Monthly Archives: June 2009

Despite complaints and DRM, Kindle is a good value

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scholjpgI’m starting to see signs that Amazon has successfully injected some major mojo behind its Kindle electronic book program. Dare we call them green shoots? This morning, publisher, blogger and Chris Anderson-fill-in Rex Hammock had a great post up about how his Kindle was aiding his effort to re-read David Foster Wallace’s massive novel Infinite Jest. I also came across a thought-provoking post about the Kindle by Kent Anderson over on the scholarly kitchen blog called “The Freedom of Not Owning Books.” Kent makes the argument that it’s worth buying a Kindle despite the DRM-imposed limits, pointing out the value of the wireless connection, the space saved by having virtual books, the ability to read and acquire new reading material on the go and so on. But he also crystallizes a more original factor at play:

Ownership isn’t a panacea, especially in an age of information abundance. Will I be concerned if the Kindle dies and books I’ve read on it become inaccessible on that platform? Not really. If I want to read them again, there will be plenty of alternative ways in the future. And my bookshelves long ago stopped being my collection of known facts and resources.

Joe Wikert points to a related post about how e-books still have room to evolve. I agree with the author’s points while noting that they’re already evolving in many ways. Two of my favorite old Sherlock Holmes collections are on my Kindle — for free. A copy of “Moby Dick” typeset especially for the Kindle also held sway for a while. From classics to current bestsellers, I can wirelessly get books for free and for less.

And I don’t have to own them.

It’s a fascinating point and one that is growing on me the more I ponder it. In fact, with Amazon keeping all my Kindle books alive in the cloud for instant access, I actually can go back and review a text from almost anywhere. A physical book sitting on a shelf at my house is out of reach if I’m not at home. And what about the Kindle’s indexing of every book you buy? It’s great that I own thousands of dead tree pulp books but if I can’t remember exactly which book contains the scrap of info I’m looking for, it can make for a long afternoon.

But, of course, this is the Internet so open the comments and queue the anti-Kindle-istas. In this case, the lead complainer was David Crotty, another member of the scholarly kitchen crew and the executive editor of an academic biology publication. Crotty wants to own his books, he doesn’t want any digital rights management software limiting what he does with his books and he is especially fearful that some day Amazon could take away his books.

I started arguing with Crotty in the comments but after a while, it started to feel disjointed. So, here’s why I agree with Kent: The Kindle is a good value if you are an avid reader, buy lots of new books and like to read when you’re on the go. It’s a good value despite the stupid DRM limitations, despite the fact that it costs hundreds of dollars and despite the fact that there’s a remote chance that Amazon will abandon it some day.

I do agree with Crotty that before you invest in any new technology, particularly one with a proprietary DRM involved, you need to make an assessment of the costs and benefits and the risks involved. Crotty cites examples like Microsoft killing its PlaysForSure music program or the defeat of HD-DVD at the hands of Blu-Ray as cautionary tales. One should wait until a DRM-free electronic book market opens before buying any ebooks, he argues. I guess that’s fine as far as it goes, but it’s not very far.

It’s obviously always better to buy without DRM but that’s not always an available choice. For example, see almost all major software programs with their horrendous activation schemes, current downloadable TV shows, movies, electronic books, downloadable video games, smart phone software etc. There is no way to buy electronic versions of current, popular books without DRM. There is no DRM-free substitute available. I wonder if Crotty buys any business software, video games or iPhone apps because they all have DRM? How long is he going to wait? In the meantime, the opportunity “cost” of not using software and playing games and using apps mounts. If anything software and computer game DRMs have been getting more annoying and restrictive over time, so he may be waiting forever.

Consider the PlaysForSure situation when Microsoft announced it back in 2004. The proper risk assessment strategy if you wanted current music back then was to go with the DRM that looked most likely to succeed. There wasn’t much DRM-free music at the time and CDs were priced well above the cost of digital albums (not to mention forcing you to buy 13 songs when you only wanted one). PlaysForSure was a steep, steep underdog to the already dominant iTunes/Apple DRM format. PFS was just one zig in Microsoft’s zigzagging, ever-changing, incoherent strategy that consistently failed to make any headway against Apple iTunes. It also only worked on a small subset of the total number of MP3 players out in the world (not ipods!). Buying into that DRM was a pretty obvious bad risk.

Not so for the Kindle today. Kindle is currently the dominant ebook format, Amazon is the leading ebook seller and the DRM works not just on the Kindle hardware but also on all iPhones and iPod Touches as well as more devices to come (Blackberry and Windows Mobile support coming soon, supposedly).

