Free The eBooks! New petition calls for supporting consumer ownership of ebooks…I think

Yesterday, I saw a link to a new petition on the U.S. government’s website to allow the “unlocking” of ebooks and reaffirmation of ownership rights by consumers for these digital goods. This comes on the heels of the Obama administration coming out strongly in favor of fully legalizing the jailbreaking or unlocking of cell phones. I agree with both sentiments, but the new petition has some issues. Here is the text: 

Protect Readers’ Rights by Unlocking Ebooks

The White House recently came out in favor of allowing consumers to unlock their own cellular telephones. We are asking the White House to apply the same laws and provisions to ebooks.

The purchase of a book, whether online or not, is a purchase, not a license. Digital books should be legal to read on any device that supports standard text files. Legally purchased digital books should not self-destruct, expire or disapper, except under conditions of damage or obsalescence. Within reasonable limits, book purchasers have the right to lend or give books to friends, charitable organizations and libraries. Finally, libraries should be permitted to lend ebooks under the same rules as physical books.

We ask the Obama Administration to champion the rights of readers to own their ebooks.

So, typos notwithstanding, let’s discuss. And by the way, if you’re going to post a petition concerning important issues like literature and consumer rights, you really should spellcheck the damn thing, otherwise your credibility could “disapper.”

For starters, the White House didn’t apply any laws or provisions regarding unlocked cell phones, they only expressed support for the notion going forward. The relevant laws concerning this, specifically in the DMCA, clearly ban the activity. Their opinion on this is all it is, just an opinion. For cell phone unlocking to actually be legal, it’ll take a legislative fix. Good luck with that. Not to mention, they stopped short of showing support for similar unlocking of ereaders and video game consoles, etc (they did mention tablets but only in the limited sense that they were becoming more like smart phones which dedicated ereaders are definitely not). A logical view would follow that if jailbreaking phones is okay, then doing so with all devices should be as well. But the White House doesn’t stretch that far, with their stated position directed at preventing lock-in by telecomm service providers and has nothing at all to do with content providers. In fact, the White House specifically called for “narrow legislative fixes in the telecommunications space.” That’s a far cry from rallying around customer rights for content they purchase. It’s certainly a step in the right direction, but there is no law or provision in this that’s even applicable to content rights for consumers.

I completely agree with the statement that buying an ebook is a purchase not a license, but that’s far from a popular position to hold. Over the past couple months, in arguing in favor of resale rights to digital goods, I found myself in many places arguing just that point of view. Content providers, including many independent writers, are clinging to the license scheme, and with some solid justification. There have been a few conflicting court decisions, but it’s far from decided that the sale referred to here is, legally speaking, actually a sale. I believe it is, and I think the licensing regime we’ve got going on here is potentionally the greatest threat to consumer rights in any of our lifetimes, but I’m definitely on the minority side of that point of view. It’s going to take a favorable SCOTUS ruling to affirm such rights, as a legislative fix simply isn’t happening in this atmosphere, and I wouldn’t hold my breath for it, even if I absolutely believe it’s what needs to happen to retain balance between producers and consumers in the stream of commerce.

I’m somewhat confused by the statement that says digital books should be legal to read on devices that support standard text files. Ebooks aren’t standard text files and, as formats improve (epub3, html5, etc) they’re even less comparable to simple text. Unless the petitioner is advocating for stripping off the bells and whistles to bare bones text, I don’t understand the point of this statement. Seems naive and, much like the recent lawsuit from bookstores against Amazon and the Big 6 calling for “open-source DRM,” whatever the hell that is, it comes off as very tech-ignorant.

As for libraries being able to loan ebooks under the same rules as print, I have two questions. One, ebooks aren’t print so why would you want to limit libraries to a physical standard that doesn’t necessarily apply? Secondly, and most importantly, the petition plays fast and loose with the first sale provision of copyright law. The ability of libraries to lend physical books as they have comes from first sale. The petitioner’s opening statement that an ebook buy is a purchase not a license supports a first sale position, but it also seems to go out of its way to avoid even mentioning consumer’s rights under the same provision, notably resale. Is the suggestion here that libraries should be granted a waiver to exploit first sale rights customers shouldn’t have, even though it opens with a strong statement supporting a first sale argument? I don’t get it. If the point here is to free ebooks from lockdown control of content providers, why skip the most important tool to achieve that, a true ownership stake in the ebook for the purchaser?

What I see as the big flaw in the argument here is the warping of the concept of first sale rights. Libraries can have them, apparently, the license scheme used to block them is dismissed, yet for some reason, consumers should still be left wanting for their full rights under copyright law? Why? And what, exactly, are reasonable limits to purchasers lending ebooks? Why should libraries get more rights to lend books than consumers? How is it that I can give away or donate said ebook, a library can then use first sale to lend it, but I can’t use the exact same provision of copyright to resell it? I thought this was about freeing ebooks for consumers, but it seems more like exempting libraries than truly benefitting paying readers.

The petition ends with a call for the Obama administration to champion the rights of readers to own their ebooks. I agree, but that’s not what they’re calling for here. This petition still ignores first sale rights for consumers while championing them for libraries and even accepting restrictions on consumers to lend or give away said ebooks. This isn’t ownership at all, but simply a desire to read a Kindle ebook on a Nook or similar type of arrangement. If all you really want is to prevent content provider lock-in to specific devices, then say that. Don’t muddle the issue with notions of first sale or ownership that you’re not even advocating. The wording of the petition also allows for ebooks to be deleted or removed due to obsolescence (misspelled obsalescence, which is a fascinating freudian slip, as license schemes are already limiting the very idea of what constitutes a sale).

I think this is a nice thought, preventing vendor lock-in has some definite merits, but ultimately this petition is poorly executed and unnecessarily convoluted. And again, spellcheck, dammit!

Stop Stealing From Your Customers! Eroding non-creator copyright protections hurts us all

The past week, I’ve been caught up in philosophical meanderings related to the digital goods business and the notion of copyright law. I’ve read quite a bit here and there around the web on the subject and I see more than a few disturbing things.

1. Most people, including creators, don’t really understand copyright

I am continually bothered by the number of writers, musicians, etc who seem to believe copyright gives them some sort of all powerful right to totally control what happens with their work, even after it’s been sold and is out in the world. Copyright doesn’t do that. It grants you a limited monopoly right to use your work commercially, nothing more. One of the primary reasons there is so much consternation about copyright is that those limitations are slowly being eroded away. Life plus 70 years is a flat-out joke that totally spits in the face of what copyright is all about. Think about this for a second and tell me that copyright’s ends of protecting the public interest even still exist: Not one single American creative work entered the public domain statutorially this year. None. Nada. Zero.

Things like the upcoming Kirtsaeng decision in the Supreme Court, depending on how they rule, and the intricate licensing schemes pioneered by the software industry and dove into whole hog by the media industry purposely erode first sale rights, giving creators control of secondary markets (or the ability to prevent them altogether). That also undermines the idea of limited protections. The newspaper industry fighting against Google News and aggregation is an all-out assault on fair use, yet another attempt to wipe away or severely lessen copyright law’s limitations.

I can’t totally blame creators who behave as though they have some kind of all encompassing powers under copyright, media companies have been working very hard behind the scenes to make it that way for their own benefit. But those limitations exist for a reason. Take them away, and the entire purpose of copyright gets perverted away from a protection that gives creators a fair chance at exclusivity for a while to try and make a buck and allows the public to benefit from these works in a way that promotes future progress. Without those limits, the very progress copyright law is supposed to promote gets stunted.

Copyright law grants you the opportunity to make money, it doesn’t guarantee it, and the value to society on the whole is supposed to be balanced against creator’s interests, protected from the very exploitation the erosion of those limits is actively causing.

2. Very few on the creator side seem to give a damn about consumer rights

This, to me, is the most disturbing trend I see emerging, especially when it comes from Indie authors. You can’t talk out of one side of your mouth about appealing better to readers, then ignore or argue against the idea that readers also possess protections under copyright law that we’re actively taking away through the licensing scheme ebooks are sold under. The digital goods market is built upon a foundation of taking away consumer rights. What’s worse, is that we also have creators out there throwing around loaded terms like piracy and stealing that aren’t accurate. Many times, they’re used to demonize people bahaving in ways they always have with regards to sharing material. Every man, woman and child in this country commits an infringing act on par with downloading a torrent file every single day. Probably several. We just don’t see it and most probably don’t even realize we’re doing it. The internet has brought part of that behavior out into the light of day. That doesn’t mean it wasn’t happening on a major scale before the internet. It absolutely was. It didn’t destroy these industries, in fact, I believe it made them considerably stronger. File sharing won’t destroy these industries today, either. What will, however, is if we continue on a path that makes copyright effectively infinite, steals rights from consumers at every opportunity, and tries to force unprecedented controls onto people for works they’ve already bought. It also doesn’t help if creators act like entitled assholes, throwing accusations of theft around while totally ignoring the fact that their entire business model is based on gutting consumer rights. Take a deep breath, go read up on the history of copyright and try to grow a little perspective.

And remember, the perversions of copyright are being driven by giant media conglomerates for their own ends. They don’t care about your rights as a creator any more than they do the rights of consumers. Don’t confuse your interests with theirs. When they’re done wiping out consumer rights, they’re very likely to turn to undermining yours, if they haven’t already. And don’t expect what fans you have left to sympathize when that happens.

