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Digital Rights Management (DRM) a restriction on learning and a route to bankruptcy?

July 9, 2012
Image of HMS Devastation - a pre-dreadnaught ironclad

Ironclad in action – is DRM shackling sales and marketing in a post-dreadnaught world/

Is DRM as illogical as VAT on books? Is it a route to destruction? In the UK for many years, books in the UK have been free from the so-called “Value Added” Tax (VAT) on the grounds that learning should not be taxed. Alas, the same does not apply to digital versions of those books and nor does it apply to digital information services. A singular distinction which implies that an electronic device appears to add value to information, unlike the cover of a book or indeed the publisher who brings it to market. A bit like DRM…

Like VAT, DRM too chooses to differentiate between a book and a digital version of a book. I can share a book but restrictions exist digitally. The question today – indeed has always been – why should these restrictions exist? Is DRM a restriction on learning and the free dissemination of knowledge? I can share my print copy of Ironclads in Action with anyone I choose, after all (not that any of my friends would be remotely interested in reading it)…

Not a new problem…

Legal publishers were early learners in this area: after years of selling expensive sets of encyclopaedias and loose-leaf works, they then had to protect their income via a range of digital pricing models including “pay as you go” (PAYG), “single user licence” (SUL); Site Licence and Enterprise Licence structures. Problems arose about concurrent usage or a pre-defined number of users which created enormous confusion among the customer base. These issues had never occurred before as books and encyclopaedias were shared openly within law firms.

These models were about one thing only: protecting the revenues and margins of lucrative accounts. Invariably, even today, a legal key account will combine a mixture of print and electronic product as customers like to have an understanding of tangible ownership and the flexibility of digital. Not forgetting that the publisher still needs to cover the costs of declining print-based numbers. Combination packages and strangely structured deals are commonplace (many of which probably wouldn’t withstand a close inspection by a price and profitability consultant).

The book world suddenly catches up…

With the advent of the e-book, these problems were passed onto an even more inefficient business model: the publishing of single-purchase books at a cheap price. Publishers for years have struggled to commission and publish enough books in a year to cover costs and make some sort of profit. Many ignored – and continue to ignore – the importance of the “end user” (the reader) and focused on their old business model rather than grasping the elusive construct known as brand value.

Today, therefore, in an effort to protect a limited slice of revenue as more consumers switch to e-books, DRM comes to the fore. Amazon, the arch-exponent of the offer-led trade business combined with rigorous consumer datasets, has fundamentally understood the importance of data in the management of profit and today has strong market share with its Kindle offering and associated DRM technology.

But what about publishers who have ignored their market, preferring to see their market as the book trade rather than the consumer? There is paranoia in the land – piracy threatens their “list”; piracy threatens their profit margins. DRM is cited as a way of preserving revenues and avoiding cash haemorrhage to the Blofeldt-led Sino-Russian Pact of Digital Piracy hidden in some dark extinct volcano in Outer Mongolia.

A different way of thinking?

Publishers today need to think beyond what they have produced – although of course this if fundamental – and also think about a strategic relationship with their readers if they are to sustain a profitable relationship with them. In a digital world where social media (and multiple platform visibility) have key roles to play, restriction of interaction could indeed be perceived as a restriction on learning – because a part of learning today is about sharing and operating within new social and electronic structures.

As this post from Mitch Joel shows, a modern consumer finds DRM to have a negative impact on what he is trying to achieve – it adds a layer of frustration in his life of digital interchange. Even this early blog post from 2004 by Dan Lockton questions the impact of restriction while the Sony BMG backfire some years ago revealed just how far paranoia can go in alienating consumers.

Meanwhile, Tor/Forge announced a dropping of DRM from its portfolio in a move which has received some positive response within the industry. Many commentators now argue that consumers themselves will always prefer to buy a product rather than to get it free and that this negates the piracy argument. Intriguingly, it is argued that getting rid of DRM will encourage pricing structures to find their own level; to define product value. This is of fundamental importance.

What is clear is that information is about sharing. The question for publishers is how paranoid do you want to be – and why? A bigger challenge for publishers – especially those who have fundamentally ignored the issue of brand and consumer interaction – is how to grasp the strategic imperative: a long term relationship with consumers.

Publishing brands need now to engage consumers in a way they never did before if they are to avoid consumer interaction in the future only being between the consumer and the digital retailers. In my view, a future based on the trade/other retailers is the publisher stepping back into the comfort zone of what it knows best.

Yet digital offers a business to consumer (b2c) relationship far greater than ever before thought possible – provided that publishers invest in brand and strategic relevance. Successful publishers of the future will be those for whom a relationship with their readers – not the trade – will be paramount.  Brand presence and emotional engagement will be key in this battleground.

PublishersRed Page Consulting works with publishing companies of all sizes to develop branding, pricing and positioning solutions for strategic impact. Find out more here.

Image – HMS Devastation, courtesy of the display at the Historic Dockyard, Chatham, Kent, Great Britain

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