Futurismic

Andrew Wheeler wants people to stop saying that ebooks don’t cost publishers lots of money to make:

Creating an individual ebook format — one of the current suite of them — costs roughly as much as creating a print-on-paper edition; the costs of the actual paper and ink are vanishingly small in this equation. Some ebook formats, such as the currently fashionable one, have a baroque process of creation that involves multiple transformations and iterations of quality control, which drives up costs further. And the cost per unit is massively higher for ebooks than for printed books — infinitely so in some cases, since there are plenty of ebook editions that have never sold a single copy.

Now, I feel the need to respond to this post, because I’ve chimed in on ebook economics before and it’s a topic I care a lot about. However, I’m going to first point out that I have a great deal of respect for Andrew Wheeler, both as a blogger and an editor, and I’m fully aware that he knows a lot more about the inner workings of the publishing industry than I do; I’m not going to tell him he’s wrong, because he isn’t. I’m not going to refute the claim that ebooks currently cost a lot of money to make. I am, however, going to say that they shouldn’t cost a lot of money to make, that they don’t have to, and that the longer they do, the smaller the chances of them ever becoming a viable industry in their own right.

Part of this isn’t the fault of the publishers; as Wheeler points out, there are a dozen competing ebook formats with arcane creation processes; there are DRM frameworks; there are ebook vendor requirements that predicatably take advantage of the over-the-barrel status of the publisher and milk them for as much as they think they can get away with. This is pretty much how new technologies always work; I can see parallels with the digital music business as it meared the Napster era. The publishers dragged their feet then, as well, and in the process allowed an openly accessible file format (the mp3) to gain ascendancy in a series of distribution networks that they had no investment in or control over. I expect book publishers are well aware of this parallel; what surprises me is that they’re not talking to the consumers about it more actively.

I do need to quibble on one of Wheeler’s points:

… the cost per unit is massively higher for ebooks than for printed books — infinitely so in some cases, since there are plenty of ebook editions that have never sold a single copy.

Now, again, I’m not saying he’s wrong here – he’s seen figures and spreadsheets that I’ll never be shown, of that I’m certain. But if you’re running a set-up where the per-unit cost of an infinite good is higher than that of the physical finite version, either there’s something massively wrong somewhere in the production chain, or my understanding of the publishing process has a huge flaw which I would sorely appreciate being corrected on.

Allow me to explain: some of you may be aware that I work for UK small press PS Publishing. Now, we don’t sell ebooks (yet), but we make PDF versions of our books available to reviewers. Those PDFs are almost identical to the file we send to the printers, except for being saved at a lower resolution to save on disk space and download times. In other words, the work to produce a template for the reproduction of a physical book or an electronic one can be exactly the same; the same editing, proofing and typesetting/layout process, all the way up to the stage where the book is released to duplication.

The obvious answer to that statement is “well, you’re using PDFs and no other formats, so of course it’s easy”. Well, yes; and that’s kinda my point – if the publishing industry continues to allow intermediary vendors to shaft them with ludicrous hoop-jump requirments and costs for multiple proprietary formats, then they’re never going to make a dime out of selling ebooks. There needs to be a concerted push by the industry for a single, simple and secure digital format that everyone uses; then leverage can be applied to the makers of reader hardware to support that format, plus the formats used by public domain material (e.g. the humble and ubiquitous PDF, which is either unsupported or charged for on most current readers of which I am aware).

Part of the establishment of that file format should include software for easy conversion of proofed electronic galley files directly into it, so that once a book is ready for printing, it’s also ready for ebooking in one click. At this point, there’s no way the per-unit cost for ebooks can be higher than print, because that ebook is ready to ship, and any intermediary vendors should be willing to eat the storage and distribution costs out of their final to-consumer price. If they’re not, you go with the one who will; the rest will soon follow. Now, sure, you’ve still got your marketing and promotion budget to consider in to that per-unit cost, but that’s the same outlay for both editions up to this point in the process, and with a digital format that cost is spread over a theoretically infinite number of units at no extra cost.