Right around here, Crotty turned to the last refuge of scoundrels in Kindle debates argument that despite all Amazon’s success it was just roadkill as soon as Apple decided to start selling ebooks in the iTunes store. I can’t face repeating all the reasons this Apple/ebook dominance meme is wrong so see my old blog post about why Apple won’t kill Amazon for more on that.

But Crotty does speculate that Apple would yank all competing ereaders from the app store — a new twist I hadn’t heard before. That seems far-fetched in the extreme. There’s no precedent for it, it wouldn’t pass antitrust scrutiny and it would infuriate literally millions of customers who have bought books in Scrollmotion, Kindle, eReader and other formats. Apple started out barring competing web browsers from the get-go — a far cry from banning an entire category of apps after they’ve already been available for a year. I have not heard of an example of Apple pulling an iPhone app because it launched its own version.

And after all of this, Crotty still has to assume that Amazon would kill the Kindle program in the face of tough competition from Apple. I just don’t see it. People buying a Kindle device now are already choosing to pay for something that they could do in part for free on an iPhone or iPod Touch. And still it’s selling out every few weeks and analysts are saying it’s a multi-billion dollar revenue stream for Amazon within three years.

So stick with it, Kindle fans, and don’t go mistaking Paradise for that home across the road.
(As an interesting aside, Kent’s post was sparked by Crotty’s post a day before pointing out two of the recently-discovered DRM limits in Kindle that I wrote about quite negatively on June 20. I guess Crotty and I agree that DRM stinks and that undisclosed DRM limits should be illegal but we differ on how much those problems diminish the value of the Kindle).

(As a second aside, Crotty is a fan of John Hodgman, so we also agree on the humourous side of life.)

As feared, Kindle prices appear to be rising

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I’ll start this post about Amazon’s fabulous Kindle just like I did the last one: I really, really like my Kindle and I’ve written about it positively here and all over the web (Internet smartie and publisher Rex Hammock says I’m his go-to Kindle fanboy). And, I really want to see the Kindle succeed. That said, just like my weekend post about Kindle DRM junk, this post has negative implications for we the Kindle consumers, customers and readers.

As I’ve feared for a while, Amazon is raising prices in the Kindle store. It’s really, really hard to nail this down exactly since there’s no way to monitor the store comprehensively over time. Some people take big snapshots of the whole database, which show an increasing proportion of books being added above $9.99, but that’s not conclusive. The growing protest against books over $9.99 and my anecdotal experience looking for newly arriving Kindle books provide additional support for the theory.

But two big macro pieces of evidence arrived recently. First, Jeff Bezos declared that Amazon’s Kindle hardware business and Kindle publication business each had to operate profitably on their own. No razors subsidized by the sale of razor blades here. That put a big question mark over Amazon’s $9.99 price point for most new hardcovers, since its been widely reported that Amazon loses money after paying publishing royalties on such titles. And with Amazon already selling Kindle books for Apple’s iPhone and iPod Touch, hardware that generates zero revenue for Amazon, there’s only so long the company could keep selling most titles at a loss.

Ultimately, I think Amazon ends up just where Barnes & Noble did a decade ago. Discounts shrink away for almost all Kindle books except top best sellers and special promotions. Maybe $12.50 becomes the new price point for Kindle books also available as new hardcovers. Now, about that $12.50 figure…

The second piece of evidence was a report by two Wall Street analysts, Claudio Aspesi and Jeffrey Lindsay of Sanford C. Bernstein, that came out on Friday (the piece isn’t publicly available and the best summary of the Bernstein piece I saw was by Joseph Tartakoff at PaidContent). The two analysts theorize that Amazon pays an average of $8.73 to acquire a $9.99 ebook versus $9.38 on a $12.50 ebook. There’s no sourcing back to Amazon but plugged-in analysts like these two have no doubt gotten some guidance from the company and talked to legions of other industry insiders, providing a one-off look at what Amazon is saying to publishers. I couldn’t quite figure out how the analysts had calculated that Amazon pays less than 100% royalties on $9.99 Kindle books, as has been widely reported, unless the analysts’ figure also includes paperbacks with lower print list prices, which it may. But looking to the future, as I explore below, it starts to make sense.

The increasing frequency of higher-priced Kindle editions of new hardcovers at least come at a 15% to 20% discount versus the dead-tree pulp version. The more annoying price hike is on Kindle books that are actually priced well-above the cost of paperback editions. Look at this screen shot of the Kindle edition of Tim Russert’s book about his dad, Big Russ & Me:

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The e-book costs $9.56 and there’s no box showing other editions of the book and how much they cost. There’s a good reason for that. Amazon’s also selling a paperback version of the book for…drum roll, please…$5.58 and a hardcover version — brand new, from Amazon — for $9.18. See the screenshot:

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So what the heck – how is the Kindle edition page showing that you’re “saving” $4.39, or 31% off list price? Because Amazon is now showing a made-up “Digital List Price.” Unsure where a Kindle book is sold at digital list? Me, too. Could be that some publishers and Amazon have struck a new deal to cover Kindle book sales, breaking free of the older print royalty and discount model (that would explain a lot about the Alliance Bernstein report, too). But by hiding the actual price of other editions available from Amazon and showing a “digital” list price that isn’t actually charged anywhere, consumers aren’t getting the best information.

