Not Only Can You 'Compete With Free' You Have To If You Don't Want Your Business Overrun By Piracy
from the basic-economics dept
Rob Reid, who recently got a ton of well deserved attention for his hilarious TED talk on copyright math, has a WSJ op-ed piece, in which he tries to explain why there's so little ebook infringement, compared to music infringement. The crux of his argument? Even though the big publishers aren't really great about this stuff, rather than fight the technology, they were actually quick to embrace the technology and make authorized works available for purchase. Contrast that to the music industry, which sued every advancement in technology, including the first MP3 player, and didn't actually license an MP3 download store until many, many years after MP3 players were widely available.Compare this to the situation in books. Although it had some small-time forerunners, the Kindle, like the Rio MP3 player, brought portability to a mass market. But the Kindle launched with licenses rather than lawsuits from the key rights-holders in its domain, and offered more than 90% of the day's best sellers when it shipped.This highlights a key point that many of us have been trying to make for a long, long time. The "answer" to the "piracy question" is not greater enforcement or more draconian laws, as the entertainment industry keeps telling us, but rather more legitimate services that can provide good value to consumers. The music industry failed at that for so long, that it really helped drive the culture of infringing music.
This meant that consumers discovered digital books through a licensed experience that delighted them. Exciting hardware, a critical mass of titles and Amazon's retail sensibilities were all integrated into a single elegant package that piracy has never matched.
Of course, piracy emerged anyway. Countless unlicensed e-books can be found online, and millions of people use them. But sales figures suggest that relatively few of these downloads represent foregone purchases. Most Kindle, iPad and Nook owners seem to view piracy as a low-rent and time-consuming experience compared with the sanctioned alternatives. They probably wouldn't if the publishers had kicked things off with a five-year content boycott.
For years, we've pointed out that of course you can compete with free. But what Rob's article is highlighting is even more fundamental. Not only can you compete with free, you must compete with free or you're going to lose out. If you don't offer a legitimate alternative, people will flock to the illegitimate ones. Yes, some people will always infringe, but over and over again we see how legitimate services pull people away from file sharing and towards paying -- if they provide enough value at a reasonable price.
Now, I know that some will quibble with one other major difference between books and music that Rob sort of leaps over in his piece: it was much easier to create digital music than ebooks. You could just take CDs and drop it into your computer and there you go. There really wasn't a simple equivalent for books. Sure, lots of people have scanners, but that's a laborious process. Still, I'm not convinced that was really as big a deal as I'm sure some will make of it. That's because once a single copy of a book is digitized, it's very quickly available all over the place. And there were plenty of people working to digitize books long before the Kindle came along. It might have been a limiting factor, but certainly not a complete hindrance to ebook infringement.
Either way, the key takeaway can hardly be challenged: the way to deal with piracy is to offer good legitimate services, and preferably more than just one, so they can compete on adding value. Unfortunately, many in the industry like to just dip their toes in the water with a few services -- and as soon as they become successful, seek to raise prices. That's no way to encourage a long term market success.
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Filed Under: compete with free, copyright math, kindle, mp3, piracy, rob reid
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You are assuming..
you are assuming they want long term success. They are only interested in this quarter's numbers, though. Or success until the CEO and get out with the golden parachute. Long term success doesn't enter into the conversation with these folks anymore. They want more money NOW
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ebooks are content done right
Now compare that to music. There is no comparison.
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Re: ebooks are content done right
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Re: ebooks are content done right
But since I can borrow books from Amazon Prime for "free", I'm ok with that.
Anyway, has that happened again since the whole "1984" fiasco?
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Re: ebooks are content done right
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Bingo. I open Amazon, click buy, and the book is on my Kindle. It simply could not be easier.
To pirate, I would have to go to TPB (or wherever the hell has pirated books, I have no idea), get the torrent, wait for it to download, email it to my Kindle or tether with a USB cord. Difficult.
This is actually one of those situations where buying is easier than piracy. Amazing.
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Plus the digital versions you download tend to have no DRM, meaning I can read it on any platform I want, easily.
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Don't get me wrong: DRM sucks and rightfully deserves to be hated, and there are some problems with Amazon's setup both in regards to DRM and in regards to their control of devices and books you've bought. I'm just saying that the Kindle's DRM as it relates to being able to read on any given platform is an incredibly small problem.
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Give me choices with reasonable defaults and I will be a happy camper.
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There was a single paragraph I wanted to copy and paste for him to read. Doesn't happen.
I did finally manage to get just that section relayed over to him.
