Saturday, January 16, 2010

Ask The Right Questions

Justin Timberlake has over 120 revenue streams—only one of them is selling recorded music.—Matt Mason (link)

Jackie Barbosa wrote an excellent blog post yesterday which kicked off a flurry of Tweets between us about piracy in the entertainment industry. Jackie is smart enough to get that the publishing industry's claim that ebook piracy is costing the publishing industry "as much as $3 billion" is a bunch of hooey. An illegal ebook download is not equal to a lost sale—readers simply downloaded the ebook. Who knows if they would have actually paid for that download if they had been offered no other choice?

While Jackie ultimately concludes that she doesn't get too concerned when she sees her ebooks on a torrent site, she lays a harsh judgment on ebook pirates:
...these people are thieves, plain and simple. And just like a thief won’t buy the diamond bracelet because he can’t knock over the jewelry store, the ebook pirate won’t go and buy a legitimate copy if she can’t get it for free.

I get where she's coming from. It can be frustrating when you put a lot of work into something, put it up online... and then watch it get taken out of your control and given to the world in perpetuity.

And that's exactly where I think Jackie is seeing everything from the wrong perspective. She's seeing the world through a pre-digital lens. In a digital world, things get copied and with P2P networks, nothing can be effectively done to stop it. You can commiserate about it, reproach, bemoan, and even try to legislate... but you cannot enforce laws against it. For every P2P network you shut down, two more rise in its place. It is a losing battle. Do you want to go the rest of your life living in resentment and bitterness? Or do you want to accept that the world is changing around you, that your presumptions about how things ought to be might have to change accordingly, and upgrade your business model to leverage the internet's unique properties of infinite distribution to work for you rather than against you?

Jackie and I had the following conversation over Twitter:
Ross: Piracy is a market force saying, "the price for content is too high." When the price comes down, pirates turn into consumers.

Jackie: So bank robbery says bank fees are too high? Sorry, no.

Ross: The difference is whether piracy adds value—robbing banks removes value, pirating books increases their popularity.

Jackie: I'm sure piracy does increase some book's popularity. But unless that popularity leads to more $ sales, it's not adding value. Even the music industry hasn't given up the notion of charging for music in favor of ONLY other revenue streams.

Ross: ...which begs the question, what are you really selling—books or stories?

Jackie: That's like asking whether you're selling music or songs, in my opinion. The "book" is just how the story is delivered. A novel cannot be delivered by a live reading via the author (or anyone else). At best, only PORTIONS can be delivered that way.
Jackie: What I'm asking is where the viable revenue streams are if not from sales of books themselves? Show me the money.
Jackie: Even in the industry you cite as "proof" sharing is good (music), publishers still put a PRICE on their product. Books are the same as movies: they're entertainment. But I don't see how that relates to the discussion (unrestricted sharing).
Jackie: If all books are free, where is the revenue stream? WHEN/HOW does the author/publisher get paid for creating the entertainment?

Jackie's asking some well-intentioned questions, but they're mostly the wrong ones. She's still focused on the selling of a tangible—her books—rather than the intangible—her stories. When Jackie finally gets that she is a storyteller and not a bookseller, she'll start to mold a more sustainable business model around that concept.

Her question, "WHEN/HOW does the author/publisher get paid for creating the entertainment?" is foremost on the minds of all producers in the entertainment industry. How is what we're doing sustainable? How do we make money at this? How do we survive and thrive?

Counter-intuitively, when content is allowed to be free in the digital realm, it seems to bolster sales. Why? That doesn't make sense, does it? Consider the story of Matt Mason who wanted to release his book online for free alongside the hard copy version, but Matt's publisher denied his request. When Matt saw his ebook was being pirated, he again approached his publisher and said, "Look, it's already out there. At least if we release our own ebook, we can control it a little more. Maybe we can even find out something about our readership." His publisher agreed and released the book as a free PDF. A while later, a music bigwig heard about Matt's book, went to Matt's site and downloaded the PDF... and he was so impressed with the ebook, he went down to a brick and mortar bookseller and not only bought a hard copy for himself, but for everyone he knew. Without the free ebook available, Matt would have missed out on those sales.

So the questions Jackie should be asking herself is, what is she actually providing her readership? Is it the book, or is it the story in the book? What are the infinite goods and scarce goods in her business, and how can she leverage those infinite goods (the ones that can be copied infinitely on the internet) to increase the value of her scarce goods (the ones that cannot be copied on the internet) so that revenue streams flow to her and/or her publisher? How can she employ generatives to her maximum possible advantage?

Perhaps the hardest question of all: if Jackie can't find a sustainable business model for being an author, what does she do next? This is an extremely volatile question which I hate asking because so few people are willing to examine with unflinching honesty whether their business as it currently exists deserves to survive. Nobody wants to hear their business is slowly dying, but history is littered with businesses who were too stubborn to accept the decline of consumer demand for tangibles that no longer met the market's needs:
  1. The need for personal transportation is perennial, but the method shifted from horses and carriages to automobiles.
  2. The need to watch audiovisual arts is perennial, but the method shifted from film to VHS to DVD to P2P & streaming.
  3. The need for listening to music is perennial, but the method shifted from live performance to records to eight track tapes to tape cassettes to CDs to MP3s.
  4. The need to share news is perennial, but the method shifted from town criers to the printing press to desktop publishing to the internet.
  5. The need to read stories is perennial, but the method shifted from illuminating manuscripts to book printing to ebooks.

If you had built your business on any of those shifting methods, and only provided a tangible product or service ["tangible service" is an oxymoron] to the market, then your business was in danger of extinction (manuscript illuminators, town criers, horse and carriage drivers, typesetters, record makers, tape cassette makers, VHS makers, etc.). Yet if you build your business on a perennial market need and shift with current methods to fulfill the market need, then your business will be around as long as that need is around.

The good news for Jackie is that authors are in the business with the lowest possible fixed costs of any entertainment sector—compared to movies which have to employ up to hundreds of people to create that first unit, authors are the definition of svelte: 1 person, 1 room, 1 laptop. It can't get much easier, or cheaper, than that.

