Tag Archives: economics

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Amazon vs. Macmillan: ebook armageddon!

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Unless you’ve been sleeping under a large rock that blocks wi-fi and cellphone signals for the last three days, you’re probably already aware of the Amazon/Macmillan ebook pricing spat that kicked off late last week. We’re hearing a lot about it in the sf-nal blogosphere, what with Tor Books being a Macmillan subsidiary as well as one of the biggest genre fiction publishers around. [image by tvol]

But just to bring you up to speed, here’s a few bits of commentary from the author’s side. First, Cory Doctorow points out that the war between these two businesses will end up harming writers and readers most of all:

If true, Macmillan demanding a $15 pricetag for its ebooks is just plain farcical. Although there are sunk costs in book production, including the considerable cost of talented editors, copy-editors, typesetters, PR people, marketers, and designers, the incremental cost of selling an ebook is zero. And audiences have noticed this. $15 is comparable to the discounted price for a new hardcover in a chain bookstore, and it costs more than zero to sell that book. Demanding parity pricing suggests that paper, logistics, warehousing, printing, returns and inventory control cost nothing. This is untrue on its face, and readers are aware of this fact.

If true, Amazon draping itself in the consumer-rights flag in demanding a fair price is even more farcical. Though Amazon’s physical-goods sales business is the best in the world when it comes to giving buyers a fair shake, this is materially untrue when it comes to electronic book sales, a sector that it dominates. As mentioned above, Amazon’s DRM and license terms on its Kindle (as well as on its Audible audiobooks division, which controls the major share of the world’s audiobook sales) are markedly unfair to readers. Amazon’s ebooks are locked (by contract and by DRM) to the Kindle (this is even true of the “DRM-free” Kindle books, which still have license terms that prohibit moving the books). This is not due to rightsholder-demands, either: as I discovered when I approached Amazon about selling my books without DRM and without a bad license agreement for Kindle and Audible, they will not allow copyright owners to modify their terms, nor to include text in the body of the work releasing readers from those terms.

Next up, a pretty good economic deconstruction of the situation from Charlie Stross:

From the point of view of Jeff Bezos’ bank account, Amazon is the entire supply chain and should take that share of the cake that formerly went to both wholesalers and booksellers. They do this by buying wholesale and selling retail, taking up to a 70% discount from the publishers and selling for whatever they can get. Their stalking horse for this is the Kindle publishing platform; they’re trying to in-source the publisher by asserting contractual terms that mean the publisher isn’t merely selling them books wholesale, but is sublicencing the works to be republished via the Kindle publishing platform. Publishers sublicensing rights is SOP in the industry, but not normally handled this way — and it allows Amazon to grab another chunk of the supply chain if they get away with it, turning the traditional publishers into vestigial editing/marketing appendages.

The agency model Apple proposed — and that publishers like Macmillan enthusiastically endorse — collapses the supply chain in a different direction, so it looks like: author -> publisher -> fixed-price distributor -> reader. In this model Amazon is shoved back into the box labelled ‘fixed-price distributor’ and get to take the retail cut only. Meanwhile: fewer supply chain links mean lower overheads and, ultimately, cheaper books without cutting into the authors or publishers profits.

Amazon are going to fight this one ruthlessly because if the publishers win, it destroys the profitability of their business and pushes prices down.

And here’s Tobias Buckell trying to explain the situation to people who think authors are being greedy by having ebook versions of their books available at high price points (as if they had the choice). It’s a lengthy post that goes into considerable detail about the costs of publishing ebooks, and takes on the perspective of both readers and writers in a down-to-earth way, so do go and read the whole thing.

… price fixing is not the answer to the eBook dilemma. Letting volume grow from the single digit percentages it is, while giving publishers the flexibility to experiment and play is not the end of the world some claim it to be.

So Amazon has the right to pull the list. It’s part of the negotiating game. They did this to Hachette UK earlier this year in the same manner to force Hachette to play the game according to Amazon’s rules, as it set them up when Amazon first started selling Kindle books. Hachette folded, Amazon views this as a way to get publishers to do what they want.

The reason Macmillan is asking for a change in the way things are done, is because Apple has released an new program, and it offers publishers a program more in line with what they think will work: including some flexibility in early release prices. This now means Kindle is not the big kid anymore, as many are assuming Apple will pull a repeat iTunes store.