3. Everyone seems to believe digital goods are infinite despite the obvious reality that they’re not

I still don’t understand how otherwise intelligent people buy into this heaping load of bullshit. A big part of the argument justifying swiping consumer rights is that digital goods are infinitely perfect. Come on! Do you really believe that we’ll be reading these same epub or mobi files on these same devices five years from now? Or ten? Technological progress is just going to come to a grinding halt, is it? We’re not going to have better, more capable devices in the future with improved or even radically different formats for these works?

If consumers don’t have any ownership rights in these products, what’s to stop an entire generation of culture from being essentially erased on the whim of corporate interests the next time a shift in standards or new technology comes along? One of the key arguments I’ve seen against second hand goods is the idea that no one will ever buy new if the used versions are identical. To begin with, nothing gets sold second hand without it being bought first hand. And don’t give me the line about people wholesale copying the same file and selling it over and over again. That’s a tech problem no one has bothered to solve because the entire industry was built upon the notion that readers were never going to have these rights. More importantly, when we do have a media shift of sorts, these current files will no longer be identical or the best thing going. If we have resale rights, I could be buying today’s epub files cheaply used or choose to buy the newest holographic version that hits the market in 2025. The long tail may be somewhat infinite, but that doesn’t mean the specific containers we’re using today are. I’m not a big fan of the notion that corporate interests can remove a giant swath of our creative culture just by switching standards or technology. Show me where in copyright law that kind of thing is allowed. It runs directly counter to its stated intent of benefitting the culture.

My perusings through this issue, mostly because Amazon filed a patent they may never even use, have been pretty eye-opening. As much as I love ebooks, and the new digital frontier, there’s always been this nagging little voice in the back of my head and I finally figured out what it’s saying: “Hypocrite!” Despite the fact that I frequently argued against increasingly controlling software licenses during my years in the industry, I never really connected the fact that, when I sell an ebook to a reader, I’m engaging in the same activity that I felt was so exploitative from the other side. I’m starting to get a picture of the weaknesses in selling digital goods, and most all of them stem from the erosion of limits in copyright law. Economic karma, perhaps. It may seem odd that I, as a writer who earns money because of copyright, would argue against more power granted to me as a creator, but I take the long view. It’s simply bad business to rip off the people paying us, and that’s what we’ve been doing from day one. By advocating for or even turning a blind eye to the giant theft of customers’ rights we’ve all taken part in, we’ve created a system that is already doing damage to our culture. Copyright doesn’t just protect creators, it protects consumers and society on the whole in a fine balancing act. What it shouldn’t be doing is warping that balance in support of business models that wouldn’t function without the self serving perversions.

Say what you like about copyright, but its value is much more than simply protecting my rights as a creator. Our system has lurched away from any semblance of balance, and it’s getting more slanted every day.

Over the past few years, I’ve read many articles from creators containing a plea for people to “stop stealing” from artists through downloading. I’d like to end this by throwing that plea back at creators.

Stop stealing from your customers!

Here are the links to the other copyright related pieces I’ve written lately, for you reading pleasure.

The Benefits of Globalization Don’t Apply to the Little People

Second Hand Blues: First Sale Rights and Used eBooks

Amazon and the Mystery of the Great Used eBooks

Second Hand Blues: First Sale Rights and Used eBooks

That sound you just heard was the collective heads of everyone in the traditional mass media industry exploding as news of Amazon filing a patent for a process to resell digital goods spread. Many of them are having enough trouble keeping their heads above water in the current digital marketplace as it is. Now, suddenly, they might have to deal with competition from an area they thought was locked down, resale rights of customers. Oh shit.

Personally, I’m all for this development, although I would much rather someone other than Amazon be the one to push this possibly emerging market. However, the fact that they’re taking steps to be prepared for it again shows why they have essentially made fools of the traditional industry. They think ahead, they pay attention, they prepare and, most of all, their business model adds value for their customers instead of taking it away.

I’ve long been a proponent of an aftermarket for digital goods. I believe it’s lack is the one key flaw in the ebook market. In fact, I’ve started to develop a little theory about this. Far from being just simply a loss of value for consumers, I’m starting to get behind the notion that the lack of an aftermarket is a primary cause of three of the most troublesome issues with ebooks and other digital media; piracy, discoverability and the downward pressure on prices.

1. Piracy

I usually take issue with even defining the activity of file sharing, even obviously infringing file sharing, as piracy. I just don’t think it is. I also think it clouds the issue by broadening the scope of conduct corporations would like to monetize into a individual crime, which hurts efforts to combat actual, destructive commercial-scale piracy. But for the sake of brevity, I’m just going to use the term piracy here. It’s easier to type than “possibly infringing and much maligned but potentially fair use protected file sharing,” which would be a far more accurate description of the conduct to which the industry objects.

The biggest joke of all from the anti-piracy brigade is the assumption that every download is a full price lost sale, complete with lost royalties for the creator. That’s obviously a skyscraper-high pile of horseshit I’m not going to waste time refuting. But let’s say, for the sake of argument, that it’s somewhat true, who’s to say that lost sale would have even been one that affected the industry or artists at all? It’s easy to suggest that someone downloading an ebook wasn’t going to buy it anyway. But what if they were going to buy it, only a cheaper second hand version? Even if it was a lost sale, it wasn’t one that would have earned the industry a dime anyway. Or any royalties for the artists. Amazon routinely lists used alternatives to new versions right on the product page, always significantly cheaper. Is it really a stretch to think that people who choose downloading for free over buying full price wouldn’t also choose to buy cheaper used than new? Even if every download were a lost sale, if those sales were going to be of the cheaper, used variety, the industry and artists lose nothing. And it’s perfectly legal under the first sale part of copyright.

Ebooks circumvent first sale by being sold as a license for use. When that happens, customers lose the ability to resell those goods (among other things). It’s why I can’t just sell the ebook I bought last week from Amazon to somebody else on eBay. But the book publishing industry has long existed side by side with its used counterpart. There has always been a place to buy books at a significantly discounted price. When eBooks took off, however, there was a vacuum left where that discounted market used to be. Isn’t it possible that piracy grew to fill this very gap that the loss of first sale left in the digitized side of the market? We went from a system where you could get books full price new, heavily discounted used, or free from libraries to a system where it was full price new, extremely limited and inconvenient from libraries or free through piracy. The industry, through the means it chose to sell ebooks, removed the discounted option completely, hamstrung the legal free option and then loudly wondered why people pirated.

I think a lot about rights, I am a writer, after all, and I spend a fair amount of time complaining about rights grabs from publishers. But it just dawned on me that I’ve essentially missed the biggest rights grab of all. The way ebooks are sold protects publishers under copyright law, protects authors under copyright law (although I would argue in too ancillary of a way through publishers but that’s for another day) and takes away almost all the rights of consumers under copyright law. It is pretty egregious when you look at it. The first theft was committed when publishers agreed to the licensing scheme and took away customer rights. Then they turned right around, started pointing fingers and yelling, “Thief!”

Removing first sale rights created a vacuum in the ebook market and piracy was what grew in its place. Nature does, indeed, abhor a vacuum.

2. Discoverability

Here’s another thought that’s been kicking around in my head: what if, instead of causing the drop in sales, piracy actually prevented that drop from being significantly worse? Think about it. When digital music hit the scene, that industry panicked, fought the rudimentary early age file sharing spots like Napster and Limewire tooth and nail, right down to suing their own damn customers. At that point, broadband was slower, not nearly as widespread, and most people didn’t know how or have the capacity to download sometimes large music files. As first sale rights fell away, the secondary markets thinned, discovery was hampered and sales dropped precipitously. When ebooks hit publishing, there were well-established file sharing networks in place, broadband was much faster and more ubiquitous. The discovery hit from loss of first sale was mitigated somewhat by piracy and the drop in sales was much lower. Book publishing, quite possibly, was somewhat protected from itself by the very pirates it so loves to demonize.

Look at it this way, when I buy a print book, I can go sell it to someone else. They in turn, can sell it again, the next owner can sell it, then that owner could donate it to the library where it can be checked out over and over again. That one book could pass through numerous hands, all legal and all based on one sale, the first sale, from which publishers and creators reap their proceeds. The rest of that book’s lifespan constitutes exposure, or discovery, if you prefer. Now, if I buy an ebook, other than a limited ability to share with a few people under specific conditions, the life span of that ebook essentially dies immediately after the first sale. All of that exposure and discovery that was present with print books sold with first sale rights is washed away. And again, the industry is perplexed about why people aren’t finding new books as easily as in the past. That kind of thing happens when you destroy the primary mechanisms of discovery by swiping rights from customers.

I’ve seen numerous polls that suggest bookstores are the number one place for discovery of new works but I’ve never seen one differentiate between what kind of bookstores they’re talking about. Is it more likely you’ll try out new authors in Barnes & Noble where you’re paying $10-25 or so on average per book, or in a used bookstore where hardcovers are $2 and paperbacks can be had for 50 cents? I suspect discovery has been done far more at bookstores selling heavily discounted used books (and libraries, where it’s free) than at stores selling only higher priced new books.

