A Wolf in Agency Clothing Is Still Vertical Price Fixing

First off, I’m not a lawyer but with all the talk about monopolies, abuse of market power and antitrust violations going on in publishing these past few years, I thought I’d dig a little into the laws themselves and see if I can make sense of what’s what. Again, not a lawyer. This is an enormously complicated and often contradictory issue that’s bounced back and forth between various stages of legality and illegality, the enforcement of such dictated by a convoluted mess of legislation and court precedent. So here goes, down the rabbit hole as I best understand it.

Agency Pricing is basically a Resale Price Maintenance agreement where, in this case, the producers (publishers) want to take control of the pricing of their products at retail (Amazon, etc). It’s vertical price fixing because it occurs between layers of the chain, suppliers controlling prices at the retail level. It was banned in a Supreme Court decision in 1911, as the ruling stated, because these types of agreements are “economically indistinguishable from horizontal price fixing by a cartel.” Horizontal price fixing being sellers fixing prices amongst themselves to their collective benefit.

A series of laws and exemptions to The Sherman Antitrust Act were passed in the ’30s that allowed resale price maintenance agreements to again be legal, but that ended poorly as the results were so unpopular, they were later repealed. These agreements were then per se illegal (inherently illegal) from about 1980 until 2007 when another Supreme Court decision found that they could be allowed under the Rule of Reason and the circumstances surrounding their use are considered. Basically, the business justification and resulting economic consequences play a role in determining if they’re allowed, not simply outright banned automatically in all cases. As such, Agency agreements can happen. The DOJ settlement with the publishers in the ebook case openly admitted as much. But as SCOTUS ruled, only if the Rule of Reason is applied.

A big component in imposing the Rule of Reason standard was the notion that the absence of Resale Price Maintenance agreements could allow free riders, or some sellers to piggyback unfairly on the benefits of promotion done by larger sellers. I think this point is a particularly important one to make. Keep it in mind.

The above is just a summary, somewhat simplified, of what I think are the pertinent points in the background of Resale Price Maintenance agreements as it relates to the current state of things in the publishing industry as I understand it and am about to speculate on. It didn’t happen in giant leaps, but fits and starts; laws passed and repealed, court rulings made, overturned and overruled again. SCOTUS has weighed in on these matters more than a few times, and likely will again, maybe even in the Apple case. So before I do a little extrapolating, here are some links to some relevant readings. Look for the various links to the actual court rulings and texts of the laws involved if you really want to dive in deep.

Resale Price Maintenance
Sherman Antitrust Act
Price Fixing
Rule of Reason

First two disclaimers: Everything that follows is strictly my opinion as a suspicious, cynical guy who’s read too many Agatha Christie novels. And we have no idea if Hatchette or anyone else is pushing for another Agency-type deal. Everybody and their brother seems to be assuming it is, on both sides of the issue, including me to a point, but I think it’s important to remember that we just don’t know. Amazon’s statement a few days ago referenced a lot of things that implied the dispute was, at least in part, about co-op fees and such. And Hatchette’s kept repeating the matter as “Amazon’s demands for better terms.” It could just simply be a fight over co-op, much like the S&S/B&N dispute a while back.

I couldn’t find any direct info anywhere on who actually won that battle, but I’d be willing to bet Amazon knows, or at least thinks it does. Going after co-op might mean B&N got a bump there or at least Amazon thinks they could succeed where the bookstore chain may have failed. The question really seems to be is Amazon abusing it’s market position to push for that by doing things like stopping discounting, cutting back on stock and taking away preorders? Barnes & Noble took some of the same actions, so it’s not exactly unprecedented.

I would say that’s it quite possible that they are, with some heavy qualifiers. At the very least, they’re walking an extremely fine line in the actions they’re taking. Amazon, given the size of their market share, is in a position where, as they continue to grow, that line is going to squeeze in tighter and tighter on them. The more power they accumulate, the worse these actions will look. Some would say they’ve already crossed it. And they may well be right.

However, Amazon is extremely smart. They know the general judicial trend is to allow more latitude to larger entities wielding power so long as they can show some kind of valid business reason that isn’t simply “we will crush them!” I suspect that’s why a sizable portion of their statement was an explanation of their business reasons for what they’re doing. Even if they did cross the line, you need evidence. Amazon isn’t going to leave any lying around. I’d argue that if it hadn’t been for the bungling publishers, Apple never would have gotten caught either. For Amazon to get nabbed for this kind of conduct, provided the conduct is even illegal or aggressively monopolistic, neither of which we know without knowing the terms they’re fighting over, they’re either going to have to be a lot bigger and these acts much less legally defensible or escalate up into more openly egregious actions.

Now, my attitude on this changes completely if, in fact, Agency or some kind of Resale Price Maintenance agreement is in play. If you’re going to give the producers leeway in trying to fix prices vertically, I think you also have to give some leeway to retailers in using their power in dealing with it. You can’t just say, “We’re going to let your suppliers fix prices and we’re going to stop you from doing anything about it.” That would ultimately end up with exactly what the original 1911 SCOTUS ruling said, economcally indistinguishable from horizontal price fixing. So, when faced with an opponent seeking to limit their pricing ability, they have a strong business reason to act as they have, I think. Remember, Barnes & Noble just did some of the same things and nobody’s suggesting the DOJ ring them up, so the argument against isn’t the act itself but the market strength behind it, a variation on the Rule of Reason and consideration of the circumstances that would allow Hatchette or any publisher to seek a vertical price fixing arrangement in the first place.

Some may suggest this is same argument publishers made in their defense only in reverse; “Amazon is behaving monopolistically so we had to do what we did to deal with it.” But there are limits. Amazon is a single entity, wielding only the power it’s managed to gather for itself, albeit a sizable amount. The publishers weren’t prohibited from pushing for price fixing to combat Amazon, which in and of itself is granting them leeway in their actions. Where they went off the rails is when they colluded together to do so. Price fixing situationally under justifiable conditions is ok, colluding to impose price fixing is another matter entirely. Nobody’s getting any antitrust latitude in the face of that.