WHY MAKE IT SO HARD TO SHARE WITH PEOPLE?!?!!
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Amazon's ebooks have been falling (at least, on the ones I've been looking for.) One book I've been waiting to buy for a while dropped recently from twice the price of the hardback to just above the paperback, and that was nearly overnight. I can only find one book that I was interested in that hasn't fallen, and it was made into a movie recently.
I suspect that even if the government lawsuit doesn't go anywhere, the days of super-high ebook prices are history. Now, get them down to ~$2-3 a book with bestsellers at $4-5, and I'll be interested in reading more (than the ones I've already been picking up for that price.) The only ones I've bought greater than $3 so far are the ones I already know I'll like. If the ebook prices were less, I'd even explore and pick up books that are recommended that I don't know if I'd like or not.
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8 bucks for a 500+ page Ebook that I enjoy is a good entertainment value IMHO.
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So - there's a real risk that the DoJ will create an actual monopoly in the name of ... competition. And once monopolies exist, they tend not to maintain the below-cost prices that enabled them to attain that position.
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I agree sir, but it will be because of a natural monopoly, not an artificial one that exists now. Any company can compete against Amazon, just like any company can compete against any other one. And if Amazon uses their natural monopoly illegally (to hinder their competitors, then they will have the same problem.) The prices may raise a little, but that will be because the true market has spoken, not because a company can force their will on everone else.
If the DoJ prevails, it will make it very difficult for anyone not named "Amazon" to stay in the reader market, because Amazon has the resources & the proven determination to sell books at far below cost in order to drive all other competitors out of the market.
Non DRM'd books can be read by any reader. If they use DRM to lock you into a particular reader, then they are using an unfair business practice that locks out competitors. I read ebooks on a Nook (I prefer it to Kindle, which I've played with in the past,) but I also read on my Android phone, my Android tablet, and my Linux and Windows laptops, all running different applications. DRM is the problem, without it then Amazon wouldn't be able to have its monopoly. Instead of forcing "Agency Pricing" to break up Amazon's monopoly, remove the DRM and they will be forced to compete against everyone else for their reader. Agency pricing did nothing but give the publishers an excuse to be ridiculous in their price models and remain out of touch with their customers.
So - there's a real risk that the DoJ will create an actual monopoly in the name of ... competition. And once monopolies exist, they tend not to maintain the below-cost prices that enabled them to attain that position.
Again, I agree. I hate monopolies. But the difference is that with a natural monopoly, any competitor can enter the market and give the incumbent a run for their money, even if it isn't successful. At the moment, the only person setting the price is the publisher, and there is no pressure to provide the customer what they want or to make sure the artists/author gets what they want (I am sure many authors would prefer to get a ton of purchases of their ebooks at a lower cost than a very few purchases at a much higher cost because their publisher doesn't understand economics. As it is, I prefer to buy dead tree versions and scan them in myself as it is ultimately cheaper to do this than buy the ebook that is more costly than the hardcover version of the book (and I own a lot of ebooks thanks to Baen and other booksellers, as well as cheaper Amazon books.)
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The Music Industry has Different Economic Underpinnings than the Publishing Industry (to Rob Reid, #43)
It is a commonplace to buy a business for the tax deductions, rather than for the profits. If a company has no assets save its potential tax deductions, it is bought by someone who can use them. Very well, publishers such as Barnes & Noble will be bought by someone who can conveniently run them at a loss, someone who is in substantial competition with Amazon across a wide range of merchandise. Think of Wal-Mart, K-Mart, Target, Kroger's, Safeway, Albertson's, etc., people like that. Amazon is already selling stuff like canned goods at competitive prices. When you take a grocery store, and cut it down to the things which Amazon really would have fundamental difficulty in handling, such as salad greens, it is small enough to be a family business, the same as a restaurant.
The idea of a publishing house being owned by a major supermarket/discount chain is really no stranger than that of major newspapers and magazines being funded by advertising revenue, something which we take for granted.
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Re: The Music Industry has Different Economic Underpinnings than the Publishing Industry (to Rob Reid, #43)
I must admit, I like shopping at Amazon, just as much as I like shopping at Wal-Mart so the anti-Amazon/anti-Wal-Mart folks can throw my argument out the window like they do with everyone else. I think you hit it right on the head with that statement...when you are fighting against a natural monopoly, you do so at the fringes. I go to Amazon/Wal-Mart because of the price, and I go to the market because of the convenience (because drop-shipped greens and fruit aren't very helpful or healthy.)