So I do think a sustainable business model for authors in the digital age exists, although those models may be so radically different from the current model that authors may not feel like they are "purely" authors anymore. Authors like Jackie complain that their primary revenue stream is being "stolen" by pirates, but look at Justin Timberlake: the guy is a musician who has secured over a hundred revenue streams which do not involve selling recorded music. Instead of resting his entire livelihood on one revenue stream, Timberlake is almost certainly hoping his fans pirate his music because the increased exposure will only make his other 100+ revenue streams increase in value. Can authors do likewise? More to the point, can they afford to not do likewise?

I've already done the broad sketches for a filmmaking model. I'd like to flesh that out more before speculating on other models so I won't offer my thoughts (yet) on what new revenue streams for authors might be. Nevertheless, I'd like to see somebody take a stab at coming up with new models for authors because the digital age isn't going away—in fact, the next generation will likely make that logical leap which we, fettered to our pre-internet analog childhood, are unable to stomach: that file sharing is easy, unstoppable, and commonplace. As long as artists find ways to thrive in the digital age, will it really matter to their fans how immoral file sharing might be?

41 comments:

miconian said...

"Jackie" has an entitled and counterproductive attitude. "Show me the money"?! Yeah, okay. Or wait, no, I think I'll just keep getting content in whatever way suits me.

Ross Pruden said...

@miconian: Killer post. Adds more flair and nuance to the lure of piracy than I had even thought of. Arrgh!

But the key word you use is entitlement. It was entitlement that led typesetters to strike for their dying profession. When a profession has been around long enough, people forget (typically because they get a fat paycheck) that markets change and that profession may suddenly cease. Where is it written that movie studios have a right to make a $300 million film? They can only make that kind of a film because they know the market will yield more than $300 million. When the market doesn't yield that amount, it's time to make cheaper movies.

Sheri C said...

Love these posts Ross. While I have nothing to add, I am addicted to seeing how this all goes down. Let the grand rumpus start!

Jackie Barbosa said...

Writers are entitled to be paid for the work they produce. If writers are not paid for the work they produce, they will stop writing.

Justin Timberlake's 100+ revenue streams notwithstanding, even bestselling authors don't have the same number of options. I have my doubts that Dan Brown would be satisfied to write books for $0 and then make up the lost revenue by being on Saturday Night Live, going on concert tours, doing commercials for Sony, and being in the Super Bowl halftime show. Aside from the question of when he'd actually write his books if he were doing all that, I don't think SNL, concert promoters, Sony, or the Super Bowl would be terribly interested.

What are the VIABLE alternative revenue streams to actually just paying for the book that would allow authors to write books and publishers to make them available to consumers? You haven't even come close to answering that question.

I'm still baffled by the claim that thinking I'm selling "stories" instead of "books" makes the remotest difference. How is my "story" delivered? In print or digital form. If I (or more accurately, my publisher) stop asking people pay for access to my story, how do we (the author and the publisher) get paid for our work? In what other way could we deliver the story that people *would* pay for?

Do I put a harsh judgment on people who KNOWINGLY distribute copyrighted material to be accessed for free by anyone with the technical savvy to do so? Yes, I do. Not because I think it ultimately takes that much money out of the pockets of the author/publisher (because, as I said, I think most people who download free books/music from torrent sites wouldn't have paid for it in the first place), but because both the uploader and the downloader KNOW this is something other people pay for (thereby making it available in the first place), yet have somehow come to believe that they are too good/too smart/too special should have to pay for it, too. If you don't WANT to pay for something, fine...but don't expect others to pay the freight so you can enjoy it for free. That's just...lame. And yeah, slimy.

Elizabeth said...

First, the music model you cite has, in fact, gone full circle to combat the "free" mindset. Musicians now depend on live performance and ancillary goods (T-shirts, etc.) for the bulk of payment for their creations instead of CDs and streaming.

Second, how is putting more of an author's creative work out where people can steal it at will going to do anything to improve their bottom line. And please spare me the anecdotes about the dozen authors who've made sales after their books were stolen via torrent. Show me some real, verified numbers that show letting people steal my work is actually helping me sell my books.

Since when has wanting to be paid for one's labor suddenly become synonymous with greed? Nevertheless, that seems to be the attitude with regard to creative works. How dare that author/musician/filmmaker insist that the hours and months and years they've put into their work is worthy of their being compensated for same?

That the internet makes stealing intellectual property easy is not justification for doing so. Not now, and not ever. Charles Dickens fought long and hard when US publishers stole his work, yet it seems we modern authors are supposed to pretend it doesn't matter because "times have changed."

Unlike musicians, authors can't do a concert tour or make up for lost sales with T-shirts. Not that they aren't trying--it's becoming more and more common for author events at bookstores to be ticketed, although whether the ticket amounts do more than cover cost is questionable.

And that's fine if you're Stephen King or Neil Gaiman or Nora Roberts. But the vast majority of published authors barely make back their advances, if that. And lost sales can mean being dumped by their publisher if the statistics don't show the right bottom line.

In other words, this isn't about someone's just being greedy. We're talking about a professional having their career literally stolen from them just because people justify the theft on the grounds "free downloads improve sales."

Times have changed, but the definition of stealing hasn't. If you take someone's property, intellectual or otherwise, without their permission and without compensating them for it, it's theft. Period.

Oh, and his friends told Dickens he was wasting his time and money, too. He won.

Jackie Barbosa said...

I now have a girl crush on Elizabeth.

My confusion with Ross's position is this: The only way piracy can INCREASE sales/revenue for the author/publisher is if SOME people are actually too ethical to download the free copy and instead go to buy it. The "piracy is helpful rather than hurtful" model STILL implies that content producers will CONTINUE to charge for the product--they'll just only get paid by those people who actually think they should have to pay. Problem is, if you take away all social constraints with the message that unrestricted free file-sharing is perfectly fine and dandy, I suspect a sizable proportion of those people who previously would have paid for the content will stop. And that pool of paying consumers will continue to shrink until effectively NO ONE is willing to pay for the content, at which point--surprise, surprise!--unrestricted file-sharing hurts WAY more than it helps.