And all of this is happening, of course, as several higher-priced ebook vendors are pushing into the space, giving Amazon some cover. Scrollmotion’s ebook prices for its iPhone app reader are horrendous. And Google says it will let publishers themselves set retail prices for ebooks it plans to sell. It’s a darn shame for consumers, but it looks like the future is arriving with higher Kindle prices.

Scary complaints mounting about Amazon Kindle’s DRM (Updated)

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infit-5I’m a big fan of Amazon’s electronic reader, the Kindle, but I have to admit that stories about the digital rights management software embedded in Kindle books are starting to make me very nervous. Digital rights management, or DRM, is the euphemism for restrictive software limits that copyright owners frequently require in digitally licensed versions of their books, movies, songs and so on. Ostensibly, DRM is to prevent consumers from pirating the copyrighted works but it’s also true that DRM-enforced limits reduce the value of digital works and help preserve the market for old-fashioned analog stuff like print books, CDs and DVDs.

One of the most recent DRM horror stories is completely acknowledged by Amazon. Some publishers and authors objected that the new text-to-speech function of the Kindle2 and Kindle DX violated copyright (arguing that it infringed on their rights to separately license and sell audio books). So Amazon gave publishers the ability to “turn off” the text-to-speech function for any item sold in the Kindle store. Sure enough, vast swaths of Kindle books and other materials had the text-to-speech ban imposed. And there’s no specific disclosure when you go to buy an item in the Kindle store. It obviously should be listed in each item’s “Product Details” section. Very bad.

Other scary stories come to us anecdotally. In some cases, they are clearly exaggerated. But taken together, they paint an ugly picture of limits placed on consumers without proper disclosure. Seems like a matter that the Federal Trade Commission or one of the many enterprising state attorneys general should look into immediately. I’m not one of those anti-Amazon bashers complaining about an imagined monopoly but I am worried that consumers’ rights are being trampled in the same vein as deceptive car leases or hidden credit card penalties which harmed people in the past.

Just today, a friend sent me this link about a woman guy who discovered a hidden and undisclosed limit imposed by publishers on the number of times an ebook can be downloaded (but see below – the writer has now backtracked somewhat) to a Kindle or the Kindle iPhone app. This flies in the face of clear promises made on Amazon’s web site:

Automatic Library Backup: Download Your Books Anytime for Free

A copy of every book you purchased from the Kindle Store is backed up online at Amazon.com in case you ever need to download it again. You can wirelessly re-download books for free any time. This allows you to make room for new titles on your Kindle, knowing that Amazon is storing your personal library of Kindle books. We even back up your last page read and annotations, so you’ll never lose those, either. Think of it as a bookshelf in your attic–even though you don’t see it, you know your books are there.

[UPDATE 6/21 The Kindle 2 Review, without any real confirmation, is claiming that there is no per-book download limit and that the post above results from a misunderstanding about the six device limit. That's clearly not the case if you read the GearDiary post and comments. I've sent an email to Amazon's pr department to see if they will clarify.]

[UPDATE2 6/22 Dan Cohen, who made the original claim, has now backtracked on a new GearDiary post, saying the problem relates to a different undisclosed DRM limit. Conceding that there's no per-book limit on re-downloading, Cohen says that while most Kindle books can be shared on six devices at a time, some books have a lower limit imposed by the publisher.]

Another story appears to have been exaggerated but it’s still worth noting. This guy apparently had his whole Amazon account suspended for some reason. That meant, along with not being able to do anything on the Amazon web site, he couldn’t access the web page for managing material on his Kindle. He could no longer re-download items he’d purchased and since deleted from his Kindle. That is crummy, though we probably don’t have the full story of why his account was suspended. And it’s simply not true that his Kindle was remotely disabled or that he couldn’t read ANY ebooks he’d purchased.

Another crazy, undisclosed limitation prevents consumers from highlighting and clipping  more than a certain portion of any ebook into their “My Clippings.txt” file. Again, just anecdotal reports of the secret Kindle clipping limit have surfaced so far. And again, there is zero disclosure of this limitation in the Kindle Amazon store.

