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.

What’s an Indie?

Lately, there’s been some hard talks and consternation floating around the net decrying the chip on some self publishers’ shoulders. The self versus traditional publishing conflict is juvenile, counter productive and mostly pointless, we’ve been told. And you know what? In many ways, those folks are right.

Just as an aside, given that I did it right there in that last sentence, I read an interview with a supposed prominent book reviewer who said one of the things he hates is when writers use conjunctions to start a sentence. I say “supposed” because I’ve never heard of him and, frankly, I care about as much for the pet peeves of critics as I do for the pie in the sky throwback dreams of publishing executives, which is to say, I don’t. I love starting sentences with conjunctions! If used judiciously, they can add pace to a narrative flow. Is it grammatically correct or technically proper? Absolutely not! But you know what? (there, I did it again) About 99.9% of readers aren’t sitting there with your novel in one hand and the little green style book from a college grammar course in the other. Narrative writing is about rhythm and pacing much more than technical perfection and, if the voice is compelling, most readers don’t care if your work would be thrashed with a red pen by an English teacher.  Besides, I don’t see anyone quibbling about the grammar in a Bob Dylan song. This is art, folks, not a technical writing essay. The rules don’t always apply.

Anyway, back to my original point, those people who tell us to knock off the hatin’ war of words between self and traditional publishers are right. There’s no percentage in it, as an old boss of mine used to say. That doesn’t mean we shouldn’t criticize. Traditional publishing and its defenders do an ample job of providing fodder for criticism. And I’m sure self pubbed writers provide ample grounds for the traditional folks to attack. In saying that, however, there’s one point of contention I just can’t get past. (By the way, I could’ve started that sentence “But there’s one point…” Quicker, more concise, makes the same point without the roundabout language and punctuation…sorry, I’m just carping now. Bastard! Disparaging my use of conjunctions! Who does he think he is?)

The reason I can’t simply say enough is enough with the self-trad conflict is that traditional publishers would, by and large, wipe us out if they could, and roll back all the progress, freedom and leverage writers have gained over the past few years. There’s no question that self publishing is a threat to their established business models, which have long been built upon an exploitative relationship with writers. It’s kind of difficult to play nice and polite with someone who you know would kill you and all you stand for if they had their druthers. While many self pubbed writers, myself included on occasion, have voiced opinions to the effect of hoping the traditional dinosaurs die off and quickly, I don’t hesitate to say most of us really only want some modicum of freedom and equitable treatment. I believe most of us would happily work with publishers offering those attributes. They, on the other hand, would sooner see us rot on the vine before they deign to offer more favorable terms to writers. Admittedly, they’re not going to have a choice in the matter before much longer, but that doesn’t mean I have to accept or turn a blind eye to mistreatment. Hopefully, someday soon, these conditions won’t be as they are today, and the giant pissing contest will well and truly be over with. But today, too many publishers still don’t respect writers and would still rather put us back in the cubby holes they’d carved out for us than to welcome us to the table as partners or equals. That’s barely grounds to form a mutually beneficial business relationship, let alone a lasting friendship. Show us some respect, and you’ll have it returned in kind. Keep dissing us, and the battle will rage on unabated.

There’s one issue I’d specifically like to address because its been on my mind since I read this missive by literary agent Sarah LaPolla. In it, she does seem very supportive of self publishing in some ways, although a bit condescending in places. Then again, that could be my biases showing, reading a slight where none was intended. Like this line, for instance:

Now, self-publishing really can be the way toward a career in writing, albeit a modest one.

Did she have to toss that “albeit” qualifier in there? I read that and felt like a little kid being patted on the head by his kindergarten teacher. “Sure you can be anything you want. You might even grow up to be a baseball star. Or President of the United States.” Really felt dismissive. Like I said, though, her piece read much more supportive of self publishers than most coming from that side, so I’m willing to accept my biases as my own and not take offense.

However, I will take on one particular statement she made:

AND STOP CALLING YOURSELVES INDIE. You’re not that either. Using “indie” interchangeably with “self” only confuses people who want to self-publish and pisses off actual independent publishers. There is a clear difference between publishing with a small press (“indie”) and using a vendor (“self”). Misusing/stealing pre-existing terms doesn’t give you credibility; it makes you look unprofessional.

To begin, she started her sentence with a conjunction. Some people hate that, so I hear. Plus, ALL CAPS? Really? Why are you yelling? Let’s use our inside voices, please. My problem with this is that, just like the traditional publisher side no longer gets to tell us how high to jump unless we allow it, they also don’t get to tell us what we can call ourselves.

“Real” indie publishers are pissed? Aw, now I feel bad. Some self publishers are confused? “I want to self publish. But wait, that guy there said it was indie publishing. But this guy over here calls it self publishing. I’m so confused! I give up!” The way I look at it, when small presses started co-opting the term indie, self publishing wasn’t a viable or realistic path. Hell, it wasn’t even called self publishing, it was given the dismissive moniker of “vanity publishing.” In that environment, the small presses unaffiliated with the giant conglomerates were the independents.

Today, however, that dynamic has changed. The giants still roam the Earth. The small presses are still small presses but the independents have changed. The individual self published authors have become that. The problem isn’t that self publishers have stolen a label from someone else, it’s that the circumstances where it made sense to call a small press “indie” have changed. Logically, it makes much more sense to label the independently published author indie than a small publisher. One is clearly more “independent” than the other.

Ultimately, I don’t care for labels on the whole. I’m a writer. I’m also a publisher. I’ve worked for small publishers, large publishers and myself through self publishing. If you put a gun to my head and forced me to label one of those “indie” it would have to be self publishing. This opinion comes not from pre-existing terms, but from genuine first hand experience. And maybe some of us wouldn’t try so hard to escape stigmas if there weren’t people out there equating self publishing with a giant steaming pile of unreadable crap.

Ultimately, labels, whatever they happen to be, are limiting. We’re not self publishers or indie, we’re just publishers. The end process is the same: produce work, refine work, sell work. That’s what publishers do. Traditional, small press, indie, self, what have you, all are publishers. A label, even one as seemingly cool or edgy like indie, eventually becomes a defined ceiling for what you are. Personally, I much prefer not having that ceiling, certainly not giving it to myself. So, if I were to re-word her point, I’d do it thusly:

AND STOP CALLING YOURSELVES ANYTHING. Labels are meaningless and self-limiting. The work is what’s important. After all, what’s to be gained by having to listen to a bitter rep from some small press somewhere bitching and moaning about you stealing their term “indie”? Nothing, I tell you, nothing at all.

And stop using all caps. Using all caps doesn’t provide added emphasis to get your point across. It make you look screechy, angry and unprofessional. Conjunctions to start a sentence, however? I’m totally cool with that.

Correcting My Mistake: Petrocelli tops Carr in battle for who can be more wrong about DOJ price fix suit

Last week, I read what, at the time, I thought was the most one-sided, absurdly inaccurate article that could possibly be written about the ebook Agency Model price fixing lawsuit the Dept. of Justice recently filed against Apple and five of the six largest book publishers in the country.  I went through some points on the complete and utter nonsense spouted by David Carr in the New York Times here. Today, being one to readily admit my mistakes, I have to say I was wrong.

Now, I’m not about to suggest that my impressions of Carr’s piece have softened or that I’ve been convinced that he was right about any of it. He wasn’t.  It’s just that I read this piece in the Huffington Post by bookstore owner and former attorney William Petrocelli that, to my complete shock and dismay, somehow managed to reach a level even more misguided and inaccurate than Carr’s propoganda piece.  I guess the old adage really is true: don’t think things couldn’t possibly get worse because they certainly can. Here we go:

The Justice Department is hounding MacMillan and Penguin Publishers, even though those companies and other publishers have done nothing more than try to protect their business from the unfair tactics of Amazon.