The original seeds that ultimately became the reasoning behind shifting Resale Price Maintenance from per se illegal to overseen by the Rule of Reason was the notion that the absence of these agreements could create an environment where free riders benefit from larger sellers promotional activity. In the present environment, relatively free of Resale Price Maintenance agreements, there’s really nothing that, say, Barnes & Noble can do to free ride on Amazon. Install a vertical price fixing regime, however, and not only does it become possible, it seems to be what they intend to happen. Eliminate price competition among retailers, and with it, what they perceive as Amazon’s principle competitive advantage, and competitors like B&N can benefit from Amazon’s past and existing efforts to build and promote the ebook market without having actually contributed to them. They’re using a Resale Price Maintenance agreement to create the very conduct the court ruled we needed Resale Price Maintenance agreements to prevent.

Giving consideration to these circumstances, and the fact that, during the brief time Agency was imposed prior to DOJ action, one clear economic consequence we saw was higher ebook prices to consumers and considering this publisher and most of the others likely to push for these deals were just caught and punished for colluding to institute a vertical price fixing system in an attempt to attack one specific retailer, I don’t see how Agency deals should be allowed for any of these publishers, even under the Rule of Reason. I would go one step farther and say SCOTUS was mistaken to change them from per se illegal to begin with, especially since we’re possibly seeing their root reasoning for doing so directly contradicted in practice. There’s probably a damn good reason that vertical price fixing never stays outright acceptable for extended periods of time. It is price fixing, after all.

Which leads me to what I think might be the ticking time bomb in all of this, the 25% of net ebook agreements that very suddenly became almost inescapable industry standard. Check the dates on these two quotes:

“We’re confident that the current practice of paying 25% of net on ebooks will not, in the long run, prevail.”
From the Authors Guild, Dec. 15, 2009

“In a strongly worded message on its Web site on Sunday, Amazon said that while it disagreed with Macmillan’s stance, it would bow to the publisher’s plan.”
From NY Times, Jan. 31, 2010

We know now that the fight that Macmillan picked was the first strike in the collusion to install Agency that got them smacked down for antitrust violations. We also know the Authors Guild turned out, per usual, to be dead wrong. Do you think it’s a coincidence that this 25% of net rate became almost unilaterally imposed across most of the industry at the exact same time that most of the publisher’s pushing it hardest were colluding to fix prices at the retail level? That it was just a happy little accident for them that they managed to both fix retail ebook prices higher and impose ebook royalties to authors at a low level near simultaneously? This is a lawsuit and quite possibly another antitrust action waiting to happen. I can’t believe authors that got pushed into these aren’t looking at the breakdown of how bad a deal it’s turned out to be for them and how their publishers were colluding with one another to the point of attracting legal consequences at the same time and not putting their lawyers on speed dial. Look at the amounts they paid out in damages in the ebook case. If it were to be discovered that this was the result of similar collusion, that number would be much, much higher.

Ultimately though, I think these publishers would be insane to go anywhere near any kind of vertical price fixing deals right now. And if the strategy includes them having to do anything that even slightly appears like it’s being done in unison, they could be unleashing hell on themselves. If you get popped for drunk driving and as soon as you get off probation, go right out and get another one, the judge is going to throw the book at you. And, oh, if there’s this other DUI charge they were unaware of at the time they punished you for first one, too? I’m not totally sure how liability works in situations like this, but what’s the point, if there is one, where these things can go from being a civil matter involving corporate penalties and fines to somebody’s going to jail? Collusive vertical price fixing that extends to both retailers and possibly their own suppliers and then maybe a fresh collusive action at the first possible opportunity to top it off probably ought to be that point, in my opinion. Why even risk the appearance of such a thing, especially to pursue a strategy that is historically back and forth between legal and illegal that just happens to be mostly legal at this moment? How desperate are they, exactly, and how much is that desperation feeding Amazon’s negotiating position? You don’t walk out into the ocean with a big, bleeding wound and then complain when something tries to take a bite out of you.

Like I said, we have no idea if Hatchette is pursuing an Agency-type deal. And the ebook royalty looks suspicious as hell to me but it could be all above board. Amazon could be simply throwing its market weight around in ways that run afoul of antitrust law themselves. I hope they’re not. And I hope the publishers steer clear of vertical price fixing as a strategy. But even if they do, that ebook royalty is going to be a problem, I suspect. Upping that pretty quickly might be a good idea. Raving about the ebook profits you’re making while refusing to budge much, if at all, is going to piss someone off enough to start poking around. And who knows what they might find or what other bodies might be dug up in the effort?

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

Without Corporate Reform, The Future is Bleak

I don’t care much for corporations. Well, the giant ones, anyway. Anybody with $1,000 can become a corporation, I did at one point, but that’s not the type of companies I’m talking about. It’s the mega-corporations and the wannabe megas that attract my ire.

During the 2012 presidential campaign, the GOP made a big deal out of refuting the notion that “corporations aren’t people” by arguing that they are, indeed, filled with people. That may be true, but it’s misleading. There are many good people working for these mega corps, I might even say most of those employed there are good people. However, the companies themselves aren’t led by those people, the day to day hard workers who get the job done. They’re led by the upstairs suits who exist in an overly-rarefied air. Over the past few decades, floor level employees of these companies have seen job losses, wage stagnation and benefit cuts while their upstairs kin have reaped compensation packages sometimes hundreds or thousands of times greater than the average working bloke. There’s not just a metaphorical level or two separating these groups now, it’s more like a 2,000 mile winding staircase to the stratosphere.