I don't rely on writing for my income. Like most authors, I have a day job--and a good one, at that. I write for a lot of reasons that have nothing to do with money...but when I take something I've written to the next level and make it commercially available, by and large, I want to get paid for it. If the day comes when authors have to solicit advertisers or find manufacturers to make action figures of their book's characters or heaven knows what else to be fairly paid for their efforts, that's the day I (and, I suspect, a lot of other writers who are considerably more commercially successful than I) will hang up our pens or simply stop writing for commercial distribution.

Ross Pruden said...

Wow, there's so much to respond to... I could write a book just responding to it all. Let me give it a shot.

I have a one dollar bill. How much should I expect to be paid for it? If you answered $1, you're dead wrong. The correct answer is, whatever the market says that $1 is worth. I have friends who bought a house for $600,000 and they added $40,000 worth of improvements to it. How much is the house worth after the market tanked? $380,000. Is that fair? No. It is reality? Yes. You can expect to be paid for something and still not get what you want because the market is ruthless. Entitlement is a false version of reality.

I would love to be paid for my work. However, if the market is such that it does not allow me to be paid for that work, then I either need to adapt the kind of work that I do to regain revenue streams, or I need to consider that I need to change businesses altogether. In the digital age, all information-distribution sectors—news and entertainment alike—face exactly this situation. The old business models were built in a pre-internet age where digital distribution did not exist. In this new age, the internet is a fantastic opportunity to distribute content global at zero cost to the producer. Why do we resist this fantastic new tool? Because we are still tied to the concept that intellectual creations are property in the same way that real estate is property... even though they are not. Ideas can be shared with zero degradation while property cannot.

Novelists, filmmakers, musicians... they are all facing a restructuring of their business models. They cannot arrest the exponential growth of P2P networks—their only option now is to adapt to them or perish. The ones who will survive and thrive will be people like Nine Inch Nail's Trent Reznor: he gives away his music for free and makes $750,000 in only 4 days by selling 2,500 Limited Edition Deluxe CD set for $300 each.

Are novelists screwed? I think they might be. Does that suck? Almost certainly. Do I wish it were not the case? Sure. Do my feelings on this matter alter the reality of P2P networks? Not a wit.

But as novelists peter out as a profession, a new and better version of storyteller may rise in their place that are far more engaging than novelists ever could have been.

Ross Pruden said...

@Jackie: Please make sure you read, from top to bottom, my post on generatives. It goes to the heart of how you can still make a lot of money selling something scarce (the CD, the DVD, the book) by giving away the free (the music, the film, the story).

I'm not necessarily saying all content should be free online. I'm only saying that you can offer content for free or close to it and by setting it free into the digital world, your scarce elements increase in value, i.e., you can charge more for them.

miconian said...

"What are the VIABLE alternative revenue streams to actually just paying for the book that would allow authors to write books and publishers to make them available to consumers?"

The most obvious way (because it's already being done) is that readers will agree (explicitly or implicitly) to view or interact with advertising in exchange for the content. Take a site like BoingBoing, for example. There is original content, provided to the user for free, and the site makes money from the advertisers.

This is where the "stories vs. books" idea comes into play. The chain of commerce between the reader and the author won't always be clear. But as long as people who have money to spend are interested in consuming content, and as long as there are novels that they want to consume, then publishers will find a way to use content to earn money. Some authors will be paid by the publisher, some will create for free in order to build their notoriety so that they can be later paid by the publisher (or some other publisher, or be their own publisher).

Trent Reznor and Cory Doctorow, among others, have demonstrated that giving away a free novel or album can actually help sales. Some people hear about the content from a friend who got it for free, but they decide to pay for it themselves. Some people get a copy for free, and then decide to pay for it to support the author. Some people get a a copy for free, but decide to pay for it because they want to enjoy fringe benefits of actually owning it, such as having it on their shelf, or getting the cloth cover that comes with it, or receiving a code to participate in a related forum, or a ton of other reasons.

Ross Pruden said...

Listen to miconian. He has grokked it well.

Look, I can hear the irritation and indignation and let me tell you flat out: as a fellow content creator, I have been as pissed off as Jackie and Elizabeth are about how revenue streams have dried up. But we all need to remember that these are traditional revenue streams and nothing more. There is no legal code that says my job should be protected until the end of time producing an obsolete product for a dying market need. By that logic, we should have caved to typesetters and not upgraded to desktop publishing systems. The future is an unstoppable freight train and traditional revenue streams are phasing themselves out.

Of course, novelists as they currently are will fight tooth and nail to protect their current lifestyle with advances, etc. But they will ultimately lose. The genie is out of the bottle and the choice they face now is—plainly put—to either reinvent themselves or to put the pen down.

Like I said, compared to filmmakers, authors have it easy. All they need to do is find a way to earn $30,000–$80,000 / year. By contrast, filmmakers need to find a way to earn ten to hundred times that amount. Here's my shoulder.

Jackie said:
"If the day comes when authors have to solicit advertisers or find manufacturers to make action figures of their book's characters, that's the day I will hang up my pen or simply stop writing for commercial distribution."

This is sad to say—this is the volatile part I never like to mention because it sounds like I'm taunting when I'm really not—but there will be at least one or more authors who gleefully step into your shoes who have "gotten it". They will have embraced all these funky new revenue streams because they are just glad to have found a way to survive as a storyteller in the new digital landscape...

Jackie Barbosa said...

Ross, if other writers step in, that's fine by me. I'm a writer, first and foremost. I write stories. Those stories either have intrinsic value for which people are willing to pay or they don't. But if they don't have value, I'm not interested in thinking up OTHER ways to make them valuable. That takes time and energy away from the part that's important to me, which is writing and telling the story. Others are entitled to feel differently.

But I'm not thinking about ME. I'm thinking about all the writers whose work I love who I suspect will feel the same way I do. I'll miss their stories.

Let me make it clear--I have several free stories available in a number of anthologies. I'm not AGAINST the notion that free content can improve sales. I think all authors are aware that giving readers a "taste" of their stories is terrific advertising and likely to improve sales. The question is whether offering the SAME product for free in one venue and for a price in another is viable. I think it's not.

