The Book Industry around the world is a buzz following the decision by three major US publishers to settle with the US Department of Justice (DoJ) over alleged collusion in regards to agency pricing for eBooks. It is important to note that the Agency Model itself was not the subject of the DoJ’s lawsuit but whether or not there was collusion between 5 publishers and Apple when they all moved to the Agency Model. It is also important to note that the three publishers who have settled with the DoJ (Harper Collins, Hachette and Simon & Schuster) all say they settled as a business decision to avoid massive legal fees and admit no wrong doing.
The agreed settlement in effect spells the beginning of the end of the Agency Model for eBooks (Random House were not part of the lawsuit as they moved to Agency 12 months after everybody else and therefore were not part of any collusion). Harper Collins, Hachette and Simon & Schuster have all agreed to a hybrid model where retailers are allowed to discount but the retailer’s total discount for a publisher cannot be at a loss. I have no idea how the DoJ or the publishers are going to monitor or enforce this. The three publishers cannont revert back to the old style Agency Model for at least 2 years, which in the eBook world is an eternity.
When I first heard about the Agency Model it did not seem like a very ideal situation for a retailer to be in. Having the publisher set the price and the retailer act as an agent where they are unable to discount seemed like price fixing. However the more I understood the agency model and the more I understood what was going on in the eBook market the more I began to appreciate the Agency Model. [Read my previous blog post about predatory pricing and the agency model.] Pricing under the Agency Model can also be quite dynamic with a savvy publishers constantly monitoring and changing their prices up and down. But the main point that needs to be made is the Agency Model for eBooks is NOT anti-competitive. It has fostered competition and allowed other retailers into the market. Before the Agency Model Amazon had 85% market share, they now have 65% and the market has grown exponentially. That can only be a good thing.
But the Agency Model alone has not been enough. The way Amazon have designed their Kindle device and format they has essentially walled their customers in. So even with eBook prices being equal across retail platforms Amazon has a huge advantage. For more on Amazon’s eBook strategy read this fantastic post.
I think that Digital Rights Management (DRM) is a necessary evil but I think the way DRM is applied by publishers and authors needs to be reviewed. This great post also goes through the issues with DRM and also touches on Social DRM which has been used in the recent release of the Harry Potter eBooks. I think current DRM punishes people who do not partake in piracy and that if you are serious about tackling piracy you should address the root cause. As with television shows, movies, music, software and now eBooks if people think their access to the content they want is being blocked (either through geo-restrictions or release dates), unfairly restricted or at an unjustifiable price (eg Pay TV subscriptions) they will turn to other means to source the content. And these days other means are not hard to find or use.
My experience with DRM is as a reader and a retailer. As a reader I have never found it obtrusive or obstructive. I don’t lend my physical books so no being able to lend eBooks isn’t an issue for me. I also don’t find setting up devices, apps or computers that hard but it is slightly annoying. However as a retailer it is a massive challenge and more often than not it is obtrusive and obstructive to selling eBooks.
The majority of our eBook customers have been new to the technology and find it extremely cumbersome to have to set up a separate ID and password with Adobe (a password they invariably forget!) and then re-enter that ID and password into our ReadCloud app. More often than not we try and take care of this step for them as we want to give as much service as possible but I’m sure there are customers who we have lost due to frustration setting up their device. There are some other options open to us but they are very expensive. I think we could eventually move to these options but not in the short term. And maybe we don’t have to.
I am a big fan of the idea of Social DRM. This is where a unique code number is watermarked or some other unique and distinguishable feature such as text or invisible html code is added into an eBook so that if an eBook is uploaded to a file sharing site it can be tracked back not only to the retailer but the customer who purchased the eBook. Other than that there are no restrictions on the eBook. So you can lend an eBook to a friend if you wish and you can store your entire eBook purchases in one place, not within various platforms. Couple this with a standard eBook format across all retailers (including Amazon) and then customers can transfer their eBooks and eBook purchases across devices and across retailers. Kindle owners would no longer be tied to Amazon as their retailer and I could sell to my customers who own a Kindle. This would result in REAL competition in the eBook market and I could guarantee that Amazon’s market share would fall below 50% and you would see even more growth in eBook sales.
So should this happen? Yes. Will this happen? I wouldn’t put any money on it which is the real tragedy in all of this. There is still time and opportunity to have a fair and equitable book industry for everyone: authors, readers, publishers and booksellers of all shapes and sizes. But I think self-interest and conservatism will get in the way which for a creative industry is a massive shame.