Publishing has long been an industry that essentially lives with a split personality. Do you wonder why it is almost every major publisher got caught with their pants down when the digital disruption took hold? It’s this separation of powers, as it were. Many of the people on the ground knew the score. They were working the day to day, they saw what was coming, saw what needed be done. The people upstairs, however, were detatched, clueless and disinterested in this fancy new internet thing. After all, they were publishers! Their business model had been perfected over a century, and profit margins were still rolling.

But as revenue losses mounted, far too frequently, the answer was to cut back on ground level people in great numbers, often the very people who spent the previous few years trying to get the “braintrust’s” attention. This has only made things worse as it reaffirmed the positions of the people who dropped the ball in the first place while running out those who actually knew the score. Now, the disconnect between the upper floors and the ground level is wider than ever.

Earlier today, I was reading about convenience stores and there was an anecdote about GOP candidate Mitt Romney’s campaign stop at a Wawa while out on the road. The article told of how in awe Mitt was with the touch screen food ordering system there. I couldn’t help but laugh. I mean, really? Those things have been common for 15 or 20 years, at least. Romney was trying to convince us he had the chops to be President yet the man was overly impressed with ordering a damn sandwich in a convenience store? That is precisely the disconnect we see within corporations. Guys like Romney are upstairs making decisions on business models but he’s so clueless and out of touch that a totally commonplace thing I don’t believe I’ve given three seconds of thought to in ten years blew his mind.

I cringe every time I hear one of these upstairs types in publishing talk about culture and supporting literature. I do it almost reflexively because it’s pure bullshit. The people on the ground floor undoubtedly believe in those things, but the people upstairs believe in profits above all else. Talking in sweeping generalizations about culture puts a shiny veneer on it but, like a faux-woodgrain surface on a pressboard coffee table, it peels away very easily. When you work with a corporation, you may be talking to the lower level people who do care about such things, but you’re really dealing with the upstairs suits. You may be able to massage the inevitable labyrinth of corporate procedures now and again to get things done, but at the end of the day, the quest for margins wins every time. Maybe that’s as it should be, they exist to make money after all, but I like to think there’s a middleground between a naive cultural focus and a cynical profit-driven exploitation. Too much of our corporate world these days is all about the exploitation.

The GOP have it all wrong. The problem with our country today isn’t a government badly in need of reform. It’s our corporate structure that needs reform. Their virtually unchecked greed has damaged the very economy they depend on for their profits. They have corrupted the government by throwing large sums of those profits as look-the-other-way bribes to legislators, buying unpopular and destructive laws that serve only their business interests, and stifling any kind of even-reasonable regulations to rein in the worst of their excess. All the while, they cut pay, break unions, offshore jobs to third world countries, evade any and all taxation and give little or nothing back to the economy that supports them.

No, government isn’t the main problem, it’s simply become the PR wing for big business exploitation. Until we rein in the overbearing corporate culture that’s suffocating us all, we’ll never get back to the true representative democracy we’ve earned. I’m no socialist or communist sympathizer. I believe in free markets, I believe in entrepreneurialism. What we have today barely resembles a free market. Our laws, and our tax codes, bought and paid for by the corporations, undermine any notion of free markets to the benefit of those who would stifle competition, sue to prevent progress, rail against technology that disrupts their income streams and wrap their brand of capitalistic totalitarianism in the flag of faux-patriotism. Our elected representatives are little more than well-paid nobles subservient to their corporate kings.

The world won’t change until the first corporation has its charter dissolved and its assets sold off. It has to happen eventually. Either we do it now, rein these self-serving bastards in, reinforcing the belief that the competition and the free market they try so hard to stifle is more important than they are, or the people will do it eventually. But who knows how that will turn out, or what kind of regime will come after? They aren’t bastions of free markets or capitalism. They, through their greed and exploitation, are poisoning the notion of what those things mean. I don’t want to live in a commune. I want a vibrant, enterprising creative atmosphere with ample competition, and rules that work for all, not just those who can afford them. If we allow things to reach the point of revolution (and make no mistake, continue on our present course and they will) the end results could be very bad for everyone.

We need to send a message to these corporations that the world does not belong to you. Dissolving a few of the biggest offenders, opening the door to real competition, genuine innovation, and removing the artificial impediments they’ve bought to shore up their business models in the face of change would be a good start.

I’m not holding my breath.

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!

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.

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.

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.

Letters From The Front Lines of the ebook Wars

Earlier today, I read this piece on paidContent.org about some of the letters sent to the DOJ relating to the proposed settlement for three of the five publishers who, along with Apple, have been placed in the government’s crosshairs for (alleged) collusion and price fixing of the emerging ebook market. The piece contained excerpts from both pro-publisher and pro-DOJ contributors in a pretty balanced manner. However, I would like to take this opportunity to point out one or two things I find disturbing in the letters of support for the accused.

Just to be clear, I’ve made it no secret that I believe they did illegally collude (you don’t order your employees to double delete emails if you honestly believe you’re on firm legal footing) and I do fully support a serious DOJ smackdown. In fact, I believe these major publishers have been colluding on various matters for some time now, and have used their combined cartel-like influence to dominate the industry in a manner that exploits writers, overcharges readers and has created enormous barriers for entry for viable competition.

The emergence of ebooks, particularly spearheaded by Amazon, is the first true encroachment to the publishers’ gated community of competition in my lifetime. To me, that makes it even more crucial that the DOJ does what I believe it should and pursues this case to the fullest. In my opinion, agency pricing served only a few purposes; to raise prices on the digital versions of the largest selling ebooks to protect their preferred print market, to slow ebook growth and stifle the digital transition at a manageable (for them) 20-30% of the book market, and to handicap Amazon, the one company that truly is driving the industry-wide changes that threaten their long-standing dominance. That also says nothing of Apple’s interests in the deal, which had little to do with being a competitve ebook retailer and much more to do with heading off Amazon’s efforts to enter the tablet market and potentially swipe marketshare out from under the infinitely more expensive iPad.

