Where DRM (or a lack of it) is relevant – even with Microsoft entering the eReader game

soc_econ.pngThere’s two points I want to respond to with Mike Stackpole’s article “Is DRM really Significant?”. It’s important I keep these two points completely separate – because he’s both completely right… and completely wrong. (And yeah, this is a multi-day thing.)

First, where he – and others – have been wrong in the past. Or at least, mistaken. Mike’s1 opined (both in his blog and in his Second Life chats) that Amazon cannot be following a Wal*Mart business model with eBooks (paraphrasing here) because they’re digital, and digital markets can move quickly. The argument goes that Amazon will be kept in check because the volatility and pushback of the digital marketplace will serve to communicate consumer displeasure in a rapid way. Therefore, Amazon (or any other online retailer) can’t do anything too egregious, because they’ll be smacked down by the informed consumer.

On the surface, this makes sense. For many retail items, you can buy from a plethora of stores – even ones you may never have heard of before. Great!
Except that’s not how eBooks have been marketed or how they’re sold today. The eReaders were sold cheaply for much the same reason that printers are sold cheaply… to get you used to buying directly from that company’s store – a practice further enforced by DRM. (It’s impossible to convert your book from one format to another without removing DRM – which is a violation of federal law in most places.)

The practice of getting consumers to use a device preferentially with a particular storefront gives that storefront a layer of traction otherwise unavailable in the digital marketplace.

(Note: I wrote this before I learned that Microsoft would be working with the nook;
that lessens but does NOT remove many of my concerns. Competition is
good, but the fundamental problem is still the same. Go to a
restaurant, and your choices rarely include anything but Coke or Pepsi
products… and usually, not both.  A mall ecosystem that has Wal*Mart and Target is better than a mall that only has one… but isn’t the same as a lot of competition.)

I remember a friend of mine once saying “Well, yeah, I could go to a bunch of different stores, but why, when I can just go to Wal*Mart?” They were used to that experience, and it was convenient. Other factors – social good, quality of products, even cost would rarely make a dent once that habit was established. It’s this stickiness – because of the hardware, not the storefront – which makes Amazon’s domination of the eBook market, regardless of what you think of it, such a big deal – and such a ripe venue for (eventual) monopoly and monosopy.
Mike described consumer behavior perfectly in his own blog post:

“With e-readers, the thing I’m discovering is that most all of them have their book purchases tethered to the company that has its name of their e-readers. Okay, so this is like assuming that if you own a Ford you can only buy gas at the Ford filling station—a stupid idea. But owners of e-readers don’t drive past other gas stations when looking for books. They might hit a link in an email, but chances are they’ll just go to the store portal on their device and purchase from there, or do a quick search when they hear about a book on the radio or television.”

And that leads us right into where Mike is completely and utterly right, which we’ll get to tomorrow.

1 Mike isn’t the only, or first, one to say this. I’m just more familiar with his statements, and I’m responding to another part of the blog entry as well.

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