Everybody seems to be wondering why online book discovery is struggling so much. Could it be because publishers have hamstrung libraries and blocked the development of discounted used ebook stores by eliminating consumer rights to resale, places where discovery is far more likely to happen than full price, brand new alternatives? Nah, couldn’t be that, must be the pirates, you know, the only place actually emulating the primary means where book discovery was done in the past.

3. Downward Price Pressure

Taking away first sale rights from consumers does one other key thing, it takes away the customer’s ownership stake in the product. If you can resell something, that has value, and when you buy a print book, it retains that value because of first sale rights. But with ebooks, the monetary value drops to zero immediately after you pay for it. Don’t think for a second people don’t understand this basic fact. The loss of an ownership stake, and the instant elimination of any monetary value necessarily degrades a product in the customer’s eyes. By swiping first sale rights, publishers have devalued their own products. It’s the reason why so many people complain so loudly about ebooks priced anywhere near what print versions cost. We’re not stupid out here, we know damn well you’re selling us a product that doesn’t have anywhere near the tangible value of a print book, and that has nothing at all to do with the quality of the book. I can’t sell it and its uses are limited. I possess significantly fewer rights with ebooks. Consequently, it makes no sense to pay print prices for way-less-than-print value.

Then, there’s this. With the aftermarket for ebooks nonexistent, wiping out a highly discounted layer of sales, it created a huge gap between the prices of trad pubbed ebooks and indie books. That, in turn, created a situation where indie books could be priced much cheaper and attract significant sales through super-low prices alone. That, then, set off a race to the bottom fight for those sales, culminating in 99 cent novels, and generally increasing the downward pressure put on all ebook prices. But consider, if there were a used layer there where trad pubbed ebooks could have been picked up for $2-3 or so, the massive gap in prices between indie and trad books never would have happened, the severe price advantage wouldn’t have sparked the uptick in sales that set off the race to the bottom. Indie authors would have been forced to compete on factors beyond simply super-low prices, and the downward pressure they’re experiencing now declines appreciably. Also, if those same customers now bitching about $15 ebooks knew that could get a few bucks back on them through resale, they wouldn’t be so likely to complain about price. They’d retain their ownership stake, and very likely, not balk at paying a few dollars more. There’s two key elements right there driving prices down that go away if customers hadn’t had their first sale rights taken from them.

First sale rights are hugely important. I’m of the mind that swiping them from consumers as ebooks have is responsible for most of the biggest problems in a growing industry segment. An aftermarket isn’t something to be afraid of, it aids discovery, maintains value in the product chain and gives your customers not just a right to resell, but an actual ownership stake in the product, albeit a small one, relatively. It now becomes in their best interest to maintain the value of ebooks because they have some skin in the game. Take them away, and it seriously damages discoverability, drives prices down as the reality of lost value sinks in, and it drives possible customers to alternatives like piracy.

Whatever the technical difficulties in creating a digital goods aftermarket, or giving consumers back the first sale rights that have been swiped by the ebook licensing scheme, the consequences will be far less severe than continuing to treat customers as naive dullards who don’t mind being gouged by higher prices for a lesser product. There’s a good reason first sale exists as part of copyright law, free markets don’t work when one party has too much control over economic activity. If we don’t change course soon, the ebook market will find out exactly how dysfunctional things can get when the playing field gets unfairly slanted. Customers have rights, too, and it’s high time publishing remembers that.

The Benefits of Globalization Don’t Apply to the Little People

The U.S. Supreme Court is set to rule on a case that has profound implications for the concept of ownership, (See SCOTUS blog here and read up. It’s fascinating) and could conceivably eliminate the last lingering vestiges of the notion that copyright law has any limits.  If the court rules the wrong way on this, copyright ceases to have any pretense of societal good. And why is it that we’re faced with the possibility from SCOTUS? To defend a publishers’ right to segment the world into territories.

In the past, I’ve argued that the idea of territoriality is already outdated and should be done away with. This case illustrates pretty clearly why that’s the case. Given the technological realities we have today, there is simply no easy way to defend this practice in statute that doesn’t have the unintended consequence of severely undermining first sale, fair use and ownership and resale rights for nearly everything we buy. The benefit to society for allowing territoriality to stand is negligible. In fact, it’s the consequences of doing so that are severe and destructive.

First, let’s look at the publisher, John Wiley & Sons. They are textbook publishers who, as many do, routinely use the concept of territoriality to both exploit poorer markets and maintain the ability to overcharge more affluent ones. The key issue in this case is that an individual, Thai national Supap Kirtsaeng, purchased textbooks sold by Wiley at lower prices in Thailand, brought them to the American market and sold them on eBay to help pay for his education at USC, where the exact same textbooks are priced much, much higher. My first response to this was, “good for him!” This guy identified a seam in the sales channels and exploited the price variance for the same product in different markets to make a buck. That’s market-based globalized free enterprise at its best.

But Wiley was having none of it, suing (in my opinion, inexplicably) for copyright infringement. The guy in question didn’t copy anything. He legally purchased said textbooks at full price offered by the publisher, then used his first sale rights to turn around and sell them for whatever the hell he wanted. There’s no copyright infringement here at all. (Note: I’m speaking in practical terms. Yes, I’m aware that there are portions of copyright law dealing with importation of foreign goods, but those parts were written long before globalization and free trade took hold, before the internet was even a thing and back when importation was a little more complicated than a few mouse clicks and a week’s wait for shipping. Those rules have about as much relevance to modern life as the use of grindstones to make bread). But the 2nd District Court disagreed, invalidating his defense through first sale, declaring his actions as infringing and fining him a substantial amount of money. The key problem lies not just in the decision, which I believe is catastrophically wrongheaded, but in the justification used. The court ruled that first sale rights don’t apply to any goods manufactured outside of the U.S.

Apparently, the judges of the 2nd District missed the memo about the new global economy we’re all supposed to be giddy about. They seem to have not noticed American corporations offshoring jobs and manufacturing at economy-gutting levels to save on labor costs and such. They’ve obviously never set foot in a Walmart or any other retail outlet and taken a few minutes to check the “made in” labels or they would have realized that a plurality of goods we buy every day aren’t manufactured in this country. If first sale doesn’t apply, then this court just swiped ownership rights to the majority of our possessions.

To make matters worse, how many foreign manufactured components do you think are present in our homes and cars? If I own a home that has a central heating system installed that was put together from any amount of foreign made components, do I even have the right to sell my home without first buying licenses for every non-U.S. element it contains? What if I want to sell my home complete with appliances, also made from foreign manufactured components? Do I need separate licenses for my refrigerator, washer, dryer, dish washer, etc? What will the costs of acquiring these licenses do to the overall value of my home. If you said “plummet” you hit the jackpot.

I can no longer legally even sell the smartphone I’m currently typing on. And what about the licenses HTC acquired for the plethora of foreign-made components that make up the phone itself? Does those licenses transfer? Is it enough to get resale permission from HTC or do I also have to get permission from every component manufacturer too? The same applies to cars. Can an ok from Toyota allow me to sell my car, or do I also need an okay from the stereo manufacturer, the maker of the chips in the car’s computer, and whoever made the tires, brake pads, oil filter and anything else in the vehicle that wasn’t American made. What does this do the value of your car? Again, “plummet” is the correct answer.

Yet, this value loss is totally on the consumer side. When the resale market gets gutshot in this way, there is no logical reason to expect car makers to do anything except up their prices. Really, all they have to do is refuse permission for resale and the used car market ends instantly. No more competition on that front.

There’s two key problems I see here. One, this kind of ruling creates a massive incentive for businesses to continue and actually speed up offshoring jobs and manufacturing. If first sale doesn’t apply to foreign goods, companies that trade in foreign made goods will control not only the primary market, but any secondary markets would only be allowed to exist on their terms at their discretion. The entire point of first sale was to prevent this very thing.

In a global economy where much if not most of what we buy isn’t made in America, how long would it be before companies still producing goods in the U.S. argue that first sale prevents them from competing and must be done away with here as well? I put the over/under on three hours.

Then there’s the legal illogic of somehow claiming one part of copyright doesn’t apply to foreign goods (first sale) yet other parts will (fair use). Supporters of Wiley have almost all claimed that the above concerns I’ve mentioned are scare tactics because consumers will retain fair use rights to defend their actions. But why should fair use be any more applicable to foreign goods than first sale? This is a flat-out lie by those who want Wiley to win. If the District Court decision on first sale stands, it’ll be roughly a half an hour before someone tries to invalidate fair use for foreign goods as well. And they’ll win because they’re right, logically and legally. If first sale doesn’t apply, then neither does fair use.

Get it yet? Think for a second, how many people in this country just bought, wrapped up and gave away foreign made goods as presents this past Christmas. If this ruling stands, every one of those gifts was an incident of infringement. I’m pretty sure we just rang up a $100 trillion worth of infringement penalities last month. Don’t think businesses will try to exploit this fully? Take a look at how publishers have been extorting exorbitant fees from libraries on ebooks. First sale doesn’t apply to digital goods (I believe strongly that it absolutely should, by the way) and fair use rights for the same have been willfully undermined as a consequence, resulting in absurdly, indefensibly high prices. And these are goods made in this country supposedly subject to the fullness of copyright law. Take away even those limited protections, and I think we can all see where this is heading.