Whether or not that happens, I don’t know. But Amazon seems to find the nuclear option okay, and after years of working to send them a lot of business, this is a reverse blow. Because of my online presence, over half of all my print and eBooks are sold via them. Just as they have the right to do this, I have the right to be pretty friggin’ pissed that they think this is the way to negotiate, or build good will in any way.

And here’s some high-snark disparagement from John Scalzi, who points out that – regardless of economics, fairness or anything else – Amazon’s poor handling of the whole fracas is a public relations SNAFU of massive proportions that may well end up doing exactly what they didn’t want it to:

Amazon apparently forgot that when it moved against Macmillan, it also moved against Macmillan’s authors. Macmillan may be a faceless, soulless baby-consuming corporate entity with no feelings or emotions, but authors have both of those, and are also twitchy neurotic messes who obsess about their sales, a fact which Amazon should be well aware of because we check our Amazon numbers four hundred times a day, and a one-star Amazon review causes us to crush up six Zoloft and snort them into our nasal cavities, because waiting for the pills to digest would just take too long.

These are the people Amazon pissed off. Which was not a smart thing, because as we all know, the salient feature of writers is that they write. And they did, about this, all weekend long. And not just Macmillan’s authors, but other authors as well, who reasonably feared that their corporate parent might be the next victim of Amazon’s foot-stompery.

[…]

And all of this is why a final, ironic bit of Amazon fail will come to pass:

7. Because Of the Idiotic Events of This Weekend, People Will Just Want an iPad Even More.

Again, Amazon: Well played. Well played indeed.

I’ve no idea how soon this matter will be settled, but the economics behind the situation aren’t going to go away, and ripples from this particular rock-in-the-lake will be washing ashore for some time to come. Personally, I want a fair deal for the authors first and foremost… and as much as I’ve long been an advocate of the free-to-read and freemium business models for publishing, I find myself worrying for the first time as to whether or not there’s enough expendable money in the system to support the literary ecosystem as it exists today. Here’s hoping.

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Econopocalypse scenario #3654: the Fat-finger Collapse

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Ars Technica has an interesting article about a couple of recent stock-market glitches caused by high-frequency trading algorithms run amok. Long story short: a screw-up at Credit Suisse was caused by “a trader who accidentally double-clicked an icon in a trading program’s interface, when he should’ve single-clicked“.Yipes.

OK, so it’s not quite the same as a tired technician leaning on the nuclear launch button by accident, but given the utter dependence we have on the instruments of high-speed high finance, similar mistakes could cause global catastrophes. [image by Coffee Maker]

The problem is connected to so-called “day-traders”, computer-assisted stock deals that occur in the blink of an eye, often without much human interaction, and minor errors are amplified at the speed of light (or at least the speed of data in optical fibers) by the networks, causing fluxes that folk like you and I never notice, but which cost bankers and investors thousands of dollars in losses and fines…

Of course, the fact that such computer-driven volatility hurts day traders matters little to long-term investors. But the fear is that these glitches are fleeting indications that the system as a whole is vulnerable and unstable, and that the right combination of circumstances could cause what happend to RMBS to happen on a wider scale. This is especially true as even more of the trading activity, even among individual traders, shifts to automated platforms.

However, it’s not all doom and gloom; the last few years have seen a sharp increase in small trading firms of the two-guys-and-a-fast-computer type, small independent operators using the same techniques as the big banks to trade automatically through the blind of commercially-available trading software.

The Obama administration’s efforts to rein in high-frequency trading by eliminating flash orders and banning proprietary trading (much of which is HFT-based) from large banks will probably have the effect of leveling the playing field a bit for these smaller algo shops. As Matthew Goldstein at points out in his Reuters article on the topic, the prop desks may disappear, but the software and expertise will not. Instead of being concentrated at a few large banks, algo trading will just spread, as the talent behind it either jumps to new funds or goes solo.

Once again, the network corrodes hegemony… but whether a world where anyone and his dog can engage in automated high-frequency wheeler-dealing will be a safer, better and richer one remains to be seen.