This is a very early quote from the piece, but it sets the tone throughout. You can see pretty clearly that his take is Amazon is totally at fault and publishers were doing little more than defending themselves. Interesting take, particularly considering Amazon was the victim in this case, the admitted target of the pricing scheme that publishers (allegedly) illegally colluded to put in place.

News coverage of the DOJ’s case has been almost uniformly critical. When large publishers, small publishers, independent booksellers, Barnes & Noble, Apple Corporation, the American Booksellers Association, and the Authors Guild all agree that this case is terribly wrong, it’s time for the Justice Department take a step back and re-assess what’s doing.

Really? I’ve read more than a few defenses of the DOJ since this was filed, but then again, he might have a point. In the mainstream press, coverage has been generally critical of the case. But consider the sources. Most of the entities that own the mainstream press also own other business interests, you know, like book publishers, including some of the defendants in this case, under giant conglomerate umbrellas. Not exactly an unbiased position to report from, huh?

As for his list of groups inside the book industry that have been critical of the decision, they have one thing in common. They all have notable ties to the traditional industry, and therefore stood to benefit from the price fixing scheme. Without it, genuine adaptation is looking even more necessary, and that places every group inextricably tied to the traditional model at risk.

By the way, the big news this week is the DRM is on the verge of being killed off by some major publishers. Does anyone for even an instant think that would have happened if not for the DOJ lawsuit that stifled the price fixing racket? The lawsuit has already worked as it has compelled these publishers to actually compete rather than spend their time trying to squash competition they don’t like.

The DOJ has stepped into a business it doesn’t understand at all, and it is tilting the outcome against those who are trying to play by the rules.

Huh? I’m sorry, but even as cynical about government as I am, I just don’t see anybody getting sued for antitrust violations for simply playing by the rules. Collusion and price fixing are illegal actions that artificially hike prices and stop or slow down competition. If that’s considered playing by the rules, I’d hate to see what a publisher who was openly cheating looks like. Maybe Petrocelli needs to brush up a bit on what constitutes playing by the rules. Pretty sure breaking them doesn’t count.

What did the publishers do to bring down the wrath of the Justice Department? They did nothing other than what any rational business person would do in the face of unfair pressure from an over-bearing, dominant retailer.

So, according to a former attorney, the rational course of action for a business person faced with growing competitive pressure is to break the law? That’s the rational choice? Not to innovate or adapt? Not to find new ways to compete in a changing marketplace but to violate the law to manipulate market conditions to quash a competitor’s earned advantage? Sure, I guess that’s rational. This must be a line of thinking I missed out on by skipping law school.

If you read the Justice Department’s complaint , you’d get the impression that the publishers adopted the Agency Plan as a means of maximizing their profits at the expense of the consumer.

You know, he’s right. When I read the DOJ complaint, I did get that impression. You know why? Because that was their intent. And it worked. Remember all those stories a few months back about publishers’ profit margins increasing even in the face of declining revenues? How do you suppose that happened? Could it possibly have been consumers paying 30-50% higher ebook prices? And let’s not forget that a big part of the Agency strategy was to protect print profits, as well. Of course, this could just be a serendipitous coincidence for the publishers in question, right?

It is clear even in paragraph 30 of the DOJ’s own complaint that Amazon was engaging in predatory pricing — i.e. by selling e-books at $9.99, Amazon was selling them below cost.

It’s only clear if that’s what you want to believe it says. Here’s a direct quote from that same paragraph 30 that he seems to believe is so incriminating: “From the time of its launch, Amazon’s e-book distribution business has been consistently profitable, even when substantially discounting some newly released and bestselling titles.”

Predatory pricing is generally defined as losing money to run off competition, then recouping those losses later through unchallenged higher prices. But what happens if the supposed predator isn’t actually losing money? Isn’t it just as feasible that Amazon’s managed to develop a more efficient, consistently profitable mechanism for selling ebooks? Maybe they’re not really predatory at all, but actually have a sound, profitable business practice? Notice the emphasis on the word profitable there. Also, there’s the perplexing fact that in all of U.S. history, there’s never actually been a monopoly created through predatory pricing.

To top it off, here’s a quote from the SCOTUS in its 1993 case Brooke Group v. Brown & Williamson Tobacco , dealing with a predatory pricing allegation:

“The mechanism by which a firm engages in predatory pricing–lowering prices–is the same mechanism by which a firm stimulates competition; because cutting prices in order to increase business often is the very essence of competition. Mistaken inferences are especially costly, because they chill the very conduct the antitrust laws are designed to protect. It would be ironic indeed if the standards for predatory pricing liability were so low that antitrust suits themselves became a tool for keeping prices high.”

Interesting that Amazon haters who toss around the predatory label seem to want antitrust law to do exactly what the Supremes in 1993 declared it shouldn’t; chill competition and keep prices artificially high. Even more interestingly, there hasn’t been a successful prosecution in this country for predatory pricing since this decision. That’s because (1) predatory pricing doesn’t work (2) the remedies end up more anticompetitive than the offense itself and (3) very few, if any, are actually engaging in it, not even Amazon.

While it is true the cost of producing e-books is somewhat lower than print books, there are large development, marketing, and other costs that publishers simply couldn’t recover if they were forced to drop their wholesale price significantly below $9.99.

This, to me, seems a little confusing. The market shifts, prices drop and publishers find themselves in a position where their established costs exceed the prices they can bring in. Ok, so that’s Amazon’s fault? It is, in a way, because they largely ushered in the ebook disruption, but other than that, this seems to be pointing out the necessity of publishers to change. Their business model isn’t working with current or sure-to-be future market conditions. Shouldn’t the point here be adapt before you go under? Rather, he seems to be using this point to justify publishers’ actions to stifle the changes in the market to support a status quo your own damn customers are walking away from! I just don’t know anymore. These people work with books, for god’s sake! Wouldn’t some knowledge and logic sink in just out of random chance once in a while?

To really see the disastrous effects of the DOJ’s action, we should probably listen to authors.

By authors, he really just means Scott Turow. Otherwise, you might actually run across some authors who aren’t all that fond of the traditional book business model, and they might even hold opinions that don’t truck with illegal collusion and price fixing. Can’t have that. Don’t these silly writers understand that if something isn’t good for old school publishers, then it must be bad for them, too? I mean, writing and literature–hell, the entire culture itself–will simply cease to exist if the so-called Big Six go under. I’m sure I read that somewhere.

With a new hardcover book, an author will typically get around $3.00 to $4.00 per copy in royalties — hardly an extravagant amount, when you consider the effort that goes in to writing a book. But if the print book fades away and the $9.99-priced e-book becomes the new norm, authors’ royalties would be reduced to a pittance.

If I started selling ebooks on Amazon for $9.99, I’d make $7 a book. I already make the $3-$4 per book he cites for an author’s royalty on a hardcover for an ebook priced at $5. Not that it’s possible to make that, mind you, I already have, virtually every day for several months now, and so have lots and lots and lots of other writers.

This is, again, a problem for the publishers and their business model. Writers get the pittance royalties, particularly on ebooks, because that’s what publishers want to pay. This may well become a problem for those chained to traditional contracts down the road, but the rest of us pretty much just shrug it off and go back to writing.

The entire end of Petrocelli’s article is a virtual point by point presentation of the failings of the traditional model. But unlike what most rational people would do, see the need to adapt, he seems to prefer sticking his fingers in his ears and yelling, “Nah, Nah, Nah, It’s all Amazon’s fault, Nah, Nah, Nah, It’s not fair, Nah, Nah, Nah!”

So, as I said at the beginning, I was wrong about David Carr’s piece being the worst possible. And to show that I do learn from my mistakes and know how to adapt, here’s my new take: William Petrocelli’s piece is the worst, most misguided, one-sided Amazon hating missive I’ve seen, so far. See, adaptation isn’t so difficult.

