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The Northern Spy
March 2004

The More Things Change

Rick Sutcliffe

Many years ago, when dinosaurs roamed the earth (yes, we know, in computing they still do) the Spy amused himself betimes by removing the copy protection from Apple ][ disks and mailing unprotected copies back to the program's manufacturer. The point: copy protection schemes were a waste of time and resources. Improve your product, sell more, lower the price. Customers will be happier. You'll make lots more money. You had to say it in short, snappy sentences using words of few syllables, and even then they just didn't get it.

Fast forward to 2004. The biggest issue with books and music publishers is DRM (Digital Rights Management) for which read "copy protection". Light file encryption schemes do create an additional barrier between people of integrity and everyone's temptation to dishonesty, and may do slightly more than that for music files, but they have no other value for text files. In particular, they hinder eBook sales and cannot prevent eBook piracy.

For data on the former, we turn to Steve Pendergrast, co-founder and CEO of premier eBook online retailer Fictionwise. Hard facts from his EPICon keynote:

- the least known author in unencrypted eBooks outsells Steven King (or any other big name) in encrypted books, - encrypted formats generate at least five times the support cost of unencrypted formats, - some customers (the Spy included, BTW) by policy never buy encrypted books, - some customers (up to 10%) can never get certain encrypted formats to work, - big name publishers want DRM, but force retailers to absorb the cost of file conversion and support.

For the latter (piracy), the Spy notes that any reasonably competent student who has the algorithm (one usually does), a block of encrypted text, and the corresponding plain text, can easily recover the key(s) and crack anything so encoded. For eBooks this is especially easy because of the large text samples in question. The less competent can buy or generate a print copy, scan and OCR it, then put it on a server --all in a few hours. That is, paper copies lack a tissue of DRM.

So why do the big New York publishing companies bother playing this mug's game of DRM? Read my lips. They cannot win. Every file that can be read into a computing device can be copied. Are they secretly conspiring to build up the business of independent publishers who don't encrypt? Or is this another case of the Spy's law: "You cannot legislate against stupidity because there's just too much of it."

Of course, eBook publishing is just a mote in the eye of the New York dead tree giants, and one could argue the latter can afford to pay lip service to this market without understanding penetrating any other part of the head. However, it has been obvious for years now that the monolithic paper publishing system is broken, market share too concentrated, the vision blinkered. A new author has no chance, only imitation and controversy sell, the distribution system is flawed, and waste extensive. New authors, cross-genre books, and innovation are not permitted in the industry, and the older writers, editors and cover artists have run out of ways to retread the same tired old themes.

Costs are rising, distribution and retail consolidation produces demands for their share of the meagre pie to increase, and sell through declines. Editors are afraid to try anything new and the public is getting bored, so the only growth in recent years has been by merger. Since everything under the paper publishing sun is now owned or controlled by a literal handful of people, even the latter has now ended, the entire industry become stagnant.

Meanwhile, eBook retail sales grow 40% per year, on an admittedly small base, perhaps $20M in 2004, but the growth compounds up, and despite being written off for not meeting inflated expectations during the tech market bubble, this sector has produced good returns for the persistent. Although many minor players are gone and Content Reserve is apparently in death throes, Fictionwise, Palm Digital Media, and Amazon are significant players in the eBook retail market, easily outselling all publishers' own retail sites (and smaller independents) by a wide margin. This business is profitable, and looks better all the time.

Fictionwise is probably the company to watch. It has a diversified inventory, good quality controls, a reliable ordering system, good promotion, and excellent relations with authors, publishers, and customers. They "get" the market, in the same sense as iTunes "gets" theirs.

What this is all leading to is yet another plea to Apple to realize that "iBook" ought to refer to books and their hardware reading device rather than to laptop computers. Sure, throw in a PDA, cell phone, and camera if you will, but give it a substantial enough high resolution backlit screen to make reading a pleasure (either a Treo 600 writ large, or a pocket Mac). Call it an iReader, iNewton, or freely take the PIEA name the Spy coined lo these many years ago for just such a device. A good chunk of dead tree book market revenues can be taken, whether in fiction or non fiction. Hey, Steve Jobs, call that other Steve, Pendergrast that is. If between the two of you book marketing and reading can't be done right, I doubt it can be done at all. Build the right reader (the Rocket was close; so was the Newton) and the right distribution system (Fictionwise is close), and when eInk on a textured sheet that can be folded into a wallet arrives, the market will already have its leader.

Oh, and while I've got your attention, how about licensing Apple's AAC DRM to everybody under the sun. Not that it can't be cracked too, but it's an opportunity to achieve a standard format, something music industry needs as badly as the eBook industry. But listen up. If you do achieve a monopoly on music (or eBooks) as a result, may it be a kinder, gentler one. The current U.S. government may have thrown the case for political reasons, but this week the enforcer of EU competition law levied a 497.2 million euros ($610+ million) fine for illegal monopolistic behaviour, and among other things ordered the unbundling of Windows Media Player from the OS, lest Real Player be crushed as Netscape was.

The Spy's own visit to Oklahoma City this month went well, with the talk to authors on web site design and maintenance quite well received. Pendergrast's keynote was spot on.

The Spy presented one of the EPPIEs, and received another. Two of his own books were in the running in the science fiction competition and The Friends, volume two of The Interregnum won the award for best SF novel of 2003! Many more congratulations than trophies are due, however, for the quality of books the Spy saw while judging other categories was very high, and the hard thing to do was make the finals. Read all about it on the Arjay Books site.

--The Northern Spy

Want to discuss this and other Northern Spy columns? Surf on over to ArjayBB.com. Participate and you could win free web hosting from the WebNameHost.net subsidiary of Arjay Web Services. Rick Sutcliffe's fiction can be purchased in various eBook formats from Fictionwise, and in dead tree format from Bowker's Booksurge.

URLs referenced

Reuters Article on the fine: http://www.reuters.com/financeNewsArticle.jhtml?type=businessNews&storyID=4644397

WebNameHost : http://www.WebNameHost.net

Arjay Books: http://www.ArjayBooks.com

Booksurge: http://www.booksurge.com

Fictionwise: http://www.fictionwise.com

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Last Updated: 2006 11 08