All of these possibilities only exist because the courts are trying to carve a legal protection out of copyright that allows publishers to gouge rich markets while also simultaneously charging more reasonable prices in poorer ones. We could all effectively lose our right to resell virtually anything because a publisher wants the law to protect them from their own pricing strategies.

We’ve all had “the benefits of globalization” crammed down our throats the past few decades, and this case puts the lie to those notions. Corporations will readily tell you how great the global economy is as they ship manufacturing to third world countries with no worker protections, minimum wage laws or safety standards, but here, a regular guy finds a way to profit from globalization, and those same corporations are screaming that hellfire, brimstone and economic ruin will descend upon us all if its allowed to stand. If the District Court decision is held, that will be a clear sign that globalization belongs only to corporations and the wealthy. They get all the benefits and profits, while we get all the sacrifices and consequences.

There are two big societal problems made worse by an upholding of Wiley’s case: offshoring jobs and the cost of higher education. I’ve already mentioned how this decision creates a massive financial incentive for businesses to stop trading in American made goods, making a serious problem exponentially worse. The cost of education is, in part, too high thanks to textbook publishers. Territoriality is one way in which they keep textbook prices in the American market artificially high. This decision would also make that problem significantly worse as well. Textbook makers already undermine resale value by routinely producing new editions with little or no substantive changes specifically to prevent students from selling their books for any tangible return. This decision provides a clear path for them to further erode consumer rights; simply print the books overseas and now students lose all rights to resell (or give away) those books at any price.

The potential damage to the public and the overall economy from upholding the District Court decision outweighs the damage done to publishers by striking down the infringement claim defending territoriality by so many levels that even considering it scares the hell out of me.

What better case can be made that copyright is irretrievably broken than this one? The District Court ruling essentially makes copyright unlimited in scope, with manufacturers retaining not only primary sale rights, but also grabbing total control of any secondary markets as well. Considering that expansion of copyright terms has essentially made copyright length infinite (Life of creator plus 70 years. It is certainly infinite for the creator as my copyright wouldn’t expire until several generations after I’ve been dead and buried. And that’s only presuming it doesn’t get expanded again, which only an outright fool would believe won’t happen when Mickey Mouse next approaches public domain) where exactly are the statutory limits on copyright that were the principle element of the protection in the first place?

If the possible consequences weren’t so severe–as in instantly stealing at least half of the value of the goods we’ve paid for, eliminating secondary resale markets, and extorting copyright monopoly rents with additional licenses on products we’ve already paid for, not to mention possibly gutting fair use which could well have serious deleterious effects on free speech–I’d say maybe a decision this inordinately stupid needs to happen so regular people can see clearly how distorted and unfair copyright law has actually become and demand much needed change. But then, I’m opposed to further destroying what little productive economy we have left to make a point about copyright. Unfortunately, our corporate leaders and government don’t seem to agree.

The only logical choice here is to strike down the copyright infringement defense of territoriality. The alternatives do a hell of a lot more damage. I wish I was more confident that SCOTUS will get it right. We can all dream, can’t we? Unless, of course, your dream includes an infringing appearance by a copyrighted character, in which case that nap’ll cost you $150,000.

Containers

I was just reading this summation of the Nick Carr-Clay Shirky battle royale over whether the book is a valuable cultural artifact or simply a container for content that, in its physical limitations, shaped the forms of that content and could be dying out for good, digital or otherwise. To be honest, I was actually glazing over a bit reading it. It’s fascinating, don’t get me wrong, in a high-minded philosophical way, but I think I’ve intellectually moved past all these discussions of form and transition. Why are we still arguing any of this?

Anyway, one particular comment attributed to Carr temporarily pulled me out of my glazed meanderings:

“In response to an email from Wired magazine founder and author Kevin Kelly on the subject, Carr gives some examples of valuable forms of media that he believes have been lost or diminished: namely, “the oral epic poem, the symphony, the silent film with live musician accompaniment, the dramatic play, the short-form cartoon, the map [and] the LP.” And he argues that the book, the movie and the video game could also fall into this category.”

I think Carr has a fundamental misunderstanding about how, exactly, each of these forms of creative effort reached a point of widespread acceptance and popularity. He’s got something of a cart before the horse kinda argument, seemingly implying that media companies arbitrarily decided one day, possibly for higher profit, that CDs were better than LPs, and stopped making LPs. It was the people buying CDs en mass that made that decision for them.

Nothing, not one thing is stopping anyone from making LPs today. In fact, they’ve become quite the successful boutique business for some artists, Jack White comes to mind. But in doing so, you have to either admit that you’re creating a form with a notably smaller market to sell to or you also have to undertake efforts to build a market to go along with the product. The form isn’t obsolete or diminished in any qualitative sense (other than the strictly cumulative monetary decline from the height of the wax album era. But surely, Carr’s discussing high-minded art here, so simple free market economics can’t be what he’s referring to, can it?). The only problem the LP has is that most of its paying market has moved on to other content forms more convenient to their lives.

It’s not up to me as a writer to decide what the optimum forms of creative expression are, nor is it up to Carr, Shirky or any of thousands of other media industry pundits. Even publishers, movie studios and music companies (who have discovered this truth sooner and far more harshly than the others so far) despite their capital reservoirs and strengths of distribution and marketing, have only a limited, minuscule ability to direct those choices.

In fact, there is no one person who can make this decision. The forms of content that reach any level of social application do so beneath a critical mass of regular people deciding in unison what they’d like to spend their money on. CDs overtook LPs because the buying public wanted it so, because CDs had advantages that fit more cleanly into the conditions of their lives at the time. For that same reason, CDs have been usurped by almost totally ethereal electronic forms. Books, print or digital, will live or die by the same hand and there’s nothing Carr, Shirky or anyone else can do about it.

It seems more and more like the publishing industry is missing a very essential point of its existence: we all live at the whims of the people who buy the product. They seem to be forgetting that we in the creative fields of endeavor have to produce both content and form that large numbers of people value enough to pay for. Not just enough to want to watch, listen to or read, mind you, but actually lay down hard cash for. That decision is, has been, and will forever remain in the hands of our audience. The creative forms that service their needs, and most ably makes the case for that aforementioned exchange of currency, will win out. The ones that don’t will end up tacked on to Carr’s list of lost art forms. 

Frankly, I’ve always believed culture belongs to the people. If large enough numbers want print, there’ll be a market for it. The same for digital. And if a super-majority develops that wants some form of the written word that hasn’t been invented yet, usurping both print and ebooks, that’s as it should be.

Every new form that comes along adds new possibilities for the artist. Every old form pushed aside becomes part of a rich tapestry of history and experience that helps shape the use of new forms. LPs didn’t die, they become a foundation upon which mp3 players were eventually built.

If art is your only intent, the old forms still exist, have at it! But if you’re also trying to pay the bills, you’ve got to go where the money is. And that money is scattered about in the pockets of every person out there who’s looking for something to read. Nothing else really matters.

2012 Isn’t The End Of The World But It Is A Time Of Transition

For the past few months, I’ve laid back and soaked up the goings on in publishing, and the economy in general. Here are a few things I expect to see as we wrap up 2012 and head into the beyond.

1. Apple is in the process of cutting its own sizably profitable throat

I was once one of Apple’s biggest proponents. This was back when they produced the best computers going, especially when paired head to head with Microsoft’s crap-of-the-month they’ve spent the past 15 years cranking out. But no more. They are far too expensive in an atmosphere with downward pressure on device prices, and are showing far too many issues with signature devices like the iPhone. The iPad Mini is nothing if not a cannibal that has the potential to swallow the market for the full size (and pricier) model whole. Add to that the fact that, fairly or otherwise (I say fairly) Apple is a poster child for exploitative labor practices, offshoring of jobs and stashing large profits out of the country to avoid taxes, and I see a company who has reached its apex and is poised to begin the long decline down.  If Steve Jobs were still alive, I’d give them a shot to pull out of it, but he’s not, and Apple is in the process of becoming just another mega corporation focusing on profit at the expense of all else.

There’s a reason Apple is putting more and more resources towards patent lawsuits. It’s corporate complacency. Live off the value you have today, and do everything you can to stifle competition or progress beyond that point. It might work for a few years, but it’s a long-term loser bet. Much like Microsoft, the world will pass them by and they’ll learn that it’s much harder to play catch up than be the industry leader, especially after your corporate culture shifts from profit through new innovation to profit through exploitation of past innovation.

2. Consolidation amongst the largest publishers is a sign of desperation not forward-thinking strategy

Corporate consolidation and mergers come in many forms. Sometimes, they are aggressive, competitive moves, other times they are backs-to-the-wall defensive maneuvers. The Big Six mergers going on are in the latter group and, as such, are little more than time-buying exercises. The Disney purchase of Lucasfilm is just the opposite. The mouse didn’t snap up Star Wars to squat on the crazy-lucrative rights, they intend to use them. Publishers, on the other hand, are merging not as an aggressive bold move, but as a means of cutting costs and combining assets to add sheer bulk in some kind of misguided dick-measuring contest with the big retailer of the moment, Amazon.

