Three little letters still have the audiobook divisions at various houses—and at least one agent—concerned. The use of DRM, or digital rights management, to deliver digital audio files has been debated by spoken-word publishers for well over a year now. Last week Random House became the first big house to announce it will start distributing its entire digital audio catalogue DRM-free beginning March 1. Many hope the move will significantly expand the market for digital downloads (already the fastest-growing segment of the audio market), while others fear the change poses a threat to the industry.
The DRM debate was first stirred up when the online music retailer eMusic.com started selling digital audiobooks last year. eMusic, the second-largest digital music e-tailer, significantly trailing the juggernaut iTunes, sells its files DRM-free. The lack of DRM, which differentiates the e-tailer from iTunes, allows customers to more easily transfer downloaded files among devices. Critics charge that DRM-free files are easier to pirate; proponents say the format is more customer-friendly and will encourage more e-tailers to sell digital audio.
When eMusic made its foray into the audiobook market last fall, Random was one of the houses that conducted what it dubbed “a test of DRM-free distribution.” The test, which watermarked selected DRM-free files sold on eMusic for tracking, found no instances of eMusic-originating files turning up on illegal file-sharing sites. In a memo to agents and other “publishing partners,” Madeline McIntosh, senior v-p and publisher of Random's audio group, noted that the test did not prove consumers aren't pirating audiobooks, just that DRM-free files are not the issue. “We did find many copies of audiobook files available for free,” she wrote. “But they did not originate from the eMusic test, but rather from copied CDs or from files whose DRM was hacked.” To ease authors' concerns about piracy, Random will not sell DRM-free audio if the author requests it.
David Pakman, CEO of eMusic, contends that the “use of DRM has stifled growth” in the audiobook market for years, and thinks Random's announcement will be a watershed for the industry. He believes that if publishers distribute DRM-free files, their product can be sold through outlets other than Audible, which uses DRM and currently dominates the market through its partnership with iTunes.
Both Pakman and McIntosh point to what's happened in the music industry—where all the major labels are now distributing their content DRM-free—as proof. “The DRM shackles have been taken off in downloadable music,” Pakman said. “It's the same premise with digital audiobooks.” Pakman noted that eMusic sold more than 100,000 audiobooks in the first 120 days after opening its store.
Random is looking beyond eMusic, though. McIntosh said the real goal is to start pumping sales through the online retail sites of the big-box stores. “If you're B&N, Wal-Mart or Borders, you can't sell [digital] audiobooks if we, as a house, insist you use DRM.”
Nonetheless, not all houses have jumped on the DRM-free bandwagon. Penguin, which pulled out of a deal to sell its files on eMusic in October because of piracy fears, has not changed its position. Penguin chairman John Makinson said while he is encouraged by sales of DRM-free files, Penguin won't change its stance until it can implement a global policy. HarperCollins also remains cautious, and a rep at the house said, “We are monitoring the DRM debate.” Simon & Schuster CEO Carolyn Reidy, however, said her company is preparing for a limited test of DRM-free audio.
In addition to opening up the field of retailers with a DRM-free model, McIntosh also pointed out that digital audio sales will bring in more money than traditional audio to authors. In her memo, she noted that given the house's digital royalty structure, authors earn, on average, $2.25 per download, compared to $1.50 per CD.
That is little solace to Trident's Robert Gottlieb. He thinks publishers need to look at what's happened in the music industry as a cautionary tale. Noting that the audio format is easier to pirate than e-books, Gottlieb believes distributing DRM-free files will lead to rampant piracy and, ultimately, eat away at both digital audio and print sales. “The amount of sales taking place in audio compared to print is negligible, and we need, as an industry, to nip this in the bud before it becomes a problem like it did in the music business,” he said. “Random House is a corporation and they have their own interests at heart. I'm an agent, and I have a responsibility to my authors.”