Bass Ackwards: NYT’s David Carr somehow manages to get everything wrong

Ever since the U.S. Dept. of Justice first dropped hints of taking antitrust actions against Apple and several publishers over what is quickly becoming the agency pricing debacle, there has been a noted increase in hit job articles ripping Amazon flooding the net. After the much-rumored lawsuit was actually filed last week, those efforts ramped up considerably. But perhaps the single worst, most misguided one of these missives came yesterday from David Carr in the New York Times. I thought I’d seen everything in this regard but when I read his piece yesterday, I was absolutely dumbfounded how someone with the skills to be a regular contributor to one of the most prestigious newspapers on the planet could get, quite literally, everything so completely wrong. About the only accurate thing in his article was the spelling of his name in the byline. Here goes:

That’s the modern equivalent of taking on Standard Oil but breaking up Ed’s Gas ‘N’ Groceries on Route 19 instead.

What? Five of the six largest publishers in the country (all six after Random House allegedly was threatened and coerced into jumping in) plus the largest tech company on the planet, one several orders of magnitude bigger than Amazon, colluding together to price fix is the equivalent of Ed’s Gas & Groceries? This is so completely absurd a statement that it almost doesn’t need to be refuted. Almost. Wow, what an amazingly disingenuous thing to say! Six companies with combined resources that far outstrips Amazon joining up to, openly and admittedly, stifle competition from the online retailer is no small thing to sneeze at.

Let’s stipulate that there may have been some manner of price-fixing here, perhaps even arranged in “private rooms for dinner in upscale Manhattan restaurants.”

Oh, okay, let’s do that. Let’s stipulate that there may have been some collusion and price fixing going on. Hate to break it to you, but those actions are illegal! What are we supposed to do, simply ignore it? Look the other way while a genuine innovator from outside the traditional industry gets attacked illegally (maybe if we keep pointing that out, it will sink in eventually) by companies who have largely sat on their hands, fat and happy with their “chummy little business” as Carr calls it? Sorry that it’s inconvenient to your worldview, but the entire point of the Sherman antitrust act was to prevent competitors within an industry from combining their market power to hamper competition. That is precisely what seems to have happened in this case, and the primary reason the DOJ got involved is because the publishers in question were too arrogant to keep their damn mouths shut about it!

(Amazon) leaned on the Independent Publishers Group in recent months for better terms and when those negotiations didn’t work out, Amazon simply removed the company’s almost 5,000 e-books from its virtual shelves.

No, Amazon was in negotiations for a new contract when the old one was up. They failed to reach an agreement, so they had to pull the books because, I repeat, the contract was up! If Amazon had continued selling their books with no contract, that would have been illegal. Besides, IPG isn’t a publisher, they’re a distributor. Distributors are still somewhat useful in the print market, but in ebooks, they represent an unnecessary and inefficient expense that increases prices and little else, something Amazon didn’t want because, you know, they seem to actually give a shit about not gouging their customers. How useful is IPG in the ebook market? Well, combined, the publishers in their membership earn, on average, about 10% of their revenue from ebooks. The rest of the industry is more than double that and growing. Did Carr ever consider that maybe Amazon wanted better terms because they actually wanted to sell some damn books!

The Seattle Times just published a series with examples of how Amazon uses its scale not only to keep its prices low, but also to keep its competitors at bay.

The only thing I’m going to say about this is of course he referenced the Seattle Times. Over the past few weeks, they’ve made one-sided hit pieces on Amazon a virtual art form. At this point, I’m almost curious to find out if the Times has gotten any large donations or influxes of cash from any particular Manhattan addresses recently.

Remember that it was only after agency pricing went into effect that Barnes & Noble was able to gain an impressive 27 percent of the ebook market.

No, Barnes & Noble earned that marketshare once they actually decided to genuinely compete in the ebook segment. The Nook device was generally well received, they smartly leveraged their physical stores to push devices and ebook sales to customers, and generally made a real effort. Funny how much easier it is to gain marketshare when you actually try!

If the decision to charge the publishers was good for competition, why has the stock price of Barnes & Noble dropped more than 10 percent since Wednesday?

This is another easy one. B&N is still inextricably linked to the print ecosystem. Agency pricing, at its core, a point Carr has apparently missed entirely, was a protectionist racket to slow digital growth and artificially prop up print. So B&N stood to benefit from the illegal collusion. This model goes away, and there’s nothing to stop ebooks from quickly jumping up to 50%, and very likely much more, of the industry’s revenues.

B&N is still saddled with a ton of physical stores that can quickly become an albatross around their neck when (not if) print sales continue to decline. That’s why there’s been rumors floating around that they will soon be spinning the Nook portion of their business off, so it doesn’t get dragged down with the stores. There’s also the little matter of B&N allegedly taking retaliatory action at the behest of Penguin against Random House to pressure them into joining agency as well. At this point, they’re lucky they aren’t named as a co-conspirator. Any of these are perfectly understandable reasons for their stock to decline.

Amazon views e-books as cheap software sold to animate device sales, in this case, the Kindle.

Here’s my favorite piece of pretzel logic making the rounds of Amazon haters these days. Apparently, they don’t care about losing money on ebooks because it drives kindle device sales. But wait, I’m pretty sure I’ve read somewhere that Amazon is taking a loss on device sales. So, apparently, Amazon is selling ebooks at a consistent loss in order to drive device sales at a consistent loss. And conversely, depending on who you ask, they’re selling devices at a loss to drive further ebook sales at a loss. At some point, you’d think someone would realize how absurd this logic is. I don’t care how much money Amazon has, they have to make a profit on something!

The problem is they aren’t really selling ebooks at a loss, only select ones (NYT bestsellers in the pre agency days, for instance) as loss leaders to get customers into their system and buy any of the hundreds of thousands if not millions of other books that aren’t discounted below cost. They might be selling devices slightly below cost today, but the tech is only going to get cheaper. Besides, some of the cheaper Kindles are ad supported which mitigates some if not all of those supposed losses. And that’s not to mention the profits on all those books that aren’t priced below cost they sell on those devices.

Publishers are pissed because, while they sat on their hands and had fancy dinners discussing ways to undermine ebooks, Amazon identified and executed a rather impressive retail plan to attract tons of customers, sell lots of devices and boatloads of books, all while keeping prices low and raking in the cash. Sorry for your luck, but I’m pretty sure this qualifies as “you snooze, you lose.”

The counterargument to the publishers’ position runs like this: why should consumers be saddled with paying an extra few dollars just to keep competition alive?

I’ve made bunches of counterarguments to the publishers’ positions over the past couple years, and read bunches more. Never once have I seen that one. If he changes the wording to read “to keep certain competitors alive” then he has a point. Why should we, as readers be saddled with artificially high prices so Macmillan’s outdated and inefficient business model can survive, for instance? We shouldn’t. In reality, the agency deal was all about stifling competition by forcing all ebook retailers to homogenize pricing at high levels across the board and protect print sales from erosion at the hands of ebooks. It’s all about picking winners and losers on the retail side, and on the product side. In the end, customers get to pay extra to have a cartel of publishers decide for them what they’re allowed to buy and from whom. Agency has stopped untold numbers of retail pricing models and experiments from happening, from package deal, group offerings, subscription services, and who knows what else could have been developed?

It has very effectively stifled competition in the retail market. Don’t believe me? Look at Google. They were gung ho to get into ebook retailing in a big way before the agency debacle. Now, they’ve dropped out of the market altogether very likely because of the restraints agency placed on real retail competition. When everyone uniformly has the same products at the same prices, it becomes an enormous barrier for entry to anyone who doesn’t already have an established ebook store and associated device. So agency really only served to lock online ebook retail to a select handful of players already in the game–Amazon, Barnes & Noble, Apple, and to a lesser extent, Kobo and Sony. Agency didn’t increase competition in ebooks, it hindered it.