By comparison, after that final file is deemed ready for production, printed books must be printed, warehoused, shipped, lifted onto shelves in brick-and-mortar stores and run past the till scanners there, too… and all that money has to be coming from the profit margins. By any rational analysis from outside (with the caveat that I’m not an economist or an accountant), that must cost more than making digital books available; I’m prepared to believe that there may be reasons that it doesn’t, but I’d suggest that those mysterious reasons point to a heroic flaw in the economics of book publishing as it stands.

To reiterate: I’m not saying Andrew Wheeler is wrong to say that ebooks cost more to make than dead-tree books; I’m saying that disparity in cost is impossible to understand for anyone not privy to the way the system works – people like me, and people like the ones who want to buy ebooks but find them either unavailable due to antiquated regional licencsing, hobbled or useless thanks to proprietary and restrictive file formats, or just simply too damned expensive by comparison to the dead-tree version.

Wheeler’s final point s that many ebooks never sell a single copy, which surely only underlines my point that making every effort to reduce that inexplicably high per-unit cost is the only way to make them a viable business. As Blue Tyson says in the comments below the post, “[p]ricing them double is a pretty good strategy to sell zero, certainly.” If your current system means you have no choice but to charge an arm and a leg for an infinte good, your system is surely broken. I think part of the problem is considering the physical and electronic versions as two separate products; that proofed and typeset file is the product, and the ebook or bound paper are just the delivery systems for it.

Now, I’m fully prepared to admit that there are things I don’t know about how the system works, as mentioned above. The point I’m trying to make here is that until the consumer has been shown why that price must be so high, they will never stop complaining about it. I’d genuinely like to know the truth of the matter, and as such I’d like to invite Andrew Wheeler (and anyone else with the pertinent experience and knowledge) to set us straight; I’ll happily publish a response here, or link to it if published elsewhere. Sunlight is the best disinfectant, so they say.

The common wisdom of record labels and publishing houses alike is that the redistribution of infinite goods – digital music files, say, or ebooks – will be the doom of the industry: if no one needs to pay for the end product, the end product will eventually disappear, as will the jobs that currently create said product.

Now, that seems logical enough, doesn’t it? But that’s because we’re used to thinking in terms of artificial scarcity. Jon Renaut has sat down and written out an analogy to explain why he thinks the conventional wisdom about infinite goods is wrong… and it’s based on the replicators from Star Trek.

A better analogy [for the music or publishing industry] would be if the replicator only made tomatoes. You could have as many tomatoes as you wanted, they’d always be perfect and delicious, and they’d always be free. This would put tomato farmers out of business. But these tomato farmers could likely start growing something else instead. And what happens to the rest of the economy? Pizza and pasta restaurants suddenly find that a major ingredient in many of their dishes just became free. Now, for the same dish, they can charge less, or buy higher quality ingredients, or make more profit. And if you’re a really talented cook specializing in tomatoes? Your skills are now in very high demand.

And there is still a demand for the people who bring the tomatoes from the replicator to your table. There is still a demand for the person who stews and cans the tomatoes, or dices and seasons them. And all the other food items, the ones that aren’t in infitnite supply, still need people to produce, process, and distribute them.

This is what’s happening in the music industry, and starting to happen in the publishing industry. Some parts of the industries are finding their functions obsolete. Instead of looking at the money they could save with electronic distribution, and what good use they could put that money to, the industry is seeking new laws and regulations to limit the infinite supply so business can continue as usual.

Even if every single song, book, and movie was distributed digitally for free, there would still be a need for the music, publishing, and movie industries. There would still be demand for editors, producers, marketers, and all sorts of other services that these industries have always provided.

As is discussed in the comments, the analogy doesn’t hold for other non-infinite goods – medicines, for example. But for goods that can be duplicated endlessly without degrading, there’s plenty of opportunity to build value-adding business models around the free stuff. [via TechDirt]

Your thoughts?