When the Harry Potter books finally went on sale in electronic form on Tuesday, it was as if Harry himself had cast the "Alohomora" spell on them — the one that unlocks doors. In a break with industry practices, the books aren't locked down by encryption, which means consumers can move them between devices and read them anywhere they like. If "Pottermore," J.K. Rowling's new Web store, proves a success, it could provide a model for other authors and publishers and undermine the clout of Amazon.com Inc., which dominates e-book sales. "I think it's a very large crack in a dam that's going to collapse in the next nine to 12 months," says Matteo Berlucchi, the CEO of an independent British-based online bookstore, aNobii. E-books from major publishers are sold in encrypted form today. The text of a book is scrambled so that only authorized devices and software can read it. For instance, a book bought from Amazon can be read only on the company's Kindle e-readers and on its Kindle applications for smartphones, tablets and PCs. It can't be read on Barnes & Noble's Nook e-readers. Conversely, a book for the Nook can't be read on a Kindle. A book purchased from Apple Inc. can only be read on iPhones, iPod touches and iPads. Publishers insist on encryption in the form of "Digital Rights Management," or DRM because they believe it stops piracy. It also helps e-book retailers like Amazon defend their business models, keeping non-Amazon books off Kindle e-readers. But when Rowling fans buy books from Pottermore, they can download them in a variety of formats, including one not protected by DRM. They can be read by a wide variety of applications and devices. These books can be purchased once and then passed around to friends or shared with children. Wider sharing is dissuaded by visible and invisible "watermarks" inserted by Pottermore before the download, which identify the buyer. Charles Redmayne, CEO of Pottermore, says that "Harry Potter" books are probably the most pirated in the world already, even though —or rather because— there have been no legal electronic versions until now. Fans have scanned or even re-typed the printed books to make them available in electronic form. "We believe that people should have the right, once they've bought the book, to read it on any device that they chose to," says Redmayne. Of course, there's another reason Pottermore is going DRM-free. It wants to "own" the relationship with the customers — the Potter fans — rather than have them go to other retailers. And the only way to get onto all reading devices without dealing with the other retailers is to sell books without DRM. "It's a very valuable thing to us to own that customer relationship. It gives us a tremendous opportunity to create new products that we can sell to those consumers around the Harry Potter brand," Redmayne says. Shatzkin thinks other authors are unlikely to copy Rowling and set up their own stores —Rowling is "The Beatles" of the literary world and an industry unto herself. But he believes publishers who can aggregate the works of many authors on their sites are going to figure out that they can bypass Amazon as long as they're willing to give up DRM. "If you don't have DRM, it opens up strategies that aren't available to you if you insist on DRM," says publishing consultant Michael Shatzkin. "The question is: is the fear of piracy greater than the fear of Amazon?" Amazon is thought to account for about 60 percent of the e-books sold in the US. Barnes & Noble Inc. is the second-largest seller with around 25 percent. Berlucchi likens the state of the e-book industry to the one in the music industry before 2008. Music publishers insisted on protecting legally sold songs with DRM, but all they did was allow Apple to corner the market, he said, since tracks bought from other stores wouldn't work on iPods. "It took five years from the launch of the iPod for the music industry to realize that they weren't achieving anything with DRM," Berlucchi said. Early in 2008, music publishers allowed Amazon to launch a music store with DRM-free songs. Apple's iTunes store went completely DRM-free the next year. Andi Sporkin, a spokeswoman for the Association of American Publishers, says DRM "has value," enabling things like library lending of e-books (without DRM, there's no way to "return" an e-book). Going the route of the music industry and going DRM-free hasn't really been discussed in the publishing industry yet, she said. In the case of Pottermore, Amazon is collaborating, sending shoppers from its site to Pottermore if they search for "Harry Potter" books. Shatzkin believes this is because Amazon, faced with getting nothing from sales of Harry Potter books, likely decided it should be in on the game to at least get referral fees. Amazon didn't comment on its reasons for sending shoppers to Pottermore, nor would it confirm it gets referral fees.