Richard Epstein, a professor at the New York University School of Law, pointed out, “It is not clear that lower prices are necessarily in the long-term interests of the public at large.” He said that lower prices work both ways, spelling “low costs to consumers and low royalties to authors.”

No, it is clear that low prices aren’t in the long term interests of publishers who still insist on expensive, outdated and inefficient products. It is also clear that lower prices are in consumers’ interests, both now and in the future. And as to his second point, here’s a slight illustration to how wrong he is. In strictly the current traditional model, he may be right that lower prices lead to lower royalties for authors, but that’s only because publishers want it that way. On a $15 agency ebook where the author gets a standard 25% net, that author makes $2.62 per sale. On a $4.99 ebook sold directly through Amazon, the author gets $3.49 of each sale. That is a rate $0.82 more than the traditional author on a book 1/3 of the price. My math skills may be a little rusty, but that kinda looks 67% lower price to the reader and a 25% higher royalty at the same time per sale.

Robert F. Levine, a lawyer with an extensive practice in publishing, said, “There is not a drop of new capital coming into this business. The margins are low and there is almost no growth, so you end up with a rather small industry, with a handful of companies and a handful of players.”

Is this guy looking at the same industry everybody else is? Ebook sales have been growing in triple digit percentages the past few years. Sales of devices have exploded. The whole DOJ lawsuit stems from the manner in which Apple brought its weight and resources into the market. There are hundreds if not thousands of independent authors selling their wares now that never could have before, and many more of them than the mainstream industry and its defenders will ever admit are making money doing it that’s nothing to sneeze at. Publishing is a growth industry again, for the first time in a long time. If anything, the agency model actually slowed that growth slightly, but that’s pretty finished now, however the suit ends up. The only way it worked in the first place was if all those publishers colluded to make it happen. They’ve already fragmented with three settling, and will stay that way for at a minimum two years. But by then, it may be irrelevant what any of these companies wants to do. Besides Apple, Penguin and Macmillan could all still be tied up in court at that point, too.

The problem with this line of thinking is that, prior to digital, publishing already was an industry dominated by a small handful of players; the so called Big Six, the few big box retailers, and two or three distributors pretty much called the shots. There’s more diversity in book publishing right now than there’s been in a long time and, despite all the hand-wringing over a theoretical Amazon monopoly, that diversity seems poised to continue expanding.

I’d be lying if I said I didn’t get a little thrill when I found out on Amazon that I could get an e-book version of “Fifty Shades of Grey,” the No. 1 book on the New York Times best-seller list, for just $9.99. But after a week of watching the Justice Department and Amazon team up, I’ve learned that low prices come with a big cost. Maybe I’ll order it at my local bookstore instead.

Interesting example. An essentially self published ebook and POD paperback that grew out of fan fiction that traditional publishing never would have touched in a million years before the DIY way spearheaded by Amazon produced a bestseller. In addition, in the past, you’d have had to order it specially because, being DIY, the local bookstore almost certainly would never have considered stocking it. And even if they did, it would have ended up spine-out on a back shelf somewhere, virtually out of sight, out of mind.

So what was all that Carr was saying earlier about Amazon wiping out competition and the publishers championing it? Seems to me, he’s got that all ass backwards.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Them’s Fightin’ Words! Even publishers’ statements on DOJ antitrust suit sound like they were written together

So the other shoe finally dropped and the U.S. Dept. of Justice filed the long-rumored antitrust suit against Apple and five of the so-called Big Six publishers for their alleged collusion on a price fixing scheme using the agency pricing model. According to the DOJ, the publishers and Apple (allegedly) conspired together to raise the retail prices for ebooks and stifle competition in the growing ebook market, specifically targeting one particular competitor–Amazon. Immediately after the suit was announced, three of the six parties named in the suit agreed to a settlement, leaving only Apple, Macmillan and Penguin left standing.

While Apple has been silent on the matter thus far, the heads of the two publishers in the DOJ’s crosshairs released statements indicating their positions on the matter and why they intend to fight what they claim is the good fight. Interestingly, both publishers’ statement dismiss the notion that any collusion took place, each taking great pains to clearly state the decisions they made on agency pricing were taken totally independently. What struck me immediately after reading both statements was how absolutely identical they each were in form, justifications and even wording in some places. Odd that two companies who vehemently claim such independent thinking on the matter manage to crank out virtually indistinguishable responses to accusations of collusion, don’t you think? Not proof of a conspiracy by any stretch, but pretty telling nonetheless.

My beliefs on the agency issue have been pretty well on record both on this site and on my Twitter feed. I do think these publishers and Apple illegally colluded, and I think the DOJ is right in pursuing this. I believe they intended to use the agency model to institute significantly higher prices across the online retail landscape for several reasons. One, to handicap Amazon’s (and, in consequence, anyone else’s) ability to discount ebooks on the retail level. Two, to use the higher prices to slow the growth of the ebook segment and the rate of digital adoption in consumers. And three, most importantly, to insulate their much more favored print products and the physical bookstore and distribution ecosystem they largely dominate from digital competition. Taken together, the agency price fixing scheme put in place was, in my opinion, a conspiracy amongst several supposedly competing entities to hamper an emerging market that was disrupting their preferred and long-standing business models.

To be clear, I don’t think there’s anything inherently wrong or illegal about the agency model. The problem in this case rests with the way agency was used by these (allegedly) collusive businesses. A similar result could have come about if, instead of agency, these publishers had all agreed in unison to force a 50 or 60% increase in wholesale prices. Even Amazon would be hard pressed to discount books to $9.99 if they were paying double that or more for them. The pricing model isn’t the problem here, it’s the collusion amongst competitors that is at issue. Agency was the model used simply because that has been Apple’s preferred system on virtually all other forms of digital content it sells.

Anyway, I thought I’d run down a few points from the two publishers’ responses, starting with John Sargent, CEO of Macmillan. Click here to read his full statement.

We felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.

The bold emphasis on that comment is mine. Apparently, according to Sargent, physical bookstores are the only folks who sell books for a living. To hell with the numerous online book sellers, or the many, many hundreds of thousands of independent writers who are now selling books for themselves as well. I think he gives their underlying motivations away a bit with this statement. They wanted to protect bookstores and the physical print business model. The damage inflicted to the emerging digital markets wasn’t a strict concern, nor were the growing ranks of self published authors outside of their traditional control. Far from creating competition in the ebook segment, this arrangement tried to stifle competition by attempting to remove the most important weapon in the retail arsenal, price.

When Macmillan changed to the agency model, we did so knowing we would make less money on our ebook business. We still believe in that future and we still believe the agency model is the only way to get there.

So these publishers knowingly enterered into a business arrangement expecting to lose money in the short term in order to better position themselves for the future? Really? That’s funny because it sounds an awful lot like Amazon losing money on discounted ebooks to grow marketshare and better position themselves for the future. But when Amazon did it, we were told by these same folks that they were evil, despicable and destructive. Apparently when publishers behave similarly, they become defenders of culture and literature. See how that works?

The difference here, of course, is that Amazon’s loss-leader practices were undertaken on their own and directly led to lower prices for consumers. Publishers’ efforts in this regard, however, required (allegedly) illegal collusion amongst a critical mass of the largest competitors, and directly led to significantly higher prices for consumers. There might be a clue in there somewhere for why Amazon keeps chugging along nicely, and these various publishers will have DOJ lawyers all up in their business for the forseeable future. Just maybe.

I hope you will agree with our stance, and with Scott Turow, the president of the Author’s Guild, who stated, “The irony of this bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition. This would be tragic for all of us who value books and the culture they support”.