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Chris Anderson on the “new industrial revolution” of bespoke manufacturing

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Wired ed-in-chief Chris Anderson emerges from the back rooms once again with a lengthy piece lauding what he calls “the next industrial revolution” – which is, in essence, the imminent explosion of small companies using modern fabrication equipment and outsourcing techniques whose agility and low overheads will enable them to sweep away the old guard of corporate giants. [image by oskay]

That’s the theory, anyway, and it should be fairly familiar to regular Futurismic readers: we’re talking consumer-price-point 3D design software; 3D printing and fabrication; outsourced manufacturing; garage-industry electronics assembly techniques; open-source designs; hardware and software hacking; crowdsourcing for ideas, designs and feedback. You should read the whole thing, but here’s a slice that captures the spirit:

Here’s the history of two decades in one sentence: If the past 10 years have been about discovering post-institutional social models on the Web, then the next 10 years will be about applying them to the real world.

This story is about the next 10 years.

Transformative change happens when industries democratize, when they’re ripped from the sole domain of companies, governments, and other institutions and handed over to regular folks. The Internet democratized publishing, broadcasting, and communications, and the consequence was a massive increase in the range of both participation and participants in everything digital — the long tail of bits.

Now the same is happening to manufacturing — the long tail of things.

The tools of factory production, from electronics assembly to 3-D printing, are now available to individuals, in batches as small as a single unit. Anybody with an idea and a little expertise can set assembly lines in China into motion with nothing more than some keystrokes on their laptop. A few days later, a prototype will be at their door, and once it all checks out, they can push a few more buttons and be in full production, making hundreds, thousands, or more. They can become a virtual micro-factory, able to design and sell goods without any infrastructure or even inventory; products can be assembled and drop-shipped by contractors who serve hundreds of such customers simultaneously.

Today, micro-factories make everything from cars to bike components to bespoke furniture in any design you can imagine. The collective potential of a million garage tinkerers is about to be unleashed on the global markets, as ideas go straight into production, no financing or tooling required. “Three guys with laptops” used to describe a Web startup. Now it describes a hardware company, too.

From a globalist perspective, it’s pretty optimistic – as you might expect from the guy who came up with the concept of the Long Tail. That said, it’s not what the big corporations want to hear… and that’s probably the main stumbling block between the here and now and Anderson’s entreprenurial utopia. It’s become embarassingly obvious how much of a hold corporate America has over the engines of policy, and it probably won’t take much effort to spin Anderson’s vision into a dark and unpatriotic future where American manufacturing jobs are sent overseas (to those sneaky Chinese, no less!), garage makers are enemies of freedom (and probably a glass fiber’s breadth from becoming terrorists), and the people’s right to not be shafted by those who already hold all the aces is swept under the carpet so as to maintain a precarious economic status quo.

OK, so I’m overstating for effect, there… but you can see where I’m going with this, I hope. Given the staggering levels of obfuscation and deceit involved with the US healthcare reforms, I can’t see Anderson’s revolution happening without some serious back-room dealing and political psy-ops from those who stand to lose the most from it. And I doubt it will be a uniquely American problem, either; the government to which I pay my taxes is just as compromised, albeit in slightly different ways, and the richer countries of the Old World are all in the same boat.

What remains to be seen is whether Anderson’s maker revolution is an economic inevitability or an avoidable alternative. It’ll come as no surprise to most of you who read here regularly that I’d like nothing more than to see the bloated corporate behemoths of the world get their shoes wet while doing a King Canute impersonation, but only time will tell. This is one story where we can’t just skip to the last page to find out the ending; let’s just hope we don’t get squashed by the plot mechanics, eh? 🙂

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The Product Bay – piracy goes 3D

Well, it was bound to happen – hell, Sven’s been writing columns that skirt around the idea for ages. Here’s the lowdown: 3D printing is maturing quickly, and 3D scanning isn’t far behind, meaning that material objects can be stored and transmitted as digital data. Digital data can be shared in many different ways, and – as the recording industry has learned the hard way – illicit filesharing is, for all intents and purposes, an unclosable Pandora’s box. So what’s to stop people trading, sharing and printing off copies of copyright-controlled objects – shoes, clothing, homeware, car parts, whatever?

The answer – nothing. Nothing at all. Welcome to The Product Bay:

RepRap and other 3D printers are the future. There’s no question about it. With the proud tradition from The Pirate Bay, we want to take all of this to the next level. TPB will be TPB, but for real life objects. For now, visit Thingiverse who already understands this.

We want you to download those new jeans.

We want you to share those new shoes.

It’s possible, let’s make it happen.

