Tag Archive for economics

Pirate Pedagogy

On February 10, 2010, a German court began what may well be the start of the book industry equivalent of the dismantling of Napster.

Earlier that month, six global publishing firms — John Wiley & Sons, McGraw-Hill, Macmillan, Reed Elsevier, Cengage Learning, and Pearson — filed suit against RapidShare, seeking an injunction against and damages from the file-sharing service for having violated the publishers’ copyrights.  At the center of the suit were 148 e-books that the publishers alleged had been uploaded to the site and subsequently distributed without compensation to the rights holders.  RapidShare, they claimed, had become a pirate vessel teeming with all sorts of illegal e-book booty.

The question I want to raise here is this: does it make sense at this particular juncture for book publishing to go the way of the music industry in chasing down websites that facilitate digital piracy?

I began pondering this question last week as I drove from Indiana to the University of Illinois, where I delivered a lecture at the Graduate School of Library and Information Science.  The extended car travel gave me the chance to listen to the audiobook of Chris Anderson’s Free: The Future of a Radical Price, which I’d downloaded gratis shortly after the book’s release last July.

I was deeply intrigued by Anderson’s discussion of Microsoft’s anti-piracy strategy in China, where the illegal trade in the company’s products reportedly runs rampant.  In the 1990s, Microsoft took a hard line against Chines software pirates — publicly, at least.  Behind the scenes, however, company executives secretly understood that while software piracy may hurt them financially in the short-term, it had the positive effect of locking the Chinese market into its proprietary platform over the long-term.  With China’s growing economic prosperity, Anderson reports, more and more people there have begun purchasing legitimate Microsoft products.  “Piracy created dependency and helped lower the cost of adoption when it mattered.”  In other words, it was piracy that significantly helped seed the ground for Microsoft’s present dominance in China.

Now, it seems to me that there’s a similar case to be made for e-book piracy.  A little over a year ago, the Guardian’s Bobbie Johnson offered a pro-piracy argument for e-books, suggesting that publishers will only move into the digital realm in earnest once they realize there’s sufficient piracy going on there.  Until they discover they need to control the e-book market, Johnson argues, there’s little incentive for them — and by extension, readers — to make the shift.

While I’m persuaded by Johnson’s thesis in principle, he doesn’t take it far enough.  I’ve already commented on his amnesia about printed book piracy, which over the years has fueled many e-book initiatives.  Now I realize there’s something else going on here, too.  Johnson claims that the music industry embraced digital downloading only after pirates dragged the industry kicking and screaming in that direction.  And where music publishing goes, says Johnson, so too book publishing must go.

The problem with this claim stems from the rather different material histories of sound recording and book publishing.  Wax cylinders, forty-fives, LPs, eight-tracks, cassette tapes, CDs, mini discs, digital audio tapes: the fact is that music formats have changed significantly — indeed, regularly — over the last 50 or 100 years. Music lovers have long understood that “music” is not equivalent to “format.”  Even before the introduction of digital music downloads, listeners were well disposed to format change.

The same isn’t true for books.  With the exception of relatively minor disturbances — chapbooks and paperbacks come most immediately to mind — bibliographic form hasn’t changed all that much since the introduction of the codex.  The result is that book readers are much less inclined to embrace format change, compared to their music-loving counterparts.  And this inertia is, in part, what has held up widespread e-book adoption.

All that brings us back to RapidShare.  What the presses who sued RapidShare don’t seem to understand is that if e-books do indeed represent the future of publishing, then you need to provide readers with significant incentive to embrace the change.  That’s exactly what RapidShare and other file-trading sites have been doing: educating would-be e-book consumers in the virtues of digital reading.

It isn’t stealing.  It’s pirate pedagogy.


It'll Be War!

By now most of you reading this blog probably know about the latest dust-up over ebook prices.  For those of you who haven’t been following the news, here’s a brief synopsis followed by some thoughts on the history of book pricing.

A couple of weeks ago officials at Macmillan, one of the largest global book publishing firms, decided to put the screws to Amazon.com.  For over two years now the retailer has insisted that $9.99 is the decisive threshold at which consumers will begin trading reading material composed of atoms for stuff made of bits.  Reportedly it’s managed to sell three million Kindles and who-knows-how-many e-books, but still Macmillan begs to differ on the matter of pricing.  Management there believes that a more flexible scale would be preferable to Amazon’s flat-rate, with new e-titles starting at $15 and older works listing for around $6.

Well, Amazon got so miffed by Macmillan’s proposal that it temporarily suspended sales of any new books published under its imprimatur, which includes such venerable labels as Farrar, Straus & Giroux; St. Martins Press; Henry Holt; Tor Books; and others.  Macmillan responded by calling Amazon’s bluff, knowing full-well that Amazon’s decision to de-list the publisher’s capacious catalog ultimately would hurt the retailer’s bottom line more than it would help its cause of ebook pricing.  With the door now open, other presses are jumping on the higher-priced ebook bandwagon.

