Author Charlie Stross posted a detailed analysis about DRM and eBooks on his blog:
- The rapid current pace of change in the electronic publishing sector is driven by the consumer electronics and internet industry. It’s impossible to make long term publishing plans (3-10 years) without understanding these other industries and the priorities of their players. It is important to note that the CE industry relies on selling consumers new gadgets every 1-3 years. And it is through their gadgets that readers experience the books we sell them. Where is the CE industry taking us?
- Dropping DRM across all eBooks will not have immediate, global, positive effects on revenue in the same way that introducing the agency model did; however, relaxing the requirement for DRM will have very positive public relations consequences among certain customer demographics, notably genre readers who buy large numbers of books (and who, while a minority in absolute numbers, are a disproportionate source of support for the midlist).
- Longer term, removing the requirement for DRM will lower the barrier to entry in ebook retail, allowing smaller retailers (such as Powells) to compete effectively with the current major incumbents. This will encourage diversity in the retail sector, force the current incumbents to interoperate with other supply sources (or face an exodus of consumers), and undermine the tendency towards oligopoly. This will, in the long term, undermine the leverage the large vendors currently have in negotiating discount terms with publishers while improving the state of midlist sales.
I don’t expect dropping mandatory DRM to have an immediate positive impact on sales; however, it will permit small retailers to compete and specialize in a market they are currently locked out of by network externalities. Right now, there is a window of opportunity for smaller resellers: Amazon’s inclusion of masses of self-published material in the Kindle store has made it impossible for heavy consumers to browse it effectively. Smaller bookstores may be able to gain a strategic edge by curating their content, providing quality control on reviews, and other tactics we can’t predict at this time. This is, I emphasize, speculative — but I believe saving the smaller resellers is key to diversity in the retail side of the market, and will further support the midlist (which is threatened right now by plummeting mass market sales and the difficulty authors experience in reaching their audience).
To the extent that piracy is an issue, I think the horse is well and truly out of the stable and over the horizon; bolting the stable door and adding chains and padlocks hasn’t worked to date, either in print publishing or in music and film publishing. However, I would recommend considering a switch to watermarking. Watermarking doesn’t prevent copying, but makes the original source of a copied file easy to find, which is a deterrent to piracy. This appears to be the current best practice in the music industry (in the iTunes store, all music downloads are watermarked), and they’re a few years further into the era of internet distribution than we are.