All of this sadly reminds me of the pathetic state of legally-sold digital music in the days before Apple opened its iTunes store. Each song had a variety of DRM-enforced limits like whether or not it could be burned to a CD or how many times it could be copied to a portable MP3 player. It was insane — every song had different DRM limits. Ultimately, Apple came along and initially enforced consistent limits. Later, Apple dumped the DRM altogether. Amazon and book publishers need to follow quickly or risk alienating consumers and sending them off to less-legal avenues to satisfy their ebook desires.

What do you think? And have you experienced these or other Kindle DRM limits?

(Special thanks for this post go out to the Teleread blog which chronicles so much of what is happening in the fast-moving e-book economy)

Apple gives stage to overpriced ebook developer Scrollmotion

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Fans of electronic books got a little bit of exciting news today at Apple’s World Wide Developer Conference. Showing off how the new iPhone OS 3.0 will allow purchasing transactions from within apps, Apple brought out on stage an ebook app developer called Scrollmotion. The company’s co-founder, Josh Koppel, showed off how his Iceberg reader app on an iPhone will let you browse an ebook store directly without needing to jump to a web browser. And purchased ebooks immediately download into the app so you can read them right away. Pretty cool. You can’t quite do that with current ebook readers like Stanza, Kindle or eReader.

Funny thing about Koppel’s presentation of his new ebook store, though: there weren’t any prices visible. Well, not totally true — he did demonstrate the purchase of one book, the 2nd volume in Stephanie Meyer’s Twilight Saga, New Moon. How much was this book, which came out in 2006 and can be purchased as a paperback on Amazon.com for $5.50? The ebook on Scrollmotion was $9.99.

Not only is the price a terrible, terrible value for customers, but I think it may even have been purposely chosen at the $9.99 level to mislead. Many people might assume it’s a more recent best-seller being offered at the Amazon Kindle store’s typical ebook price for best-sellers of $9.99. No way Jose. And p.s. the book is $5.50 for the Kindle version.

Turns out Scrollmotion isn’t new to the iPhone app store either. Turns out they’re the folks selling all those one-off, mainstream ebooks. You know the ones where each ebook is a completely separate app taking up space on your home screens? And what are the prices like? Absolutely insane. I mean wack. I mean more than you would pay for a brand new hardcover. Bob Barker’s recent memoir, Priceless Memories, is $25 from Scrollmotion versus $9.99 in the Kindle ebook store or $16.49 for a hardcover version.

You read that right — Scrollmotion is charging you a 34% PREMIUM over the hardcover for an itty bitty electronic version that is locked down with DRM and can only be read on an iPhone or iPod Touch. There’s far less value in the ebook edition, which can’t be shared or resold and remains tied forever to a particular device platform. But they want more. I won’t even get into the fact that no matter how you measure a publisher’s costs, it is cheaper to sell an ebook than a print book (debate rages over how much cheaper, a lot or a little).

And Barker’s Scrollmotion ebook price is typical. Infinite Jest by David Foster Wallace is $9.99 on Kindle and $17 on Scrollmotion. Testimony by Anita Shreve is $16 for a hardcover or $9.99 for Kindle but as a Scrollmotion ebook app it’s $26. Outrageous.

Koppel says Scrollmotion will have 170 newspapers, 50 magazines and 1 million (you know, use your best Mini Me voice for that: one meeeelion) ebooks available for its new in-app purchase store. No surprise that publishers are jumping on board at these prices. The question is why would anyone pay these prices? Lately on some of the ebook blogs, people from the publishing industry have been whining about Amazon’s low ebook prices and claiming that if only they were given more leeway to set prices things would be much better. I think Scrollmotion is Exhibit A, B and C in why that would be a disaster for the entire field.

By the way, although Apple is making the in-app purchase feature available to all apps in theory, don’t expect many of the other existing ebook reader apps to offer it. Apple is, first of all, prohibiting any free app from offering in-app sales. And further, Apple is demanding 30% of the revenue from any sales through in-app purchases. But with Kindle and other ebook vendors selling ebooks at big discounts, even at a loss in some cases, there is no margin to hand 30% of every sale over to Apple.

The high profile Apple gave to Scrollmotion, which is ripping off its customers daily, marks yet another sad episode of Apple caving in to the interests of big publishing and broadcasting corporations over the interests of its customers. In April, Apple caved to the music labels and raised prices on popular songs by 30%. And its video store has never taken off in part because it never offered good value, charging as much or more for low-quality downloads as the same shows cost on DVD. Seems like they’re running the same self-defeating game plan for ebooks.

(This post started as a comment I left on the excellent Teleread blog. UPDATE: now David Rothman is adding his voice and documenting some more of the crazy prices.)