I expect the Big Six will filter down to three, possibly even two within the next two years. The remaining giants aren’t going anywhere, they’ll still be raking in money, still produce bestsellers by the bushel, still be big name players, but while they get individually bigger, the overall share of the market once held by all six separate companies combined will decline.

While this consolidation will very likely appear positive on the accounting ledgers, in the real world, it means less skilled people employed in traditional publishing, less opportunities to get books published traditionally, less competition for authors between traditional houses, lower advances, lower royalties and more stringently pro-publisher contracts with increasing restrictions on writers. If you’re one of those people who still see a traditionally published book as something to aspire to, your work just got a lot more difficult and a lot less potentially lucrative.

If anything, I expect consolidation among the industry leaders will drive more writers to control their own destinies. In fact, I would not be the least bit surprised if, eventually, the bulk of the work coming out of the last of the giants winds up as work-for-hire ghost written material. Anonymous author-mills, basically.

3. Any improvement in publishing’s fate depends on a functioning economy

We just had an election that comes at a pivotal time for us and the one obvious problem that’s suffocating us went completely unaddressed. How, exactly, do we convince the corporate world to reinvest in its workforce through better pay and benefits, thereby investing in the market for its own products? Many corporations have become virtual crack-whores to ever-increasing margins, and the du jour move of the moment is to cut everything not nailed down from your employee base to improve the bottom line. We need to convince them to break that addiction, sacrifice some of those profits in the short term for the betterment of everyone, and mostly, their own long term bottom line.

The current system is clearly unsustainable. They need customers, and lots of them, which they’re not going to get if corporations en mass continue to bleed the workforce of any and all disposable income to pad their own criminally undertaxed capital gains. It’s doubly damaging condition because egregiously low wages also add to all of our tax bills. Walmart, for instance, made $15 billion in profit last year. Their employees, however, were paid over $2 billion in government assistance. That means we subsidized billions in Walmart profits with our taxes. But its the poor single mother on food stamps who’s the parasite, right? As things are now, obscene percentages of capital are being sequestered totally out of our economy, with more being drained every day. That has to stop, and it has nothing to do with tax rates. It’s a grab-the-cash-right-now strategy, and it’s sacrificing the future for everybody, rich and poor alike, to support gluttonous profits today.

It’s a common problem. Publishers suffer from it. They invest less and less into the actual productive areas of their business and more into their corporate structure. In doing so, the financial barons on Wall Street reward them for their stats on paper, which always look good right away but don’t reflect the long-term negative consequences of the cuts. Those come later, and inevitably lead to more cuts. It’s a death spiral writ large. Amazon, by contrast, does reinvest large chunks of profit back into its business, and Wall Street punishes them for it routinely. It’s a good thing Jeff Bezos doesn’t seem to care what Wall Street thinks or Amazon might never have been anything more than one of the online retail pack. Our financial system, where nearly all of our resources are controlled, rewards corporate behavior that is destructive to the real-world economy and punishes actions that help it. How a system that was originally intended to allow companies to raise money with which to expand business has been allowed to mutate into this self-sustaining casino game is one of the great disgraces of the late 20th century. Our ends are fundamentally at odds with the ends of the financial sector.

These things have to change, or our very basic social fabric risks being torn asunder. It’s not going to matter what ebooks cost if people can barely afford food. A severe rich/poor class system will rip itself apart in this country. And all it takes to fix it is if our corporate leaders give up a small percentage of profits in favor of better compensation for employees. Stop hoarding your money overseas, pay your damn taxes, and pay your employees a fair, living wage. Actually give something back to the market you’re getting filthy rich on. There’s nothing to harvest if you don’t plant a few seeds. I’m not sure how, or even if we can change our corporate culture from its current parasitical nature back into a sustainable one, but I do know that if we don’t, the changes we’ve seen the past few years are but small scratches on the surface of what’s yet to come.

4. I’m holding to my opinion that the smart money is for people to develop their own skills and use them entrepreneurially

We can no longer count on steady, good paying employment on a wide scale. Companies aren’t going to give up the exploitative profit margins they’ve grown used to without being strong-armed, and any means of forcing them will have immediate, very ugly consequences. So let’s not do that. People everywhere need to cultivate ways to make money outside of traditional employment. The get-a-job thing is becoming a worse and worse deal by the day for workers and unless we are all happy ending up as poverty stricken wage slaves, we need to start creating our own economic opportunities. For writers, this means get off the fence and learn publishing. “I just wanna write,” sounds great and all, but it’s becoming increasingly unrealistic. Not knowing the business side intimately isn’t going to be a matter of choice much longer, either figure it out or get stuck under the boot heel of a giant publisher. It’s not an intriguing little side-light to consider any longer, but a virtual requirement for your long-term survival interests.

And it’s getting to be the same with everyone else. Wide-scale employment is becoming a race to the bottom, creating bottom-rung, benefit-less, minimum wage level jobs in droves while shedding living wage jobs. Figuring out how to generate adequate incomes on our own is the next essential skill we’re all going to need. Getting started sooner than later is probably going to be a very good idea.

Steal Your Face! The Grateful Dead disproves the notion that sharing is destructive

Get a load of this. Sometimes, I actually enjoy these little screeds that turn up now and again about copyright and the great internet menace. I especially like the parts where the writers pretend like anybody on the industry side really gives a shit about artists. Does anyone really believe the RIAA, MPAA or publishers’ interest in stamping out what they call piracy has even the slightest thing to do with protecting artists? That line is the media conglomerate equivalent of the great political deflection “won’t somebody please think about the children?” These are, after all, entities that have done some amazing work creating innovative accounting tricks specifically to screw over the various artists they claim to want to protect. In reality, their position can be far more accurately described as, “How dare you steal from the people we’ve been stealing from!”

But that’s neither here nor there. Those folks are the real crooks in this debate and just about everyone who doesn’t have a direct financial interest in allowing the continuation of their money grabs from actual content creators knows it. What I’d like to discuss is the principle reason I simply don’t believe that sharing is piracy, and further, why I don’t believe it’s harmful but in fact can be beneficial. All I have to do is look at the wall of shelves filled with cassette tapes in my house, and I see right through the corporate bullshit that has defined sharing as a steeply punishable crime, and re-christened the activity with the much more ominous and deceptive term “piracy.”

Admittedly, cassette tapes are very much a technology of the past, but this is the past I’m talking about here, how casual sharing has always existed ever since there was a widely available means of reproduction accessible to regular people. Far from destroying legitimate markets for creative goods, sharing has been very likely the principle means of discovery for consumers, and I believe it has done more to create demand for artistic works, as well as putting money into the pockets of both artists and media companies, than all the marketing dollars in the world.

To begin, there is absolutely nothing illegal about any of the two thousand or so tapes in my home. Every one is a copy of a live concert recording of bands that explicitly allowed that activity. Every one was either given or acquired by me in a straight trade of other concert recordings with no money changing hands, a behavior also sanctioned by the bands in question. It’s a large and varied selection of some of the best musicians we’ve ever produced, and all indisputably the result of legal, sanctioned sharing. I say this to head off anyone throwing accusations of piracy at me for this collection. But sanctioned or not, I still don’t believe it’s piracy, and I know that it’s far from destructive to the artists.

By the time I graduated from high school, I had been turned on to the Grateful Dead by a good friend when he gave me a few copies of some bootleg tapes of their concerts. This set off a life-long interest in music for me that has directly led to my spending tens of thousands of dollars on CDs, concert tickets, books, tee shirts, even digital music, thus far. I’ve been so appreciative of that act that I’ve returned the favor many times over by giving copies of some of this music to many different people over the years, turning numerous people into fans (and paying customers) for a wide variety of bands.

A few years ago, I turned a friend of mine on to a bluegrass jam band called Yonder Mountain String Band by giving him a copy of a concert recording I had acquired. Yonder also allows taping and the free sharing of such recordings. Since then, he’s bought their CDs, bought tee shirts, hats and seen them perform live at least three dozen times at venues up and down the East Coast, tripling the amount of times I’ve seen them myself. And that’s just one instance with one person and one band. I’ve turned hundreds of people onto hundreds of bands over the years. None of it would have happened if not for that first person handing me that first Grateful Dead tape twenty years ago. I can’t even begin to estimate what the total dollar figure that resulted from my sharing of this material would be, but my best guess is well into six figures, possibly more. Without that first tape, without that sharing, none of that spending exists.

Let’s discuss the Grateful Dead for a moment because, above all else, they are a fascinating case for how open sharing can generate buzz and a paying fanbase, turning a band that the mainstream music industry had little use for into one of the most widely recognized, influential and highest grossing music acts to ever grace a stage anywhere.

The Dead released 22 total studio and contemporary live albums during their 30 years. By contemporary, I mean live albums released as they went along in their various incarnations at the time. They’ve since released over a hundred live recordings from their archives, but the 22 albums I’ve sited are the only ones fitting the standard music industry album release pattern. Of those, only one ever reached the top ten on the charts, that being the 1987 album In The Dark, which peaked at number seven. Only three others even hit the top twenty. As for singles, the Dead had a grand total of one Top 40 hit, Touch of Grey, from In the Dark, which peaked at number nine. Not exactly the kind of success you’d expect to see from a band that ended its run as one of the highest earning bands ever. And unlike the current top grossing bands who charge absurdly high ticket prices, the Dead’s concert tickets were always affordable. I still have my stub from the very last show they ever played at Soldier Field in Chicago in 1995. I had field seats, row 30 from the stage that day, generally pretty fantastic seats. The price printed on the ticket was $33.50. Today, those kind of seats for a major rock band would easily be ten times that, maybe even more.