In my mind, this entire enterprise had nothing whatsoever to do with creating and fostering competition in the industry subset of the ebook market and everything to do with stifling genuine competition across the entirety of the book publishing spectrum. The bigger the ebook market gets, and the faster it gets that way, the quicker the house of cards that is the legacy publishers’ cartel-driven dominance of the industry collapses. So to stop it, I believe they colluded to put the price fix in.

Anyway, here are a few excerpts from three of the pro-publisher letters listed in the piece. I’ll start with literary agent Simon Lipskar, whose full letter can be read here.

“The price of the average bestselling ebook has decreased significantly, from approximately $10.20 in Q3 2010 to $8.29 on April 27 – a decrease of 19% in the two years since the introduction of agency pricing – and that, furthermore, the average price today is in fact lower than it was before the introduction of agency pricing. (As a side note, it’s also clear that even agency-priced ebooks themselves are now cheaper than they were shortly after the introduction of agency.)”

These numbers are clearly false. I won’t get into specifics on the figures because Joe Konrath already has here, using Lipskar’s own methodology to show that, particulary, agency released bestsellers have increased in price dramatically since the introduction of the agency pricing scheme. It also strikes me as somewhat disingenuous to include self pubbed or independently pubbed bestsellers in the average price he sites for a couple of reasons. One, the six publishers involved in the agency scheme control something like 85% of the bestselling books in the U.S. To clarify, that’s referring to books that sell more copies than any other books. So the prices of nearly 9 out of 10 books that sell more copies than any other books have gone up significantly, yet Lipskar somehow believes this doesn’t constitute harm to consumers? Secondly, if you take a $14.99 agency book and a $0.99 non agency book and average them, you get $7.98. That might look good on a stat sheet, but it doesn’t change the fact that the agency book is way over priced and could only get that way through collusion of the six companies that control 85% of all bestsellers.

“It is impossible to look at today’s ebook marketplace – from a price perspective alone – and not see that, rather than causing a general increase in prices, instead the agency period has evidenced a remarkable explosion of competition, with new publishers, self-publishers and retailer-owned publishers providing consumers ebooks at lower prices than the agency publishers and taking significant market share from them in the process.”

One more time, these six publishers control 85% of the most frequently purchased titles. Agency pricing specifically stopped price competition on those books. Nothing agency did created the lower priced competition or the growth we’ve seen in the ebook market. In fact, I would argue that the recent slow down we’ve seen in ebooks is more attributable to the effects of agency pricing than any of the growth we’ve seen. That’s because this is specifically what the scheme was designed to do, stifle ebook growth.

As for all the extra competition Lipskar claims came about because of agency, that’s somewhat wishful thinking as well. As much as higher priced agency ebooks have helped Indies find marketshare, and it has, though not nearly as much as he suggests because the books in question were already several times more expensive than indies under the previous wholesale model, let’s remember that the ebook market has only been a major player for about three years now. Agency has been in effect for two of those three. As the ebook market grew, it was inevitable that other competition was going to enter the game whether agency existed or not.

What this actually means is that the agency publishers seriously overestimated the power they wield over the industry. It means that this shift isn’t about reasserting control but changing and adapting. Whatever their intent, agency was doomed to fail from the get go. At best, it’s an historical speedbump in the digital transition. Just because their efforts were an inept failure and steeped in entitled arrogance, that doesn’t mean we should ignore illegal collusion or the damage done to readers who’ve spent tens of millions more than they would have on these ebooks had no collusion taken place, and the damage done to their own writers, who’ve seen the pittance royalties these publishers deign to throw their way shrink even more with agency pricing.

On a somewhat related note, here’s a truly perplexing point made by independent bookstore owner Peter Glassman:

“Publishers have never sold ebooks under the wholesale model. Rather, they have sold them under the consignment model. Amazon and other ebook sellers never purchased or took ownership of the ebooks they resold. Rather,they advertised the product, handled the transaction, and only after they had received payment and concluded the transaction did they pay the publisher for the ebook. That is consignment, not wholesale. Amazon never placed any buy orders or made any commitments to purchase specific quantities of any ebooks.”

What? I’m pretty sure they did buy wholesale because, you know, that’s how the publishers sold the ebooks to them. Not sure I’d call it consignment because part of the transaction includes Amazon electronically delivering a copy to the buyer’s device. I may not be a tech wizard, but I’m pretty sure Amazon would actually have to have a copy of the work in their possession in order to do that. As for the last sentence there, it’s gotta be on my short list of the most absurd, ignorant statements I’ve seen yet. Amazon didn’t make any buy orders? Why would they? They already had what they needed to sell 10 copies or 10 million. And I can’t even come up with a smartass quip for the “specific quantities of ebooks” line. Does this guy even have a rudimentary knowledge of what ebooks are? You don’t suppose he really thinks publishers have bunches of individual copies of each ebook on their servers and every time someone buys one, Amazon gets it from the publisher, then sends it to the reader? He can’t possibly believe that, can he? That would be just silly!

I’m hoping he was just trying to make a point that digital sales resemble consignment more than wholesale, but it wasn’t particularly effective. To me, he just looks like someone far too stuck in the print book ecosystem to see the realities and efficiencies of digital. His comparison makes no logical sense whatsoever. That is the first and only time I’ve ever seen the term “quantities of ebooks” used in that way. I certainly hope he understands that Amazon only needs the one file to sell them to infinity. I also wonder if there’s not a bit of envy in there, being a purveyor of print books, for having to actually buy quantities of books and hope they can resell them or return them later. Of course, being the owner of a small bookshop, he might not want to see the reality. That has to be a bit like standing on the beach watching a 200-foot tsunami heading your way, I suppose.

Finally, here’s a pair of points from industry consultant Mike Shatzkin, whose full letter can be read here:

“My first concern is that there is a failure of recognition of the necessity for price-setting of individual titles across the ebook supply chain. Indeed, only by eliminating price as a basis of competition can we ultimately have
balanced competition in the real world of publishing as digital change has remade it.”

