A Thought on the Shifting Ideal of Value and Price

I read this piece in the Bookseller today and there were a couple of comments I’d like to address. First, here’s one from everybody’s favorite literary crusader, Doug Preston:

“I think Jeff Bezos is an evangelist as much as he is a businessman. He believes he’s making the world a better place and I think he’s less concerned about making a profit. Now that might sound like a nice thing but if you study history you’ll realize it is the people who believed that they were right, believed it absolutely, who are the ones who do the most damage.”

Can’t disagree with him there. It is very true that people who believe that they’re right even in the face of mounting contradictory evidence, are capable of doing the most harm. All I can say is, as such, Preston himself needs to take a long, hard look in the mirror.

But his relative cluelessness and lack of self-awareness notwithstanding, there’s another quote in the piece that I find far more interesting. It’s from author Germaine Greer:

“Amazon wants to sell e-books at less, so they should. They should cost less because they don’t have to be put together, stitched, printed, designed, blah, blah, blah. If you skip all that and all you have got is a ribbon of text on a Kindle, then it should cost you pennies, frankly.”

Now this is obviously going to set some people on edge. I, for one, am not down with the pennies assessment, but I do agree that the pricing for ebooks should reflect the far lower production costs. As a side note, does anyone else find it kind of ridiculous that many publishers are now openly dismissing production costs as not that big of a deal yet at the same time arguing royalties need to stay low to cover those expensive costs? Which is it? I think it’s pretty obvious that they’d like it to be both, depending on the question they’re answering, and who they’re answering it to. Remember, just a couple of years ago, these same publishers were swearing up one side and down the other that ebooks weren’t cheaper to produce than print, and some even went so far as to suggest they might actually be more expensive. The massive profits publishers are pulling in from ebooks today shut that line of thought right up, exposing it as the lie it always was. Anyway, back to the quote…

Here’s a tweet I found in response to it:

“Ebooks should cost what readers are willing to pay for good writing, editing and design. Many readers value those far more than pennies” — Caleb Woodbridge @calebwoodbridge

Here’s where I have an issue. The word “should” in respect to what readers want to pay is out of place. There is no place for should there. Readers will pay what they want to pay, be it $20 or just the pennies that Greer suggests. There’s no should involved, only what the market will bear. But this got me thinking about the notion of value and how that relates to price. Sure, it would be nice if readers were interested in paying high dollar for concepts and ideas within a story but, and here’s the kicker, they never have. Nobody in the industry had a problem with that, either, up until they lost control of pricing and fell behind the curve on reader expectations.

I’ve found myself comparing newspapers and book publishers a lot lately, mostly because the Amazon/Hachette dispute has exposed more of the underlying strategy of the publishers. It’s a strategy that appears, on its surface, to mirror the strategy that newspapers used to decimate their own business. This is another example of that, I think.

Contrary to what you may have been told, newspaper readers never paid for the content in the paper, they paid for the bundle of services including coupons, circulars, classifieds, etc, etc. The bundle they bought wasn’t even priced to reflect the value of the content. It was done so to maximize the audience to better support the exorbitant ad rates because that, and not selling content to readers, was where most of their revenue came from. But as the value of their bundle declined, the industry decided people should pay for the content. Not only that they should, many believed almost religiously that they would. They were wrong. Some have but most won’t, principally because they were not paying for that content in the first place. Nobody in that industry segment had any problem with it, either, so long as the ad sales kept flowing. Once that dried up, though, their argument switched to one of value and what readers should do.

Books are having the same problem. It’s popular in some circles to claim books aren’t commodities but that’s disingenuous. People have always paid for the container not the content. Pricing for books of similar form have always been eerily consistent based on the form. There was never any kind of premium pricing going on between similar books that I’ve ever seen. In fact, the more popular books were usually subject to more discounting than others. Oddly, ebooks are exhibiting a far greater range of pricing relative to its form than almost any other type of book, yet that’s hardly ever mentioned when folks start discussing the issue of pricing. Funny, that.

Now that the value of those older containers have diminished somewhat, and ebooks have emerged as a potentially very cheap type of container, the discussion is starting to turn to one of the value of the content. Just like newspaper readers never paid for the content but the packaging, book readers have never paid for the content, just the packaging. And that’s leading to suggestions about what readers should do. According to some, they apparently should now pay for something they’ve never paid for in the past. That argument simply doesn’t fly and, unless you’re interested in watching book publishers piss away their business like newspaper publishers did, it’s not one anybody should be interested in pursuing.

The difference here is that should absolutely applies to people producing and selling books. People buying them, however, are under no such requirement, nor will they ever be. The pricing structure for newspapers was to sell to a mass audience to support ad rates. Pricing in books was to sell mass numbers of similarly commoditized books in total to stores and other retailers. There was never any point that the value of the content inside was the principle driver of the price, except to the people buying them. Even then, that value has been established by the practice of commoditizing book prices based on their form. As newspapers learned the hard way, you can’t just shift gears and expect people to pay for something they’ve never paid for when it’s convenient for you to do so. There is no such word as should when dealing with the choices readers will make for themselves.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

A Hazy Future Can Make For Strange Bedfellows

Let me start by saying I like Mike Shatzkin. I see his work as a view from the other side. He’s very much entrenched in the traditional worldview but, unlike some, that doesn’t mean his thoughts are ignorant and should be discounted. Certainly, he falls into some of the same traps of assumption and false narratives that others do, but who involved in following any of this and voicing opinions on it doesn’t occasionally, in some form or another, including myself. I find Shatzkin to be a fairly vocal critic of publishers. Certainly, his point of view can sometimes be very Inside Baseball, as it were, but there’s value in seeing and understanding that point of view. Everyone on all sides have reasons for what they believe, and I’ve always thought the underlying reasons for those beliefs are more important than the beliefs themselves. That’s why I tend to be far more harsh on people voicing opinions based on faith rather than fact, assumption over analytics. You can’t argue with someone who has no sound basis for what they believe. Logic doesn’t work on people whose beliefs are formed without it.

Anyway, here’s an article by Shatzkin from back in May where I think he asks four very pointed and cogent questions, not only about the future of publishing, but what the nature of that future will be. I’ll first state the question he presented, then a short quote from Shatzkin on each point before expounding in my own rambling way…

1. How persistent an activity is immersive long-form reading?

“As my generation is replaced with digital natives, a decline in the market for novels would seem to be a very likely consequence. Or, at least, novels as we know them now.”

I agree to a point. The novel, perhaps more than other types of writing, fit the form of the printed book extremely well. But if it was the pinnacle of the form for fiction, digital “books” open up new channels of possibility with the potential for new forms to emerge. I am confident the novel in its traditional form has legs, be it digital or print. But I’m not as convinced it will remain the dominant form for fiction in the long run. What it will be ursurped by, now that’s a question I’m not sure any of us can answer at this point.

2. How persistent is the demand for printed books for long-form reading?

“My hunch is that ebooks will continue to take share from print for long-form reading, in fits and starts, but inexorably.”

I’m not going to call it a hunch, I’m absolutely certain digital will take share from print over time. I think hardcovers will transition into a boutique market, likely a larger one than what has developed for vinyl albums, but a much smaller niche than it maintains today. I think trade paperbacks have a niche of their own, largely because of the efficiencies and portability of POD technology. This niche will be larger than the hardcover one, cheaper and less ornamental but, however limiting it may be, paper is a great form for static work. And I suspect the conceit of books used basically as furniture and/or expressions of your personality may hold on longer than widespread numbers of people actually reading on paper. At the end of the day, though, I think digital is going to account for 85-90% of the industry’s sales in the not too distant future.

I have one caveat to this, it’s dependent on attracting younger readers and that’s dependent on being available when, where and for how much they want. The only way I can see print maintaining anything close to even 50/50 market share is if we all fail to bring in younger readers, print sustains through the older audience and the industry as a whole contracts greatly as that audience dies off (see: newspapers). But for this to happen, it would constitute an epic failure of the big houses as well as the smaller ones, the indies and retailers both large and small. Possible buy not likely.

3. How well do informational illustrated books compete with alternatives?

“My candidate for a Black Swan here is some industrial-strength attempt to curate the vast amount of video and other Internet-based content into ‘packaged’ competition for books that teach skills.”

I can’t say as I disagree with this either. I think it’s only natural that the vast amount of information available at our fingertips will be packaged in such a way as to maximize it’s use and, ultimately, revolutionize the way we approach education. Anybody looking at the mind blowing costs of college these days can’t help but think of it as an area in dire need of revolution. This will not be good for publishers of textbooks, however, who control a vast, extremely lucrative, captive market of students. But as time goes on, it will become more and more apparent that they no longer control any kind of monopoly on information. What’s available to all of us instantly will end up as the death knell of their exploitative business model. Couldn’t happen to more deserving group, either, in my opinion.

