Whither publishers?, part 2

Back in February, I was provoked by an article on Eric Hellman’s blog to write a post, Whither Publishers?, on the future of publishers in a digital world.  Today, in a completely different move that is certainly not just a retread, I find myself provoked by a comment on Eric’s blog to write … another post on the future of publishers in a digital world.

What’s worse, it’s almost the same post.  So try not to fall asleep.

In the comment in question, veblen wrote:

There always have been and always will be costs involved in protecting your property, and I don’t understand why so many people seem to believe that digital networks will lead to some kind of Utopian world in which all of these costs will go away.

As we all know, the fundamental difference between a physical book (or journal, article, sound recording, whatever) and an electronic one is that you can make infinite perfect copies of the latter at zero cost. Users would like to do that; publishers who have invested years and millions into physical-media business models based on scarcity would like to prevent them.

No solution is going to satisfy both.

The existence of back-channels such as The Pirate Bay makes me think that in the end, users are going to win this war. It’s so much easier to make and distribute 100 new copies than to stamp out 100 existing copies. I know this is not a popular message among publishers, but I suspect a lot of the argument against it doesn’t amount to much more than LA LA LA CAN’T HEAR YOU.

(Note: I am not necessarily saying it’s good that publishers won’t be able to restrict free distribution of perfect copies of published material.  I am just saying that it’s true.)

How can publishers remain in business when infinite perfect copies are free to make and distribute? When the question is couched in these terms, I think the answer is pretty obvious: they can make their money by charging for the actual services they provide, such as copy-editing, review, formatting, design and publicity, rather than by holding increasingly useless “rights”.

And this of course is exactly what open-access publishers like The Public Library of Science (or PLoS for short) do: they charge authors a fee to cover their costs in providing those services — services which authors are prepared to pay for as they do provide genuine value, increasing the quality of the final, published work.

That approach works in academia, because academic authors don’t expect to get paid for their writing. They live off grants, and writing papers (and paying to have them published) is a core part of what they do.  Also, the grants provide the publishers’ fees, so when I blithely say that “authors are prepared to pay”, I don’t mean that the money comes out of their own pockets, I mean that the publication cost is part of what costs to do science.

But.

This doesn’t translate into the rest of the writing world — fiction, for example — where the author expects to get paid.

What is the solution? I don’t know. But ignoring the problem, or pretending we can make it go away, isn’t going to help.

One possible solution that we ought to consider, if only to dismiss it, is this model: fiction authors pay publishers to perform publishing services such as editing, reviewing and design, just as academic authors pay PLoS to do this; and then the authors retain the rights to the resulting work, and make money selling copies of it.  This won’t work for the obvious reason that individual authors are going to be even less able to prevent the proliferation of cheap perfect copies than publishers are.

So the more I think about it, the more I think there are only three possible outcomes:

  1. We don’t move to digital books, but stay with hardcopies which authors/publishers can control access to.
  2. Authors/publishers tie everything up with unbreakable DRM.
  3. Everyone relies on readers’ honesty and good nature.

#1 is not going to happen: anyone who’s spent time reading fiction on a Kindle isn’t going to want to go back.  #2 doesn’t work: all DRM gets broken, usually quickly, and buyers rightly hate DRM anyway.  That leaves #3.

And you know what?  I actually don’t feel too bad about that.  It feels somehow poetic to me that the outcome of a technological revolution should be that we’re all thrown back on something as un-tech as human nature.  As two philosophers once said, “Be excellent to each other”.  Or I could quote an earlier and greater philosopher, who said “do to others what you would have them do to you, for this sums up the Law“.  Here we are in the 21st century, and it’s as important as ever.  Who knew?

20 responses to “Whither publishers?, part 2

  1. Somewhat related is the subject of video game piracy, for which I can share two points of interest.

    First is that, some time ago, 2D Boy decided to sell World of Goo completely free of any DRM whatsoever. You just downloaded it and off you went. They later worked out that approximately 95% of the copies being played were pirated. I imagine something similar happened with the Humble Indie Bundles; collections of games sold DRM-free.