So we can only have competition in ebooks by eliminating the principle means of competition? I’m sorry, I do like Shatzkin’s work generally, even though he’s a little pro-publisher sometimes, but he’s really wrong here. Taking price out of the equation means that publishers themselves would then represent the only truly viable means for competition. Excuse me if I don’t find that a particularly compelling notion, given that the largest and most powerful among them are currently on trial for colluding together to fix prices. That, and the fact that many of them still appear clueless on how to actually compete in ebooks in any way other than trying to cram them into the same molds they’ve always used with print. Given that these same publishers have openly talked about things like windowing and higher ebook prices to protect print sales, increasing friction on the reader in the ebook acquisition process, and steadfastly attempting numerous rights grabs from authors while refusing even modest royalty increases, what reason does Shatzkin have to believe that these old guard publishers will give us anything even remotely like competition? The retail competition should be left right where it is, in the hands of retailers. Unless, of course, these publishers want to become retailers themselves. He also touches on that:

“The publisher of the future must be able to sell direct. With Amazon as their single biggest wholesale customer, that puts publishers in a Catch-22. If they sell direct at full price, Amazon will undercut them and make them look foolish to their customers.”

I understand Amazon is the biggest shop on the proverbial block, but as far as I can tell, there’s no law that says publishers have to sell through them. If they do set up a direct retail mechanism and they don’t like Amazon undercutting them, then don’t sell through them. Or cut a deal with them so that they won’t undercut you. Or offer books with special editions or bundles or what have you that Amazon doesn’t have. You know, actually figure out how to compete and take advantage of the opportunities of the market! Nothing’s stopping them but themselves.

To me, this sounds like the publishers want all the benefits of the retail giant Amazon’s built but only on their terms. Life doesn’t work that way, so sorry. They could have pioneered ebooks, and online retail book sales, but they didn’t. Amazon did. You don’t get to bitch and moan how unfair it is when you dropped the ball. Don’t like it? Too bad! Deal with it or find a better way. That’s how Amazon got where they are right now.

It all comes back to competition. These publishers didn’t have any for the longest time, then Amazon and ebooks came along. Now, they must compete to survive, but the best they can come up with are protectionist schemes like agency pricing that either stifle it or try to control it.

We’re past the point where they can control this industry like they used to, no matter what they believe. Crying to Uncle Sam that a better, more nimble, more efficient competitor is stealing their customers while they were out back napping in the hammock will get them nowhere. The quicker they realize this, and move on with some actual adaptive, genuinely competitive efforts, the better off everyone in the industry will be.

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.

Scott Turow, Whitley Streiber And Legacy Authors Quest For That Elusive Clue

The Author’s Guild, a group that theoretically exists to represent the interests of writers, has recently been cranking out a bunch of statements fresh out of the legacy publisher, Amazon is super evil and will destroy the industry, wipe out civilization and eat your children playbook. Guild president Scott Turow, of Presumed Innnocent fame, has himself authored a couple of these disruption-hating diatribes, but perhaps none more clueless than the one that hit the web on Friday. I had to read it twice just to be sure it was real and not an elaborate hoax given the fact that it reads almost like something The Onion would have written. I suppose I expect too much from a group who’s priciple players are steeped in the legacy model of bookselling that’s quickly meeting its demise at the hands of technology and the culture shift we’re all undergoing.

The point of his letter, appropriately titled “Grim News” because what could be more grim than discovering that the president of an organization that represents you has his head buried so far in the sand that only the tips of his toes remain visible, challenged the validity of the Justice Department’s threatened antitrust action against Apple and five of the Big Six publishers for their (alleged) pretty obvious illegal collusion in agency pricing for ebooks. By all means, read his full statement. It’s good for a laugh, if nothing else. Of course, if I were actually a dues paying member of the Guild, I certainly wouldn’t be laughing. Maybe asking for a refund, or sobbing uncontrollably, but not laughing.

The entire piece is pretty astounding, honestly, for its shortsightedness, and I could write a full volume reciting its many, many fallacies but I won’t. Plus, there’s the fact that that the web has already been peppered with several long refutations of Turow’s misguided tome. I’ve picked out a half-dozen high spots that seem worthy of addressing. Here goes:

Amazon was using ebook discounting to destroy bookselling

Really? The largest book retailer pretty much on the planet was discounting ebooks to destroy bookselling? A business that dumped tons of money into developing tablets designed to provide a quality reading experience and then sold them at or below cost to increase the pool of potential ebook customers was trying to destroy bookselling? A company that built the best consumer interface for browsing and buying books online wanted to destroy bookselling? The place that essentially created the self publishing boom, making it possible for many, many more writers than ever before to earn from their works was actively trying to destroy bookselling?

I’m giving Turow the benefit of the doubt and say this was just a poorly worded statement. Of course they weren’t trying to destroy bookselling. Trying to grab a bigger marketshare, absolutely, no question. Of course there is also the possibility that his bias is showing a bit here. Amazon’s actions could be seen as an attack on physical bookstore selling. Maybe to Turow, that is the only type of selling that really matters and that digital sales don’t really count as bookselling.

Five of the largest publishers jumped on with Apple’s (agency) model even though it meant those publishers would make less money on every ebook they sold

Here we see that Turow does really understand what publishers were doing with agency pricing, that is using it as a protectionist weapon for the benefit of print against digital sales growth. How else does it make any sense at all for publishers to collude together to force a pricing model where they actually make less money? The entire point was to keep ebook prices high, even at the expense of their own bottom line, to artificially prop up the fading print product against market forces.

Of course, he obviously thinks that’s fine and just, but think about it for a second and you’ll see why the Justice Department is getting involved. Five of the six largest publishers going and the largest technology company in the world collectively designed and implemented a system to keep ebook prices higher than the market had any interest in specifically to stifle the growth of the ebook segment of the industry and hamper digital competition against their preferred print products. That’s not the obvious, good business decision Turow claims, it’s illegal collusion, anti competitive behavior and price fixing to support the quasi monopoly position they maintain on physical print book distribution. Allegedly. I always forget that part, especially when “obviously” or “blatantly” seem much more fitting to this particular situation.

