrum of ownership for digital files, you can never really get there.

What does ownership mean, anyway? Two legal scholars, Jason Schultz of NYU and Aaron Perzanowski of Case Western Reserve, wrote an entire book about ownership in the digital age two years ago, in which they explain what ownership means in legal terms, lament the deterioration of digital ownership, and propose legal mechanisms to restore it. But in lay terms, ownership means that you get something that you can call your own, that belongs to no one else; that you can point to and keep and protect as your property; that you can alienate as you wish but then it’s not yours anymore. This means that being able to make a file freely available online for anyone to copy and use — while certainly desirable for consumers — isn’t ownership anymore; it’s something else. As a practical matter, it doesn’t coexist with the other attributes of ownership.

Let’s look at how ownership can be approximated from both legal and technical directions.  Some lawyers argue that all you need to do is distribute DRM-free files and offer ownership by putting ownership-like terms in a license agreement. This, of course, is very easy to implement. But while a few publishers actually do this, I say it’s not realistic; I don’t believe in verbal DRM.

From the technical side, if you take the view that ownership of an object should enable you to do anything you want with that object — including what Ed Felten of Princeton calls the freedom to tinker — then a DRM scheme that governs alienation, allows copying some text to the clipboard, and requires you to use a proprietary e-reader app doesn’t get you to ownership either. This is what Publica and Bookchain do.

Schultz and Perzanowki’s book presents research suggesting that people expect ownership rights. But that’s not the same thing as suggesting that people see value in ownership rights for digital content. That leads to the second question: Never mind what ownership is or whether schemes like Publica and Bookchain achieve it for digital files. Are the features they offer desirable for readers or authors?

The answer, of course, is that we don’t know yet but we’ll find out as these platforms proliferate. Today’s centralized e-book platforms impose restrictions that impinge on ownership rights — not only on copying, pasting, and printing, but also things like device restrictions and the risk that your e-books will become inaccessible if the vendor goes out of business or deletes them remotely from your devices. But they also provide benefits that go beyond ownership, such as the ability to get copies of an e-book for each of your (compatible) devices with a single purchase, and in some cases to share copies with family members. It’s hard to see how an ownership paradigm gibes with this.

This isn’t the first attempt to create a simulacrum of ownership for digital files; another one was something called IEEE P1817, a proposed technical standard for Consumer-Ownable Digital Personal Property that was first proposed in 2010. P1817 didn’t get very far and was apparently abandoned around 2015. But P1817 was just a spec; it wasn’t used in any consumer-facing systems that would help determine whether anyone was interested in digital ownership features or not. Now such systems are becoming available, and we’ll be able to see whether ownership is still relevant for e-books or if, like music, it’s going to be relegated to physical objects in the future.



  1. […] Meanwhile, as DigitalBookWorld approaches, there has been some interesting industry interest in two of its more interesting attendees. Publica and Bookchain are both using blockchain technology for publishing. Blockchain has become such a ubiquitous term there’s an unsurprising backlash in many quarters. Nonetheless, the industry, and copyright experts in particular, are finally seeming to take an interest in its most promising application – a system of ownership that avoids the multiple difficulties of DRM. […]

  2. […] most recent post, Blockchain Comes to E-Books, DRM Included, provides a good overview of the landscape for blockchain technology in media industries. His June […]

  3. […] Blockchain Comes to E-Books, DRM Included […]

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