How DRM weakens publishers’ negotiating leverage with retailers
April 2, 2012 | 11:09 am
By Paul Biba
A post by Cory Doctorow on BoingBoing (reprinted under a Creative Commons License):
My latest Publishers Weekly column is “A Whip to Beat Us With,” which describes how publishers who allow retailers to add DRM to their products hand those retailers a commercial advantage to exercise over the publishers themselves.
Jim C. Hines’s e-books are marketed both through a big publisher and solo. The books that were re-priced by Amazon were his solo titles—unagented, and unrepresented by a major publisher. As an individual, Jim has no leverage over Amazon. Not so Macmillan, which controls a much larger number of SKUs and has much more leverage. Macmillan made headlines during its tense standoff with Amazon in 2011 over e-book pricing, but the publisher was able to sway Amazon because it could make a credible threat that it might get up from the negotiating table and take all its books, too—and others might follow.
But Macmillan’s edge—its scale—is also its undoing. Every day, Macmillan sells more e-books that have been locked into Amazon’s format. The millions of dollars that Amazon customers spend on Macmillan’s DRM-locked e-books represent millions of dollars of e-books Macmillan customers lose if they wanted to follow Macmillan away from Amazon. Publishers believe DRM protects their books. But DRM has created a world where publishers who walk away from negotiations with a DRM vendor like Amazon leave their customers behind.
Not just Macmillan. Any publisher that sees a substantial portion of its income from DRM vendors becomes little more than a commodity supplier to those vendors. If Hachette or HarperCollins decided to bite the bullet and pull their titles from Amazon during a dispute, how many of their authors would stay with them, knowing that the world’s largest bookseller and most popular e-book platform no longer carried their titles?
To appreciate this vulnerability, just look at what happened in February with the Independent Publishers Group, a distributor that asked Amazon to hold the line on its discount. They weren’t able to reach an agreement, and Amazon removed all IPG’s e-books from the Kindle store. The day that happened, IPG sent out a communique describing the situation and asking its readers to avoid the Kindle store in future.