Bookstores are critical to modern bookselling

I guess the meaning in this statement all depends on one’s understanding of the word “modern.” If by modern, he means the post Civil War era then, yes, he may have a point. But anyone who believes physical bookstores are going to be critical entities in the bookselling process from this point forward (how I would define modern) is simply not paying attention to the changes in technology and consumer spending habits.

Bookstores have more in common with CD stores than the Apple stores Turow sites in his piece. Print books aren’t going completely away any time soon, but they are losing ground to digital alternatives every day. Very soon, we will reach the point where there is simply not enough foot traffic to support more than a select few brick-and-morter book retailers. Even Barnes & Noble, legacy publishing’s current most favored son, is being forced into allocating more of its floor space to non-book items like toys and games just to pay the bills. Tablets, increasingly better smartphones and ereader devices are further saturating into the consumer market and more and more people are becoming digital only or primarily digital customers. Another year or two of double digit declines in print book sales, a reality even the most conservative analysts begrudgingly admit is nearly a certainty, and a sizeable number of the remaining bookstores will simply be no more.

Far from being critical to modern bookselling, they are almost certain to become little more than a quaint afterthought or a specialty nook within the industry. What’s actually critical to modern bookselling is for publishers to develop and cultivate online retail replacements for the real-world shelf space they will soon inevitably lose. I can understand being sentimental about bookstores, nostalgic even, but just because you want to believe they are still critical doesn’t make it the case.

In bookstores, readers are open to trying new genres and new authors: it is by far the best way for new works to be discovered

This one has much in common with the previous notion that bookstores are critical to the future of bookselling. Again, just because you really, really want something to be true doesn’t make it so. The notion that physical bookstores are, as Turow put it, “by far” the best way for readers to discover new authors is so absurd that it almost doesn’t need to be refuted. But I’ll try anyway.

The emergence of book superstores like Borders and Barnes & Noble, giants helped along greatly by legacy publishers, virtually gutted the independent bookstore ecosystem years ago, wiping out many of the small, eclectic bookshops that genuinely stocked unique and original works outside of the mainstream. Many of the survivors morphed into smaller versions of the superstores, filled with little more than a lesser variety of the works of big name, famous authors. There are exceptions, but they are few and far between. The superstores themselves, particularly B&N became basically big publishing’s warehouses where all the biggest, high profile books received every premium spot in the store, and virtually all the promotion. If smaller, little known writers and their works made it into these stores at all, they were packed away like sardines, spine out, on the out of the way rows of shelves, not exactly what I consider prime real estate for discovery.

Online, you can browse through a virtually endless supply of works, grouped by whatever search terms your heart desires; big legacy books, small press books and independent self published books all interspersed together by their content, not who published them. Apparently, Turow missed the study a few weeks ago showing about 2/3 of the top 200 science fiction books were independently published. Most all of them had little or no access to the bookstore sales chain, yet somehow, readers in large numbers managed to discover them. A look at any of the Amazon top seller lists shows them peppered with relatively unknown indie writers, whose works are either ebook only or maybe including a print on demand trade paperback. If Turow is right in his presumption that bookstores are the best place for discovery, where are all the reams of new-found star writers coming out of the legacy system that dominates the bookstore sales space? That’s a rhetorical question because everyone but Turow and his ilk, it seems, already know the answer to that one.

Publishers won’t risk capital where there’s no reasonable prospect for reward. They will necessarily focus their capital on what works in an online environment: familiar works by familiar authors

Arrogance bleeding through here a bit, I believe. What works online is only familiar works by familiar authors? Well, that’s pretty obvious because they are familiar, they already have a built in sales hook. But I suspect there are more than a few indie authors collecting regular checks from Amazon and various other online retailers who might argue the point that only familiar authors work in an online world. There was also a distasteful moment in Turow’s piece where he tosses the poor, unwashed hordes of unknown writers a bone by feeling sorry for them and their quest because he’s a big, famous author and his book sales are an inevitability. The only things certain in life are death, taxes and big sales of Scott Turow’s books apparently.

To me, that line came off as detached and somewhat condescending. It seemed to show Turow stating that he, and other name authors, sit above this fray, that the seismic shift in the industry doesn’t apply to them because they’ll sell books regardless of any changes in the industry. To some extent, at this very moment, he has a point, but if he really believes the risks don’t apply to him, he may be in for a very rude awakening. Besides, as publishers’ revenues continue to decline, where does he think they’ll turn to make up those losses and save themselves? Maybe the big name authors under their control who are still bringing in revenue?

Our government may be on the verge of killing real competition in order to save the appearance of competition

This may be the most laughable one of all. Illegal collusion amongst the largest publishers and tech company in the world constitutes “real competition”? And the legacy print system Turow so adamantly defends was, need I remind anyone, a long standing ogliopoly that thrived on providing nothing more than the mere appearance of competition itself. Amazon, among others, has brought real and genuine competition to the game for the first time in all of our lifetimes, challenging every aspect of the industry from the way books are written and produced to how they are sold and distributed. There is not a single portion of the industry that hasn’t had to either reassess, adapt or defend its position in the value chain. That has led to more innovation and opportunity in the past two years alone than in the previous two centuries.

Is it a good thing if Amazon becomes a dominating monopoly? Of course not, but legacy publishing’s quasi-monopoly wasn’t a good thing either. Certainly, some like Turow were more fortunate than others, but the vast majority of writers had gradually become nothing more than fodder for a bloated, lazy and entitled industry.