Antitrust lawsuits make strange bedfellows, apparently. Here we have a publisher being sued by the U.S. Government for a (alleged) price fixing scheme that, by their own admission, raised ebook prices and cost publishers (and by association, their authors) real, tangible dollars and he quotes the head of an organization called the Author’s Guild to justify his actions. I discussed Turow’s rather shortsighted take on this issue a while back, so I won’t rehash that, but if I were a member of that group and I saw his statements used in support of an act that both cost me money and tried to stifle competition and emerging market opportunities, I don’t think I’d be very happy. Turow seems to be supporting the publisher apparatus when he should be looking out for the interests of writers. His statements being used in this way by a publisher is awkward at best, and a serious conflict of interest to his position as representative of writers, at worst.

As an added problem for the publishers wrapped up in this, there are numerous civil lawsuits that will very likely result in many tens of millions of dollars in damages above and beyond whatever penalties the DOJ will look to extract. In fact, it’s already been reported that the three publishers who agreed to a settlement with the DOJ have also agreed to settle a civil suit with several state attorney generals that will result in damages that somehow filter down to consumers who purchased high priced agency ebooks during the time this practice was in effect.

My question is, if I’m an author under Simon & Schuster’s banner, for instance, and they end up paying a percentage of damages for each of my books sold under agency terms, is that money going to be backed out of my future royalties? After all, they theoretically paid me royalties on the initial full sale price, miserly though it may have been. If they’re forced to refund a few dollars of each sale back to the customers, am I going to be forced to give back my percentage of the refunded price? How thrilled would Turow’s membership be if all the agency authors he speaks for suddenly had future royalties docked to cover part of a legal settlement for a questionable practice he defended so openly? Sure, its hypothetical, but would it surprise anyone if publishers took this action?

Now it’s on to Penguin Group Chairman John Makinson. You can read his full statement by clicking here.

The decisions that we took, many them of them costly and difficult, were taken by Penguin alone.

I already addressed this point a bit, but for added clarification, no, they didn’t make this decision alone. They and four of their largest competitors all made this decision at the exact same time, with the exact same justifications. The DOJ’s complaint details a nice long list of instances where these publishers were in communication on this matter with one another and Apple in the lead up to this decision. There’s even an allegation that the publishers issued strict instructions to double delete emails and to leave no papertrail. Does that sound to you like businesses acting independently and behaving like they’re doing nothing wrong?

One of the allegations in the DOJ complaint I find most interesting relates to the one member of the so-called Big Six who initially stayed away from the agency scheme, Random House. According to the DOJ, Random House was actually gaining marketshare during the year in which they stayed out of the agency agreement. Allegedly, they were then pressured by the other publishers to get with the program, including an overt threat of retaliation against them by a large print and ebook retailer made by none other than Penguin’s U.S. CEO David Shanks. Sure, Penguin made that choice to go agency all alone. So did the other four, obviously. How could anyone think otherwise? It looks as though, according to the DOJ, that the one member of this group that actually did make a decision alone was pressured and/or threatened into changing their mind later. No collusion there, nope. Totally above board all the way, right?

The decision we took in January 2010 to move Penguin’s e-book business to agency pricing has been vindicated by the very rapid subsequent growth in the volume of e-books sold by agency publishers, and by the benefit to consumers of the steep decline in the price of e-book readers that that has resulted from this open competition.

Does he mean the rapid growth of ebook sales by everyone in the market, agency publishers or otherwise? That growth happened because the consumer demand is there. The agency pricing scheme had nothing to do with it. In fact, I would argue that these so-called agency publishers actually left a ton of money on the table they otherwise would have made if not for this pricing scheme. I think this shows that not only was this arrangement destructive to those involved because now they have to deal with the DOJ, compliance requirements and numerous civil lawsuits and probable steep damage claims, it didn’t even have the desired effect. The ebook market continued to grow, the print market continued to stagnate and decline, Amazon’s market position has remained strong and Jeff Bezos hasn’t exactly been crying himself to sleep over this matter.

This may ultimately end up as one of the most futile and expensive mistakes in recent business history by the time it all shakes out. Publishers have taken what was a difficult and trying circumstance in the teeth of a major technological disruption and made things exponentially worse for themselves. Good job, guys! I hear the local Waffle House is looking for a new manager after you’re finished running your respective companies into the ground. Have your resumes ready!

And perhaps I’m mistaken, but wasn’t the steep decline in device prices he mentions spurred almost entirely by Amazon? One of the accusations in the DOJ complaint was that Apple’s involvement in the conspiracy was driven by their desire to undercut Amazon’s ability to enter the tablet market as a legit competitor to the iPad. That would seem to me to indicate Amazon was well into the process of developing cheaper tablets long before this agreement ever came about. It seems Makinson just enjoys pointing out things that were inevitably going to happen, agency deal or not, and ascribing those results to the model they undertook. This, too, despite the fact that these results were precisely what the (alleged) collusive arrangement was supposed to prevent. I really wish I could find a job where I could fail upwards so magnificently.

We reasoned that the prevention of a monopoly in the supply of e-books had to be in the best interests, not just of Penguin, but of consumers, authors and booksellers as well.

Just a brief addition on this. I don’t doubt that they believed they were preventing a monopoly in ebook sales. But, to be clear, they tried to do so in a manner that propped up their own ogliopoly of the physical print book market. This wasn’t some selfless act undertaken for the greater good of the little guys, this was a fading cartel of major publishers desperately trying to hang on to the glory days in any manner possible. They pushed the envelope of legality because, apparently, actual innovation and adaptation to the changing environment was too difficult, and they got caught. No more, no less.

Amazon is no saint, and there are some significant, perfectly valid concerns with some of their business practices, but, at this point, it’s these publishers and Apple who’ve (allegedly) crossed the line into violating the law. Kind of hard to stake a claim to the moral high ground by crawling through the sewers to get there.

Anyway, here’s a link to a pdf of the full 48 page DOJ complaint. It’s definitely worth a read. This problem is not going away, though it remains to be seen what the far-reaching effects will be on the ebook market and book publishing in general. Keep in mind, too, that there are still a few civil lawsuits and an EU antitrust investigation hanging out there as well. This really has the potential to get a whole lot uglier for those involved before it gets better.

Reading (In) The Future: Does Clay Shirky have a point when he says publishing is going away?

The future of publishing is and has been a hot topic of discussion ever since the first weblog went live. There are many people lined up on opposite sides of the debate and, as is typical in most things, many more scattered amongst the vast middleground. Over the past few years, I’ve been rather unabashed in expressing my opinions that the legacy institutions that have dominated all sides of publishing for so long are now living on borrowed time. Nothing I have seen or any recent developments have changed my opinions in the slightest. In fact, legacy’s continued resistance to needed change have only further emboldened my beliefs. Unlike some, however, I don’t believe the fall of these long-standing organizations is a bad development. In fact, I’ve come to believe that it is a necessary step in the evolution of communication and will only help to usher in a new era of growth for the written word and, most especially, for those who practice it.

Earlier today, I read an interview with internet scholar Clay Shirky. He detailed many aspects of the emergence and value of social reading that makes it well worth a look, but I was particularly struck by his comments on the publishing industry itself. I had thought my opinions were strong in the matter, but Shirky takes things one step further. While I think some of the formerly great and powerful entities may crumble in the digital upheaval, I never considered that “publishing” itself may cease to exist. But after reading Shirky’s opinions and, specifically, how he defines things, I am starting to see his point.

The word publishing means a cadre of professionals who are taking on the incredible difficulty, complexity and expense of making something public. That’s not a job anymore. That’s a button.

Many people, myself included, have always considered publishing an act. But Shirky paints an interesting portrayal of publishing as the entities that engage in disseminating written works. From that perspective, I can see his point about publishing no longer being a job at all. Perhaps what we need here is a different term for the industry at large. Maybe we’re not simply shifting the players and tasks within the industry, but the entire industry itself. What we may be looking at is, in fact, the death of the publishing industry and, rising from it, the birth of the writing industry. (Actual future industry name may vary.)