Some forms of book haven’t yet translated in any kind of peak form to digital alternatives. But it’s only a matter of time before they all do. The technology isn’t just going to stop progressing at today’s level. It will keep getting better and better.

4. How much of the creation and selling of books spreads beyond the book business?

“I’m sure that in less than five years every multi-million dollar marketing plan will have an ebook component: sometimes free, sometimes freemium, sometimes paid. Over time the businesses that do this work will learn, probably faster than many book publishers, how to use the online discovery mechanisms to drive the attention of relevant consumers.”

Why this isn’t happening more already is a bit of a surprise to me. Despite what publishers may tell you, it’s not that expensive to bring a book to market. Much of their expense comes from the model they developed to do so in the conditions that it developed. Things have changed, barriers for entry are little piles of rubble in most places now. Individual people can and do access this market regularly and to good success. If you’re a company of any size or bankroll, the cost of diving into this type of product is miniscule.

But more than just using them as a marketing add on, I can see all sorts of businesses using digital writings to supplement their brands. You see a business like Chipotle already experimenting with things like short stories on cups and their own miniseries television show released directly to Hulu. Producing entertainment or informational media and distributing that to an audience is no longer the sole purview of media companies. Everyone can be a publisher now and over time, everyone will.

So there’s Shatzkin, a person whose opinions I often disagree with yet I find I’m in near total agreement (to some extent) on these four questions, all of which forward-looking beyond the present day conditions of the publishing industry and it’s nascent battles with Amazon and the digital revolution. Just because someone seems to be on the other side of the fence today doesn’t mean they’ll always be there. Look at the underlying reasoning for why people believe what they do and you may find more commonalities than you expect.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Published in: on August 28, 2014 at 2:51 pm  Leave a Comment  
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Revisiting Paywalls Revisited

(Note: this is an unfinished piece from April of 2012 that’s been sitting as a draft in my WordPress que of posts since then. I never did get around to answering the question I asked at the end, but it increasingly looks like there’s no real reason to. The answer seems even more clear now than it did then, so much so, that the question itself even seems rhetorical now…)

Earlier this week, I received a message from a friend of mine asking if I’d heard about the latest round of layoffs at our local newspaper.  Since I moved from Cecil County to Chestertown nearly two years ago now (wow, time flies) I’ve found that I’ve lost interest in the comings and goings in that particular neck of the woods.

The state of printed media in my hometown was a popular topic of discussion on this site for the first couple of years, primarily because it was close at hand, their struggles echoed the newspaper industry at large in a lot of ways, and I still had connections with many folks in and out of the company. As I mentioned in the past, I worked there myself on two separate occasions in various capacities.  Before I received that message the other day, however, I hadn’t experienced a stray thought in their direction for months. 

Professionally speaking, I’ve moved on from any hope of getting back into the newsprint business.  It’s not just the derth of jobs (layoffs, buyouts, downsizing still abounds industry-wide as the revenue sinkhole just keeps getting deeper year after year) it’s that I simply don’t see a future in that area as it presently exists and I have yet to find a digital alternative that looks truly sustainable. Better to look in other directions, I figured.

Ebooks have been my focus for the past year, and, to this point, I see all the possibilities for revenue generation and sustainability within that area that are lacking in the digital-alternative newspaper segment. I’ve been writing, publishing, experimenting, expanding my skills and, most encouraging of all, actually selling my work at a level I’m not scoffing at (nor are the folks whose bills I’m paying with that money)*.  The gist of it is that, to my way of thinking, the struggles of newspapers are yesterday’s problems, ones that I’ve left, rather properly, in the past.  They had ample opportunity to innovate and adapt but didn’t, and the slow crawl to oblivion may be irreversible at this point. 

(* Note: Since then, I’ve since rethought my approach to ebooks and digital publishing. I did bring in a decent chunk of change at the time but I grew dissatisfied with my own efforts, so I’ve been cranking out new material, reworking old material and developing a different, much more expansive approach to this that I’ll be kicking off likely early next year, if not sooner. Try doing that when you’re locked into a publishing contract.)

So, when I read this message about further layoffs, it was a bit like hearing that an old girlfriend you were serious about a decade ago just got married. You hadn’t thought about her in years, she played no part in your day to day life for as long as you could remember, and news that would have seemed enormously important not that long ago ends up met with a shrug. It’s not that it doesn’t sadden me a bit to see the continued decline of my hometown newspaper, it does. But at this point, there’s really nothing that can be done about it. The point of no return for many newspapers passed by a while ago.

In today’s atmosphere, resources have eroded to such a level that genuine full-scale innovation really isn’t possible any longer. If it had been undertaken 3 or 4 years ago, it might have made a difference. Even scrapping the enterprise and starting over isn’t really feasible at this point simply because so many skilled people have been let go, particularly on the content side. You can’t really launch a new direction in an increasingly content-driven market when saddled with a money losing print albatross and a sparse skelton crew of leftovers. It saddens me to see it but, again, all of this at least could have been avoided with a bit of vision and foresight a few years ago when it mattered. But you can’t cry over spilt milk now that the carton’s down to the last few dregs of backwash.

All of which got me thinking about the last stand of newspapers, the paywall. Much like those famed 300 Spartans fending off the Persians, paywalls may hold off the onslaught for a short time, but in the end, the Spartans all ended up dead. For the Greeks, however, that stand provided the necessary time to execute a larger strategy that ultimately stopped a Persian takeover. Do newspapers even have a larger strategy to survive beyond simply fending off immediate annihilation? Or are paywalls their final stand?

Update

So, here we are two and a half years later, and I think this question answers itself. There was obviously no deeper plan going on at most papers, and the renewed push for paywalls then did little if anything to stem the hemmoraging of revenue. Here’s a piece by Clay Shirky essentially penning the obituary on the print newspaper business. As you can see, not only did this strategy not work to stifle print declines, it may well have instigated digital ad declines for them as well. They killed their future trying to protect a past that, at best, was on life support.

As for the company I mentioned, there have been more layoffs since these and the company was eventually sold to a venture capitalist known for slice and dice acquisitions. Doomed isn’t a strong enough word for their prospects at this point. Book publishers and their writers should take note of this. Following a print protectionist strategy did great harm to their emerging digital business. Ask questions, loudly and in no uncertain terms, anytime someone from the industry tries to tell you that restricting digital to protect print is a sound idea and in your best interest. It didn’t work here and I don’t hesitate to say it won’t work there, either.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Breaking the Scale: Bigger is not always better

A couple weeks or so ago, I left a comment on The Passive Voice under an article about Hachette’s CEO and his response to Amazon’s late night call to give him hell…er, politely inform him of your desire that they think critically about their pricing decisions, and seriously consider dropping the push for higher prices. Anyway, I got into a little bit of my experiences in dealing with large consolidated corporate accounting departments and the thinking I’ve run into about higher prices in days gone by. It got me thinking about a couple things and how this might relate to further understanding Hachette’s position and what the possible consequences could be, even if they get what they want.

Here’s the first comment I left:

“It may even be simpler than that. It reminds me of something I called the bean counter effect at a couple of magazines I worked for. They just couldn’t conceive of the notion that a higher price didn’t automatically mean more money. They wouldn’t recognize any kind of multiplier effect of more for less, no matter how many times we showed it to them on paper. It was a risk, unquantifiable (at the time) and all they knew was the difference between what we were selling at and the increase they wanted. We were selling print ads but it’s the same principle.

“Amazon could have said each sale at $9.99 generates a thousand extra sales and they wouldn’t have recognized it. They simply can’t see past “If I sell this for $13, I make $3 more than if I sell it for $10.” What I could never get across is that it’s not the difference between $13 and $10 that’s at issue, it’s the difference between $10 and the $0 that a not-insignificant number of people will choose instead $13. In this case, it’s the difference between $17.50 and $0 with Amazon’s multiplier data, which makes it an even dumber choice, I think. You’re not gaining anything at $13, you’re losing all the people who would have bought at $10. Essentially what you’re doing is making your customer base smaller and milking your best customers for extra money.”

Later on in the thread, I related a second instance of what I considered overly simplistic thinking involving money we paid out in this case. Here’s that second comment:

“At the same time though, you can’t always trust what they’re telling you about marginal cost. I was the managing editor of a free distribution magazine several years ago for a publisher who’s name would be instantly recognizable (not any of these folks). We were strictly ad supported and we operated on a 60/40 ad to editorial ratio, meaning we basically added up paid ad space and that number would represent 60% of our page count.

“Now I was a huge proponent of trading out ad space for various kinds of work we needed whenever possible. These trades were not counted as paid space so that added no cost outside the simple real price of what we paid to produce that space. Say I needed a delivery route run, something that would take a couple hours. I might pay someone $100 to handle it. Or I would offer them an 1/8 page ad for their business or whatever that’s listed at $150. They always took the ad, every time. Our real-world cost for that space across the entire print run was something like $20. And coming from non paid space, that $20 was a total sunk cost. So I traded $20 worth of sunk cost in exchange for not laying out $100 in real cash, effectively adding $80 to our bottom line. (You could argue it was adding the full $100 to the bottom line considering that $20 was being paid no matter what.) I was saving us somewhere between $2,000-$3,000 an issue with this stuff, if not more.