This is a fraught issue, to be sure.  As a frequent book buyer, I’m grateful to Amazon for doing its part to keep ebook prices low for as long as it could.  The company clearly understands the psychology behind the pricing of digital goods.  Consumers intuitively grasp that the marginal costs of producing any given copy of an ebook is next to nil, and so we’re understandably reluctant to buy up e-titles and expensive hardware when paper books can be had for a comparable enough price.  On the other hand, I recognize that the promise of advances and royalties gives professional authors incentive to continue producing new work.  Accordingly, they have a compelling interest in maximizing their return through healthy (read: inflated) prices.

We could go around and around all day about who’s right and who’s wrong here.  As someone whose paycheck comes primarily from my work as a university professor and only secondarily from my publications, selfishly, I’m inclined to side with Amazon.com.  But really there are no clear-cut good guys and bad guys here.  The whole situation reminds me of a recent dispute between physicians at my local hospital and a major health care provider, each of whom accused the other of excessive greed and bullying.  In the end, the only party who suffered was the people who, for the duration of the quarrel, had to drive 50 miles to get the health care to which they were entitled.

Anyway, this may well be the first major conflict over the price tag for ebooks, but it’s surely not the first time the book industry has gone to war over book prices.  This has happened at least a couple of times before, first in the late 19th century and then again in the 1920s/30s.  In both instances, a bunch of young, brash publishers decided to slash their prices as a strategy to gain market share.  Older, more established firms responded by digging in their heels and waging a clever PR campaign designed to convince the public that it was in their best interest to pay more than they actually needed to for books.  (You can read more about this history in chapter 1 of The Late Age of Print and in volume III of John Tebbel’s magisterial A History of Book Publishing in the United States.)

What might these earlier price wars tell us about the present situation?  Anyone looking to establish themselves as leaders in digital publishing would do well to undersell their competitors by offering electronic editions at or below the $9.99 price-point.  The goal should be to sell as many copies as possible, by finding a price so attractive that no one can resist.  It’s funny: we hear all the time about how book reading is on the decline in the United States and elsewhere.  Could it be that the falloff is attributable not only to the usual scapegoats (electronic media, waning attention spans, etc.) but also and significantly to publishers’ greediness over book pricing, electronic or otherwise?

Indeed, if history teaches us anything, then it teaches us that publishers who’ve made their mark selling low can succeed in the long run.  Just ask Simon & Schuster and Farrar & Rinehart (yes, that’s the same Farrar of Macmillan’s Farrar, Strauss, & Giroux).  They were among the upstarts of the 1920s and 30s whose decision to sell books for a buck sent the old-timers into a tizzy.

Ringing any bells, Macmillan?


In Medias Res

This week the blog In Medias Res, which is hosted by the Institute for the Future of the Book, has gathered together a bunch of great contributions around the theme, “Books as Screens.”  Definitely, definitely check them out.

On Monday Hollis Griffin of Northwestern University contributed a post called “Talking Heads: Books, Authors, and Television News.”  There he explores the becoming-everyday of books and authors on TV, in an era of media deregulation and convergence.  Yesterday one of his colleagues at Northwestern, Elizabeth Lenaghan, posted a provocative meditation called, “How Do you Hide Behind a Kindle?”  She asks, “Apart from our ability to snoop on fellow train riders or pass quick judgment on a person’s taste, what are the potential consequences of fewer printed books in public spaces?”  Today IMR is featuring my thoughts on “The Selling of Bookselling.”  It’s largely a riff off of the themes I develop in Chapter 2 of The Late Age of Print, which explores the politics of retail bookselling in the United States.  On Thursday we’ll see a post entitled “Possible or Probable? An Imagined Future of the Book” from Pomona College’s Kathleen Fitzpatrick.  Capping things off on Friday will be New York University’s Lisa Gitelman, whose post is called “What Are Books?

In Medias Res is an intriguing publication in that it asks contributors not to post per se but rather to briefly “curate” a film or video clip, often connected to some larger theme.  I love that the blog is hosted by the Institute for the Future of the Book, and that Hollis Griffin and Elizabeth Lenaghan finally connected the dots between books and audiovisual media to give us our theme, “Books as Screens.” Thanks, you two!  And thanks to all of you, my readers, for hopping on over to IMR to post comments.


Oh Brave New World…

Courtesy of José Afonso Furtado’s Twitter feed comes a blog post by PersonaNonData (PND) called, “Book Insurance.”  Don’t let the snoozer of a title turn you off.  It’s an offbeat but nonetheless thought-provoking piece on the future of electronic reading.  And it’s a future in which you better make sure your coverage is up to scratch.

PND opens by noting the book industry’s accelerating journey down the path of digital rights management (DRM) — this despite the recording industry’s growing realization that locking down content may not be the best long term survival plan.  She or he then goes on to discuss a significant problem stemming from publishing’s recent turn to DRM.  The latter not only forestalls illicit file-sharing, but it also “places limits on interoperability.”

So while I may have legally purchased Toni Morrison’s Beloved for my Amazon Kindle, there’s no hope of my ever reading it on whatever e-reader I may have purchased in the past or may one day purchase in the future — short of my hacking the e-book, of course, which is illegal under 1998’s Digital Millennium Copyright Act.

