Article By Bill Rosenblatt
Blockchain technology has made its way to book publishing. The e-book platforms from two startups — Scenarex, based in Montreal, and Publica, based in Gibraltar and Latvia — are strikingly similar. They are implementing ideas that have been discussed in the book publishing world for a little while. Publica launched its system a couple of months ago, and Scenarex is launching its Bookchain system next month. As these systems roll out, we’ll see whether the advantages offered by blockchain technology will translate to features that book authors and readers care about.
There’s a growing number of startups building media industry solutions based on blockchain technology. Until now, most of them have been focusing on the music industry and on behind-the-scenes applications such as rights management and royalty processing. These new e-book platforms are consumer-facing systems that include online stores for purchasing e-books, apps for reading them… and features for reselling them, lending them, and giving them away. They use blockchains to track users’ ownership of e-books. When you buy an e-book on one of these services, it puts a record of your purchase on a blockchain that establishes your ownership of the file. You get a token — a small digital file — signifying ownership. Then you can alienate — a legalese term meaning to sell, lend, rent, or give away — the file to someone else. When that happens, a record of the new ownership is put on the blockchain, and the token moves to the new owner.
Some e-book services already offer limited alienation features; for example, the Amazon Kindle and Barnes & Noble NOOK platforms allow you to lend e-books to other users for up to 14 days, but only if the publisher allows it, which is not often the case. None of the major e-book services allow you to resell your books. This begs the question: when you buy an e-book or other digital file, do you own it?
This question has been a controversial one for a long time. If you own a physical copyrighted work, you get a set of rights under copyright law, which includes the right to alienate it. But if you get a digital file that takes up space on your device, the law says that you don’t get that bundle of rights; instead you get whatever rights the retailer decides to give you in a license agreement, which is a contract. Often those rights are narrower than the copyright rights bundle, and they are limited by what the publisher (or record label, movie studio, etc.) allows the retailer to offer. Typical license agreements of this type forbid you from alienating the file. The law also says that such restrictions in license agreements are enforceable, despite the fact that they curtail the rights in the copyright bundle.
But legal constraints on use are not the same as practical, technical constraints, which may be tighter or looser than the legal constraints. Broadly speaking, there are two current paradigms for this. In one, files are DRM-free. This means that users are technically able to do anything they want with their files, including sending copies to their million best friends, posting them online for anyone to download, selling copies and keeping the revenue, and extracting samples to create derivative works — as long as they don’t get caught, because the license agreement with the retailer probably forbids those activities.
In the other paradigm, files are encrypted with DRM, resulting in technical constraints that make it difficult or impossible to alienate content, share it with others, create derivative works, and so on — regardless of whether the license agreement forbids or allows such activities. This is the case with movies and TV shows; it’s also the case with most e-books in the United States and other countries such as the UK, Canada, France, and South Korea.
The basic concept behind today’s e-book/blockchain startups is to emulate ownership — as a practical, technical matter — more closely than existing digital content distribution systems do. The idea is to use two properties of blockchains that help facilitate digital ownership. First, blockchains are ownerless, so that a record of file ownership on a blockchain is not controlled by a central distributor such as Amazon or Barnes & Noble. Second, blockchains are immutable, so that if a system puts an entry on a blockchain that you own an e-book, that entry is there to stay forever, even if the vendor whose technology you used to buy the e-book goes out of business. And if you sell the e-book to someone else, another entry goes onto the blockchain that also stays there, unaltered, in perpetuity.
In other words, blockchains enable transfers of ownership that are secure and not controllable by a third party after the fact. But there are other aspects to emulating ownership, such as not being able to send copies to your million best friends or keep your own copy after you’ve alienated it. For this, DRM is necessary. Files must be encrypted, and tokens are really enhanced versions of license files that most DRM systems use to contain encryption keys and information about usage rules.
There have been a couple of blockchain startups that purport to emulate “ownership” for digital music without DRM. I view this as pointless. Consumer behavior and the market over the past fifteen years or so have brought us to a place where music downloads are DRM-free and users haven’t gotten an experience of owning digital music files; so users have gravitated to licensed streaming services where paying is optional and ownership is beside the point — or, to a lesser extent, to physical objects like vinyl LPs where ownership is unambiguous. And because purchased music downloads are DRM-free, a system that uses DRM for downloads has no chance of success anymore.
But e-books are a different matter. Most e-books still have DRM, at least in the countries mentioned above (some European countries, such as the Netherlands, Italy, Germany, and Austria have moved or are moving away from DRM for e-books). Most users expect it, even if some don’t like it. Furthermore, explicitly non-ownership models for e-books, such as monthly subscription services, have been held at bay, mainly by major trade publishers that won’t license their titles under those terms. Therefore, a blockchain-based scheme could possibly work for e-book distribution. And sure enough, both Scenarex and Publica use forms of DRM, although neither of them likes to talk about it.