Change is a good thing. But to allow yesterday’s monopoly to blatantly collude illegally in an effort to squash tomorrow’s business model can’t possibly seem like a good idea. Amazon isn’t perfect, and there are very real risks to their ascendancy, but much like they’ve used better products, terms and consumer relations to break legacy publishing’s market stranglehold, I am confident if they go overboard, someone else will emerge very quickly to do the same to them. That’s the nature of the disruption economy we live in today; no one can dominate for long and when the king gets fat and lazy, the lean, strong-willed up and comer will be poised to have him for lunch.

Turow wasn’t alone in his beliefs. After reading the “grim news”, I scrolled down through the comments underneath and found this one from author Whitley Streiber:

I am very much afraid that Justice is pursuing this, and that, if they succeed in proving that publishers colluded in the adoption of the agency model, they could strike a blow that would devastate the publishing industry–unless, of course it compels them to do what they should have done from the outset, which is to hold back ebooks like they do softcovers, which is the one choice that will certainly save our business.

I’m so glad you pointed out the importance of the bookstore to our industry and our livelihoods. The first job of every publisher and every writer is to save the bookstore. Without bookstores, we will spiral down into an entirely different and far less viable part of the culture. In the end, writing will become a hobby.

A simple idea: let’s revise the recommended contract to write in that we will not allow ebooks of our work to be published until at least nine months after hardcovers. If we the writers do this, we will save our livelihoods, our industry and this crucial foundation of our culture. And there is no question of our right to do it. No lawsuits will result.

Now, as with some of Turow’s work, I enjoy some Whitley Streiber on occasion. But this comment really gets me as much or more than Turow’s. First, he also far too easily dismisses the (allegedly) illegal acts commited by publishers to institute Agency in the first place. And he should realize, if Justice finds publishers guilty in this case, they won’t be the one’s responsible for the devastation to the industry he fears. Publishers will be responsible for it by commiting the illegal acts in the first place. Backwards logic, the publishing industry is going to be destroyed because the Justice Department is going to force us to follow the law, who the hell do they think they are?

He also repeats some of the same glorified nostalgia for bookstores and takes it one step farther, claiming that our culture and the very profession of writing will suffer irrevocably without them. And the first job of every publisher should be finding a business model where they’re still relevant in five or ten years, not trying to save another business model that technology has made somewhat obsolete. I always thought the first job of every writer, by the way, is to write the best material you can. The second job of every writer is to find a market for that work. If bookstores are no longer viable, then find somewhere else to hock your wares. Streiber seems to be missing the key point in much of this, that far from bookstores being the end-all, be-all of booksales, there are many, many more potential markets for writers today that ever before, across a variety of mediums.

It’s not the act or prominence of writing that’s changing, it’s simply the medium of delivery. Technology is making it easier, cheaper, more convenient and efficient for readers to acquire, consume and discuss more material across a broader spectrum than ever before. Couple that with a before-impossible ability for readers and writers to interact, and I believe it’s far more likely we’re entering a new golden age of reading rather than the dark age Streiber is describing here.

His suggestion of windowing ebooks for nine months after initial print publication is, bluntly, assinine. He is correct that there would be no lawsuits resulting from such a practice by authors and publishers, unless, of course, you want to count the suits filed by publishers to fight the rampant copyright infringement such a policy would surely instigate. The film industry engages in this behavior all the time, and I feel confident that it will soon be their downfall.

People like to complain that Netflix and similar streaming services don’t have a good enough selection. Well, blame that on the studios who either withhold titles altogether or window their release to support DVD sales in much the same way Streiber is advocating withholding ebooks to support print sales. The flaw in these policies is that technology has irrevocably changed the conditions of the consumer/ content provider relationship. Denying your primary customers what they want, when and how they want it to prop up fading mediums of distribution is a long term loser. Far from saving the industry, as Streiber seems to believe, it could very likely expedite their decline.

The film industry still brings in tons of box office money every year. But look closely. That money isn’t being generated by an increasing audience, it’s coming from a shrinking number of customers paying ever increasing prices. They don’t yet seem to get that there’s a tipping point coming. Nearly everyone has a theater right in their own homes now, with large, affordable high definition screens, more than ample surround sound systems, much more comfortable accommodations and access to refreshments you don’t need a small personal loan to afford. Make no mistake, there is a serious reckoning coming to the film industry very soon. Following their windowing policies will only help make publishing’s current troubles even worse.

Windowing films and DVDs against streaming and print books against ebooks forces your customers to come to you when all signs point to a world where people’s preference is that their entertainment be available to them when and where they want it. Pushing against the desires and capabilities of the folks that pay for your wares is never a good business strategy.

So what we seem to have here are two legacy authors who are unaware, or unwilling to truly see, how things have actually changed. Their combined opinions speak to a protectionist strategy for both print books and physical bookstores at a time when technology is creating legitimate, and in many ways, far superior replacements. I love print books, and I’ve always liked bookstores, but I’m not about to ignore the reality and benefits of what has and has yet to come.

I’m more than a little disturbed that they seem only too willing to excuse what looks, for all the world to be anticompetitive collusion amongst Apple and publishers, shamelessly so in some cases, because it suits their particular interest in rolling back the clock on technology and progress. But when you possess the names and reputations of these guys, they do a great disservice to the industry and writers everywhere, past, present and future, when they make little attempt to inform themselves on reality rather than simply slanting arguments to defend a backward thinking model that is soon to be supplanted.

If I was a member of The Authors Guild, I would demand more from those supposedly representing my interests. Now, perhaps more than any time in a century, the interests of writers and publishers have been disintermediated in many ways. Shilling for legacy publishing does the writers you supposedly represent no real good and, quite possibly, significant harm.

Note: I wrote this in bits and pieces on a fairly busy Saturday. By the time I finally finished, I noticed that a few others have made many of the same points, plus many more, far more eloquently than me. Here is author Kevin McLaughlin’s take. This is David Gaughran on the subject. And here is another wildly entertaining double team from Joe Konrath and Barry Eisler.