By the way, you're absolutely right that an item is only worth the price the market will bear. But you assume that ALL potential buyers of your dollar (in that analogy) think it's only worth fifty cents. The reality is that there may be some potential buyers who think it's worth fifty, some who think it's worth a whole dollar, and maybe even a few who think it's worth MORE than a dollar.

The market is made up of individuals, and while right now there are obviously a fair number of people who think books/music are worth $0, there are still people who feel differently and actually believe in paying for what they consume. One of the reasons they feel that way, however, is that their moral compass tells them it's wrong to enjoy the fruits of other people's labor without paying for them.

Moreover, it's basically IMPOSSIBLE in the digital environment to EVER lock down any online content to the point where ONLY paying customers can access it. All it takes to overcome subscription-based content or even advertisements is for someone with a little extra time on their hands to do some copy and pasting into a new digital file, which anyone who wants it can now download for free.

I think the PROBLEM isn't so much that file-sharing is easy; it's that some people have decided the fact that it's easy makes it okay.

miconian said...

"All it takes to overcome subscription-based content or even advertisements is for someone with a little extra time on their hands to do some copy and pasting into a new digital file, which anyone who wants it can now download for free."

That just isn't happening, though, at least not enough to matter. More importantly, the web that we're heading for is a web of aggregators and filters, the so-called semantic web. If you want free science fiction, then you'll go to a site where it's offered, framed in a familar way, in a readable font, associated with a community of other readers, complete with your own profile, comment history, ratings, etc. and user-friendly links to related content. And somewhere mixed in there will be advertising and/or marketing. It won't be painful, and for most readers it won't be an incentive to read the story somewhere else.

"I'm thinking about all the writers whose work I love who I suspect will feel the same way I do. I'll miss their stories."

Ross may not agree with me here, but I actually don't think that a transformation in the nature of the content is going to be necessary for successful content creators of the old school. In other words, the way the revenue makes its way from the consumer to the creator doesn't have to be engineered, or even understood, by the writer. Publishers will still sometimes pay writers to write. The publishers, then, having a clue, will give the content away "for free," i.e. payment will come in the form of advertising or other sponsorships. I work in online advertising, and I'm here to tell you that that there are a ton of ways to make it work. Writers like you will eventually shrug and say "Doesn't make sense to me, but I'm still getting paid, so thanks." However, part of that model will still be allowing free copies to circulate online without limit.

Jackie Barbosa said...

I think people are not terribly likely to attempt to circumvent advertising when it comes along for the ride with their content. I'm not so sure that's true of subscription-based content, where there is the same financial incentive to copy and make content available for free as there is with any other digital file. I just think subscription based content isn't common enough yet for us to know how likely people are to try to get around it.

That said, there is a finite amount of ad revenue available for exploitation by online content providers. The number of websites providing free content supported solely by ad revenue that turn a profit is, to my knowledge, quite, quite small. I'm sure there's more room for advertising on the web to expand relative to other media (although I think it's more that the various forms of media will merge more and more into the internet as the delivery source, so it will all be web advertising at some point), but is there enough to support free delivery of even half as many "books" as are published today? I doubt it, personally, though I'm happy to be proved wrong.

You're right about one thing, though--I don't care how my publisher chooses to earn money for providing my book to consumers, as long as they pay me fairly for my work. I've seen plenty of major publishers provide free shorts as a means of marketing an author's longer stories. I think they do it because it works. So it's not that the publishing industry doesn't get the value of "free." But they also frown on free distribution of content that isn't supposed to be free because...oh, yeah, it means they aren't getting paid.

miconian said...

As far as subscription-based publishing goes, I agree that it's a dud. Savvy online publishers are learning that it just doesn't work that way.

It's true that the web is not bursting with profitable content-based sites. But it's also true that there are more and more each year. I have worked with quite a few myself, acting (with my employers) as a sort of third-party broker to make the sponsorships happen.

My feelings about why more sites aren't doing it successfully can be boiled down to two elements: a) Most publishers don't understand how to do it right, and b) The infrastructure that will make it easier on a large scale is still falling into place (and, to an extent, being actively built).

Ross Pruden said...

@Elizabeth said:
"Show me some real, verified numbers that show letting people steal my work is actually helping me sell my books."

Seth Godin released his book Unleashing the Idea Virus as a 100% free ebook (which is still available for free, by the way) and it catapulted sales of his hard copy to #5 on Amazon sales.

In fairness, part of Godin's success hinges on the fact that his content is excellent. People crave it. Few novels leave me with a similar feeling. However, I can say that I don't want to read a 197 page book on my iPhone, nor do I wish to print it out, either. Thus, the more I read of Godin's free ebook, the more interested I am in buying a hard copy.

"Since when has wanting to be paid for one's labor suddenly become synonymous with greed? How dare that author/musician/filmmaker insist that the hours and months and years they've put into their work is worthy of their being compensated for same?"

Do you relish spending $500/hour on a lawyer? Do you *want* to spend that amount of money because of the hours and years a lawyer has put into learning their profession? Or would you *want* to spend that money if your lawyer were able to provide you with exceptional legal counsel? People willingly pay money when they feel they've been given something really worthwhile, not because the person they're paying is owed it.

Give your readers a decent Reason to Buy and you will see revenue flow. Don't slap a label on your book and say, "Here, pay up because I worked years on this." That's a recipe for extinction. Instead, you offer customers free lemonade and give them an amazing buying experience. Make sure your tip jar is conspicuous. Money will flow if you lay it all out just right for people because piracy is usually about convenience, not cost.

"Unlike musicians, authors can't do a concert tour or make up for lost sales with T-shirts. Not that they aren't trying--it's becoming more and more common for author events at bookstores to be ticketed, although whether the ticket amounts do more than cover cost is questionable."

Enough talk about what authors can't do... How about let's talk about what can they do?

Let's assume your tangible is a book and that prices will remain static ($25 for a hardcopy, $15 for a paperback, $10 for a Kindle version). How do we generate value for that book? How do we leverage the internet's unique power of "free" to increase exposure and bolster physical book sales?