So if mainstream commercial success was virtually non-existent, how were the Dead able to build the empire they did? They built a large, enthusiastic community of followers unmatched in music history. Name one other band that had a following of tens of thousands of fans who would tour the country with them. Every show. Every tour. Every year. A Grateful Dead show produced a literal village at every venue they stopped at. Bands like the Dead-inspired Phish from Vermont, managed to replicate some semblance of that, but no one has ever fully embraced the notion of community like Jerry Garcia and the boys. It was those bootleg tapes I referred to earlier that were instrumental in building that community. They ended up with a large group of fans who were virtual archivists. I, myself, have over 500 Dead concerts on tape spanning the late ’60s right up to their final show. Honestly, that collection is one of my prized possessions. I’ve since digitized many of them, and I very rarely listen directly to the tapes themselves anymore, but I still can’t bring myself to part with them, and I’m pretty sure I never will. At least not willingly.

Dead fans were a unique group, most possessing an almost encyclopedic knowledge of the band and its music. All of that stemmed from the enormous community they cultivated. And that community, in turn, grew out of the free and open sharing of their material. The Dead became immortalized not by selling records, not by an association with a giant record company, and not by any massive marketing effort. They did it by cultivating a community of fans based very much on the concept of sharing.

While it’s very true that times were different then, and that there are some very real issues with downloading that need to be addressed, I’ve always believed that their approach held many lessons that directly apply to today’s artists, musicians and writers. For instance, the Dead would allow the free distribution of concert bootlegs under one condition–no one tried to make money from them. I saw nearly twenty Dead shows in my time. Only twice did I ever see anyone trying to sell tapes in the parking lot. In both instances, the seller was essentially shamed into shutting down by the fans themselves. The band built such a strong community that they didn’t even have to police the distribution of those tapes, the community did it for them. How many of today’s artists have that kind of mutually beneficial relationship with their fans? I can’t think of one.

Sharing isn’t piracy, and it doesn’t have to be destructive. The Grateful Dead have proved that. Completely outside of the recording industry machine, they built a stunningly successful commercial entity. They did it by building a community with their fans, encouraging the free and open non-commercial sharing of their work, keeping the prices for their material affordable and by retaining all the rights to their recording masters and publishing rights. Seems to me like there’s a lesson or two in there that might apply these days, don’t you think?

The Big Picture: Should we be a nation of 300 million employees or 300 million entrepreneurs?

I try not to be political. I don’t try that hard, obviously, but I do stop myself for diving full on headlong into it most days. Politics just disgusts me so much and I can get enraged so easily. Sometimes, I just can’t avoid it, though. It’s election season, so it’s absolutely everywhere and it just annoys me to see all the people who think this pomp and circumstance makes a damn bit of difference. Even if your guy wins, the day after inauguration day isn’t going to be any different than the day before. I’ve seen enough presidential elections in my lifetime not to get taken in by the rhetoric anymore. They’re all reactive anyway. Government policy generally follows what people start doing on their own. I’ve always believed that the real strength of a President is how he would respond in a genuine crisis not how he governs. I haven’t heard that question asked yet this year. Have we gone so long without a genuine, far reaching crisis that we’ve forgotten that totally fucked up shit can come outta left field with no notice and how one deals with that can be a pretty important trait?

See what I mean? I wasn’t even thinking presidential politics when I started typing, but it just took over. Dammit! What I wanted to talk about was economics (I know, thrilling!) or more specifically, what kind of economy we need to have because, I don’t know if you’ve noticed, but our’s ain’t quite cutting it any more. If I thought this was a typical slowdown or correction of some sort, I might be inclined to hang back till the tide turns, but it’s becoming increasingly clear that we’ve got deep structural problems that tax cuts and/or spending cuts simply aren’t going to fix. Neither party has a clue what to do about it, either. Although I will say, frighteningly, the republicans are a little closer to understanding the implications of what’s going on than the Democrats seem to be, it’s just that their “solutions” are self serving policies for the already haves while discarding the have nots to a future of “Would you like curly fries with that?”

The simple fact, as I see it, is that the days of mass employment are ending. Companies will be functioning on 10% or less of the staff they traditionally needed, manufacturing businesses likely less still. That’s a helluva lot of people with no jobs or hope because they are never coming back. With shitty retail jobs being basically the only widely available growth sector, even that’s self-defeating. Eventually, when such a high percentage of the population is getting piss poor wages, they stop buying stuff. Besides, the internet’s kicking brick and mortar retail’s ass. How many fast food jobs can one nation reasonably support?

I bitch a lot about offshoring jobs, and I’m right, I think. It is exploitative, and it has been destructive to our economy. But I’m now realizing that it was going to happen anyway. Those factories will be fully automated in another decade or so, and even the third world workers raking in their 35 cents an hour will be out of work then. This is a problem we would inevitably have had to deal with, even if businesses on a wide scale hadn’t decided to openly screw their own workers for an extra something-something in their stock options years before it was necessary to downsize.

We’ve got an abundance of people with skills and experience nobody wants or needs to pay for any longer. A problem, I might add, that’s going to continue to get worse as technology gets better. Look at health care, for instance. You know why health care is so fucked up? Because we’re continuing to act like the 1950 model  (when you got a job in a company, health insurance was part of the package and you stayed there for 40 or 50 years, before retiring with a nice pension) is even close to relevant any more. People don’t work in companies for five years, let alone fifty any more. And that cuts both ways. Employers who began to treat workers as resources rather than people destroyed the concept of employer-employee trust, and as time went on, they paid less and less, kicked in less and less for insurance, converted the relatively stable pension system into the volatile 401k racket, all so more and more money could go upstairs. You don’t think the people working in these companies saw the effects, first hand, of their bosses reaping giant windfalls while they had to fight to get a 50 cent raise every couple of years? The whole get-a-job/career mantra has become almost totally exploitative to workers, and their loyalty went straight out the window, as well it should have. The natural outgrowth of this is that companies will automate as many jobs as possible, eventually having as few people on the payroll as is feasible.

Yet our entire economy runs on the foundation of getting-a-good-job/career. How the hell are we going to survive if there’s only 1 good job for every 5,000 or 10,000 people looking? That’s the description of a society poised to collapse in on itself. I don’t know about you, but I’m not quite ready to be living out scenes from Mad Max just yet. I still haven’t finished taking the tread off my old tires and tacking it on to some football shoulder pads.

What can save us? Probably the same thing that fucked us up, technology, specifically the internet. What’s the one big rallying cry on the Democratic side? Income inequality. Well, look at what the internet has done to media companies. Established newspapers and music companies got hammered. But look at what else happened. That money that newspaper lost is being spread around to hundreds or thousands of smaller outlets that made nothing before. The top music companies and the highest grossing bands lost ground, but there’s thousands or tens of thousands of smaller bands making money now that made nothing before. Books are heading the same way. As print loses ground, there’s now tens of thousands of writers making money digitally who made nothing before. You want income redistribution? That looks suspiciously like a free market based way to go about it. Can’t call that socialist. Certainly, this process created giants; Google from newspapers, Amazon from books, Apple from music; but giants will always exist. Besides, the old media companies existed as exclusionary forces. Amazon works with anybody selling ebooks, Apple with anybody selling music (and ebooks), Google with anybody producing content. It’s a simplification, true, but these new media companies generally don’t discriminate between giant multinational corporations and individual entrepreneurs. I’d be willing to bet that alone is the principal reason media companies hate the tech giants so much. It’s not that they revolutionized their industries, its that, in doing so, they failed to properly pay tribute to companies who got a little too comfortable perched on their unapproachable golden thrones.

This is just the media industry, too. Eventually, it’ll work across virtually the entire spectrum of commerce, and individual people will have direct access to a virtually unlimited customer base, helped out by tech companies that are happy to take their cut regardless of who’s selling it. My uncle, some twenty years ago now, well before the internet was widespread enough to be genuinely practical, tried his hand at building furniture for a living. This was no picnic table operation, he was a craftsman, making high-end wooden furniture, ornately carved, hand hewn, the best materials, intricate inlays of hand carved objects like crabs (we live on the Chesapeake Bay, after all) or oak leaves perfectly done. This wasn’t cheap IKEA crap.

And that was ultimately his problem. One that turned out to be a fatal one for his business at the time. Building the furniture; the time it took, the materials, etc; required a price above what the market could bear. The number of people around who could afford to drop that kinda coin on a hand crafted dining room suit was too small to attract a large enough customer base to make money. His work was exceptional, some of the best I’ve seen, certainly, but he just couldn’t connect with enough customers who could afford his rates.

Now consider if he had been twenty years later. What kind of access do you think he could get to high-end furniture buyers? How much do you think it would cost him to get that access, something that was quite simply impossible at the time he tried his business. I’m pretty confident he could’ve found more customers. Actually, I wouldn’t be surprised if he ultimately ended up with a waiting list of custom projects, keeping him in steady work, or maybe being able to hire a someone or two to help. The internet levels a lot of traditionally slanted playing fields.

