How Harry Potter Could Influence Ecommerce

Wanna get your hands on a Harry Potter ebook?

You won’t find it on Barnes and Noble or Amazon, though you may find some knock offs like Harry Putter (which disappointingly is not about golf)…

But word on the street is author J.K. Rowling has teamed up with Sony to launch an interactive web experience that will also be the only place to download Harry Potter ebooks. By some spells and magic, Rowling has maintained the rights to digital distribution of her work, while her publishers own print rights. (Rowling will be sharing a portion of revenues with publishers Scholastic and Bloomsbury, and potentially, Sony.)

Harry Potter ebooks will be compatible with many devices, rather than be locked into a single device or platform. Rather than use strict DRM, the files will use a “digital watermark," embedding the identity of the owner. While this won't stop copying, a copyright holder could trace an illegally shared file uploaded to the web to it's original purchaser.

You can read the details at Ars Technica. But what does this signal for digital goods and ecommerce?

Amazon Doesn't Rule the World

Not every brand can survive without marketplaces like Amazon or the iTunes Store, but Rowling's lead may give others the guts to follow. If enough brands go indie, larger marketplaces could potentially lose the "one stop shop" advantage, changing consumer behavior to buy direct for a value added experience.

Strong Brands Want to Own the Conversation

Pottermore.com will essentially own the relationship and conversation with the entire Harry Potter consumer demographic when it launches, in perpetuity. The value of this could be worth more than the ebook sales revenue, especially considering other merchandise may also be sold through the channel. Says Rowling on publishing her own website:

“We can guarantee that people everywhere are getting the same experience at the same time. That was extremely appealing to me. I am lucky to have the resources to do it myself and I think this is a fantastic and unique experience that I could afford to take my time over to make this come alive. There was really no way to do it for the fans or me than just do it myself. Not every author could do this, but it’s right for Harry Potter."

The fact that JK Rowling owns the digital rights here (unusual for authors) is irrelevant. The driver behind this model could just as well have been Bloomsbury or Scholastic. There's opportunity for publishers to build out communities-combined-with-retail-channels for key franchises (book series, magazine titles, etc). A publisher could use a core platform with a consistent back-of-house (entitlement, analytics, revenue recognition, admin, etc), while customer experience would be highly tailored for each franchise.

DRM Away...

The decision to use watermarked files that can be used cross-platform could put pressure on platform owners regarding their take of revenue. Comments Wired's Olivia Solon:

"Currently, both Amazon and Apple have restricted their e-book files so that they can only be read on the Kindle and the iPad respectively. But in order for Kindle and Apple to be able to offer their owners access to the e-books of the biggest selling author of the decade, they will have to create an exception to this rule, and forgo the 30 percent commission that they usually charge authors or publishers. This is a big precedent and perhaps indicates the start of a sea change. Will there be a sliding commission scale for authors depending on their stature? Will they finally scrap their proprietary DRM?"

By selling D2C (direct to consumer) and removing DRM in favor of watermarking, JK Rowling and company are breaking new ground in online selling. Whether other brands follow suit is yet to be seen, but it appears the consumer and Rowling will both be winners as a result of this move.

This post was written in conjunction with David Chiu, Elastic Path's ecommerce industry strategist.

Looking for help with ecommerce strategy? Contact the Elastic Path consulting team at consulting[at]elasticpath.com.