Can authors...
...create a web site?
...write a blog?
...use Twitter?
...use Facebook?
...record audiobooks?
...start their own podcasts?
...hold competitions?
...do geocashing?
...Skype with fans?
...virtual book tours?

That's just off the top of my head, but you could come up with a hundred more options that are free or nearly free that would help audiences become more aware of your book and thus more willing to buy it. I challenge you to take off the black hat of "it can't be done" and put on the green hat of "how can it be done?"

Ross Pruden said...

@Jackie said:
"I don't care how my publisher chooses to earn money for providing my book to consumers, as long as they pay me fairly for my work."

Who decides what is a fair amount for your work? This is the point I was making about how much a one dollar bill is worth. If the fair market value of a house is $380,000, however much you owe on the house is moot. If the fair market value for a writer is $100/year, then that's what is fair. The market decides how much you deserve to be paid, not you.

Will Entrekin said...

"The question is whether offering the SAME product for free in one venue and for a price in another is viable. I think it's not."

And yet you maintain a blog. Which offers the same product (your writing) for free in one venue, but which you're hoping to get paid for as books. So quite obviously you don't actually think it's not.

Nice post, Ross. I've faced a dilemma bringing my books to publishers, because I think most of them are attempting to impose an old model on a new industry. Everyone plays catch up to yesterday.

Jackie Barbosa said...

"The market decides how much you deserve to be paid, not you."

Wrong.

I decide how much I am willing to sell my work for. If the market significantly undervalues it, I don't have to sell it at all. True, I make just as much as if I'd given it away for free, but the bottom line is, I am not required to sell at a "loss" because I'm not required to sell at all.

Jackie Barbosa said...

"And yet you maintain a blog. Which offers the same product (your writing) for free in one venue..."

I don't blog an entire novel (or even an entire short story). I don't blog FICTIONAL stories at all, with the exception of an occasional excerpt here and there.

The writing on my blog (or here or on Twitter) is not at all the "same product" as my novels/novellas.

Ross Pruden said...

"I decide how much I am willing to sell my work for. If the market significantly undervalues it, I don't have to sell it at all."
"I decide how much I am willing to sell my work for. If the market significantly undervalues it, I don't have to sell it at all."

Spoken like a person still centered in the Industrial Age (where economics were based on scarcity), not the Information Age (where economcs is based on abundance).

The moment your work enters the digital realm, you lose control over pricing because your work echoes throughout eternity. Thus, while you have the option to stop selling your scarce goods like books, ebooks are in a free-for-all market. At that point, you really don't decide what you sell your works for—and if you do, the market largely ignores it.

An extreme example: if you decided to price your ebooks at $1000, because that's what you thought their value was, you can be sure nobody would pay, opting instead for piracy. Piracy, then, is a market force that tells you what fair market value your products have. If you offer a tip jar, people will pay you.

Jackie Barbosa said...

"If you offer a tip jar, people will pay you."

If you're so confident that this is the case, why don't you try it? At the end of your posts to this blog, suggest that those who've enjoyed reading them send you a tip via PayPal. Report back at the end of, say, three months and let us know how you've done.

Ross Pruden said...

:)

The magic question. I was wondering how long it would be before someone asked it.

I have no desire to solicit payment, so a tip jar experiment would be a pointless exercise for me personally: I blog for the fun of it, and to offer value to others in the film business. I am using my blog as a simple free way to build a brand and increase my clout. Writing on this blog for free has increased my exposure and led to other writing gigs. When I have something really substantial, something which I feel provides substantial value, like a book, I will frame it in a CwF + RtB model like techdirt.com and release a free ebook like Seth Godin's Unleashing The Idea Virus.

Have you read my post on generatives? I get the impression you haven't but could be wrong...

Jackie Barbosa said...

Thought so.

Here's the thing--if the tip jar concept would really provide as much revenue as being PAID for your product, Starbucks would stop charging for coffee and rake in the bucks in tips.

There's a reason manufacturers charge for their products--it costs something to PRODUCE them. Books, whatever their form, don't come into the world without incurring costs.

I feel as though you are under the impression that the cost of producing a book is next to zero. You even said: "authors are the definition of svelte: 1 person, 1 room, 1 laptop." That's a serious misapprehension. You ignore all the other people involved in the creation of the final product: the editor (and you REALLY do not want to read books that haven't been edited, even by your favorite authors), the cover artist, the typesetter (yes, they still exist), the person who converts the digital file into the different formats. For books in print, add the cost of paper, printing, and physical distribution. And then there's the cost of marketing/promotion. None of these things come free.

There's nothing "entitled" or "selfish" about wanting to be paid enough to cover the costs of producing one's product with a little profit to spare. That's the definition of a "business," after all.

miconian said...

"You ignore all the other people involved in the creation of the final product: the editor (and you REALLY do not want to read books that haven't been edited, even by your favorite authors), the cover artist, the typesetter (yes, they still exist), the person who converts the digital file into the different formats. For books in print, add the cost of paper, printing, and physical distribution. And then there's the cost of marketing/promotion. None of these things come free."

Online, though, all those things are free, except editors (and those are sometimes free too).

I agree that the tip jar model won't usually work for online publication, but there are other options. If Ross' blog gets popular enough (after he does a lot of writing "for free"), then he can sell ad space, or he can use his popularity as an argument to publishers (online or otherwise) that he can draw an audience, and that they ought to pay him to write.

Ross Pruden said...

At the risk of sounding like a nag, Jackie, have you read my post on generatives? It answers many of the issues we keep churning about. I'm going to keep asking you about that until I get an answer.

"If the tip jar concept would really provide as much revenue as being PAID for your product, Starbucks would stop charging for coffee and rake in the bucks in tips."

I don't think I ever said tip jars would provide the same amount of revenue. In fact, as the sole source of revenue, I doubt they would. But think about all the other scarce goods that Starbucks does charge for—mugs, bags, french presses, snacks—and ask yourself if their business model is completely dependent on selling coffee. Sure, coffee is an important driver, but people aren't even paying for the coffee—they are paying for the experience of the coffee. They are paying for flavor, for personalization, for authenticity, for convenience. Coffee is merely a tangible good that delivers these intangible commodities. When you read that post on generatives, you may start to see why I make the distinction between books and stories.

