Before I installed the new app I downloaded a book using the existing app. I've also been converted to the new drm like a bunch of other people here. I tried to read the downloaded book in Mantano and it asked for the user and password. I was able to open a book previously downloaded in Mantano so I know it's set up. Oh well, I wouldn't buy anything from them anymore anyway.
The old app also downloads to my internal sdcard, so I guess them downloading to an area only accessible to root users is just another way they are trying to rid themselves of those pesky customers.
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