“Well our accounting department threw a fit. They insisted that we were actually losing $50 on this transaction. (Actually, they started out saying we were losing the full $150 price of the ad but I did manage to convince them the $100 was going to be outlayed in any case.) No matter how many times or how simply I laid it out for them, they would not move off the position that we were losing $50. It turns out their accounting systems had no mechanism for quantifying this because there was no revenue coming in but when they audited the paper, they recorded these ads as paid space, so we showed a deficit between the revenue they said we should have and what we actually produced.

“Eventually, they forbid me from making any more trades rather than adjust their accounting systems to record these gains. To make matters worse, our bottom line actually looked better on paper after they banned trades despite the fact that we were now spending a few thousand more per issue than we had been. That’s when the light bulb went fully on for me. If their standard accounting practices can make a real world $80 gain look like a $50 loss, and do it in such a way that it’s actually defensible and looks like it makes sense, can any of the figures they produce be trusted? How many other gains are showing up on the budgets looking like losses?

“Now this is a little simplified. There are tax issues and time a designer spends getting the ad together and such. But generally, we would get about 4 times the value back on a trade than we would paying out for it, and they banned me from doing so.”

I’ve found myself recently re-asking the two part question I wondered about back then, why in the world would you throw away essentially free money (in the instance of trades) and how do they not see that a much broader customer base at lower prices makes a far more stable longer-term revenue stream than a smaller base with higher prices? I also spent a not-inconsiderable amount of time worrying about the fact that I knew absolutely that the budget sheets we were getting from them were showing an artificially better bottom line than what actually existed. The disconnect between reality on the ground and the faux reality of their accounting systems was an insoluble issue simply because they wouldn’t even admit there was a problem.

I’m watching book publishers and their supporters today making arguments that are just as inexplicable to me as those were then. Do they not understand what’s really going on out here? Can they really be deluded enough to believe that readers will be supportive, even in the short term, of a strategy that gives them less choice, more restrictions and a higher price? Were they being taken in by comments from some readers supporting such a position? What I knew, from lots of experience, is that there’s often a hell of a difference between people speaking in high minded pronouncements about paying a premium to support their “culture” or what have you, and the choices they actually make when it comes time to break out the wallet.

I’m starting to believe the problem here is scale. Larger and larger companies require higher and higher outlays of resources just to keep the lights on, meaning the proportion of price needed for simple infrastructure that has nothing to do with actual production expenses grows near exponentially with the size of the entity. We’ve had it drummed into our heads that scale is beneficial because it provides greater negotiating leverage and greater purchasing power at lower prices from larger levels of bulk buying. This may have made sense at some pre-internet point, but does it still make sense in the current atmosphere? Does it even apply to something like ebooks that requires no physical materials to produce or distribute, making the notion of bulk buying power completely irrelevant? Certainly, Amazon is a large and growing company, their scale does have decided advantages, but is there a similar advantage from scale for publishers in dealing with them? It certainly doesn’t appear that Hachette’s size is any kind of advantage. If it were, there’d be no dispute going on.

Penguin Random House is often pointed to as the direction of things to come, but should it be? Consolidation in the periodical sector, looking back now, clearly did considerable harm to those publications siphoned up in it. It looks like efficiency on the surface but in practice turned out to be just the opposite. The question I have now is does the counter effect of increased infrastructure costs of consolidation counteract any bulk savings? I say yes, and then some.

Hachette’s not arguing for profit so much as arguing for maintaining revenue to cover sizable infrastructure costs. The obvious counter of why aren’t you decreasing your infrastructure costs to support those margins doesn’t seem to be a very popular one. It is, however, a needed question to ask and answer. There’s a line of thought going around that the lower production costs for ebooks and POD should have no bearing on the end retail price. I find that as inexplicable as not understanding a multiplier effect from lower prices or the savings from trades based on actual out of pocket expenses. Of course those lower production costs are a factor in price. Not only that, they must be.

Smaller entities are currently taking full advantage of these lessened costs. The problem for large publishers is their sheer size changes the equation. For an independent, the lower costs are directly tied to both lower prices to readers and a higher margins to themselves. For the larger entities, the lower price is threatening because of the sizable portion of the cut must go to the infrastructure costs associated with such scale. They can’t risk the multiplier effect not taking place because they need the raw revenue stream to be somewhat constant to keep meeting payroll and keep the lights on. The conventional wisdom that bigger is better is increasingly looking to be just flat wrong in this atmosphere. And if you’re doing it as a publisher to “compete” with Amazon, you’re making an even bigger mistake, as well as displaying a fundamental misunderstanding of the word compete.

There are numerous reasons to believe that, in the current environment, it’s better to be a smaller entity. One is that your accounting doesn’t have to be so complex and standardized as to be inflexible. Really, the problem I had with trades was that what I was doing didn’t fit into the parameters of their accounting software, so instead of adapting the software they just stopped me from doing it. Admittedly, changing that software is a pain in the ass on a much smaller scale. On a giant corporate one, I can understand why it wouldn’t be your first choice. But that’s stupid! I was one magazine adding an extra $50 grand a year or so to our bottom line doing what I was doing. This company had dozens and dozens of publications. They chose to throw that away because of inertia. It was a big enough amount to be a pain but not a big enough amount to force any accomodations. And they somehow managed to make the budget sheets look better than they had when they were in reality, worse.

Another is that the costs of the bundle of services publishers offer are inflated well beyond what those same (or better) services cost in an open market. That’s why you see some trad writers, when discussing the costs of publishing on their own, will cite numbers anywhere from $15k to as high as $40k for those services. It’s what they’ve been told these things cost. The knowledge of the reality that this work actually can cost at least 10 times less outside the gated publisher world isn’t even available to them. My lower prices/higher margin sales can relatively quickly cover those costs where your lower royalties require many, many times the number of sales just to cover the overly-inflated expense figures. Publishers costs in this regard are inflated for the same reason they want to maintain higher prices on the books themselves, their huge infrastructure costs have to be paid from somewhere.

In the present environment, scale isn’t some kind of competitive panacea for suppliers to retailers. It’s an albatross of expense and inefficiency hanging about their necks that necessarily limit their ability to fully exploit emerging markets and bring costs down in flattening if not outright declining markets. Scale, which may have been useful in the past, is increasingly suffocating now.

It’s really a matter of intetests. Is it in a writer’s interest to sign on with one of these increasingly consolidating publishers? How much does their sheer size, and the need to pay for that, change the dynamic between their interests and yours? How much longer will it be before a critical mass of writers realize that they’re bearing much of the weight of paying for many of elements of the publisher that have nothing whatsoever to do with producing, marketing and selling their books? They’re paying their expenses using you for pennies on the dollar, while pocketing the gains from the diminished to near nonexistent ebook production costs. Just on a simple dollar for dollar examination, the publisher’s interests run almost completely counter to my own and that’s moving more into the publishers favor as each day passes.

When the print ad revenue collapse hit newspapers, the companies with the largest scale responded the only way they could, tens of thousands of people losing jobs in round after round of layoffs. This not only hurt their ability to handle the size they had become, it further handcuffed their digital growth, which is now evident in the fact that their digital revenues are also declining and managing little to no separation in the rate of loss as the decimated print sector. Their scale forced the cutbacks which in turn left them understaffed to handle the essential tasks and woefully short on money for experimentation and growth in digital or keeping forward-thinking folks in their employ. Their scale became a self-defeating necessity to maintain itself rather than the advantage it had initially appeared to be.

What happens if we have a bad holiday season in print books sales this year? Can Barnes & Noble even sustain through another massive hit? Publishers are already squeezing writers both with deep discount clauses on print books and low ebook royalties (not to mention shrinking advances). If a round of layoffs or two end up a reality, the value of their bundle of services declines even more than the over-inflated costs we’re already experiencing. In turn, these companies become even less efficient, and less productive as they become understaffed to handle their sheer size. And raising prices to recoup print declines simply is not going to possible.

In the future, bigger is better may no longer be true, even for Amazon. People seem to be under some impression that it takes a giant to slay a giant. But that’s not altogether accurate. As Amazon continues to grow and expand, it’s own scale is adding massive infrastructure costs by the day. It’s not going to be one big company that gets them (certainly not one big consolidated publisher). They’ll suffer the death of a thousand cuts as many small, nimble entities target various bits and pieces of what they do, undermining the whole by eroding key components of it wherever possible. And Amazon is in a position where it simply cannot raise prices to compensate. Trying to do so will drive customers away in droves which will, in turn, further exacerbate the infrastructure cost problem. It can try to further squeeze suppliers but there are limits to how far that kind of strategy can take you, too. If they get complacent and anything is going to get them, it will be their scale that’s they’re undoing.