    The thing is, no one seems to have been hurting from these piracy rates. The major publishers go on about the amount of money they lose, but they calculate it as Number of Copies * Piracy Rate * (Full Retail Price – Retail and Shipping). The problem is that it’s simply unrealistic; just because somewhat pirates a game, doesn’t mean they were ever going to buy it in the first place. Consider a 12 year old pirating a slew of games because he can only afford one with his pocket money (I grew up in simpler times, OK?) They’re not really lost sales when there was no chance of a sale in the first place.

    Secondly, there’s Steam. For those who don’t know, Steam is a combination of DRM, storefront, community (friends list, achievements, profiles, groups, etc.) and cloud storage for games. The thing is that most gamers I know don’t lump Steam in with other DRM “services” because Steam actually adds value.

    The purpose of most DRM is to strip away as many rights from the user as possible whilst still extracting money from them. The purpose of Steam is to provide relatively simple protection (you have to have logged in to Steam to activate the game at least once) on top of a host of unusually generous benefits: install a game as many times as you want on as many machines as you want, re-download as many times as you want with no time limit, automatic, optional patching, etc. Oh, and frequent sales. Seriously, Christmas in my family consists of waiting for the Steam sale to roll around and then just buying everything we were even remotely interested in.

    The one bug-bear with Steam is how games are priced. Australians are frequently hit with anywhere from 50-100% markups on games. Keep in mind that these are often bit-for-bit identical to the US versions, no localisation done, and we have to (effectively) pay for distribution. I don’t really blame Valve (Steam’s developer) for that; it’s the publishers who set those prices.

    I have a simple solution for these situations: publishers who inflate their prices [1] don’t get a single cent of my money (sales can change things, though, if they’re extreme).

    Maybe things are different with books, but maybe authors just need to accept that their works are going to be pirated no matter what they do; instead, they should be trying to encourage as many readers as possible to give them money by treating them with respect.

    You know, as opposed to punishing them for doing the right thing.

    [1] That and games with Games for Windows Live; that’s an automatic disqualification.

  2. I think #3 will work. I recently downloaded a pdf of big technical book to check it out, since I’m simply not going to buy an expensive book I can’t look through thoroughly first, and I’m trying to cut down on wood pulp. So I started reading it, found it to be good, and bought (to legitimize myself and reward the author) the kindle edition (so I can read it on the road, since I travel for work). I will keep the pdf I converted to text, so I can link to passages from the rest of my text-based note system, keep those notes in context, and cut-and-paste code samples into source files. I could do this, without context, by downloading my notes from kindle.amazon.com, but it’s less convenient. The only books I see a real point to buy in paper form are those well-printed, like art, architecture, or Tufte’s books; and kids’ books, since sitting with my son on the couch and reading a colorful book to him is totally worth it.

  3. I’m preaching to the choir here but another reason DRM is a bad solution is what happens to your locked content when the DRM host goes offline (PSN), no longer supports your OS platform, or stops doing business altogether and shuts itself down (MSN Music Store)?

    When the DRM host has a network outage, legitimate users – those who actually purchased the goods – cannot access the content they licensed while those who pirated the same goods aren’t affected.

    Millions of Windows XP users are going to be affected in the near future when content publishers drop support for the OS. Heck , Microsoft’s latest browser won’t even run on it.

    Lastly, when a business shuts down, all that money people spent on is locked into inaccessible content. Sometimes the publisher awards credits to their users – though usually to another DRM content publisher – but whether it’s a one-for-one or some arbitrary ratio is up to the host and not the consumer. And sometimes the publisher has no choice but to simply shutdown and close the door.

  4. I think that if the success of iTunes taught us anything, it’s that payed for content can exist in a world where it is all available for free. You have to rely on people’s good nature, but more importantly you have to make it *easier* to buy content than it is to download it for free.

  5. I was also going to mention iTunes. In fact any current online music service where you purchase tracks is DRM free now. And the success of iTunes and Amazon pretty much says that you can make money through convenience in the face of alternative “free” competition.

    The music industry still complains about the collapse of their CD sales, but I think in most cases that has been proven to be due to an abundance of alternative entertainment available now rather than piracy.

    The only use I can possibly see for DRM is a rental service, because otherwise there is no way to expire the rented material. But still it will be easily broken.

  6. You have to rely on people’s good nature, but more importantly you have to make it *easier* to buy content than it is to download it for free.

    I’d like to vehemently second this sentence. I, err, “know of a lot of people” who pirate things for this reason: Not because they are unwilling to pay, but because the publisher has made it prohibitively difficult to pay them.