Granted, The Product Bay is just a one-page site with a provocative message, and I rather suspect it has been launched with the purpose of starting a conversation more than any real hope of kicking off the world’s first tracker site for digital files of real-world objects… but it’s also a harbinger of things to come, and the big-brand companies that aren’t scared by the idea should probably start planning for the worst. It’s not like there’s been no warning, after all. [via Fabbaloo]

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Gesturing toward tomorrow: gestural UIs, hardware hacking and rise of the makers

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Suddenly, touchscreen devices seem to be everywhere, changing the ways in which we interact with our phones, computers and tablet devices. But the next user interface revolution is already waiting in the wings – gestural interfaces will complete the user-interface paradigm shift that touchscreens have started. So says Stowe Boyd:

Gestural UI, or ‘hand jive’ as I call it, once deployed as a built in aspect of future computers, like touchpads and mouses are today, will set the stage for a rethink about user experience.

First we will see hand jive as a way to manipulate the gears of now-tradition windowed UIs: pulling down a menu in an app, moving windows around, dragging a file to the trash.

In the future, we’ll have real Minority Report stuff, without the enormous touch screens: we’ll also see the emergence of augmented reality goggles — Terminator goggles — where we can toggle back and forth between 100% computer screen sorts of display to 100% augmented reality. And the goggles — as an integrated part of the computing device — will be watching our hands for commands, and watching the world for reality to augment.

The combination of these trends will make computing primarily mobile: we’ll have an iPhone sized device we carry all the time, which will be a phone and a PC. We will be free of LCD screens — in general — courtesy of our goggles, and free of keyboards, courtesy of hand jive. A keyboard can be imaged on any flat surface by the goggles, and we can type without a physical keyboard because the gestural system is watching our fingers in 3D. And of course, a lot of things could be done without typing, especially once kids start using sign language and voice to communicate with computers. (I say kids because that’s who start first.)

While we’re waiting for that revolution to arrive, the inclusion of accelerometers in mobile hardware offers some avenues for interfacing with your phone without mashing the keypad or fingering the screen. Anyone who’s ever found themselves with a pocket full of unsolicited novelty ring-tone in a crowded cinema will probably appreciate the opportunity to silence their phone with a few well-timed slaps of the hand through their clothes:

With the right software installed, it may one day be possible to cut a call by “whacking” the phone in a particular pattern while it’s still in your pocket.

[…]

The team developed a simple vocabulary of “whack gestures” designed to rapidly communicate simple commands such as silencing the phone. To help the device distinguish the gestures from background bumps, each begins and ends with a firm “whack”.

The biggest roadblock for gestural UI will probably be the software houses, however. Keith Stuart of the Guardian Games Blog wonders whether anyone will actually bother using Microsoft’s Project Natal motion sensor device for truly new gaming experiences, or whether they’ll all play it safe with re-runs of what has gone before:

For a start, publishers are massively, obsessively risk averse. If there’s any way of leveraging market pre-awareness into a new product they’ll leap at it. So even if these companies are developing titles that work only on Natal – not just new games with vaguely specified Natal-support – it’s unlikely that they’ll do this without recourse to familiar brands and gameplay experiences. In other words, we may get a dedicated Natal version of, say, Mass Effect 3, but it’ll still be Mass Effect, it’s just that you’ll act out those in-depth personal relationships with aliens rather than just talking and watching the cut-scenes.

A little pessimistic, perhaps, but given the enduring tightness of the global economy, playing it safe is likely to be the order of the day for those with the most to lose. But we shouldn’t discount the independent hardware hackers, who the Electronic Frontier Foundation suggests will be a growing cultural force in the year to come. Every day my RSS feeds are full of ordinary geeks doing amazing things with off-the-shelf devices and a handful of cheap parts, and despite the best efforts of easily-riled device manufacturers and their copyright lawyers, it’s getting harder and harder to keep the details of mods, hacks and retrofits a secret.

Cory Doctorow’s latest novel Makers (which I still haven’t had the time to sit down and read beyond the tenth instalment or so) posits a near-future economy where the agile and frugal make-do mind-set of hackers and makers changes the way the world does business for ever. With 3D printing showing every sign of maturing to the affordable “prosumer” level in the next year or so, and landfills across the planet still inhaling mountains of obsolete consumer electronics and tcotchkes, it’s far from being the most implausible future I’ve read about lately. [image by See-ming Lee]

What do you think – will our recent economic woes push us toward reuse and repurposing, or will we wander slowly but surely back to corporate-capitalist business-as-usual?