PND poses a novel solution to the problem of interoperability.  She/he suggests creating an ancillary or derivative market for e-book insurance.  That way you can pay to cover yourself and your library should you ever decide that it’s time to switch e-reading platforms, or in the event that the model you’ve purchased gets discontinued.

It’s as brilliant an idea as it is chilling.

It’s enough that the marginal costs of producing e-books are next to nothing.  But now imagine adding on, say, a few cents per title — maybe more, as you can never anticipate just how deep the greed runs — to make sure that your content remains accessible to you in perpetuity.  Essentially you’d be paying for the privilege of retaining access to what is already yours.  Sadly, I suspect that many and perhaps most e-book readers would accept this type of arrangement, since micro-payments are astonishingly easy to swallow.  What’s a few pennies here or there?

The costs of the physical hardware notwithstanding, the benefit of e-books is that they are cheap (at least in theory).  But that’s now.  You can be sure that down the road, the business-savvy book industry or perhaps some outside entrepreneur will figure out some creative way to gouge e-book prices — book insurance or otherwise.


What Publishing Can Learn, Part III

In the realm of video, I’m fast becoming a fossil. I’m not still spinning VHS tapes, thankfully, although in the age of Blue Ray even my DVD players are beginning to seem like (I love this euphemism) “legacy technologies.” No, I’m a fossil because I persist in renting videos from a local video store, while almost everyone I know subscribes to Netflix.

Since 1998, Netflix has emerged as one of the leading DVD rental outfits in the United States. It has quickly distinguished itself from — and gained extraordinary ground on — its competitors by challenging video rental’s prevailing business model.

Instead of relying on a vast network of physical storefronts, à la industry leader Blockbuster, Netflix interfaces with customers exclusively online. With infrastructure consisting mostly of computer servers and regional warehouses, Netflix is a far more capital-efficient operation than its competitors.

The company’s other key innovation has been to replace the traditional video store membership program with a subscribership. For a flat monthly fee, Netflix delivers any in-stock DVDs you’ve requested straight to your door through the mail — postage paid, both ways. An added bonus is that there are no late fees.

With over 10 million customers Terrarium and more than a billion DVDs shipped thus far, it’s no wonder why Netflix has garnered so much attention. What might the publishing industry learn from the company’s success?

This probably seems like a bizarre question to ask. After all, when was the last time you or anybody you knew rented a book? And why would you even want to, given the preponderance of bookstores and public libraries?

It turns out that so-called “rental libraries” used to be a mainstay of U.S. book culture. They filled an important niche, especially during economic hard times.

The Waldenbooks chain (now owned by Borders) got its start that way, back in 1933. Founders Lawrence W. Hoyt and Melvin Kafka believed in books, but in the throes of the Great Depression, they decided against opening a retail bookstore. The pair saw books as something of a luxury, and reasoned that few people would be willing to part with what little money they had to purchase these non-essentials outright.

Like the founders of Netflix, Hoyt and Kafka bucked industry trends. They decided to set up shop in a department store in Bridgeport, CT, where they leased floor space in the hope of reducing fixed capital costs. And instead of selling books, they rented them out for three cents per day. By 1948, Hoyt and Kafka had opened as many as 250 rental libraries in department stores spanning from New York to Maine.

The rental library business declined after the Second World War. Rising wages and fuller employment meant that rental culture could once again give way to consumer culture. Waldenbooks followed the trend by introducing retail book sales in 1945, and abandoning book rentals in 1957.

Given the current economic downturn, the rampant fears of plummeting book sales, and the slashing of public library budgets, now seems like an opportune time in which to revisit the book rental option. A 21st century book rental outfit might look to the early Waldenbooks for inspiration. It would do better in the long run, however, were it to model itself on Netflix.

The online book rental experience — call it “Netboox” — might go something like this. You log on to the website, where you’re immediately greeted by name. If you’re a new customer, then you’re invited to sign up for an account — which is free, although you will be asked to choose from among three different monthly rental plans. The plan prices are scaled according to the number of books you expect to check out at any given time.

Netboox allows you to search for specific authors, titles, and subjects. Powerful algorithms aggregate your past selections with those of other customers, and the site makes personalized recommendations accordingly. Ordering is as easy as finding a selection and clicking the “RENT” link appearing on screen. User-generated book reviews and other interactive features round out the picture.

Most of Netboox’s infrastructure exists behind-the-scenes, like Netflix. Its distribution facilities contain none of the amenities of a retail bookstore or public library; they are nothing more and nothing less than large warehouses teeming with books, conveyors, and workers busy filling orders. And in contrast to many public libraries, new releases and bestsellers are always in ample supply. Netboox’s capital-efficiency means that an extraordinary back-list is available, too.

Could it work? I’ll leave that up to the entrepreneurs to decide — but be warned: shipping books is a whole lot more expensive than shipping DVDs! Nevertheless, history shows that something along the lines of Netboox has worked in the past. Perhaps it may work again today.