    Is this ethically sound behaviour? No, definitely not. But most people won’t consider it to be that bad, and if you ask someone to choose between a convenient mildly naughty option and an inconvenient option they’re probably going to choose the former.

    Relying on peoples’ good nature only works if you keep them happy enough that they remain good natured.

  7. Oh, there’s lots of ways these problems might be overcome.
    * Micro-payments – as the price of reproduction has been reduced so should the price of product. In this way book publishing business is transformed from retail to service. Publishers make finding and downloading books much more convenient and readers pay for that convenience. The bet here is that customers are willing to pay small amounts of money for convenient access to essentially free items.
    * Services – authors can go back to being service providers (ie. bands go back to playing concerts). Writers can sell their books as tickets that provide access to services such as: lectures, error corrections, online discussions with the author…
    * Updates – authors can sell their works as services. An example of this would be Minecraft. While it is certainly possible to download a pirated version of the game it is far more valuable to buy the game as a service that enables you to play online and get frequent updates. As long as the author makes updates there’s virtually no way to get the latest version for free.

    So I have no fear for the future of authors. Copyright protection was envisioned as a means to stop others from creating a business distributing your work not as a means for individuals to make copies of it. It will probably revert to that role.

  8. It strikes me that users win, but it’s a Pyrrhic victory, as we destroy the model that’s funding the stuff we want.

    And to rubbish a few suggestions – books as as advert for services, lectures, personal appearances. Please! Why would I want to spend my valuable time making an effort to go and hear an authors opinion, as if we were living in some pre-literate age where workers attended lectures, when I can get the same thing at my own convenience by this wonderful invention called The Book?

    Ditto similar proposals like ‘playing live’ – they seem to ignore the fact that film, radio and record players, destroyed a huge live performance industry.

    We can’t re-invent it because it would be economically convenient that a live audience elsewhere subsidises our desire for a recorded performance in our pocket or car.

    I’ve got a great idea myself, it’s called the ‘somebody else should pay’ model.

    I dp like the idea of authors buying services from publishers, just as I like the idea of the same model for music. But the big thing that drives authors to publishers, or musicians to labels, is the difficulty of raising the money to pay for services (like studios, or artists) – the proverbial advance that lets you quit the day job.

    (It’s also not that different from those of us who seek employment by someone else, rather than being self-employed. We know we’d keep more of our income if we were self-employed – but then we’d be responsible for the income).

    And I don’t see that issue changing. There’s some lovely anecdotal successes for crowd-funding at the moment, but I don’t see it being a scalable solution (it has a kind of negative network effect – I am thinking of mySpace, where at first I listened to people who posted a ‘check out my band’ message, but over time, the signal-to-noise ratio got so high I stopped bothering with anything).

    What I can see happening there is a layer of curatorship evolving (i.e. trend-setters, or the new equivalent of commissioning editors) – but those people being paid directly on their reputation for quality – there’s always going to be a model for filters or channels. But it could be multi-party rather than exclusive (like professional charity fund raising)?

  9. Thanks to all — lots of good comments, which I’d like to engage with more closely if I had time. But I’ll just pick out a few things.

    First, Daniel’s point about Steam, that they provide a whole bunch of services, of which DRM’d access to the games is only one. That’s appealing, and obviously seems to be working for them. But I’d still worry about what will happen when Steam go away. Right now, I know that my physical copy of Just Cause 2 will continue to work if Square Enix go belly-up. I wouldn’t feel so confident about anything I’d bought from Steam. (bwsd made a similar point.) Can someone who knows Steam tell me whether I am mistaken?

    I echo Jason Catena’s observation that people will often buy copies of material they have already freely downloaded, in order to “legitimise” it. (I have done this many times with CDs.)

    Yes, as Pete and Jody point out, the success of services selling DRM-free MP3s is encouraging. My feeling is that it’s still too expensive, though: for example, I’m interested in buying MP3s of Richard Shindell’s album Somewhere Near Paterson, but the price of £6.99 for digital files just feels over a line to me. I think I’d buy it without hesitation at £5. (This may be less of an issue for people who listen to songs rather than to albums.)

    I love David R. MacIver’s observation that Relying on peoples’ good nature only works if you keep them happy enough that they remain good natured. That ought to be tattooed onto the insides of the eyelids of every executive at every media company.