The old ways of mass employment, companies who hired thousands of people at a time are dying off. The new companies coming in aren’t hiring on that scale, and thanks to technology, they never will. We can’t rely on the business community to provide the work we need, no matter how many tax breaks we give them. What we need is to transition from an economy dependent on large companies hiring mass numbers of workers to one where individual people create their own work, their own incomes, likely from multiple smaller sources. There’s never been a better time to be entrepreneurial, either. Modern possibilities are virtually endless, and affordability has opened doors into industries that were unthinkable just a few years ago. We have a society still living in the mass employment model, even though its failing. We need a country of 300 million entrepreneurs instead of 300 million worker bees.

I see two areas where we’re making crucial mistakes, two places where I think government could be useful, for a change. One is not pushing to make broadband internet a utility. Let’s be realistic here, the internet has already become virtually ubiquitous. It’s only going to grow more so as it continues to dominate communication and commerce. Everybody will need access to it and cheaply. Yeah, that means telecomms might take a hit but who among you doesn’t feel just a little exploited by the bills you’ve paid over the years for phones, cable, internet, what have you? Be honest, you know damn well they’re capitalizing on their advantages as much as possible. Considering they operate in a government regulated little monopoly playground, I wouldn’t exactly weep for their loss. Despite the current GOP mantra going around, sometimes things are important enough that for-profit businesses can’t sufficiently handle the task. They have no reason to expand access to outlying areas with few people. There’s no market reason where it makes sense for them to do so. Do we just leave those people in the dark ages? What if we had done that with the electrical grid? Your municipal taxes should cover broadband internet as a utility for all, wireless preferably.

Secondly, we should be expanding the postal service, not defunding it. Look at the direction things are going. How much stuff do people buy online? What happens when most of commerce comes to you rather than you to it? There’s going to be huge demand for delivery services. Sure, UPS and Fed EX would be none too happy, but if government’s role is to create an atmosphere of wide spread opportunity, what harm could possibly come from cheap internet access for all and cheap delivery costs? That sounds like a recipe for retail growth to me, primarily amongst segments who are currently blocked out by high-cost barriers to entry.

Just think, a nation of millions of individual business people, taking advantage of that atmosphere. The established businesses who have locks on the marketplace now will lose some ground, but possibly millions of people will be making money where none was possible in the old economy.

You want income redistribution? Here’s how you do it, you give as wide a swath of regular people the tools to compete in the open market with the big boys and earn that income away. More free and open competition. Some other things will have to change. Health insurance will necessarily have to sold individually instead of in group company rates, yet still be affordable, which it already isn’t even close to now. The tax code will have to be seriously simplified, as well. Can you imagine getting 250 million itemized tax filings from small, individual businesses? How many people essentially just staple their W2 from their one or two jobs to their 1040 EZ and be done with it now? That won’t happen much any longer. We’ll probably end up with some kind of progressive flat tax with higher rates at higher income levels or something like it. Otherwise, the tax preparation industry is set for a serious boom period.

Look, what I’ve talked about here is already happening. Do you really think all these out of work people aren’t finding ways of making a buck here and there to get by? Most of it is unreported cash, no doubt, but people are basically very resourceful creatures. Give everybody the tools and the opportunity and bring this individual resourcefulness out into the light of day.

The time of mass employment at a relative few large companies is ending. What we need is to shift to where the average person is a participant in the market from both sides, not strictly a consumer. The real money is in selling the stuff, or offshoots that assist in the process. Labor in a mass employment world will always get the short end eventually. And the way we’re heading, there won’t be enough of that short end to go around much sooner than later.

The Death Throes of a Small Town Newspaper

Regular readers of my ramblings here will recall that the trials and tribulations of my hometown newspaper, The Cecil Whig, was a regular topic of conversation a couple of years ago, before I moved out of Cecil County and, honestly, I finally lost interest in watching what was a staple of the community I grew up in crash and burn as spectacularly as The Whig was.  It reached the point where I simply had to avert my eyes from the carnage. 

Well, in the time since I last mentioned anything going on with the formerly-distinguished, nearly two century old newspaper, things have actually gotten worse.  The Whig has now dropped from printing five days a week to three, a shift, I’m told, was horribly unpopular with many of their regular subscribers.  More than that, layoffs have continued periodically, including another region-wide purge reportedly shedding somewhere in the neighborhood of 80 people from Chesapeake Publishing’s (The Whig’s immediate parent company) payrolls in the past few weeks.  Their long-standing office in Elkton is up for sale, nearly vacant as it stands after the printing facility that operated from there was shuttered nearly two years ago.  The office itself, where something like 200 full time workers were employed not that long ago, has been pared down, unbelievably, to less than a dozen, reportedly.

With the sorry state of the newspaper industry these days, what’s happened at the Cecil Whig isn’t really surprising.  It is, however, difficult to watch a once-venerable institution be picked to pieces like this.  Sometimes, I almost think bankruptcy and an outright shutdown would’ve been preferable to this death by a thousand cuts.  At least that way, the paper’s legacy would’ve remained relatively intact.  When the doors do finally shut on them now, will anyone really miss the wispy, hollowed out shell that was left during its final days?  I kind of doubt it.

At this point, it serves no purpose to rehash what went wrong.  Like many in the newspaper industry, good decisions in the face of technologically driven change were virtually nonexistent at Chesapeake and The Whig, overwhelmed as they were, and continue to be, by the poor choices of those who never really came to grips with the disruption that shredded their business model.  None of that really matters anymore, with the Whig down to a skeleton crew, soon moving to a smaller office, then, very likely, oblivion sometime later.

No matter how difficult times have become for them, it does seem like the hits just keep on coming, taking away a little more of what was once their sole domain. Earlier Today, I read this piece on the Cecil Times website about a battle going on within the Cecil County government about where its sizeable (for a small town) legal ad business will go in the future.  Legal ads are one of the last bastions of classified revenue still flowing into newspapers’ formerly dominant positions in communication, made so by local laws that generally require publication in a region’s “paper of record.” It’s also one I happen to believe is in dire need of reform. Frankly, in a time of shrinking tax receipts and shriveling municiple budgets, there is very little justification in sending good money after bad by continuing to pay monopoly rents to a fading, formerly only-game-in-town newspaper business. According to the Cecil Times piece, the county government spent upwards of $150,000 on legal ads with the Whig last year, a sum that strikes me as massively wasteful, particularly considering how the newspaper itself has continued to decline in relevance and readership.

A few years ago, when I was publishing Pet Companions Magazine, I put out about 20,000 monthly issues for a year between 32 and 52 pages each, with a full color glossy cover and my print bill for the entire year was less than a third of the county’s legal ad bill. The glossy cover alone accounted for about a quarter of that amount, too. So, what’s stopping the county government from publishing its own legal ad magazine monthly in regular 8 x 10 size or so on newsprint? They could put out 20,000 to 25,000 a month and bulk drop them for free everywhere in the county where the Whig is available. They could also post everything freely on the county’s website, provide a pdf file free for download or, if they’re especially adventurous, put in a little extra effort to format it into an ebook and make that available freely as well. The county could pay someone to compile the info, typeset it, layout the publication, get it to a printer, have the finished print run delivered, bulk drop the entire county and create the pdf and ebook files for, at most, half of what they pay The Whig for position in its rapidly thinning classified pages, if not significantly less.

As many have learned over the past few years, it has become much cheaper and more efficient to communicate directly with the public than to go through the traditional path of an intermediary like newspapers. With the local paper losing its influence, we see more and more advertisers, writers, and even readers circumventing the old ways altogether. With the crush of needed funds in localities all over the country, it really doesn’t track any longer for governments to pay exorbitantly for newspaper advertising. Crucial government information can be passed along to the public in any number of formats, print and digital, without that traditional large expense.

The fight in Cecil County shows another interesting issue with governments supporting those who’s job it is to cover them with advertising revenue, as well. Cecil County Commissioner Diana Broomell obviously has a problem with the content of The Cecil Guardian, a competitor of the Whig who put in a much cheaper bid on the legal ad business and got legal approval as a qualifying newspaper from a judge. She clearly wants no part of shifting that business The Guardian’s way, savings be damned. The Whig’s coverage of county business, on the other hand, has either been pared down to non-existent or is outright positive. Do we really want to have a situation where local newspapers, struggling for revenue, have to softball their coverage of the local government for fear of losing that ad money?

With the current and constantly improving technology, there’s no reason at all why local governments can’t communicate cheaply and effectivly with the people they represent on their own in matters like legal ads. The laws about “paper of record” are becoming more and more costly to follow, and have lost much of the justifications for their existence in the first place. If the paper was donating the space out of a sense of community, that would be one thing, but a $150,000 annual advertising bill seems to me to be a harbinger of a past better left to history.

This illustrates why it’s both sad and inevitable that newspapers will soon meet their demise. Sad because we are leaving a rich and storied element of our past behind us. Inevitable because there is virtually no single element of a newspaper’s role in the community that can’t be done better, cheaper, and more efficiently by any number of alternatives. Newspapers have always been intermediaries between the public and institutions, be it government, private or business interests. The digital shift going on now has very effectively removed the necessity of intermediaries from much of open communication.