There's a reason manufacturers charge for their products--it costs something to PRODUCE them. Books, whatever their form, don't come into the world without incurring costs.

You're still getting caught up in the selling of the tangible, a book. Instead, focus on the intangible, the story in the book. People don't buy a book, they buy a story (that happens to come in book form). Likewise, people don't pay for a movie, they pay for the experience the movie gives them. This is why a great filmic story can be shown on an IMAX screen or a 5 inch iPhone with few caring too much about the story's final format. The difference between books and movies is the cost to create the first unit—it takes so much more effort to create the final stories for films (the movie) than it does to create stories for books (the words).

Ross Pruden said...

I feel as though you are under the impression that the cost of producing a book is next to zero. You even said: "authors are the definition of svelte: 1 person, 1 room, 1 laptop." That's a serious misapprehension. You ignore all the other people involved in the creation of the final product: the editor (and you REALLY do not want to read books that haven't been edited, even by your favorite authors), the cover artist, the typesetter (yes, they still exist), the person who converts the digital file into the different formats. For books in print, add the cost of paper, printing, and physical distribution. And then there's the cost of marketing/promotion. None of these things come free.

If you're going to insist on framing this debate exclusively on the fixed costs of producing a tangible—which is itself a serious misapprehension—then, fine, here's how you can indeed produce a book for next to nothing:

1. Write a book, at home, on a laptop. Cost: electricity, food.
2. Solicit newly graduated designers from a local design college to create your front cover. Or, design one yourself. Cost: nil.
3. Find an editor via Craigslist or an astute professor at a local college. Cost: nil.
4. Upload your book to Print-on-Demand lulu.com and start selling copies. Cost: nil.
5. Market your book online via free social networks, your blog, word of mouth, web sites, etc.. Cost: nil.

BONUS:
6. Create an ebook and let it freely circulate to promote the book. The more people exposed to the ebook, the more who will buy the book. Cost: nil.
7. Use 10K of profits from lulu.com to buy a first run of a traditional publisher. (10,000 units = 1 unit @ $1 each).
8. Sell each paperback at traditional rates ($15) until you can afford to print a second run. Repeat as desired.

This is not an ideal strategy for all books, but it should illustrate how it is indeed possible to write and even print a book in today's world for next to zero costs.

Now. If you want to skip the tangible book step altogether, you could create a model like this.

1. Create a free blog of stories. Be consistent. Be excellent. Build a brand.
2. Use Google adsense to generate some tiny(?) income.
3. Cultivate your a large and loyal fan base via various free social networks, blogs, word of mouth, etc.
4. Use a crowdfunding platform like Kickstarter to pay for the fixed costs of a hard copy version of all short stories posted on your blog. "True Fans" will gladly pay $1-$20 each. If you have 1,000 true fans, you can easily afford to traditionally print a paperback.

This is a model that could thrive in the digital age.

You seem dead set on trying to justify why novels as hard copy books should continue to exist, whereas I have made so such assumption. The only assumption I make is that people yearn for stories and only resort to buying books because books are more convenient than any other existing method. In 10–20 years, books could finally be upstaged by ubiquitous e-ink readers... and then what happens to the book industry?

ScooterCorkle said...

1. Write a book, at home, on a laptop. Cost: electricity, food, rent, TIME.
2. Solicit newly graduated designers from a local design college to create your front cover. Or, design one yourself. Cost: TIME.
3. Find an editor via Craigslist or an astute professor at a local college. Cost: TIME.
4. Upload your book to Print-on-Demand lulu.com and start selling copies. Cost: TIME.
5. Market your book online via free social networks, your blog, word of mouth, web sites, etc.. Cost:TIME.

BONUS:
6. Create an ebook and let it freely circulate to promote the book. The more people exposed to the ebook, the more who will buy the book. Cost: TIME.
7. Use 10K of profits from lulu.com to buy a first run of a traditional publisher. (10,000 units = 1 unit @ $1 each).
8. Sell each paperback at traditional rates ($15) until you can afford to print a second run. Repeat as desired.

This is not an ideal strategy for all books, but it should illustrate how it is indeed possible to write and even print a book in today's world for next to zero costs.

Everyones time has a dollar value associated, the same as if you were selling cellular phones, you WORK on an hourly or salary or what have you. Either way, the major piece missing is the hard costs of putting in the work and leaving it up to advertising ect. to recoup costs.

This is the elephant in the room. Plus searching out an editor on craigslist or getting a college grad to do designs is devaluing the product before it even starts. Not to mention the Designers and Editors who have been working and developing their craft for (x) years are now in competition with college grads who work for nothing??? Does anyone else see this as an issue? I know the creative do!

ScooterCorkle said...

I think stepping into the digital age is necessary but I haven't heard any long term solutions, just band-aids and easy statements for.... well I don't know, nothing. Also a lot of analogies, and personal justifications that are supposed to represent the masses. After reading all these posts and blogs I feel the solution is not here.

Assuming the masses will buy into advertising, merchandise, tip jars ect. is just that, an assumption... not a solution.

Ross Pruden said...

@Scooter:
It's funny you make this point about time as an element of cost because in my draft comment, I originally had time included as a cost. The only reason I took it out is that I was making an apples to apples comparison and out of pocket expenses are usually the bottleneck that slows up the whole process—the trade off you get by self-publshing is a larger percentage of the profits. Professional publishers expect authors to do nearly all the marketing anyway, so it's all a wash in the final tally, the way I see it.

As for newly graduated students competing with established creative talent, welcome to the world of capitalism. As a graphic designer myself, I hate that my competition is 18 years old and already well versed in Adobe CS and Dreamweaver, but that's how the market works, doesn't it? Even so, you gain a competitve edge over younger competitors by selling clients on intangibles only you possess: expertise, auhenticity, and professionalism.