The question isn’t what happens to publishing. The question is what are the parent professions needed around writing? Publishing isn’t one of them.

If publishing and publishers are no longer necessary, as Shirky claims, then it really does make little sense to refer to the entire industry by a term of description for a soon-to-be obsolete element of the past. Recently, there has been an increasing number of defenses of publishers springing up all over the place. What I’ve found intriguing is that all of these defenses rest essentially on the same points–editing, marketing and some mythical notion of quality. Editing and marketing are tasks that can easily be farmed out, for much less than the cut a publisher will take of your proceeds.

Quality, on the other hand, I’ve found to be a bit of a disingenuous defense. Publishers and their advocates always spring this one to support the gatekeeper role they’ve occupied for so long. But the physical necessity of limited offerings no longer makes much sense in the online retail environment, and it’s this very gatekeeper position, one that has served to cement publisher’s control and position atop the literary food chain, that has directly led to so much resentment amongst writers and helped expedite the robust environment that new technologies have created to circumvent exactly that practice. It’s always seemed not quite right to me for publishers to use actions that have alienated and, to be blunt, oppressed so many writers to justify their continued existence. If we truly found value in publishers’ narrow windows of opportunity, why would we have ever embraced self publishing in droves, as we have?

Institutions will try to preserve the problem for which they are the solution.

This is, perhaps, one of the clearest and most reasonable points Shirky makes on publishing and publishers’ efforts to retain power over readers and writers. There can be little doubt that practices like overpriced ebooks, windowing of releases, restrictive DRM, resistance to libraries, etc, all display a pattern of publishers’ intentionally hampering ebook growth in favor of print, an area in which they still maintain a modicum of their former control. Some publishers have even openly advocated increasing friction on the customer experience, ostensibly to undermine the advantages of digital over print.

In these instances, publishers are almost certainly trying to protect the problems they have long been the only answer to. Unfortunately for them, by handicapping what we all know is possible and, increasingly, preferred by the customer, they themselves have become more of an obstacle to digital growth and consumer desire than a solution to it. This is not a good place to inhabit if you’re taking the long view of the future.

The more I thought about Shirky’s point, the more I found myself agreeing with it. Remove print books and the physical bookstore chain out of the loop, and publishers bring absolutely nothing to the table for writers that can’t be acquired cheaper and more efficiently on our own. Certainly, print still maintains a majority of the industry, but can anyone honestly claim they believe it’s going to stay that way very much longer? Typically, those that do so fall back on nostalgia and some vague notions of tradition, but those elements play very little role when competing directly with the real, tangible benefits to readers that digital possesses.

I look at book publishers in some of the same ways I look at print newspapers. It is patently obvious that newspapers in their traditional form have little or no future at all if, for no other reason than digital alternatives do every last thing they do better, quicker, cheaper, more efficiently and more conveniently for readers. Newspapers still exist, of course, but who can say for how long? Two years? Five? A decade at the most? Given the advancements of the past 10 years, can we even imagine the means by which we’ll be consuming news by 2022? The only thing I can safely say is that ink on paper will look even more obsolete than it already does. And to an increasing number of people, it looks pretty damned obsolete already.

Book publishers have the same root problem. Digital alternatives are quickly reshaping the environment into one where every last aspect of what they do can be done better, cheaper, more efficiently, etc., etc. Shirky has a strong point, I think; publishing isn’t dying, it’s already dead and just lingering around waiting to be buried.

Which brings me to another point. About a month ago, the New York Times ran this piece on how publishers have begun to sour on multi-purpose tablets over dedicated ereaders because, they believe, tablets provide too many distractions for readers. This, to me, is yet another example of industry people refusing to see the forest for the trees.

Firstly, what leads any of them to believe that distractions for readers are some new development brought about by tablets? I can be distracted while reading a print book every bit as easily as I can a digital version. If I want to read, and what I’m reading is engrossing, I’ll stick with it. And if not, I can always pick up where I left off later, same as I always could. Why else would they have invented book markers in the first place if not to allow readers to easily walk away from what they were reading, for whatever reason, and come back to the same place at a more opportune time?

Secondly, and most importantly, what about our society leads any of these folks to believe readers want to plunk down money on a device that intentionally limits its possible utility? I have a nice HTC smartphone that is capable of all sorts of nifty tasks, from checking email, Twitter, Facebook, web surfing, playing music, games, watching videos and, lo and behold, reading books. Hell, I’m even writing this blog post right now on it. I’m gonna post to the site with it when I’m done, too. All of this utility is the reason I bought it in the first place. It would have been somewhat shortsighted of me to buy a basic cell phone because all these other things might distract me from my phone calls. I wanted all of these capabilities when I went shopping for one, I bought it because of them. On purpose, no less.

I even have the Kindle app, and I frequently read ebooks with it, and am a regular Amazon customer. Sometimes, I do get distracted while reading when a text message comes through, or I get a notification from email or Facebook or Words With Friends. You know what I do then? I either keep reading, ignoring the notification, temporarily stop and check on whatever it was that wanted my attention then go back to reading, or I close it and come back to the exact same place I left off sometime later. Pretty simple. Never once have I thought, “Wow, I need a device just like this one but that’s purposefully limited to only read books so the rest of my life doesn’t intrude.”

Most disturbingly, there was a poll of publishers referenced in the article stating that only 31% believed tablets are the future. Well, tablets, smartphones and other similar multipurpose devices are the future. Anyone who’s really ever used one for an extended time can tell you that. It’s disturbing that almost 70% of publishers surveyed don’t believe that. But again, this is an opinion rooted more in what they want to believe rather than what is the reality.

If publishers are so afraid of competing for readers’ attention that they think widespread adoption of intentionally limited devices is a viable possibility, then they should just close up shop now. Besides, even if every customer had a dedicated ereader; hell, even if they only read print books; distractions in our lives would still abound. That’s the nature of the world we live in, and it’s the reality of the marketplace we have to compete in. I can buy one device that does many things, including reading ebooks or I can buy numerous task-specific devices to avoid distractions. Which option do you think most people will choose?

Of course, if Shirky is correct in his assessments, what publishers believe really isn’t going to matter in the long run, anyway. The publishing industry is dead! Long live the writing industry!

The Defenders of Literature and Cultural Heritage? Ha!

In the past week, there’s been several long-winded screeds written about the end of days for publishing at the hands of the exploding supernova that is Amazon.  This isn’t altogether a rarity, but I’ve noticed, as print sales continue to decline, ebook sales continue to pick up, and the traditional ways of doing business continue looking more and more like a quaint remnant of a past soon to be forgotten, the bile and vitriol thrown around at those who are at the vanguard of this vast cultural shift have gotten more pressing and severe.  First there was Scott Turow’s “Grim News” letter defending big publishing’s (alleged) collusion and price fixing.  He followed that up with a somewhat more tempered but still massively slanted and misdirected interview on Salon a few days later.  I myself, along with several others, took a swing at the hanging sliders Turow threw into all of our wheelhouses here.  After that, there was Harper’s Magazine publisher John MacArthur’s rant on what he calls the “internet con-men who have ravaged publishing”.   I fully intend to expound upon his comments a little later, as I did find myself agreeing with bits and pieces of what he had to say about the newspaper business’ futile  addiction to elusive web ads, but his overall missive was still very much misplaced.  Finally, I ran across this piece by Bryce Milligan, publisher of Wings Press, on what he calls Amazon’s assault on intellectual freedom.  It’s been a pretty busy week for the dinosaurs of the publishing industry.

