Amazon, ebooks and piracy – tipping points ahoy?

Paul Raven @ 21-01-2010

Sticking with the piracy theme for a moment (yeah, I know, so out of character, right?), here’s an article at TechRadar that features an interview with one George Walkley, head of digital developments for publishers Hachette UK, talking about ways in which the publishing industry has tried to learn from the spectacular blunders and ostrich impressions of the music recording industry – the issue of file format compatibility, for instance. [image by Eirik Newth]

Says Gary Marshall the journalist:

Digital downloads weren’t cheaper than CDs, and for now at least ebooks probably won’t be cheaper than print. That’s partly because most of the costs apply whether you publish a book on paper or on an iPhone, and it’s partly because of tax: “printed matter” books are zero rated for VAT, whereas electronic ones have to charge the full 17.5%.

It’s a weird anomaly, and if we were in the book business we’d be lobbying Alistair Darling like crazy to get electronic books treated the same as printed ones.

The challenge for publishing is to avoid being seen as greedy. In music, the debate quickly became characterised as The Man versus The Kids, where The Man was Bono, his celebrity mates and their filthy rich record companies.

In reality, most musicians are struggling to pay the rent, but that’s not what the average file sharer thinks.

This is very true… as is the article’s revelation that the book-buyer demographic and the music pirate demographic are very very different. But as a side note, I’d point out that almost all musicians (and, I suspect, the vast majority of novelists) have been struggling to pay the rent for decades, and that the exceptions to that norm – the Bonos and McCartneys and Rowlings of the world – have been enthroned on their disproportionate mountains of cash by the same business models that are now collapsing under the pressure of filesharing.

I’d even go so far as to say that the business models in question have gone some distance toward ensuring that the smaller names in music and writing can’t make a reasonable living wage at it; if there’s [x] amount of money sloshing round in the economy that people are willing to spend on entertainment, then the way that money is divided up between the entertainers is controlled by the distribution and publicity systems of the industries that publish them.

The utopian promise of The Long Tail is that the more obscure artists will have a better chance of being discovered by readers or listeners who will enjoy (and hence purchase) their work, while the megastars will wane to a more modest brightness as the monopoly control their publishers had over the formerly-limited channels of publicity and sales frontage is eroded. Whether that utopia arrives or not remains to be seen; personally, I think we’re headed in that direction, but it will take hard work from the publishers to avoid creating the black-market demand that buried the big record labels. I want to see the artists I enjoy get paid, and I’m happy to pay them… but the price has to be right, as does the share that goes to the creator. Walkley is wise to this, it seems:

“Copyright infringement cannot be prevented altogether, only reduced,” he says. Speaking personally, he says he’d like to see action against the most egregious offenders – but he also says that the key is to give consumers what they want.

“One of the most important things we can do is to make the purchase of legitimate ebooks as easy and as convenient as possible and produce a broad range of titles in digital formats,” Walkley says. It’s a lesson that took the music industry more than a decade to learn.

Amen. And right on the tail of that article comes an announcement from Amazon, wherein they try to sweeten the deal on Kindle-based ebook pricing for publishers:

Amazon.com […] today announced details of a new program that will enable authors and publishers who use the Kindle Digital Text Platform (DTP) to earn a larger share of revenue from each Kindle book they sell. For each Kindle book sold, authors and publishers who choose the new 70 percent royalty option will receive 70 percent of list price, net of delivery costs. This new option will be in addition to and will not replace the existing DTP standard royalty option. This new 70 percent royalty option will become available on June 30, 2010.

Delivery costs will be based on file size and pricing will be $0.15/MB. At today’s median DTP file size of 368KB, delivery costs would be less than $0.06 per unit sold. This new program can thus enable authors and publishers to make more money on every sale. For example, on an $8.99 book an author would make $3.15 with the standard option, and $6.25 with the new 70 percent option.

It’s a generous offer, but it looks to me like Amazon wants to be the iTunes of books – which is an understandable business goal, certainly, but hinges on locking publishers and consumers alike into one proprietary and intrinsically limited hardware platform. I suspect that once Steve Jobs has delivered his next sermon to the Fapple faithful, and the much-vaunted Tablet paves the way for cheaper and more open equivalent hardware, the range of affordable and open devices upon which ebooks can be read comfortably will mushroom.