I hear a lot of criticism, but little constructive criticism. Why has nobody offered the possibilty of an equity split with all production talent (editor, designer, typesetter, printer)? Instead of paying all costs on the front end, why not pay a fraction of costs on the front end in exchange for a share of the back end profits? If you feel obliged to list reasons this model won't work, I challenge you to also offer alternative options that can work. Surprise me. Think waaaay outside the box.

Mike said...

So, authors produce content (stories) for which there is a demand, easily measured by the number of people anxious to acquire a copy and read it. Historically, the story has been tied to a physical product, the production and distribution of which has been harnessed to provide the creator with an income.

Currently, that distribution model is being replaced with one in which the author has no control over distribution of the story, and no effective way to monetize it. Ross is just one of many idiots who think this is awesome news. Free books for everyone!

Except it won't work like that. Not everyone has the skill, and yes, the dedication to become a successful author. Even those that do typically develop their talent over many years. Under the "new" model, authors are supposed to labor in solitude for years and then beg for money like an indigent, hoping some kind passer by will toss a few pennies in the tip jar. Bullshit. It won't work.

We make our living writing books. Currently, sales are good, but there are more illegal downloads of the books than paid copies, and the numbers keep getting worse. While it's profitable, we'll publish, but I'm figuring we'll be hanging up the keyboard and doing something within a few years. Many other authors are having the same thought.

Digital distribution is removing the MONEY from publishing, but doesn't do a damn thing to produce new works. The scarcity in this equation is the skill of the authors; the very authors that are being told they're not needed.

I think you're right. I think digital distribution is probably inevitable. I think it's equally inevitable that we'll all be reading shoddy Harry Potter fanfic, watching 'I Love Lucy' reruns, and wondering what happened to all the great content creators. It's your future, embrace it!

Ross Pruden said...

"...that distribution model is being replaced with one in which the author has no control over distribution of the story, and no effective way to monetize it."

Mike, with respect, you really have no idea what you're talking about. Seth Godin released his book for free and was still able to sell many many hard copies of it. Not in spite of his free ebook, but because of his free ebook.

I hate to keep harping on it, but it's a delicious example to emulate: Trent Reznor gave away his music for free and then made $750,000 in 4 days by selling a $300 limited editions to the first 2,500 fans. So let me get this straight—you're telling me there is no such equivalent for authors? Seriously?? Wow.

Sustainable business models for authors already exist in the digital age—you simply need to accept that piracy is an unstoppable market force which you can use to your advantage if you are clever enough. Godin is clever enough... perhaps you are not so clever. Godin will keep writing. And you will not.

ScooterCorkle said...

"As for newly graduated students competing with established creative talent, welcome to the world of capitalism. As a graphic designer myself, I hate that my competition is 18 years old and already well versed in Adobe CS and Dreamweaver, but that's how the market works, doesn't it?"

Yes and no. A person's work should show for itself, yes, but having a recent graduate work for nothing, to me, is not only unfair to a person who does have talent, but devaluing their work and the work one hopes to have created for them, is a problem is it not?

"Instead of paying all costs on the front end, why not pay a fraction of costs on the front end in exchange for a share of the back end profits?"

Working on deferral... split equity is a nice term to rehash an old idea that will scare those who have been burned by it in the past. Myself included. We all have to pay rent and eat, and as a filmmaker, I have not been able to do both in the past because of split equity.

Do I have a solution? Not really. The digital age is here, piracy is going to be here whether we like it or not, and Ross you bring up a lot of good points about the future. We all need to think outside the box. I just want to see ideas develop not get defended through assumption.

I do like crowdfunding though. Have a product pre-sold, so there is no moneys owed. Everyone gets paid for their time, the product gets financed without leveraging, professional artists get to express with an audience already established. I think it can push art to be more original and keep the financing people fed as well for they both have to work hard to impress the crowd. A persons work should show for itself. Sounds delicious to me!

ScooterCorkle said...

The Trent Reznor example is great, that's just good marketing! But not everyone is Trent Reznor. That's not to say it can't be done, it's just good marketing for a very respected artist.

wynns said...

Ross- this is a fascinating discussion and I agree with you in pretty much all the cases above and have cited many of them (particularly NIN) on panels myself.

I have to ask, though, given the copyright/attribution notice at the bottom of the page. What if someone cut and pasted this entire conversation in to their own blog without a link back to you? I ask because I've been asked in the similar questions in the past and I'm always curious as to how content creators respond.

Lost Dalai Lama said...

I've only been able to read up to comment 6 so far, but I wanted to say that I have pirated music, as well as movies and I have yet to pay for them purely because I don't make the money I used to. If my income returned to what it was around 2004, I'd be buying all my music and movies the traditional route. Part of me thinks that the revenue pinch that everyone is experiencing is a combination of p2p and people's wallets thinning out.

Now back to reading! :p

Mike said...

Ross:
I've been in this game, successfully, for many years. I'm very tech savvy, and I've heard all the rhetoric before. In short, I actually do know what I'm talking about.

It's true that Trent, and Cory Doctorow, and a handful of others are making a fine living while actively giving their product away for free. However, there are also folks that have made a fortune at the roulette table by always betting on black. That doesn't make that a smart plan. The difference between a workable model and a statistical anomaly is reproducibility.

Cory, for example, was has been evangelical in his assertion that if you give your work away, you'll gain such widespread recognition that people will flock to the bookstore to buy a copy and show their support. It's worked for Cory. However, a number of other authors have drunk that kool-aid, posted their work for free, and killed their careers.

Early adopters do pretty well by giving the stuff away, claiming they somehow 'get it' and taking their bow in the form of donations from the adoring masses. So Trent sold a bunch of grossly-overpriced collectible CD's. Goody! Do you REALLY think that's going to work for everyone, or even as a sustainable business model for him?

The other thing that's always suggested is advertising. Sure, I could give away books loaded with a bunch of advertising. I've even run the numbers. In order to garner the same profit I see on a paperback, I'd have to cover over 20% of the book in ads (suspiciously like most magazines). Of course, that product would be inferior to one without the ads, so you know someone is going to 'clean up' a copy and publish that to web, where it will be distributed in preferance to my ad-ridden version. I think advertising is a false hope for a sustainable industry. Besides, several studies are showing that people are becoming more inured to advertising, and less likely to buy the advertised product. Companies don't spend money on ads for fun -- if it's not selling product they'll take their money elsewhere.