None of this is particularly surprising to me.  I’ve seen a lot of this before, watching the legacy newspaper industry’s response when the internet first started to really take a bite out of their once whole-ly locked down apple.  The newcomers were usurpers, illegitimate, doing nothing but stealing their hard-earned positions and work.  The folks heading the industry at that time were so caught up in the belief that the mechanisms they had been in charge of were the pinnacle of their business, and virtually omnipotent, that they failed to see the handwriting on the wall.  It was much easier to lash out and demonize the agents of change than to actually admit to themselves that they had to change as well, or be left on the scrap-heap of history.  So bitch, moan and complain they did.  For years while their revenues shrank, their marketshare plummeted and their customers–both advertisers and readers–moved on to bigger and better things.  The newspaper industry today is roughly 40% the size it was only a half-dozen years ago and still contracting.  Their big plans for the future are website paywalls, an argument that really should have been settled somewhere around 1998.  They slipped, ignored the reality of change by spending too much attention to the quirks of those bringing it right to their doorsteps and, in the process, doomed themselves to a slow, wasting death.  Look closely and you can see the same thing happening to parts of the book publishing segment.

So this isn’t exactly an unheard of development, the disrupted lashing out at the disrupters, and it is more than predictable to see their points of view on the precise business aspects of the issue.  Obviously, they will violently defend the status quo mechanisms while disparaging the strange, new and different ways others have found to achieve the same ends, that being to put written works in the hands of readers.  That, I expected.  It still strikes me as living life with blinders on, but at least it makes sense from a business perspective.  After all, the new digital revolution is barely a few years old.  The legacy bookselling model has existed, pretty much as is, for decades, if not centuries.  You don’t make money that well for that long without developing a nearly-religious belief in your business model.  That faith won’t save them, but it is understandable.

One thing, however, that has begun to emerge in these anti-Amazon (truthfully, more anti-future and anti-change) rants is the notion that legacy publishers, editors, distributors, agents bookstores and the authors entwined with them aren’t simply defending a means of doing business; they are beginning to position their plight on a higher plane.  They aren’t simply disrupted business people, they are pious defenders of literature, heritage and the very culture itself.  Every time I see one of these comments, I can’t help but snort.  I’ve even taken to putting down my drink whenever I get the slightest hint I’m reading one of these for fear of shooting some of said drink out of my nose, a fate I’d like to avoid if at all possible.  It’s one thing to defend your business and how it operates, even if you do so in absence of facts, reason and rationality.  It is quite another to pretend to be martyrs on the cross of literary heritage.  Of course, it’s entirely possible they’re not pretending and that would be telling in and of itself.  I’ve always approached these types of backwards defenses as willful blindness by those so worried about losing their meal tickets that they refuse to acknowledge the validity of the opposing arguments.  But, perhaps, what we are dealing with here are actually “true believers” so indoctrinated by legacy publishing’s dogma that anything challenging its preeminence is immediately treated as heresy.

When a Konrath, an Eisler or any of the other outspoken proponents of the changes that have torn through the industry advocate their positions, is it possible that these true believers don’t see a reasoned argument supported by observation, statistics and facts?  Does Turow look at Konrath the way the Pope looked at Galileo when he challenged the notion that the Earth was the center of the universe?  Did he consider the matter at hand, looking at all the available evidence and make a reasoned judgement or does he simply launch into an inquisition-style defensive assault that twists logic like a Philly soft pretzel to suit his preconceived beliefs?  I sincerely hope it’s the former because, even though I believe he’s wrong, at least he would still retain the possibility that further evidence and reason could have a positive effect.  If it’s the latter, no amount of reason will have any effect, except to make the vitriol even stronger because if there’s any one trait that defines true believers of any stripe, it’s that they almost always double down against things that challenge their faith, no matter how logical or reality-based they are.

Read each of the four pieces I linked to above and look for the similarities in their arguments.  Far from simply a discussion about the difficulties of transitioning from a print-centric business model to a digital-centric one, they each pine for the glory days of yore, nostalgia for the way things have always been done literally drips from their words.  And they each, at various points, make the proclamation that, as the new digital frontier continues to spread over the old physical one, our culture and even literacy itself will suffer for it.  The literacy point is somewhat inexplicable to me.  How, exactly, can literacy decline through the act of more people reading more than ever?  It’s seems a lot like Barry Eisler excellently pointed out on Turow’s allegation that Amazon is trying to destroy bookselling, apparently, by selling lots of books.  I guess when logic, reason and facts fail to produce a convincing argument, scare tactics are a consistently easy fallback.

“The end is near!  If our business fails, the world will be consumed by hellfire!  The people will become illiterate slugs if we’re no longer around to tell them what’s worthy of reading and spending their money on!  Without us, our culture will collapse into an horrific hodgepodge of things regular people actually enjoy, without having a gatekeeper like us to tell them it’s okay to like it!  What about our heritage?  Won’t somebody think about the children and how they’ll be able to learn of their heritage on their own, god forbid, without the facts they’re exposed to being vetted and approved by we professional keepers of what’s right and just!  It’ll be the end of days!  The horror…the horror…”

Publishing is a business, folks, not a religion.  They operate, as they always have, on a business model that allowed them to make money on the written word.  Technology has changed the ways in which people can access those words, undermining publishing’s long-standing business model.  Now, if they want to survive, they must transition to a model that fits today’s (and tomorrow’s) readers.  That’s all this is.  The world won’t end.  Great masses of people won’t suddenly lose the ability to read.  The written word will continue on as it always has, only now with the means of reaching more people more inexpensively and efficiently than ever before.  Our culture will not suffer.  Our heritage will not evaporate.  In fact, they may well be greatly enhanced by what’s coming.  The fact that a relatively small number of people who used to make a living putting words in ink on blank sheets of paper and selling them could possibly be out of work isn’t going to doom civilization as we know it.

Print publishing has had a good run.  They’ve existed as an industry largely undisturbed for numerous generations, far more fortunate than many, much more successful industries before or after them.  Change in life is inevitable.  How we deal with that change is what separates the people who keep moving forward, whatever the obstacles and the people who just whine about how much better things were back in their day.  Some of these old-guard folks sound to me like they’re desperately in need of a rocking chair, a tall glass of lemonade, a quilt to keep the evening chill away and a nice front porch to retire to.  Put enough of them together, and they should have plenty of tales to share amongst themselves about how great things were back in the good ol’ days.

As for the rest of us?  We’ve got things to do.  There’s a disruption going on, don’t you know?

MacArthur: Print shall return!

In following the plight of the newspaper industry over the past few years, I’ve seen many, many illogical defenses of the fading print segment from people often with vested interests in maintaining the status quo. However, the one I read last week from Harper’s Magazine publisher John MacArthur may well take the cake. It wasn’t so much that he was totally and completely wrong about everything. He wasn’t. In fact, there were entire sections that echoed sentiments I, myself, have voiced numerous times. No, the problem I found was in his tone.

MacArthur’s pontificating came across as certainty. In his mind, it’s a settled issue that print has been proven far superior to the internet, and that this whole web craze will blow over soon enough, returning print to its rightful position at the top of the communication food chain. While some of his points have merit, particularly with regards to publications giving away the farm with no specific plan on how to monetize that, and the very real problems with web ads on newspaper sites, the notion that print isn’t really failing and that digital doesn’t possess some very strong and pertinent advantages over print seems extraordinarily naive. If anyone hasn’t caught on just yet, digital is very much a replacement-type of technology for print, not a supplemental one, and readers in consistent, vastly increasing numbers know it.

Here are a few of the comments from MacArthur, starting with his anecdote of a conversation he had with a group of internet folks he met in a restaurant one day. When asked how they, too, could get in on the internet boom, here’s his description of the exchange:

“It depends,” one of them said smoothly, “on what kind of platform you want to establish, how you want to present your content.” I said that I wanted to publish a magazine filled with sentences, not build a tree house, and the conversation came to an abrupt halt.

I wonder why? Here you are discussing the future with some people clearly excited about the possibilities of the web, and when they make a very pointed inquiry about how you’d want to exploit your material online, you reply with a dismissive crack that shows not only arrogance but ignorance of some of the fundamental points of internet media. If I was discussing the possibilities of online content and was faced with a similar attitude, I don’t think I’d continue the conversation either.