I am sorry to see a classic element of society like the newspaper struggle and fall, but, as with all of us in our day-to-day decisions, needs must win out. That means the county government and the people they represent are much better served now and in the future by going directly to the people and using the extra $80,000-$100,000 they save on things like infrastructure, firefighters, teachers, and what have you. To do anything else in this day and age with these present conditions, is a level of wastefulness we can no longer afford. Tradition doesn’t pay the bills.

Bile-Soaked Spite and Vitriol: Why traditional publishing should shut up and adapt already

After reading a week’s worth of steaming recriminations of the antitrust lawsuit brought against Apple and a handful of super large publishers, I thought, in the service of clarity, that I’d like to make a statement:

If the players on the traditional status quo side of the publishing industry had put as much time and effort into figuring our how to adapt and compete in the changing book marketplace as they have in bitching, moaning and complaining about Amazon and the Dept. of Justice lawsuit, maybe the publishers in question wouldn’t have had to (allegedly) illegally colluded to put the price fix in and stay afloat in the new order of things. 

Most times, I take the whinings of the disrupted with a grain of salt but after a few days of reading pronouncement after pronouncement of the end times for literature and the twists, contortions and generally pretzel-shaped reasoning that somehow manages to justify collusion and price fixing as the right and proper path to open competition, I’ve gotten a little tired of it. 

Coming from newspapers, I totally understand how disturbing it can be to have the manner in which you’ve earned your living thoroughly torn asunder by disruptive change.  But in that circumstance, I saw who was to blame and it wasn’t the disrupters.  They found new, unique and innovative ways to do the tasks we always had, and used the new technologies at their disposal to do so ever more efficiently.  That’s called progress.  It’s called innovation.  It’s the very engine that has always run our economy.  No, the blame for the newspaper industry’s catastrophic collapse doesn’t rest with the disrupters, it lies at the feet of those at the helm of the industry itself.  They refused to even acknowledge there was a problem until it was far too late.  They fought innovation every step of the way. They ignored the clear and certain handwriting on the wall screaming for change, and instead laid off everyone not nailed down, clung to a steadily declining revenue base and pissed away pretty much any and all opportunities to successfully transition. 

The reason there aren’t more jobs in newspapers today isn’t because the disruption wiped them out, its because of the pig headed obstinance of those in who’s care the industry resided.  They didn’t want to admit that their business model was fading, and didn’t want to put in the time, effort or resources necessary to save themselves or all of those that depended on their leadership to earn a living.  The problem I have with the insistent rhetoric coming from the traditional book publishing segment is that it contains heaping helpings of the same obstinance, the same refusal to see the cracks developing in their business model, the same tendency to throw blame and vitriol on the disrupters without looking inward at those who should be leading the way but instead choose only to cling to a fading past, reassuring those depending on them with false platitudes about their importance to intangible ideals like culture, heritage or literacy.

I’m not a prophet of Amazon ranting out of blind devotion. They are an enormous corporation who sometimes engages in some pretty hardball business practices. There is a risk, however minor I happen to think it is, that if they consolidate too much of the publishing industry under their banner, they may well exploit that position unfairly. But consider for a moment, the one big, constant complaint about Amazon is that, if and when they gain a dominant monopoly position within the industry, they’ll use that position to jack up prices and squeeze percentages on writers. Well, even before Amazon went to the 70% royalty from 35%, they were still paying nearly double the rate to writers that traditional publishers were. Today, in many cases, they’re paying three or four times the average ebook royalties. What’s the risk here? That Amazon will screw writers by dropping royalties to the level that traditional publishers already pay right now?

As far as hiking prices goes, correct me if I’m wrong, but isn’t the whole point of the DOJ suit that publishers got together to push a model on Amazon that forced them to significantly raise prices? See the hypocrisy here? We’re being told by traditional publishers and their supporters that an Amazon controlled market will be virtual Hell on Earth because they’ll pay pittance royalties and jack prices way up at the same time those very same publishers are, at this moment, paying pittance royalties and openly taking actions intended to jack prices way up.

There are risks involved with a company the size of Amazon, but there are also advantages like the single best online bookstore by a long shot, massively increased selections of books of all stripes, and a platform that has ushered in a new era for writers where we can do an end run around the gatekeepers of old and get our wares into the marketplace quickly, efficiently and affordably. I haven’t seen traditional publishers bring anything remotely as positive as those three changes to the table in my lifetime. Amazon isn’t a saint by any means, but they’re not a devil, either. And they’re certainly not an old-guard cartel throwing propaganda bombs and desperately clinging to a fading business model by any means necessary, legal or otherwise.

I’m probably most disturbed by the lack of understanding of the law used by defenders. If even half of the facts laid out by the DOJ are true, there won’t be much debate, if any, that the publishers in question illegally colluded. And far from creating a fair and open competitive market for ebooks, they were attempting to create a flat, uniform, highly priced ebook market to slow its growth and prop up print sales, which is their bread and butter. The ebook boom, and digital disruption in general, is possibly the best thing that could have happened to this industry. Prior to this, reading for pleasure was a declining activity, looking a lot like yesterday’s news heading for a much smaller level of importance in our society. Today, however, people are reading more than ever, buying books at rates I never thought we’d see. Digital and ebooks have brought reading back from a slow decline to an industry segment that is potentially poised to grow like wildfire over the next few years. And what do we get from traditional publishers as a response to these developments? Nothing but doomsaying and protectionist scams, legal and (apparently) otherwise intended to stifle this coming boom period and prop up a model that was fading before digital reignited widespread consumer interest.

The traditional industry did nothing to reignite interest in reading. They were responsible for precisely zero of the innovations that have come to pass in the last few years. And now that consumer interest, demand and the money that goes with that is growing again, they are trying to shove their way back to the head of the industry table, pretending to be defenders of culture when, truthfully, they are little more than late-comers and former pseudo-monopolists trying to swipe the profits away from the businesses who took all the risks and actually did create an atmosphere of growth around publishing again. Amazon CEO Jeff Bezos says their primary goals are to provide the best possible shopping experience for the consumer. The head of Penguin in the U.S., John Makinson, recently said in his response to the DOJ lawsuit that their primary goal is to make money for their shareholders. See the difference in corporate culture there?

I don’t implicitly trust Amazon to always do the right thing. They are a giant corporation, after all, and we need to watch them closely. But traditional publishers are far, far worse. I find it interesting that the term “predatory pricing” has become almost synonymous with Amazon in some circles, despite the fact that their pricing strategies were anything but. Amazon never lost money on ebooks. They priced some ebooks below cost as loss leaders and recouped those losses and then some on the vast bulk of their catalog of offerings, which weren’t priced below cost. If that conduct is illegal, as so many seem to suggest, then so is the behavior of virtually every store, physical and online, on the planet. When I go to the grocery store later today and pick up some buy-one-get-one-free deals, do you think they’re turning a profit on those? Is the ACME going to wipe out orange juice suppliers because they selectively sell some at a loss to get more customers into their stores? Of course not.

What’s at issue here isn’t a giant company wiping out a long standing industry by behaving unfairly. It’s an industry that simply must adapt, they have no choice, but are extremely reticent about doing so because it would entail an entirely different culture where, more than anything else, even the best, most successful publishers who make the transition will lose a significant amount of the power they’ve grown far too comfortable exerting over writers, readers and retailers. Agency pricing is about keeping that control. It’s about stifling competition from digital retailers they don’t control to the perceived benefit of the print ecosystem they do. The saddest part to me is that, in doing so, they’ve not only damaged themselves and their writers, it wasn’t going to work anyway.

One particular positive thing that could come from this, and one that affects Amazon as well, is the rebuke of the most-favored-nation clause. Without that enforced, we actually all gain more control of our pricing across all platforms. This can only mean that pricing will become even more important in the post MFN world. It also could mean that those who backdoor free books into the Kindle store by listing them free somewhere else and waiting for Amazon to price match them down will have to shift strategies.

That is the nature of business, particularly in a highly disruptive, constantly evolving market like ebooks. Things change, we adapt and make the best use of those changes for as long as we can until they change again. What the publishers have done here is the exact opposite. Things changed, but they didn’t want to adapt. So instead they joined forces in an attempt to undermine those changes and lock in their preferred status quo. That wasn’t good business, as some have said, and it was doomed to failure anyway because these changes can’t be stopped. On top of it all, if the DOJ is right, it wasn’t even legal.

I would like to think that those on the traditional side will take a lesson from this. Don’t ignore the changing landscape around you, find ways to use it to your advantage. If individual writers in large numbers can figure out how to benefit from the new market that’s been established, I find it hard to believe that giant publishers with all the resources at their disposal can’t. The only way that makes sense is if they really don’t want to. So instead, we get illegal collusion, protectionism of fading markets under the guise of literary culture and tradition, and an over-willingness to condemn those truly leading the way to the future, and much more effort put into throwing roadblacks in their path than exploiting the new possibilities on the trails they’re blazing.

As I said, I’d like to think they’d learn something from this, but based on the increasingly dire rhetoric coming from those quarters, I’m not holding my breath.