Smaller Is Better appears to me to be the approaching mantra of the 21st century. As huge consolidated corporations fall by the wayside under the weight of their own infrastructure, the only question I have left is how long it will take for Wall Street and business schools to catch on. Consolidation and ever larger entities may seem like something beneficial to those businesses today but, ultimately, they might only be serving to break the scale.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

A Letter to the New York Times Public Editor

So I just sent off a letter to Margaret Sullivan, the public editor of the New York Times, asking some very pointed questions about their journalistic standards and the ethics involved in yesterday’s piece on Douglas Preston, especially with regard to its one-sided nature, the timing of its appearance and the sizable ad buy from Preston set to appear tomorrow. I did get an automated reply from them, so they have received it. Hopefully, some answers to my questions will be forthcoming. Here is the letter in its entirety:

Hello,

I’m writing in reference to the article that appeared in yesterday’s Tech section of your paper featuring author Douglas Preston and his Authors United effort by writer David Streitfeld. I have to say I’m extremely concerned and disappointed. The article itself was very one-sided and dismissive of a great number of authors who have differing opinions on the matter. When the subject in question is also reportedly paying your paper over $100,000 for an ad in tomorrow’s paper, this not only is unseemly but gives the appearance of a quid pro quo arrangement.

You are the New York Times, The Grey Lady, what should be a well-respected voice in journalism. I believe we deserve some answers to how this article came about. Here are several points I believe you have an obligation to explain:

1. Who initially pitched this article? Was it Preston himself?  Was it Streitfeld? Was it someone else within the Times staff assigning it? What was the thinking behind it?

2. Who was responsible for the timing in which it appeared? Was that timing in any way connected to the very expensive advertisement taken out by Preston in your pages? If so, what is your justification for that? And if not, how do you excuse the ignorance of how this would appear, especially considering the article itself specifically references the ad and when it would run?

3. At one point, Preston makes reference to asking Hachette for his recent sales numbers and apparently received accurate, up to date figures very promptly. Did this not raise any eyebrows with either the author of the piece or any editors at the times? Did anyone think to question the validity of those figures or why a company such as Hachette was so quick to respond in a manner totally inconsistent with their history?

4. What editor approved this article and what justification was used to allow the clear bias within to appear in your pages essentially unchecked? Was this editor aware of the large ad buy connected to the subject of this piece and did that play any role in its treatment?

5. What is your standard policy for editorial coverage of people or organizations who also happen to be advertisers?  Do you have one?  Are you or anyone at the Times concerned with the appearance that this was simply a value add in exchange for the ad buy?

6. Why was there no effort to present the opposing point of view, one which is clearly supported by a large number of people both inside and out of the publishing industry? Did the editor who green-lighted the piece show any concern that it was offering only one side of the debate, in a completely uncritical manner while being openly dismissive of the other? Did the ad buy play any part in the tone of the piece or its content?

7. Did the editor in question voice any concern about the reference to the whale meat petition to dismiss a petition opposing Authors United on this specific matter that has collected 9 or 10 times the number of signatories? Did no one see this as disingenuous?

I believe it is important that you explain to your readership exactly what thinking and actions went into the article in question. The Times should be above simple pandering for ad dollars, and given the fact that Preston and Authors United have already had significant coverage within your pages, an explanation should be required as to why this latest piece was needed at this specific time given the large ad buy connected to the subject. The position you hold within the journalistic world demands it. Many people look to the Times for important news and information every day and expect that you will apply a high standard of journalistic ethics to your coverage. This is crucial, I believe, not just to the state of journalism in this country but to your continued reputation as a trusted news source.

Thank you for your time and I look forward to your prompt response.

Dan Meadows

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Publishing Industry Action…It’s Fan-tastic! Three-team deal falls through

First off, everything that follows here is idle speculation. I don’t know anything that wasn’t reported in the coverage of this attempted merger. But since this is America, and our media was built on unfounded speculation, I’m going to engage in a bit of that age-old tradition.

The deal the publisher Hachette was trying to consummate for Perseus Books with the involvement of the distributor Ingram fell apart yesterday. No specifics were given but a few subtle hints were dropped. Now I’m going to use the parlance of the NBA to describe how I think these conversations went down because this looks very similar to a failed attempt at a three-team trade to me. Keep in mind, while I’m speaking in terms of players, just consider the dollar figures as straight cash except for the two Perseus assets (their catalog and distribution business). Also, there is no correlation between the amounts I’m using and what was actually discussed. I just picked some nice even numbers to illustrate my point. Here we go…

Hachette, a capped out team with no space to take on any extra salary, approaches Perseus about one of their players (their catalog of titles), and makes them an offer.

“We really like that guy. We’ll give you this $3 million guy here for him.”

“Well, we don’t really want to move that guy,” Perseus responds, “we like him, so we’ll have to say no.”

“What about if we gave you this $5 million guy over here?” Hachette comes back.

“We do like him a bit better but, really, we’re not inclined to move him. No thanks.”

“Is there any way we can reach a deal?” Hachette asks.

“If you really want him, we’ll take the $5 million guy but you also have to give us $10 million in assets for this other guy here (distribution business). It’s the only way we’ll make a deal.”

To which Hachette responds, “We’ll get back to you.”

Hachette does have an $8 million guy to pair with the $5 million guy but they’d still have to come up with $2 million more in assets to meet Perseus’ price and there’s nobody on their roster that meets that description. Not doing so would leave them $2 million over the cap. And they don’t really want the other guy anyway. So Hachette calls up another team they think would want him, Ingram.

“So we’re working on a deal with Perseus and we’re going to take on this guy here. We know how much you’d like a player like that on your team. We can send him to you for in exchange for that $8 million guy and this other $2 million guy you have.”

“We do really covet that guy,” Ingram replies, “but we think that’s a little steep. Plus, you need us to finish this deal or you wouldn’t be calling so we’ll give you the $8 million guy only.”

Now this wouldn’t work for Hatchette either because it would still leave them a $2 million asset short and still that far over the cap. So they go back to Perseus.

“Ok, we’ll take that other guy back but we’ve only got this $8 million guy here we can give you for him.”

“No,” Perseus replies. “We want $15 million coming to us for those two guys or nothing. We’re happy with where we are. We don’t have to make a trade.”

To which Hachette finally says “Fuck.”

Basically, Hachette was in a position with limited resources and no leverage trying to pry a guy away from a team that didn’t want to move him and trying to convince a second team to take on the part of the trade they didn’t want at full cost. The problem here is the approach. Hachette needs to understand that in order to pry something loose from an unmotivated seller, you’ve got to make a Godfather offer. Overpaying in a situation like that is simply a necessity. If they weren’t prepared to go there, don’t make that phone call in the first place. Both Ingram and Perseus seemed to understand that, and understand that Hachette had to pay the freight if they wanted their assets and cooperation. Hachette didn’t seem to.

This makes me wonder if they’re doing the same thing with Amazon, over playing their hand. Their leverage with Amazon isn’t very overwhelming, and shrinking by the day, and they seem to be asking for a return on a deal Amazon is neither motivated to nor terribly interested in acquiescing. This failed acquisition smacks of a company that thought it was going to quick and easy add a big catalog of new titles, simply flip the distribution biz out at full cost to someone else and position itself better to fight Amazon, all while talking other companies into doing what it wanted without having to sweeten the deal for them.

What kind of return you get on a deal like either of these, or if you can even make one at all, depends on the leverage and/or money you have at your disposal. Hachette doesn’t appear to have much of either but they’re negotiating like they have the whole world in their corner.

If I had to make a guess right now, we’ll see one of two things happen in the immediate future. Either Hachette will quickly and quietly cut a deal with Amazon and put out a press release pretending like they won or the struggling publisher will be split off from its parent and sold to someone else before a deal with Amazon ever gets made. Hey, maybe Amazon will buy them. They do like low prices and Hachette’s value is sinking like a stone.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Print Protectionism Rules The Day…For Now

So Amazon came out with a statement a week ago detailing its position on ebook prices and, not insignificantly, it’s belief that authors are being short changed on royalties by publishers. Not surprisingly, it was met with a collective shrug by the mainstream industry, if not outright contempt. One thing this has done, however, is bring the belief that publishers’ actions on ebooks are all about protecting print out of the implied shadows. Here’s a variety of quotes from various sources critical of Amazon in response to their statement. Read on:

“Amazon doesn’t quantify what lower e-book prices would mean for sales of physical copies of the same books. Authors who work with traditional publishers like Hachette tend to make more, per copy, from hardcover sales than from e-books. If cheaper e-books draw people away from hardcovers, that could hurt these authors financially.”

“If lower e-book prices were to eventually destroy the market for physical books entirely—or even shrink it enough so that it wouldn’t make financial sense for traditional booksellers to publish them—that would help Amazon consolidate its power, which would ultimately be dangerous for authors.”