MacArthur may well believe his crack about “platforms” was pretty clever. In fact, later on he notes how much he hates the term “platform” when he mentions that Harper’s is available across several of them. Of course, his obstinance makes me want to run right out and sign up for the internet experience from a publication run by a man with such an obvious contempt for the medium. I’ve got news for him, though. Your beloved print magazine is a type of platform, too. Always has been, and was long before anyone even imagined the transistor, let alone a computer, smartphone or tablet. Magazines, newspapers, catalogs, fliers, etc, etc are all types of platforms, no different than websites, blogs, ebooks, apps or anything else someone can dream up as a means of communicating with people.

I told them the internet wasn’t much more than a gigantic Xerox machine and thus posed the same old threat to copyright and the livelihoods of writers and publishers alike.

This one really got me. His notion of the web as a giant copy machine is simply asanine. Sure, it does have some of that capacity in spades, but it is far more diverse and to label it as such dismisses the massive volume of material created and posted by regular people and professionals alike every minute of every day. Then he went on:

Photocopying had long been the enemy of periodicals…so I had good reason to beware.

Maybe I’m too new to this game, given the fact that I have no recollection of a world before photocopiers, but I have never, ever, not even once, for even the tiniest fleeting second considered copiers as enemies of publishers. I am, apparently, totally incapable of even comprehending such an accusation. I have never, at any point in my life, encountered a situation where I saw a copy machine used as a weapon against publishers. The only possible way this makes sense is if what he really wants here is a world where the only way to access the information in a printed work is to buy a copy. Imagine, for a moment, how incredibly destructive such a practice would be in actual widespread practice. It would also be massively counterproductive to people like MacArthur, too, but I wouldn’t hold my breath waiting for that particular point to sink in with him.

Of course, it could be that there’s an enterprising young pirate in MacArthur’s part of town who got himself a copier and runs off copies of each new issue of Harper’s, stapling them together and selling them out of a backpack on street corners. Because, you know, that kind of thing really happens, right? But it does speak to his mindset. Here’s an advancement in technology that has made things infinitely easier and more efficient in so, so many ways, and all he sees is a potential enemy. It explains quite a bit. If this guy still sees copiers as an enemy of publishers, then the web must look to him like a giant, roving, 500 ton beast, spewing fire from its six heads and crushing everything in its path. Somehow, though, I suspect Harper’s offices probably have a copier or two on the premises. And an internet connection, most likely.

It turned out that while web sites might be great for classifieds, they are in general a poor medium for display advertising.

Here is an example of his line of thinking that I actually agree with, to a point. I, too, believe that websites are lousy vehicles for display advertising, particularly when the advertising you’re pushing there is simply a replicated version of the exact type used in printed publications. He’s totally correct that ads like this are very easy to ignore, they’re a waste of time and money for publications to chase after, and, no matter how low the price, they’re not terribly effective for advertisers, either. I have never believed that display ad supported publication websites are the way to go for the long run.

That being said, this doesn’t mean that the web isn’t an effective vehicle for advertising and promotion, it undoubtedly is. Just not for trying to duplicate the exact process and mechanisms that have historically worked in print. The problem with his argument, to me, is that he seems to be saying that, because the one way they’ve tried to generate ad revenue online (the simplest and least imaginative way, not coincidentally) has been largely a failure, that means that ads on the web will never work and they should just give up. That’s the kind of thinking that has greatly contributed to the newspaper industry losing 60% of its revenue in less than a decade. Keep up the good work on that.

As the ever-more-demanding Internet God continues to bleed writers and publishers…the advantages of advertising in print become more obvious.

More obvious to whom? The advertisers who are fleeing print in droves? The readers who are doing likewise? The print salespeople who have increasing trouble earning a living on lessened commissions? I understand that this is what he believes and, in some respects, he’s right about things like inavoidability and adjacencies in printed material. But just because he believes it, doesn’t make it so.

The problem with this is that, even if he’s right, it doesn’t matter. The digital transition is well underway. No matter how great he thinks his print platform is, readers and advertisers are the ultimate judge and they’re speaking with their feet, walking away from print in steadily growing numbers. You simply can’t ignore that fact. While it may be true that he believes print is better, the people ultimately holding his purse strings don’t necessarily agree.

This is the crucial issue with why so many former print titans seem to have lost their way. There is no simple answer to how to generate needed revenue online, and they just can’t understand how something they believe is inferior can continue to grow while they languish. The pool of money is moving to digital, from advertisers and readers alike. We’re past the point of no return. You can have the greatest, most effective print platform in the world, but if all the money isn’t in print any more, you’re doomed to failure. You have to go where the money is and find a way to get people to spend it with you. And nobody cares how great you think print is if that’s not where they want to put their dollars.

Patrick de St. Exupery insists that the internet, whether paid or unpaid, doesn’t just reduce the value of writing, it destroys value. This may stem from a whole generation growing up never learning to distinguish between a blog and an edited, thought-out piece of writing.

Hmmm…maybe I’m suffering from this. Was MacArthur’s piece that I’m talking about here an edited, thought-out piece of writing? Is this? I’m writing on a blog, so does that mean this is simply a slap-dash collection of incoherent sentences? That’s ridiculous. It’s a totally dismissive opinion toward any and all writing that exists outside of the publishing gatekeepers. If your works appears outside of the established publication websites, then it simply must be inferior. Beside that, regular folks are apparently too stupid to distinguish genuinely quality writing approved by the gatekeeper class apart from the ground up mush produced by the rest of us.

I, personally, don’t underestimate readers like that. I wonder if he’s ever considered the possibility that, if readers can’t distinguish between his publication’s work and the work of people like me, maybe that’s an indicator there isn’t actually that large of a gap in relative quality, if one exists at all? Probably not, I’d imagine. Just to clarify things, by the way, I’ve thought out writing this over the past several days. I’ve also copy edited it, something I believe my 15 years of experience working for various publishers as an editor, no less, qualifies me to do. Does that mean I’ve cranked out Pulitzer Prize winning material here, or made certain every last syllable of every word in each sentence of every paragraph is a model of perfection? Of course not. But neither is his self-proclaimed edited, well thought-out piece.

The difference is that I’m not claiming that only pure gold drips off of my keyboard. This is an opinion piece where I’ve used my knowledge, personal experience and beliefs to contest what I believe was a shoddily constructed argument from an old guard print protectionist. His was exactly the same, only from a different point of view. I think his real problem is that his piece and my humble effort exist on the same plane, with the same availability to the same readers, and can have the legitimacy of his positions and mine judged not by editors, publishers or other gatekeepers, but by actual readers on equal footing. It’s an entitlement mentality, truthfully, one that stems from the internet undermining not only publishers’ ability to control who gets on the playing field, but their control of the very field itself.

He claims that the internet is undemocratic and exclusionary, but what institution could be more of those elements than the locked down print world of the recent past? These guys who make arguments like this one ultimately reveal the same bias in the end. They always show a contempt for the capacity of their audience to determine quality of material on their own. I think they secretly fear that the works they push really aren’t that superior and, given increasing opportunity, the readers they depend upon will see through their sham. Otherwise, if you truly trusted your readers to know quality when they see it and gravitate towards it, why would you have any issue with pitting your work against the supposedly inferior ramblings of us outside-the-gates barbarians?

To close, here’s another refutation of MacArthur’s opinions by Alexis Madrigal on The Atlantic’s website. I wonder if MacArthur considers it a well thought-out, edited piece? If I had to guess, I’d say probably not. After all, as he claimed at the very end of his screed, he is planning to translate his piece into a speech which he’s being paid to give later this year, so it must be of higher quality. I wonder if he realizes that paid speaking engagements are a type of platform, too?

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.