    I’m encouraged by Goran’s list of other ways authors and publishers might make money in a world of abundant free perfect copies, even though I share JulesLt’s skepticism about some of them. The broader point is that there are other models.

  10. I think Cory Doctorow got it right with making all of his writing completely free and downloadable. And I mean free as in beer and speech. This results in people taking it and doing things with it like writing a screen play version to be acted on stage, but the most effective I think is it lets people translate his work to different languages and different formats for eReaders, iPods, etc, which all makes it more accessible.

    In my case, I only discovered Doctorow because he made his work freely available. I like finding new authors, but the investment of my time of seeing if I actually like them is prohibitive, I’ve tried reading new authors too many times to only find I think they’re crap. Now, I like Doctorow enough to buy his books, if anything because I feel he’s good enough that I would like to pay him for me enjoying his work and also because I want him to continue writing.

  11. My feeling is that it’s still too expensive, though: for example, I’m interested in buying MP3s of Richard Shindell’s album Somewhere Near Paterson, but the price of £6.99 for digital files just feels over a line to me. I think I’d buy it without hesitation at £5.”

    I only ever buy albums, and the 9.99€ for most new albums in iTunes is seems quite okay for me. At the 10€ mark the ease of finding things in iTunes (and the legality) beats searching online. My time has value. Although much above that and I start to think twice.’

    That is compared to a new CD in the shops which is easily 20€ and I have to wait to get that (and then rip it).

  12. Interesting, then, that Jody and I have dramatically different “that’s cheap enough” points — given that a Euro is worth nearly a pound now (89.75p now, according to Google), he’s prepared to pay about twice as much as I am. But it sounds like hardcopy CDs cost more where he lives, too.

    In the case in hand, I see that a vendor on Amazon.com will sell me a second-hand Somewhere Near Paterson CD for $5.23. Even including transatlantic shipping, that’s going to come out cheaper than Amazon.co.uk MP3s. I don’t see how that’s sustainable.

  13. Mike: If Valve implodes, the very likely outcome is that a library of Steam games could go up in a puff of smoke. I’ve read a number of times that Valve have promised to, in the event the Steam authentication servers are taken down, provide a means for people to continue playing their games. I can’t actually find a citation for it, so it may just be made up.

    The possibility does worry me a bit, but I look at it this way: almost every alternative is worse. Since I’m a PC gamer, just about every new game has some form of DRM on it; I could do a lot worse than Steam.

    Actually, you can do a lot worse while still using Steam: some publishers bolt their own DRM on top of Steam (I can’t imagine why aside from sheer bloody-mindedness). The most infamous recent example was Assassin’s Creed II which required you to maintain a connection to Ubisoft’s DRM servers at all times. If your connection drops, the game pauses. If it fails to reconnect, you’re booted out of the game.

    Console games aren’t really that much of an option since there’s plenty of games that never come out on consoles, trying to play an FPS on a game pad is like trying to steer a cow in a shopping trolley with a fifty-foot pole and you lose out on mods, editors, etc.

    So for the moment, Steam is the (significantly) least of the evils.

  14. One point I forgot to mention: the DRM servers for Assassin’s Creed II did actually go down when the game was released, thus demonstrating yet again that the only people who don’t suffer because of DRM are the pirates.

  15. Interesting, then, that Jody and I have dramatically different “that’s cheap enough” points

    I’m just lazy :-).

    I am in Finland. For example something recent, “Lady Gaga, Born This Way”, retail price 19.95€. Although you can get discounted off the net, even locally. Here iTunes ranges from 5€ to about 12.99€ with most new releases being 9.99€. There are a few local MP3 stores as well, but their prices are quite similar.

    I still buy physical Bluray/DVD for movies though. Mostly because they are generally cheaper than it costs to go to the theatre. And also because there are few/poor online options here. Especially lacking is anything close to the quality of a good HD Bluray.

    TV programs are a totally different matter though, especially for the new big thing (e.g. Game of Thrones). I know many people, myself included, who would think nothing of getting the latest series off the net. Especially when it is available in HD with 5.1 sound compared to crappy SD and stereo on local TV. Not to mention the fact it will be weeks or months later on TV.