Three Reasons Why SOPA Must Be Stopped (and why something like it is probably inevitable)

image Tomorrow is the day that a sizable portion of the internet is going black in protest of the egregiously bad, supposedly anti-piracy legislation SOPA. I thought I’d throw my thinking on the subject out there to kick off the much-needed protests.

There are three main reasons why I believe it’s imperative that SOPA, and its Senate equivalent PIPA, be stopped dead in its tracks. Just to be clear, my reasons have nothing to do with so-called piracy. For one thing, as I’ve repeatedly asserted, what’s being defined as piracy by the various media industries is anything but and, secondly, this legislation does absolutely nothing to prevent the real thing. Unless, of course, you consider making the whole of the web totally useless to the vast majority of people a means of fighting piracy. In that case, it’s certain to be wonderfully effective.

Reason 1- SOPA epitomizes the reality that Americans are no longer represented by our government

There is absolutely nothing in SOPA that benefits your average American at all. It is a bill who’s entire purpose is to shelter the media industry at the expense of the whole of the nation. It will cost jobs, it will stifle free speech, it will wipe out competition to legacy monopolies and directly lead to higher costs for just about everything. About the only thing it won’t do is stop piracy. No one outside of disrupted media companies thinks this is a good idea. If this bill were put up for a general referendum vote, it would lose by a landslide of epic proportions. On top of all that, the entirety of the tech industry is virtually unanimous that SOPA will threaten the very fundamental foundations of how the internet functions.

So, with so much destructive possibility and so much united opposition, how is this bill even still alive? One word–graft. Our legislative process is horribly compromised. The one and only reason SOPA exists is because media companies and similar entities have dumped millions upon millions of dollars on representatives’ doorsteps through lobbying and campaign contributions. The will of the people has become almost totally meaningless in the face of this kind of obvious purchasing of government favors. This detatchment between the interests of the people and the legalized bribery of the U.S. Congress is, alone, reason enough to stomp it out.

Reason 2- SOPA provides a framework for media companies to reconstitute their monopolies and eliminate wide swaths of independent competition

One of the worst aspects of SOPA is that is puts the onus for monitoring potentially infringing content on the host sites. This means that sites that use significant user-generated content will have to either pre-scan virtually everything posted there or face severe consequences if so much as a bad link slips through. The cost of this requirement will be prohibitive. But then, I suspect that’s the point. There’s even been several venture capital firms who have come out and said, in no uncertain terms, that if a bill like SOPA becomes law, they will no longer put so much as a dime toward any internet startups. That’s sure to do wonders for our struggling economy.

This imperative will make it significantly more difficult and expensive to operate social networking sites or any sites with independent content from users. It could, conceivably, kill popular services like Google, Facebook, Twitter and Wikipedia, blogging hosts like WordPress, even self-publishing options at sites like Amazon and Barnes and Noble would be at risk. Eliminate or significantly increase the barriers for entry for independent content on the web and guess who benefits? The very media companies lobbying so hard for this bill.

The consequences of being linked to infringing content could be expensive and severe. Worse yet, there’s almost no due process in the proposed system at all, and the entire burden falls on the host to prove innocence after the penalties have already been handed down. Given that some media companies barely admit fair use even exists (at one point, the Associated Press said that quoting as little as four words from one of their articles required a license fee) this is a system that seems almost designed for abuse.

Nothing threatens the future of media companies more than the new-found capacity of independent content creators to market and distribute their work. Eliminate or severely hamper the sites or services they use, and traditional media companies effectively wipe out that threat. SOPA has nothing to do with piracy and everything to do with stifling or outright eliminating competition.

Reason 3- SOPA provides a legal framework and process for goverment to stifle opposition and dissent

The past year has seen several remarkable developments in the capacity of citizens to organize in opposition of their governments. The Arab Spring, protests in Europe and the Occupy movement here are all clear examples. It is significantly more difficult for propoganda to go unchallenged than at anytime in history. If you don’t believe these developments are of the utmost concern to governments around the world, including our own, you’re kidding yourself.

The same provisions of SOPA that benefit media companies by squashing independent content also benefit any government looking to deceive or control its people. This bill would provide effective legal cover for our government to stifle dissent and make it much more difficult for citizens to exercise our Constitutionally guaranteed rights of free speech and assembly.

And consider, when the legacy media once again controls the message, how we are informed, or even if we are, comes into question. If you need any proof of the dangers of allowing legacy media to control the conversation solely once again, look no further than their performance on SOPA itself and the equally questionable NDAA act recently signed into law. These are enormously important issues that threaten the fundamental nature of liberty and our nation yet they have both been largely ignored by the mainstream press. And once the media is given that control back thanks to this government regulation, what are the chances that they’ll significantly challenge anything it does in the future? Their very existence would depend on government stifling legitimate competition. Not only would the media industries be corrupting government by buying this legislation, they’d be compromising themselves by becoming dependent for survival on government regulation.

I can’t imagine a worse turn of events. Freedom of speech, of the press, of assembly all hindered dramatically and further cementing in place a system representative of the highest bidder over the best interest of the people.

Any one of these three reasons would be ample justification to kill SOPA and anything like it. Taken together, there can be absolutely no doubt that this effort needs to die a quick and dirty death.

Unfortunately, these very same reasons are why I’m almost certain a version of this will reach the President’s desk at some point, my guess being after the November election. The media companies will continue to throw massive amounts of money at representatives. Their only alternative is to adapt and compete in the current atmosphere, which many of them have already proven unwilling or unable. Their very survival may depend on changing the nature of the game, consequences to the rest of us be damned.

Government will continue to have a double motive. They will suck up all the money they can in lobbying and contributions. And as people get louder and louder in their discontent with the status quo, as is sure to happen, their motivation to stifle organization and dissent will only increase.

No, it will take a massive sea change in our government to prevent something like SOPA from becoming law eventually. Of course, this kind of far-reaching, self-serving and imminently destructive legislation may be the final impetus that spurs that much-needed change. We can only hope.

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