Literary agent Brian DeFiore in The New Yorker

“Lower e-book prices aren’t necessarily the best thing for writers. We get a percentage of the price as a royalty. You also have to take into consideration the price of the hardcover. Yes, it’s cheap to make a digital book but it’s expensive to present a book in hardcover.”

Roxana Robinson, Authors Guild President in Wall Street Journal

“Amazon’s assumptions don’t include, for example, that publishers and authors might have a legitimate reason for not wanting the gulf between eBook and physical hardcover pricing to be so large that brick and mortar retailers suffer, narrowing the number of venues into which books can sell.”

John Scalzi from his blog

“It is true that ebooks live in a world where they compete with other media. It is also true that the they live in a world which includes print, also an important component of a publisher’s and an author’s economic world. This analysis is very short on measurements of the impact on print sales of lower ebook prices.”

Michael Shatzkin from his blog

“Their figures consider a world of ebooks only. Their “total pie” is really just a piece of the pie. But publishers and authors are looking to maximize revenue across all formats. “Total revenue” on an ebook is only part of the “total revenue” for a new release book, and the hardcover edition still generates substantially more revenue per unit.”

Michael Cader from Publishers Lunch via Joe Konrath

“Even if ebook prices are the focal point of the dispute, that does not mean (Hachette) should not be looking at the effect across their total business, and their total account base.”

Michael Cader from Joe Konrath’s blog

What do all these have in common? The belief that the ebook is not only inextricably tied to print, but must, in some way, be handicapped to shield the older, more expensive and inefficient model. So what we’ve got here is the key issue in modern publishing, do you believe that digital must necessarily be hamstrung in some way to the benefit of print?

If you’re a Patterson or King or someone who gets the benefits of large numbers of hardcover sales in physical bookstores, that answer seems to be a resounding yes. But if you’re not one of those very select few, the question becomes much more difficult to answer. How does it benefit the midlist author or the debut author to have your ebook prices placed higher to support brick and mortar hardcover sales that benefit a much smaller number of superstar writers almost exclusively, and very likely, not you? As for the indie authors, it clearly doesn’t seem to benefit you to link print and digital in this way at all.

There appears to be two schools of thought on this. One is that print must be protected from lower priced ebooks because they will hurt physical stores, shelf space will decline and Amazon will reign hellfire over the industry forever and ever, which will result in damage to all authors in the long run. This is a call for all but the publishers and most fortunate authors to sacrifice in order to preserve an ecosystem that doesn’t really help them. You must sacrifice now in order to prop up a network where, unless you’re extremely fortunate, you must sacrifice in perpetuity, essentially.

The second school of thought is that ebook prices must necessarily be higher (and royalties lower) because the revenue generated pays for the totality of the book. This line of thought is that profits from ebooks aren’t really profits at all but a portion of the total revenue of a book that includes high print expenses that must be paid. This is a call for authors to sacrifice on ebooks to pay for the publishers’ print expenses even though they’re already being paid for that with a royalty structure on print that was designed and implemented to cover all the costs of bringing the book to market. You’re basically donating 75% or so of your digital proceeds after the retailer’s cut to your publisher for generating and uploading an epub file.

Either way, the presumption is that ebooks can’t be allowed to grow independently of print. They must either be restricted to prevent the erosion of print sales or a large portion of their revenue must be siphoned off to pay for the print infrastructure. There is also the assumption baked into this that the future of bookstores depends on the continued furtherance of $25 or $30 hardcovers. Also that any contraction in the print market (and conversely any unchecked growth in ebooks) will lead to Amazon consolidating even more power. Both assumptions rest on the belief that ebook and print revenue exist in the same continuum as hardcover and paperback revenue did in the past.

Here’s the thing about that, paperbacks didn’t undercut hardcovers because they were windowed. Windowing doesn’t work with digital. So the only means they see to prevent hardcover sales erosions is to actively lessen the sales of ebooks. Presumably, I would think, once the hardcover cycle runs it’s course, the high ebook price should come down to old mass market paperback levels, if not less, but that’s not really what we’re seeing.

All of this rests on the belief that digital sales can be essentially capped at 30-35% of the industry. And further, that print, particularly pricey hardcovers, won’t erode anyway due to other factors irrespective of ebooks or that the large and growing segment of the industry that simply doesn’t care about the hardcover/bookstore ecosystem they’re essentially locked out of won’t undermine the higher ebook prices to the point that publishers lose out on both print and digital sales.

Protecting physical bookstores is also a tenuous ideal from this two-pronged perspective. One, ecommerce is not going away. In fact, same day delivery is being rolled out by multiple players, not just Amazon. That has nothing to do with the price of ebooks but a more existential question on the nature of consumer shopping choices. Two, print on demand technology will become better, cheaper and more pervasive, possibly even resulting in kiosks that have the potential to do some of the same things Redbox did to video stores. When was the last time you visited one of those?

Are publishers going to withhold books from these kiosks? Will they demand near-hardcover prices for the trade paperback products they produce? Are they also going to demand higher prices for print books sold online? All of these elements will eventually erode bookstore sales and if publishers’ interests rely on protecting those stores, then these acts would be totally consistent with the higher ebook price strategy. It also means that publishers would be intentionally harming virtually every new publishing technology that increases efficiency, lowers prices to readers and increases sales in favor of their one preferred sales channel and format. One that, it can’t be understated, makes books more expensive, more inconvenient for readers to buy and less lucrative for writers overall.

If you’re James Patterson, Stephen King or Douglas Preston, these strategies may make some sort of sense in the immediate term. If you’re any of Hachette or any other large publisher’s thousands of non superstar authors, however, this doesn’t make a whole lot of long-term sense. Remember, you’re not just making less money on a contracting print market, you’re covering the publishers’ revenue declines in that respect through lower ebook royalties. The only way declining hardcover sales and rising ebook sales harms these authors is if the publishers are saddling you with a much-too-small cut of ebook proceeds. Amazon is right in this respect. If publishers were paying writers fairly on ebooks, then you stand to make more money on more sales at cheaper prices for readers. Their strategy is going to make you less money on fewer sales at higher prices to readers. The fact that there’s one single non-superstar writer who signed on to that Authors United letter is another illustration that, much like politics, dogma can and does lead some people to make choices that run counter to their own economic self interest.

Also consider, much like ebooks, independent authors will jump all over POD kiosks and the opportunities they bring. After all, when you’re looking at a physical store ecosystem that actively discriminates against you, protecting their margins or even their very existence is likely a non-factor in your choices if not a potential negative to you to do so. This is something bookstores would do well to keep in mind. Continuing to block, ignore or alienate indies is creating an entire giant class of increasingly successful writers who are ambivalent to your problems if not outright hostile to you. You might want to knock that off.

Basically, this strategy that the big publishing houses are engaging in is not in the best interests of readers or the vast majority of authors. The concern that Amazon will dominate everything is a very real one, but this isn’t a particularly practical way of dealing with that. I want a diverse ecosystem as well but asking me to sacrifice to the benefit of organizations that aren’t willing to do so in return isn’t going to work for me. Amazon’s market force is a different problem in need of a solution as innovative as the ones Amazon has used to gain that position. I think it’s fairly safe to say any such innovative competition is not going to be any more friendly to the publishers’ 20th century business strategy.

Let’s say I self publish a few books and my sales take off. A publisher comes to me with an offer. Ignore for a moment that the advances being offered barely cover a few weeks worth of sales in some cases, let alone life of the book. Let’s say I sign it anyway. That offer would require me to pull currently good selling material from the market for months in some cases. When they do return, my ebooks are now two or three times the price, the share of which I receive is less that what I was making per book on my own. I’m locked out of doing anything about it. I’m also hoping that bookstores stock my books in a way that generates sales rather than just another title on just another shelf and that declining physical sales doesn’t cost me even more money. I can’t get my books into libraries without the crazy high prices and restrictive terms publishers impose on them. I can’t take advantage of POD opportunities without my publisher’s approval and even then only on terms they set. On top of that, I have little means of having a viable route to rights reversions should everything go south. I have to hope I get lucky enough to generate hardcover sales (if I even get a hardcover print run) at a high enough volume that my next contract can get more favorable terms or a bigger advance, if there’s a next contract at all. The icing on this particular cake is that my material that was finding a foothold on my own may now be stagnant and trapped with that publisher for at least 35 years unless I can afford a good lawyer and a drawn out legal battle to get my rights back. And all because my publisher chose to emphasize its most difficult, expensive and inefficient product line for a litany of reasons that have little to nothing to do with benefitting me. Why would I sign that? Why would anyone?

