22 July 2005 Blog Home : July 2005 : Permalink
An article in the FT a couple of weeks ago (link is to a pay article) about the woes of Hollywood and the music publishers gathers together many of the points that should be accepted by all sides but yet it fails to draw the obvious conclusion. There is no doubt that file shareing programs such as Grokster do indeed facilitate the piracy of music and films, and there is no doubt that they do indeed threaten the comfotable livelihooods of those at the top of these industries. However the article fails to understand that the domination of content publishers is a comparitively recent phenomenon and one which exists purely because of the support of governments for a monopoly. It is entirely reasonable to argue that the monopoly of copyright is justified but that doesn't stop the beneficiaries of the monopoly from falling into all the traditional errors of monopolies though the centuries. Part of the problem for a monopoly is that it tends to lead to a lack of customer service or the ignoring of customer demands or overall trends.
This is precisely what has happened to the entertainment industry which has completely failed to grasp the impact of the internet and modern technology in general on the underpinning assumptions of its business model. Despite what should have been the wakeup call of the videocassette, the entertainment industry has, to date, utterly failed to adapt its business model to the new distribution and paradigms that modern electronics have provided. If they continue to do so then we will see some interesting times before some alternative publishing and entertainment producing entities show up.
For the most of the 20th century production and dsitribution of content has been a capital and labour intensive process that meant that it was possible only a few, well capitalized organizations could manage to distribute recorded audiovisual entertainment or even printed material such as books and magazines. The movement to digital recording permitted a drastic reduction in the cost of distribution but the providers, while they may have benefited from the resulting increase in profits they utterly failed to realize that their customers are both demanding other formats for their entertainment and a reduction in price to correspond with the reduction in cost. Moreover the bundling options used in the past, whether for one decent track on an album or a group of cable channels or whatever, are now being perceived as a way to sell second rate products on the back of the good stuff. Combine this with the way that there has been significant price inelasticity with regards to quality - CDs, movie tickets, books are the all same; good/popular ones cost the same as bad ones. In general no one denies that artists or writers should not be rewarded for the work they produce, however as an article at theregister.co.uk makes clear the problem with copyright law and publishing as it stands today is that we have a crisis over appropriate levels and methods of compensation and over the right of others to control the use of material we have bought.
The pigopolists, to use a register expression, still want to force apparently arbitrary controls on what we can do depending (for example) on where we happen to be - Star Wars III took months to arrive legally in Japan despite being available illegally on various filesharing networks since the day it was released elsewhere. Likewse author JK Rowling and her publisher(s)/agent(s) have refused to meet demand for an ebook version of Harry Potter. The result is that the latest HP was available for download on the web for free a few hours after its UK release - according to barflies at Baen's Bar this meant:
It was actually on the net before it was released here in the states. Since it was released at midnight that gives a big chunk of the world time to scan it in before it reaches midnight here.
Just out of curiosity I checked IRC the night it was set to be released. At 8pm CST when I looked chapters one through five had already been posted in a proofed format for people wanting to get the jump. Chapters six and seven also but not proofed. By 2am the entire book was posted in an unproofed edition.
There is a problem here that, as another barfly in the same thread put it:
I wanted an ebook version so I can read it again before September. And
its SEARCHABLE!.
I would have paid a reasonable price for an ebook. I invested time
instead, which gives no financial reward to the author. Silly author.
The evidence of iTunes, not to mention the statement above, indicates that consumers are looking for electronically storable versions of content for all sorts of reasons that have nothing to do with theft. Many of them are willing to either spend money to obtain such content from a legal source or if not spend the time to find it elsewhere. This is precisely the same issue that causes the smuggling of almost everything that has been smuggled from French Brandy to tea. There is a demand and entrepreneurs are willing to meet that demand with supply. Historically the prohibition of legal supply for something that is in widespread demand means that everyone winks at the breaking of the law in question and even begins to treat as heroes those lawbreakers who make the product available.As Jeff Jarvis notes, judging by an AP report, the pigpopolists still haven't got the message, prefering to make us all potential criminals rather than customers with a demand they won't meet.
I don't know why they do this because the evidence is that they would probably make more money by meeting the demand. It should surely be possible (trivially so I imagine) for someone to take something like the bittorrent code and create a version that allows you to mark certain streams as accessible only after the recipt of some payment and use of resulting access code. Of course the hackers will enjoy reverse engineering it but the point is that such people would never pay anyway. The vast majority of people will (witness starbucks vs generic coffee) pay money for a trusted reliable branded supplier. Disney etc. already have the brand, they could build on that to make a reliable, cheap download service (say $5-$10 per movie, $1 per music track) instead of forcing us to either look for the illegal versions of wait months for the legal but much more expensive DVD. In this hypothetical model they would almost certainly make money even if the download option ate into DVD sales. For example Amazon sells DVDs for between $15 and $30 (and sometimes less) and it is hard to imagine that the publisher and creators actually pocket more than $3 or so from that sales price when you take into account all the production and distribution costs, not to mention the cut that the retailer takes. With such an online model there is no reason why the price should not vary item by item, hour by hour depending on demand, age of product etc. so Harry Potter 6 could have started being priced at $10 then in 6-9 months depending on demand the price could have been cut to $8 then $6 etc. Since there is almost no distribution cost practically all the $x charged is available as royalty or publisher profit and if the barebones electronic format is popular then it may drive sales of the book/DVD/CD format that has the pretty cover etc etc.
This model is not completely hypothetical. Baen has just started to release "eARCs" - electronic Advance Reader Copies - of some of its more popular forthcoming works with a pricing model (for the eARC of David Weber's At All Costs) as follows:
Here's how it will work. You can get the complete =At All Costs= (when I get
it up) for $15.
That price will be good until July 31 when the price will drop to $12
That price will be good until August 31 when the price will drop to $10
That price will be good until September 30 when the price will drop to $8
That price will be good until October 15 when the usual WebScription single
version becomes available.
Note that this is entirely separate from WebScriptions. If you want the
final corrected version you still have to buy the WebScription bundle or the
final individual book.
The signs are that both the works currently available have had a good number of downloads and it is highly likely that the readers (including yours truly) will in fact buy the books again either in paper format or as part of our monthly eBook fix (or both). [For the curious Baen's webmaster reported 400 downloads on the first day at $15 each - when there was essentially NO publicity what so ever and many more since. My rough estimate is that the first day's eARC take basically paid for all the electronic proofing/typesetting for the book which means that al subsequent sales of both the eARC and the final eBook are at a gross margin of 100% less the trivial cost of the website and internet link] I can see absolutely no reason why similar schemes would not work for others but I am sure that the majority of publishers and authors would reject it out of hand and then, having spent gazillions on some awkward, proprietary eBook format, complain that there was no demand for eBooks, because their potential readership is unwilling to jump through the hoops that they want.
FWIW Baen seems to be (as I have noted before) one of the few publishing firms that makes a serious amount of money from eBooks - my recollection is that Baen sells over 2000 webscription bundles (of 6 books) per month at $15 per bundle. By my calculations that is a minimum of $30,000/month, or $360,000 per year - and it is probably considerably more, and once you deduct the cost of one salaried employee, a webserver and internet link, the remaining money is all profit to be split between publisher and authors. In terms of JK Rowling style blockbuster revenue this is peanuts. In terms of the average SF author's royalty take (maybe $10,000 at best) it is significant.