Vons has been delivering groceries for a while now...and at my local Vons, it seems like the only people who shop there are the ones going for last minute quick items (as am I.) Albertsons seems to be the same way. Some companies are popping up taking the fringe away from Vons/Albertsons too, Fresh and Easy is taking away their single-shopper market.
In all those cases though, there is a pressure for each company to expand their market by offering better service. It only makes things work better in the long run. You don't get that in artificial monopolies.
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Even more impressive.
The fact that it hasn't tells me two things: That the threat posed by copyright infringers is far overblown and/or that the book publishing industry is doing something less wrong (I won't go as far to say 'right') than the film and music industries.
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Re: Even more impressive.
Consider that globally, a book written in English isn't going to appeal to the majority of the world's population. Music and movies cross borders much more easily.
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If some people will always infringe, and that has to be accepted, I'm curious what would happen if a medium did in fact do everything right and yet too many people ended up in that "will always infringe" category in a way that the medium couldn't address.
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The measures to combat the crime also have to evolve, just not in a way that oversteps boundary lines.
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Just in the way one looks at it I suppose.
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I think it's a delicate process, and understanding the internet better is a way to go about setting up boundaries.
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If there are boundaries is the boundaries that we reached already, society is not willing to give up any more rights so a handful of people can keep enjoying theirs while screwing the rest of us.
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The labels and movie companies just don't like losing control lover the content because of it's value to them
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No need to grant monopolies to anybody.
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There are also a lot of cheap and even free ebooks. And there are sources that have been DRM free, and the DRM-free ebook movement is expanding. http://economistsview.typepad.com/economistsview/2012/04/the-drm-free-movement-for-ebooks-expands.ht ml
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So yeah, I could go and pirate and transfer to my device, but its so much easier to buy.
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The difference between industry and musicians
Many smaller writers have also published books electronically that would never ever be published by a major publisher and for a very small amount of money invested by the writer,
Musicians are doing the same. The little senior adult group that I used to play with had an album. About 20 copies were made.
The thing is that people have something to say, whether it is through a book or music and now there is a medium to say it with.
Hooray for electrons!!!
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compete?
I guess the last paragraph of this post can be read to say that, but "deal with" still sounds pretty negative -- "leverage" would be the (maybe equally inaccurate) positive spin.
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High prices
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Re: High prices
If the book isn't available (legally) in electronic format, however...
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Right, wrong...it just is what it is. any media i want is available, any time, any where, in any format, for free.
The only authors that get my money are the ones i buy drinks for at conventions, or the ones who go above and beyond to be awesome like Cory Doctorow.
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You wouldn't steal a car....
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Or maybe...
People find more pleasure in listening to music than reading an e-book?
I mean, there COULD be other reasons, you know.
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Re: Or maybe...
I find pleasure in listening to music *while* reading an e-book, I'll have you know.
The problem is, as is mentioned above, there are legal methods of getting e-books that have been around since the first e-book reader was available. The RIAA fought, and even as late as 2008, was claiming in court that ripping a CD that you legally purchased in order to fill your mp3 player with music was against the law.
If RIAA had embraced technology and allowed those at the time to produce mp3s of their music instead of suing them into oblivion, the outcome may have been far different (I certainly wouldn't have been boycotting them for so long.)
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The market for e-books is relatively new, and is still growing. This is something that, 2 years ago, didn't exist at all, has existed mostly as walled gardens, and didn't permit a bunch of intermingling. Third party piracy isn't a big thing yet, because the market is only in the defining process.
A rush to judgement, perhaps?
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despite DRM
I'm actually quite astonished that some many people put up with DRM. Seems it's not so much a hassle to most, or more probably, the majority hasn't yet realized what freedoms they give up.
But the real problem is of course that DRM is just a big enabler to enact monopolies, and THAT I cannot condone in any way. It's plain evil, wicked, vicious, nasty, mean, bad, villainous, diabolic and malevolent. It's a destroyer of culture, and a menace which has to be eradicated from earth. Same as patents.
Of course, I totally do not understand why one can initiate and antitrust-investigation while totally ignoring the main reason these monopoly-practices were possible in the first place.
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One very rarely hears ISPs mentioned
Your point about easy access to ebooks hits the nail right on the head. Time and again surveys have shown that the majority of 'piracy' is caused by the difficulty of obtaining legitimate content rather than the cost. The basic problem with the music and movie industries is that they seem to be run by mentally-retarded street-corner drug peddlars, rather than the entrepreneurial businessmen who should be doing it. My chickens have a greater capacity to grasp the big picture, even after their heads are cut off.
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For more on this topic....
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