I’m of the opinion that, if I were to sign on with a publisher to handle my print business, I absolutely do not want that same entity to also be in control of my digital business. They will almost inevitably do just as these publishers are, handicapping the digital to prop up the print. What should be happening here is another round of disintermediation, this time separating the print and digital products entirely. Focus on finding a way to maximize print that doesn’t involve sacrificing digital. That could mean exploiting POD technology and finding ways to actually cut the cost of physical books to readers (and bookstores), not raise the cost of ebooks. Can it be done? Maybe, maybe not. But what you won’t be doing is handicapping the emerging market that customers’ dollars are flowing toward. $30 hardcovers of mainstream genre fiction is not a long-term growth market, just as $20 compact discs weren’t for the music industry and multi-thousand dollar print ads weren’t for the newspaper industry. Their respective businesses may have been dependent on those things at one point, and they may have seemed reasonable at the time, but they weren’t a strength, instead a major weakness making them extremely vulnerable to technological change and shifting consumer habits.

The music business lost nearly half of its CD sales revenue in a just few years. Newspapers lost near half of their print ad revenue in just a few years. Sometime in 2025, will this paragraph be finished off by saying book publishers lost nearly half of their print revenue in just a few years? Those other two businesses refused to adapt, engaging in protectionist strategies under the mistaken belief that digital alternatives would top out at a lesser market share and the physical product would still retain primacy. Sound familiar?

Ask yourself this: if I sign on with a publisher whose entire strategy is to use digital to support the furtherance of print, what happens to me if print drops precipitously anyway, as there is clear precedent for? How you answer that question may well determine which writers still have a career a decade from now.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Sharing stifles creativity? Why this guy is just flat-out wrong

So I read this article today with this guy whining about piracy, file sharing and the music business and I’m compelled to make a few points. No sense in beating around the bush, let’s get started at the beginning, with the headline.

“How a generation’s freeloading has starved creativity”

Starved creativity? The last I checked, there is more music being produced today from a wider range of artists with a more diverse sound than ever before, and that’s expanding. There’s more books being written and available by a wider range of authors with more diverse styles than ever before, and that’s expanding. Creativity hasn’t been stifled at all. It’s been unleashed in a major way. The studio system (and the traditional publishing industry among others) is what stifled creativity. If you want to argue that the changes have stifled these old school media conglomerates’ ability to dominate their respective industries, I can get behind that. But it has in no way stifled creativity. Just the opposite, in fact. It’s generally a bad sign when the headline of your piece kicks off with unsubstantiated bullshit. You’re basing your argument on a false assumption right off the bat, and an easily refuted one at that.

“Things changed for me when I got a job in a Brooklyn café in the late 2000s. Many of the most respected and critically-praised bands of the day were customers there, but my excitement at getting to know them was dimmed when I realized that rather than enjoying the fruits of their success, they were, well, just as broke as I was.”

And if you’d gotten that job in the pre – Internet ’90s, they’d still be just as broke as you were. Same goes for the ’80s, ’70s, ’60s etc, etc. Conflating that with the coincidental emergence of file sharing is a mistake. He goes on:

“Apologists for digital piracy advanced one fantastic new rationalization after another—that artists would actually be helped by their rights getting trampled; that old-timey models like touring and merchandise would magically become a cash cow; that you could solve the whole problem by just letting fans “pay what they want.”

If you retain control of your rights, you have the choice to allow sharing of your music or not. Unless you’re signed on with a big label, in which case you have no choice in how you’re music is distributed or shared. That’s evidenced by this guy, the musician Kaskade, who is directly opposed to his label suing for copyright infringement but he has no legal right to stop them or to determine what he considers an acceptable use of his own music. In that sense, you’re correct that artists’ rights are being trampled, by their own labels.

Touring and merchandise are old timey? How much do you know about the music industry? Touring and merchandise were where artists made their money in the past. The labels made their money from album sales (whatever format) with contracts structured so that even some of the most successful bands ended up owing money to the label when all was said and done. If touring and merchandising aren’t cash cows, then why are record company contracts increasingly demanding large cuts of any revenue bands earn from both of those areas? Bands are broke because of the labels and their exploitative advance structure, their accounting practices and increasingly grabbing revenue from touring and merchandise that bands themselves generally controlled in the past. These aren’t problems the internet or file sharing created, this is the result of the standard operating procedure of the labels.

The book industry isn’t quite as exploitative as music, but they’re not far behind. They, too, use an advance system and accounting practices that virtually guarantee the majority of books never get to the point of earning royalties above the advance (and not because advances are high or because the books themselves aren’t largely profitable). They, too, try to lock up other rights so authors can’t generate any other income streams on the material, even when they have no intention of exploiting them.

Did you see the recent UK report that showed writers’ incomes shrinking? Most of those writers were longtime traditional writers. Publishers have been establishing a low rate for ebook royalties that pay them more but authors less than on a regular print edition. They focus their sales efforts on ebooks and high discount print books, both of which cut authors’ compensation per book dramatically. The internet isn’t causing these authors’ incomes to shrink, their own publishers’ actions are. And not coincidentally, the publishers are reaping sometimes record profits.

And fans have always paid what they want. If they want it new, they’ll buy it. If they don’t, they’ll get a copy from someone or they’ll buy a used cd for a few dollars. Today, they may download it. They used to record it from the radio or television. But if you only offer one full price option, and somehow magically eliminate any possibility of obtaining any other copy, you won’t see more sales. You’ll see significantly fewer. Not to mention a whole lot of pissed off people with money in their pocket that might have decided to spend it with you now and in the future.

“The people who fought against copyright in this battle would have to confront the fact that they were never carrying the flag for freedom or “openness”, but for aggression, entitlement and selfishness.”

Like it or not, we live in an increasingly on demand world. You can call it entitled and selfish all you want. It’s not going to change it. The people you’re trying to sell to want what they want when they want it. The technology exists to give them exactly that. And everybody knows damn well digital distribution is far cheaper than physical, so prices must reflect that. There’s a huge stream of people looking for music and books 24 hours a day, 7 days a week. Not providing what they’re looking for in the price range they’re looking for, that they can access in the way they want to is their failing, not the internet.

Even then, people will still seek out free alternatives. I downloaded my first song in 1998 on AOL dialup. I had been a huge music collector for a full decade prior to that. At no point in those 10 years pre-internet, was I ever not able to get a copy of any damn thing I wanted for free. The internet didn’t invent this behavior, it’s been with us for a long, long time. What happened to the music industry as technology proliferated to allow people to make and acquire copies of music on their own? It grew exponentially. When did it shrink? At the precise time they chose a strategy that openly attacked the sharing of music. That’s not a coincidence.

“Don’t make the mistake of thinking the torrent-indexing websites that popped up in my search results are just rambunctious, boundary-challenging adolescents swapping files with their friends, as Napster disingenuously spun themselves.”

That’s precisely what most of the people using Napster (and later Limewire) were. The music and film industry stomped on them, leading to the development of torrents that let little pieces of files be downloaded to and from multiple sources so no one except the few souls who seed ever actually made a full file available for download. It drove them from their own communities into the arms of the profiteers like Megaupload. The persecution of which, by the way, regardless of what you think of them, is a disgusting abuse of law and power. Read up on it.

It’s a bit like the gateway drug problem, I think. These sites make millions precisely because the actions of industry drove sharing amongst individuals underground. Without those acts, people would be openly sharing within their own communities now instead of enriching parasites. If there’s any gateway effect to marijuana ( and I don’t think there is) it’s caused by the prohibition. The only place you can get pot is from that sketchy guy on the corner who’s also got meth, heroin and some blow. Take out the prohibition and exposure to genuine bad elements drops dramatically if not altogether.

Black markets come about when there’s a gap between what a sizable portion of the public wants and what’s available to them. Drive off the safe alternatives and you’re left creating many more problems than you solve. I don’t get down with media companies decrying the black market when their own actions created the problem and made it exponentially worse.

“The big question is: how would things look if the illegal free option weren’t as convenient? Would Hollywood not be quite as dependent upon comic book blockbusters and take a few more chances on new stories? With stable promotional budgets for record labels and studios, a few more daring artistic voices might find an audience, and charge their way onto the pop culture radar, and even change the way some of us think about the world.”

Hahaha! No. I’ll tell you what it will look like, exactly like it looked in the late ’80s, stagnant and repetitive. The only time new voices got through was after an independent movement somewhere built the momentum for it. And then, the labels would descend, sign up every band that remotely sounded like the new in-thing, saturate the world and squeeze every last dollar out of it before moving on to the next hot movement (see: Seattle in the ’90s).

On top of that, with increasing digital sales yet no free option, discoverability, which largely happens word of mouth from sharing, would take a huge hit. Sales of all but the biggest names would plummet and we’d be left with far fewer risks being taken and far less unique voices ever getting a chance. You know, precisely what was happening before the internet came along.

“Forging an internet that takes individual rights (including privacy), cultural diversity and sustainable progress seriously also requires that consumers get on board.”

Ah, yes. Please pay considerably higher prices so we don’t actually have to adapt or alter our ridiculously outdated and inefficient corporate structure, or even pay lip service to giving you what you actually want for those higher prices. Get on board, already!

“We are all entitled to fair compensation for our work.”