Will the publishers be ready with the right formats at the right price? Will the book-buying demographic be more willing to compromise than the BitTorrent kids? I guess we’ll just have to wait and see.

[ Full disclosure: I have done freelance work for Hachette UK, and George Walkley is an acquaintance of mine. ]

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6 Responses to “Amazon, ebooks and piracy – tipping points ahoy?”

  1. pulo says:

    For example, in music there is a very expensive, heavyweight legacy intermediary, the music industry, that siphons off money that could go to artists. Ironically the music industry says it does this for the artists. Legitimately, it played a part in bringing music to the masses when producing and marketing music was expensive to scale. Maybe when the Internet finishes disintermediating this industry, and consumers can always directly buy from artists or sites from which artists directly receive payment, then artists will do as well as the market values their work.

  2. Adam Roberts says:

    V. interesting piece Paul. The only bit I’d take exception to is: ‘if there’s [x] amount of money sloshing round in the economy that people are willing to spend on entertainment…‘ I don’t think it’s zero-sum like this. The key to the game is bring more people into a wider sense of culture; e-platforms make that easier, not harder.

  3. Rick York says:

    Paul,

    I recommend you take a look at Charles Stross’ post on his website: http://www.accelerando.org/

    The post is titled “The Monetization Paradox (or why Google is not my friend)”. As is usual with Charlie, the post is thoughtful and full of insight.

    There are already 162 comments on the post, most of which are ideas for monetizing an author’s work. Almost all, in one way or another, are models that take advantage of internet publishing.

    I note in my own comment (either #100 or #101) to Charlie’s post that one of the biggest problems with earning money for any type of publishing on the net is advertisers’ failure to properly value online advertisements. That also goes for all kinds of publishing.

    This will eventually all work out but, a great deal of damage will be done getting to that future. Most of the damage will be irreparable.

  4. Patrick H says:

    I wonder how this development will effect the sell-on in books? For most of my book buying life (most of my life, therefore!) I have gotten a large proportion of my books from libraries or second hand.

    Can you buy a secondhand ebook? Although we talk about the publishers’ losing monopoly over the content, the resale of books etc – where not a penny goes to publisher or artist – will become impossible. Can I get an ebook out of the library? This one might be a double edged sword, because libraries buy lots of books, of course. I imagine these numbers are quite dependable, and guaranteed sales like that are likely important to publishers. So, whatever gain is made from cutting off this competition will be mitigatedby the loss of library sales.

    Already, amazon sellers and ebay have decimated the second hand bookshops – there used to be half a dozen good ones in Greenwich, but only one remains. On the other hand, I guess there’s more on Project Gutenberg than you could read in a lifetime, and it’s all free!

    Patrick H

  5. Charlie Stross says:

    Adam @2: there is a zero-sum game in train to some extent; the issue is that there are only 168 hours in a week, and only 3600 seconds in each hour, in which to be entertained.

    In other words, the scarce currency is time, not money.

  6. Adam Roberts says:

    Charlie @5. I take the force of that, of course. But I’d still say that a good deal of DRM/platform bickering is fighting over a small base of dedicated consumers of (eg) novels. What we need to do, and what new platforms provide an opportunity to do, is to reach out to the much much larger group of people who don’t read SFF books — or perhaps any books. They do like SF though (that Avatar has taken $1 billion dollars is evidence of that). And they would like SF, if they tried reading it.

    Put it this way: we need to reach the guy I sat opposite on the train yesterday who spent the whole journey from Colchester to Liverpool Street playing Bejewelled 2 on his iPhone. We need to put the idea in his head that he could have spent his time reading a Charlie Stross novel on his iPhone. Had he done that he would have achieved his primary aim, for the time would have passed without tedium; but he would have done a lot more, in terms of entertaining himself, and stimulating his brain, and engaging his emotions and so on; and then in short order he would be seeking out all the other Charlie Stross titles, and not only filling dead time like commuting time with them, but actively rearranging his days so as to make more time for reading. Bejewelled 2 cannot do this; but high-end content like good literature can.

    It wouldn’t have to be a Charlie Stross novel, of course. It could be a China Mieville novel.