Both of these schemes are targeted towards independent authors who want to sell their books outside of the mainstream e-book platforms, as alternatives to existing platforms for indie authors such as Smashwords, Aerio, and indie author programs on all the major e-book retail platforms (Amazon Kindle Direct, NOOK Press, Kobo Writing Life, etc.).
Both Publica and Bookchain use the Ethereum blockchain, which supports smart contracts. Smart contracts are constructs that enable rules to be encoded and enforced across all copies of a blockchain. In this case, smart contracts embody rules about e-book ownership. They ensure, for example, that when you sell your e-book to someone else, they get rights to the e-book and you don’t anymore. Or if you bought two copies of the e-book and you give one copy away, you only have one left for yourself.
Both enable resale and other forms of alienation. Bookchain allows sellers (authors or publishers) to place constraints on resale, such as minimum or maximum prices, or whether a portion of resale revenue goes to the original seller; whereas Publica doesn’t enable such constraints. Both make their money by taking commissions on all transactions (first sale or resale). Both use the standard EPUB e-book format and have their own e-reader apps: Bookchain’s will be web browser based while Publica’s are mobile apps for iOS and Android.
But the biggest difference between Publica and Bookchain is that Publica only accepts payments for e-books in Ether, the Ethereum blockchain’s cryptocurrency, or Bitcoin. It converts those into its own PBL (“pebble”) cryptocurrency. This creates some interesting possibilities for e-books as cryptocurrency-related investment vehicles, but it does not exactly make the system accessible to average consumers. In contrast, Bookchain will take payments through various standard means, using the Stripe payment system.
These platforms raise two questions: How closely can a scheme like this really emulate ownership? And will their feature sets be attractive enough to wean readers and authors alike off existing e-book platforms or inject new life into the stagnant e-book market?
Let’s take these questions in order. My view is that ownership and pure digital files are apples and oranges. While you can get close to a true simulacrum of ownership for digital files, you can never really get there.
What does “ownership” mean, anyway? Two legal scholars, Jason Schultz of NYU and Aaron Perzanowski of Case Western Reserve, recently wrote a book about ownership in the digital age, in which they explain what ownership means in legal terms, lament the deterioration of digital ownership, and propose legal mechanisms to restore it. In lay terms, ownership means that you get something that you can call your own, that belongs to no one else; that you can point to and keep and protect as your property; that you can alienate as you wish but then it’s not yours anymore. This means that being able to make a file freely available online for anyone to copy and use — while certainly desirable for consumers — is really something other than ownership. As a practical matter, it doesn’t coexist with the other attributes of ownership.
Let’s look at how ownership of digital files can be approximated from both legal and technical directions. Some lawyers argue that all you need to do is distribute DRM-free files and offer ownership by putting ownership-like terms in a license agreement. This, of course, is very easy to implement. But while a few publishers actually do this, I say it’s not realistic, because no one actually pays any attention to end user license agreements and they are virtually impossible to enforce by themselves.
From the technical side, if you take the view that ownership of an object should enable you to do anything you want with that object, then a DRM scheme that governs alienation, allows copying some text to the clipboard, and requires you to use a proprietary e-reader app doesn’t get you to ownership either. This is what Publica and Bookchain do.
Schultz and Perzanowki’s book presents research suggesting that people expect ownership rights. But that’s not the same thing as suggesting that people see value in ownership rights for digital content. That leads to the second question: Never mind what ownership is or whether schemes like Publica and Bookchain achieve it for digital files. Are the features they offer desirable for readers or authors?
The answer, of course, is that we don’t know yet, but we’ll find out as these platforms proliferate. E-book platforms like Kindle, NOOK, and Kobo impose restrictions that impinge on ownership rights — not only on copying, pasting, and printing, but also things like device restrictions and the risk that your e-books will become inaccessible if the vendor goes out of business or deletes them remotely from your devices. But they also provide benefits that go beyond ownership, such as the ability to get copies of an e-book for each of your (compatible) devices with a single purchase, and in some cases to share copies with family members. It’s hard to see how an ownership paradigm gibes with this.
This isn’t the first attempt to create a simulacrum of ownership for digital files. Back in 2010, for example, a technical specification called Consumer-Ownable Digital Personal Property was proposed and made into an IEEE standard. This didn’t get very far and was apparently abandoned around 2015. But it was just a spec; it wasn’t used in any consumer-facing systems that would help determine whether anyone was interested in digital ownership features or not. Now such systems are becoming available, and we’ll be able to see whether ownership is still relevant for e-books or if, like music, it’s going to be relegated to physical objects in the future.