  16. This comment section isn’t really appropriate for long discussions on the subject, but I think JulesLt might have gotten the wrong idea. I’m not saying authors and/or publishers can retain the same amount of income changing their business model. To borrow from N. N. Taleb, the former is scalable while the latter is not.
    Also, lectures and live concerts are very different from books and recordings, so you can’t really compare them and say one is better. And less we forget, live performances were the way authors made their living back in the day. So removing copyright will not make art disappear – it might actually make it better.

  17. As Jules said above, I think it will indeed be a Pyrrhic victory. The scarcity model was the moat that made investing in the castle a viable economic model. The greater the moat, the more could safely be invested in the castle. Zero cost duplication means zero moat. This means the only wide-scale model (baring special cases like Doctorow, etc.) for investing in the creation and/or production of digital content is ad-based (of limited value, depending on the genre) and having an ax to grind, which reduces the value to the consumer.

    In the book-writing industry I believe we are already seeing the first effects of the drying-up of the moat – reduced output of existing authors and a dwindling supply of new ones as it becomes increasingly difficult to obtain an advance that permits full-time investment of energy in the project. It’s all very well to do something for love of the art, but you have to pay the bills somehow. This is not necessarily a bad thing, or at least altogether bad. The scarcity model has enabled the creation of so vast a collection of such priceless material over the centuries of its reign that it is hard to see what will replace it, but something inevitably will.

    The long-term result will, I think, be a different type of scarcity, not that resultant of the cost of reproducing a physical medium, but a scarcity of content itself. The danger is that in the breaking down of the model wherein the consumers pay the suppliers for what they consume, the free market has shot itself in the foot and has made itself vulnerable to distorting interference, much as middle-age and Renaissance artists needed patronage.

  18. Andrew Hickey

    I don’t know if this makes a difference, but it’s a data point. My three books so far have been 90%+ stuff that’s already been posted on my blog – they’ve been proofread, fact-checked, and some other bits put in, and there’s value in the editing etc, but you can get almost all of it on my blog. I make, on average £50 per book per month – almost all out of ebook sales, almost all from people who’ve already read some or most of the content for free, none of it DRM’d. And that’s with no promotion other than a couple of posts on my blog when each book comes out saying “buy my new book”.
    I think option three is more possible than it first appears ;)

  19. Goran – my point is that we can’t appeal to back-in-the-day models because we have MP3 players and books now. I don’t go to as many live concerts as I used to 20 years ago, precisely because I have so much entertainment available instantly at home.

    Further thoughts (not related to Goran’s comments).

    1) Just because we CAN do something with technology doesn’t mean it is socially desirable that we should – there is nothing to physically stop me driving a car at 50mph through a residential area, or playing my stereo at full volume. The Law is restricting what I can do with technology I own.
    (And copyright itself was a reaction to printing becoming a relatively cheap and widespread technology).

    2) Models that suggests that B (the thing people want) should simply be an advert for A (the thing a far smaller number of people will pay for).

    They seem to be based around the idea that B is what the author, musician, etc, has some deep desire to produce. But I’m not sure – The Beatles seem a good demonstration to me – it’s hard to believe they’d have created Revolver if their main focus had been on using recorded music to get people into gigs, for instance – largely because the focus of what they would have been doing every day, would have been so different.

    Of course, we don’t know what we missed in the same process, just as we won’t know what we’re missing in the future, because attention will be on what IS.

  20. The real threat to publishers isn’t piracy, it’s Amazon.

    It’s easy to forget, but most users aren’t even technically savvy enough to use bittorent. Those who do, often aren’t savvy enough to avoid downloading viruses. It’s really not that hard to deter the majority of pirates. You just need to give them an easier alternative. Amazon, Steam, and Apple, have all solved this problem.

    Publishers on the other hand, are the wrong people to deal with IP issues. They can’t bring the necessary engineering talent and infrastructure to bear to make their own Kindle Store. For this reason, engineering firms like Amazon are eating traditional publishers lunch. For every book over $9.99 on the Kindle Store, Amazon takes a 70% cut.

    This process began way before the Kindle Store. Even plain old Amazon.com cuts into publishers profits, for the same reason that Walmart can eat into their suppliers profits. Since they control distribution, they can dictate whatever terms they feel like, and publishers have no choice but to accept or be left out in the cold.

    The same pattern is going to be happen over and over again. Tech firms will come up with a way to break into new businesses and gobble up the traditional players.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s