I see, customers are entitled in a bad way for wanting what they want for their money (or not) but labels and artists are entitled in a good way for wanting what they want for your money. Nobody is entitled to make one red cent. You have to convince people to want to pay you willingly. That means convenience, price, format, restrictions on use; everything must be done to appeal to the guy holding a credit card and deciding if he wants to use it. “Hey you! You’re gonna pay more and we’re gonna tell you what you’re allowed to do with it and you’re gonna thank us for it” is a bad strategy.

I do agree in one way with being entitled to fair compensation. But that argument isn’t directed at the internet or consumers. It goes to the media companies. Stop ripping off your artists! You think artists aren’t being paid fairly? Changing conditions so media companies make more money isn’t going to change that. It’s just another version of trickle down nonsense. The labels make more money and those musicians in your coffee shop, they’ll still be just as broke. The copyright argument with file sharing has nothing to do with rewarding artists, it’s all about further enriching large media conglomerates.

“Just as US Supreme Court Justice Oliver Wendell Holmes Jr said of taxes, consider it ‘the price we pay for civilization.'”

The price consumers pay, you mean, in high prices that have no bearing on production costs or market value? Or the price artists pay in exploitative contracts and shriveling compensation from their corporate “partners”? The media conglomerates here don’t pay any price, for civilization or otherwise. They simply reap the rewards of squeezing the only two irreplaceable cogs in the industry machine, consumers and creators.

Why should we as artists have to accept pittance payouts? Why should consumers have to pay more for less? Why shouldn’t these corporations have to alter their business models, ones that developed in a different time and a different set of conditions, to meet the new realities? Why should we have to severely restrict the conduct of people that has far pre-dated the internet and file sharing?

You are conflating the business difficulties of large, once dominant corporations that are becoming increasingly obsolete with a decline in the industry and creativity itself. That’s a mistake. We don’t need record labels. We don’t need publishers. Before much longer, we won’t need film studios either. What we need are artists willing and able to create and customers willing and able to buy. Restrictions and higher price points to support corporate bottom lines achieve neither of those ends.

Piracy and file sharing isn’t the problem. The old industry titans who choose to stand in the way of what artists want, what consumers want and what civilization in general wants; they’re the problem. Advocating for a system that enriches them by taking money out of the pockets of both artists and consumers achieves nothing.

As a final point, there seems to be a thread to the piece that assumes people getting music for free is not good for commerce. Well, take a look at The Live Music Archive. There are over 6,000 bands and 130,000 separate concerts available for download or streaming absolutely free and totally legal. Concerts range from 40 years or more ago right up to yesterday. Many of the artists in here are very well known, many are unheard of independents. But they all allow fans to bring equipment, record their live shows and freely distribute them however they choose. In fact, the one thing they are prohibited from doing is selling them. And the community itself polices that kind of conduct very nicely. There’s a huge sub-industry in music totally outside of the major label system that not only encourages the free sharing of their music, but thrives on it. The most famous band to take this track is the Grateful Dead, who pioneered much of this and parlayed the touring and merchandising you dismiss into being one the highest grossing bands of all time, almost totally outside the label system. Their big label studio albums were almost an afterthought to their career accomplishments.

And as for bit torrent, which you sited as a particularly egregious tool for piracy, look at this. Etree.org has a huge, ever changing list of torrent files for concerts totally free and legally available for download. Bit torrent is far from simply an elicit tool for piracy. It’s used here to great effect to freely distribute music from bands who aren’t cowering in fear of consumers or sharing, bands that are building careers one fan at a time, without so much as a dime of support from the label system. I’ll guarantee you’ll find a wider array of music styles and talent here than any label-driven alternative. Giant media companies, as more of us are learning every day, aren’t the only way to pursue a career in the arts. They’re likely not even the best way.

There are problems with the internet, legitimate problems with piracy, too. But what you advocate benefits a portion of the industry, who also happen to be the richest, most entrenched, afraid to adapt element of it and does nothing to further anyone’s ends but theirs. Take a wider view of things. Track the problems you site deeper than simply, “Oh, Napster caused this” and you may find issues like artist compensation and stifled creativity far predate the internet itself. And who was running the show back then? These same giant media conglomerates. Huh.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Stratego

I’m developing a little theory on publishing. Here’s how it goes: In 2009, book publishers, fresh from watching the music industry and their newspaper brethren get hammered when digital competition struck hard and fast, decided they needed a different approach. Part of that was the collusion for Agency pricing, essentially to fix retail prices of ebooks on the high side and slow adoption to protect their brick-and-mortar print interests. Most people believe that was the extent of it.

But consider, at the same time they colluded on Agency, more restrictive contracts, 25% of net ebook royalties and ebook rights grabs on old contracts proliferated across the entire industry. Many people presume the publishers wanted to preserve brick-and-mortar for the long haul and more than a few opinion pieces were written calling them out for futility and lack of vision. After all, ebooks were a problem for physical stores but the real problem was online commerce. Every without ebooks, sales were moving away from stores to the internet. Borders died partially because of this.

But what if this isn’t about the long term future of physical bookstore sales at all? What if the publishers were playing a different game entirely? Other creative industries suffered when digital adoption grew at rates that decimated their physical business while not yet bringing in the profits to counteract that. Publishers have acted, in explicit and seeming concert, to both slow digital adoption (not stop it, mind you) and to shore up better margins on ebooks. This point, that much of those profits are coming directly out of authors’ pay, seems to be largely ignored in press reports touting publishers’ higher profits, by the way.

In this theory, the publishers knew full well ebooks were potentially far more profitable, despite their illogical protestations of that point, and they knew that the brick-and-mortar segment was inevitably going to continue to shrink in importance. The point may not be to save the physical market but to slow it’s death to a manageable pace, while locking in increased profits from the digital growth on the other side.

We’ve already reached two interesting points that may support this. One, more books are sold online now that in physical stores, a rate that keeps growing steadily in online commerce’s favor. And the report from ALCS about the UK market tells the story of writers having their incomes squeezed while their very publishers are increasing margins and improving profits. It my theory, this wouldn’t be accidental or an unintended consequence, but absolutely intentional.

In a few years, if everything goes according to plan, we’ll reach a tipping point where online sales and the higher margins that go with them will exceed any justification to slow their adoption to protect dwindling physical store sales. At that point, these protective actions (prices too high, DRM, maybe even Agency itself) will be systematically abandoned. But by then, they’ll have most all of their writers locked into low paying ebook contracts that will look even more egregious after they shed large portions of the expense of serving brick-and-mortar stores. They’ll also have effectively wiped out every possibility of reversion except the 35 year rule (and just wait till Mickey Mouse is faced with public domain in a couple years. I can almost guarantee that’ll either be eliminated or pushed back to 70 years or so). Many of their writers will have non-competes that encumber their ability to fully leave them behind, if at all. And they’ll have locked down ebook rights on their entire backlist of titles, even in contracts signed decades before this market was even someone’s random fever dream.

In this model, they’re not protecting print or defending the culture of print, they’re transitioning away from it, and in the process grabbing a much larger slice of the pie from authors than the already too damn large one they take.

Am I right? Who knows? But if we’re going to sit around tossing doomsday scenarios for writers under Amazon’s bootheels, there’s one hanging right there in plain view, possibly being perpetuated by the very entities many of their supporters think are nurturing them. And, given that ALCS report, looks like may actually be happening right now.

Choose your friends wisely, but choose your enemies even more so.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Pissing Contests Can Be Fun, Just Not Into The Wind

Here’s something I’ve been wondering lately. Amazon’s a monopoly, right, so we’re told? They had a 90% market share in ebooks 5 years ago. Today, estimates of their market share in ebooks range from 55-65% or so. Do monopolies typically lose 25-35% of their market share over 5 year periods? Yet we talk about Amazon today as if they’re more dominant than ever. Maybe they are, but something about that doesn’t seem quite right. It looks to me like that 90% was, as the sports analytics guys like to say, the result of a small sample size (very young market and they were the only player going all out after it). But that would mean they’re not actually a monopoly but a highly competitive company who grabbed a commanding lead in the market. And a commanding lead is a far cry from a dominant monopoly. Just ask Barnes & Noble.

What I find interesting is this assumption that Amazon will become abhorrent, they’ll destroy publishing, tear the fabric of time and space, and we’ll all suffer with no recourse forever. Anybody actually watching the lifespans of these tech companies? The pace of everything has sped up. We’re in a world where an unknown startup can become a beast in a few short years. But it’s also one where the beasts can fall on their faces just as fast. Nobody is afraid of Microsoft’s market power anymore. I hear Yahoo is getting into TV shows these days. In fact, that’s the first thing I’ve heard about Yahoo in months. AOL still exists, apparently. At least they pop up now and then to piss away money on some new acquisition they’ll proceed to run into the ground. When was the last time Google did something truly innovative that didn’t turn out to be all hype? Even Apple just dropped billions on a questionably-profitable headphone maker to get their hands on a flailing music store and seems more interested in protecting what they have rather than continuing the innovation they earned it with in the first place.