All the talk about giving away the infinite goods to monetize the finite doesn't make a lot of sense to authors. (Yes, I read 'Free' as you obviously did.) Authors produce stories; just a collection of words. THAT's the product. Whether the product is shipped in Corinthian leather, or ASCII text makes little difference.

If the product is available for free, all we have left is personal appearances, advertising, or offering writing classes. Really, there's only two ways to get paid. Get a patron to commission a work, and get all the money up front, or charge a small amount to all the folks who consume the product. The digital age is making the second option virtually impossible.

Ross Pruden said...

@wynns said:
Given the copyright/attribution notice at the bottom of the page, what if someone cut and pasted this entire conversation in to their own blog without a link back to you?

Tee hee. To be honest, I had almost forgotten about my copyright notice in the footer. I added that footer text when I originally put up my blog and have (obviously) come a long way on the topic of digital rights. I've been wanting to upgrade the legal notice to a CC license, but now I'm thinking about setting the blog completely free because free words are unencumbered. Free words and ideas spread as fast as they can be communicated. Maybe a CC license granting all those rights away is the best option. Haven't really had time to look into it.

Ross Pruden said...

Mike:
I really do appreciate your lengthy response.

But dude: you are still focusing on the product, not the method. If you focus all your energies on how to sell a product, and that product becomes more financially unsustainable in existing markets, you're going to struggle harder and harder, like putting a square cube into a round hole. It simply isn't possible. Sooner or later, you're going to realize that.

However, if you redirect your energies into selling a benefit—a story, a service, a perk—of which the product (a book) is only an iteration or vehicle, then a world of possibilities opens up that you simply did not see before.

I could explain it again, but I've done that ad nauseum. Nothing, it seems, will make a difference if you won't take off your glasses.

So go on, continue struggling to figure out how to continue making book printing affordable. Go on, ignore how the market prefers free content, but also supports free goods by using generatives. Yes, please, ignore everything I've been saying because with your approach, you will never beat piracy and will get increasingly frustrated because of it. With my approach, I have already accepted the realities of our new market economy and am seeking creative ways to leverage the market to work in my favor.

As for reproducible successes, there are many: Robin Sloane (a novelist) Amanda Palmer, Trent Reznor, Seth Godin, Joss Whedon... the list goes on. Go ahead, pick them apart and keep telling us all how each one is an outlier. As the list grows, that tow line will become increasingly harder to pull.

There are so many successes, in fact, that in studying them, I think you'll find the freemium failures all have one flaw—the artist failed to give fans an adequate reason to buy their scarce good. In Robin Sloane's case, he offered fans a finished book (generative: authenticity) as soon as it was published (immediacy) plus an increased tier of perks like autographs (personalization), your name listed in the acknowledgments (patronage), and even an ebook (accessibility). Do you get now that Robin isn't even really selling the book? He's selling the benefits, and the book is merely a vehicle for those benefits. If you try to sell a book without any of these non-copyable generatives, you will have a very hard time in the digital world.

ScooterCorkle said...

As for reproducible successes, there are many: Robin Sloane (a novelist) Amanda Palmer, Trent Reznor, Seth Godin, Joss Whedon... the list goes on.

After reading this fun comments section, and it's been a lot of fun, I have realized that most of what is being discussed has a lot more to do with these generatives being simply good marketing tools.

Robin Sloan used kickstarter and was pre-selling a product, plus additional benefits that were still a product. Amanda Palmer's example is really just a publicity stunt against corporate what have you's. Trent Reznor is Trent Reznor. Seth Godin used the generative to a T, the independent donations can't work for everyone if the market get's flooded though. And, my favorite is Josh Whedon who's example is a fantastic publicity stunt against the WGA during the strike, which, also utilizes the internet generations addiction to the ridiculous.

Moral of the story is that the audience is getting smarter and that there is no be all end all solution to save us all from piracy. Get creative and have fun with it. Traditional... everything, is constantly changing, follow and be heard or get swallowed and disappear. Seriously, the crowd is king here.

Jackie Barbosa said...

I know this thread is mostly dead, but I didn't have a chance to post again due to a series of power outages and a busy work schedule.

Ross, I understand your point about generatives and intangibles. The problem, in my mind, is that a book is nothing BUT generatives and intangibles. It is, from beginning to end, not a product but an experience. And that experience doesn't depend on the delivery method (e.g., the experience is largely the same whether the book is delivered in print, a digital copy the reader paid for, or a free/pirated digital copy). And yes, it COSTS something to produce that experience (I'm not going to argue WHAT those costs are or whether they can be got more cheaply because I honestly have no interest in coordinating that stuff or in self-publishing...period).

So the problem from my POV of your theory of getting people to pay for the "experience" as opposed to the product is that, in the case of a book/story, there is nothing to sell OTHER THAN the experience If you give away the content for free, you have nothing else to sell.

And just because a very well-known author's hardcopy sales were good even though he gave away the digital book for free does not mean the bulk of the hardcopy sales were the direct result of the digital free book. At this point, many readers simply prefer the print reading experience and won't read a digital copy even if they're PAID to. Moreoever, the viability of this model assumes an author who has either a traditional publisher to print the hardcopy books OR has the cash to bankroll that cost upfront, with the risk that if it DOESN'T work and there's no profit (or even a break-even).

I don't think the Seth Godin model works for unknown authors, and I even doubt that it's sustainable for THEM. When the vast majority of books are read in digital format because that's what people have become accustomed to, there will not BE a market for the hardcopy variety. Oh sure, maybe a few collectors, but that's not enough to pay an author to keep writing.

Rob:-] said...

Research Shows Unauthorized Digital Books Leads To 'Significant Jump In Sales'

http://techdirt.com/articles/20100208/0217548076.shtml

"Brian O'Leary discussed his firm's research on the effect on sales when a title finds its way into an unsanctioned online market. The findings -- a significant jump in sales -- have surprised many in the business."