I think this reflects a bit of the problematic thinking that’s infecting the industry. Self published writers aren’t real writers or they’re disgruntled trad rejects or they’re a substandard slush pile gumming things up with bargain basement prices. They don’t truly believe any sizable numbers of indies can produce work as professionally or more so than they can. It’s unthinkable to them. They have the same problem with Amazon. They don’t understand where Amazon came from and they have no idea how to deal with them. I feel extremely safe in saying that when real competition comes to Amazon, and it inevitably will, it’ll be another publishing outsider that brings it, someone who can and will find weaknesses in Amazon to exploit when they appear. I’m also certain that publishers won’t like them any more than Amazon, either. Publishers would clearly rather force all retailers into the party line that’s escorting B&N on a slow walk to the bankruptcy judge. They don’t really want genuine competition with Amazon to emerge because what that requires isn’t going to bring back the good old days for them, either.

I watched (most) of that Amazon hate panel at the New York Public Library the other day. The most telling comment of all, I think, was when one of the panelists said that tech companies needed to learn manners. By that, I took it to mean why aren’t they acting like everyone else? Don’t they know they’re supposed to be making as much as they can squeeze out of readers, not us? And it’s just rude of them to undermine our leverage with writers by giving them real options and a sizable cut. Where are your manners? Get with the program, already!

Which brings me to the dueling petitions circulating, one from traditionally published writers “not taking sides” by bashing the hell outta Amazon and a response to that by independent writers. The former was ridiculous and embarassing, I thought, and it showcases either the ignorance of these authors to actual business dealings above their station or is simply a disingenuous attack designed to protect their personal paychecks. Either way, I thought it was unseemly. How can you claim to not be involved in the dispute in a document specifically designed to inject yourself into the matter and pressure one side over the other? It’s dishonest.

The latter petition, while I agree with much of what it said, did come off a bit preachy to me. I totally understand the desire to counter what you (and I) see as the slanted misinformation and fear-mongering going on out there. It’s hard to understate the freedom writers have now. We can literally do anything we can think up, produce it and distribute it to a wider audience than ever before and not have to sell our souls, rights and most of the proceeds to a middleman. It’s so obviously beneficial that I often wonder how there are writers who don’t see this or worse yet, seem to actually be afraid of it. We now live in a world where it’s possible to make money directly on our copyrights without being forced to give them up in perpetuity. That’s a huge development, and something that was very nearly impossible to consider a decade ago.

It probably shouldn’t be surprising that some writers haven’t grasped the full implications of this yet. It’s a major change in conditions that had been static for decades, if not longer. How much longer they can continue to ignore it is the question. I suspect many of these writers have the unfaithful girlfriend or boyfriend problem, with their publisher playing the roll of significant other. They suspect he or she is cheating on them, have bits and pieces of circumstantial evidence that something isn’t right but they don’t want to admit it to themselves because admitting it means a necessary major upheaval in their lives. So they rationalize away the concerns staring them right in the face. Given the sometimes irrational and conflicting nature of that petition, and other similar sentiments I’ve seen recently, I suspect many are at the point where they’re going to come home from work early one day soon to find him/her in bed with someone else and not be able to avoid that particular elephant in the room any longer.

As far as the indie petition goes, while I like and appreciate the sentiment behind it, I just don’t think it needed to be done. I’m all for calling out bullshit, but to do it in a similar format with a bit of a rah rah attitude, even if it’s totally justified, gives the people who ought to be paying attention a ready excuse to dismiss it. To rationalize away finding a pair of panties that don’t belong to you under the passenger seat of your boyfriend’s car, as it were. “They must be his sister’s.” Uh huh. The original letter was a back patting exercise, preaching to a choir that’s not currently going to be convinced of anything other than what they already believe. Unfortunately, I think the indie petition is the same sort of thing. My opinion is who gives a damn what those other authors think? Let ‘em look foolish, let ‘em slap their names on something that’s fairly easily refuted and, frankly, not particularly well written. When the entity you’re yelling at is more responsible for making you money than the one you’re giving most of the proceeds, you’re in for a sizable wake up call in short order. I’m not convinced slapping them in the face with their own format will do anything but make them more entrenched in their beliefs, no matter how well intentioned or how clearly we see they’re setting themselves up to be burned.

You can’t stop people from making their own mistakes. Our copyrights have direct benefits to us now, something they essentially never had before, and that alone makes them more valuable than ever. Yet royalty rates are anywhere from “meh” to outright terrible. All reports also indicate advances are shrinking as well. At what point does it become obvious that what you’re giving up far exceeds what you’re getting in return? The man who hired me at my very first job in publishing used to talk about the law of diminishing returns all the time. He was usually talking about circulation, the point where the costs of increasing it would outweigh the return you got from it. That’s where we’re heading with publishers, I think. The cost of doing business with them is outweighing the return. A much larger cut of the proceeds should be the very least we should expect from publishers but we’re getting the opposite with threats of even harsher cuts in the future. And by much larger, I’m talking double or triple what they pay now, at least. And none of this lifetime copyright, or non compete, or discount clause nonsense anymore. It’s not my or any writers’ job to leave money and control of my career on the table to lifeline your business infrastructure because you can’t afford to pay the freight. Writers’ offer more value than ever, Amazon’s retail platform offers more value than ever. Publishers’ problem is that they’re one of the few in the loop who’s bringing less value today than a decade ago. Basic rules of business would dictate that when you become less valuable, you can no longer command as big a paycheck. What’s at issue here is that publishers and some of the writers still being paid by them as they always have, don’t truly understand their value has fallen off and continues to do so. Look no further than the fact that ebook profits (built on low standard royalties to authors, btw) are the only thing keeping many of these publishers out of the red. If the traditional business model is so valuable, then why are your profits basically gone without the contributions of the non-traditional?

Writers on the whole were never really compensated for giving up our rights anyway. For most, they had no value at all without a publisher, and you giving them up was a required condition. Writers were paid based on sales. The rights were a necessary toll basically sacrificed for access to the market. The value of those rights to us have increased while the rewards of signing them over have gotten smaller. Yelling at Amazon isn’t going to change that. Do you think if Hatchette gets higher prices, you’ll see any more of that money? Will they up standard royalties? Chances are you’re on a contract where the more successful your book is, the more money you’ve left on the table. Go back and do the math. If Hatchette gets what it wants and mitigates the competitive impact of Amazon, do you think that makes them more or less likely to improve writer compensation? And given the nature of these publishers, generally working in lockstep, what one settles into, they all likely will shortly thereafter.

The question in my mind isn’t why aren’t indies rooting for Hatchette, it’s why aren’t trad writers rooting for Amazon? (Well, the question after “why should we be rooting for either?” anyway. What we should be doing is advocating for the best possible treatment from all sides.) I’ll tell you why, because Hatchette owns your rights. If they run themselves into the ground, you’re contractually obligated to eat a face full of dirt with them. If Amazon (or any other retailer) destroys themselves, I just move on to another one. Amazon doesn’t own me. Hatchette (and other publishers) do own you. If you can’t see the inherent long-term danger in that, and you obviously can or else you wouldn’t be bitching at Amazon rather than your own publisher, then no petition, no logic, no facts, no amount of fisking is going to help you.

By the way, your letter basically demands Amazon cut a deal immediately and go back to discounting your books. Do you realize it’s highly likely Hatchette wants the ability to restrict Amazon’s discounting as part of any kind of agreement? How’s do you expect that’ll work out for you? “You should settle so you can go back to doing what a settlement with my own publisher will prevent you from doing.” Good luck with that.

One part of the indie petition I liked very much was the thank you to readers. We should all do that far more loudly and often than we do. But readers don’t care about this conflict. Most don’t know Hatchette from Heineken. They do know Amazon and seem to like them in overwhelming numbers. No petition from a handful of best selling and/or famous authors is going to change that, especially when the argument behind it is higher prices for them. Supporting culture and literature against cold corporate business sounds great until you say, “Oh, and all our ebooks are going to be $12.99 from now on.” Good luck with that, too.

I believe very much in the “look where your bread is buttered” school of thought. Amazon offers a fair retail platform at a fair rate. Publishers may offer you the butter but you have to lease the bread from them. And the knife you need to spread it, well, that’ll cost extra, too. Maybe Amazon ends up like them someday, but that day is not today. And it also discounts the idea that, hey, maybe they won’t because, as a tech company, they know better than most the second they do, someone else is going to pounce. “We want competition by preventing the circumstances where competition can actually develop” is not a viable plan.

Everyone is ultimately going to make the choices they’re going to make, and they’re going to face the consequences of those choices; good, bad or some of both. I’m not sure dragging readers into the middle of a pissing contest between two groups who really should be in agreement on most things furthers anyone’s ends, regardless of who started it. And that’s what I think about that.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

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