Why They Hate Free

I hear a lot of anger from content creators whenever they hear me say "free" and "content" in the same sentence. They seem to think I want everything to be free, that "information wants to be free", etc. Their main point of contention, it seems, is they feel their hard work is devalued by offering it to consumers for free.

But free is just another price.

Say a book publisher offers a book for $15, and I offer a similar book for $10—all things being equal, my cheaper book will attract more buyers. To regain readership, my competitor might lower their price from $15 to $9. Then some jackass comes along and offers a similar book... but for free.

That's insane! That's so stupid! That's retarded! Readers will obviously choose this new free book over our book! We must loudly and unequivocally denounce this moronic behavior, and tout this interloper as a purveyer of dangerous ideas that will surely kill the publishing industry. Above all, we must insist that everyone will lose, especially the consumers. So get on our bandwagon, consumers! Stop all this free stuff if you want to save the publishing industry!

But free is just another price.

When I arrived at that conclusion, I realized that—from the perspective of most Old Dogs in the industry—they hate when I talk about offering product for free because they see no way to compete with it. Not only am I "devaluing" their work by giving away product which they must still charge for, which must feel pretty offensive to them, but I'm also offering up content for a price far lower than they can afford to offer... if they want to stay in business. In short, I'm advocating a strategy that represents their single most lethal business threat. Of course they're going to hate me for that.

But free is just another price.

If I discover a new and more innovative business model which allows me a chance to give away a product for free and still make a profit (by selling other scarce and valuable things), should it be my moral responsibility to help keep all those Old Guard competitors in business even though they continue to reject and openly deride my new business model? Of course not. My responsibility is to compete and if I don't compete better, then I'll be beat by those who do compete better than I. If my business model means I've found a way to give product away at a price lower than my competitors can afford, too bad for them. That's how it goes. But offering content for free is not anathama in itself.

Free is just another price.

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?

Piracy is a Hydra

I went to a workshop on copyright the other night. It was extremely informative, but even the lawyer giving the lecture acknowledged that something major needed to be done to address the current situation of massive pirated downloads. Having worked as counsel for Tower Records, she represented them in that famous lawsuit against Napster because Napster had been dumb enough to specify in their business plan, "We're going to put companies like Tower Records out of business." Well, Napster went under, but then so did Tower Records. Ironically, Napster was reincarnated under a subscription-based model.

One attendee mentioned The Pirate Bay, which is an anti-copyright organization run out of Stockholm, Sweden. The Pirate Bay hosts a server indexing all BitTorrent files currently available, which means that if you go to their web site, you can find an "index" link to any film, movie, or song they have. When you use BitTorrent on that index link, it finds all the people who have a small fraction of that song on their computers and assembles all those parts into a complete file for you to watch or listen to. This is called, "hyperdistribution". As an American, by using BitTorrent, you have almost certainly infringed the copyright of the artists and their producers... but that doesn't seem to stop anyone from doing it. The Pirate Bay has gotten a lot of heat from the MPAA and record companies, and their offices were even raided by Swedish police in 2006. After that raid, however, The Pirate Bay was up and running again only three days later.

A few months ago, I discovered a site that goes a step farther—Watch-Movies.net. You don't even need BitTorrent to use this site. All you do is go to their site, type in the movie you want to see, and find the file that works the best for you. Invariably, these files are made from illegal camcorders in movie theatres, so you can see films still in general release. The quality is not always high, but if you're willing to sacrifice quality, then you can see practically any movie you want, for free, as long as you have access to the internet. Even though watch-movies.net stopped working quite suddenly (due to someone complaining, no doubt), Watch-movies-links.net Watch-Movies-online.tv Watchmovieslinksonline.com was started up not long thereafter.

A Whois lookup on Watch-movies-links.net returned this:

Registrant:
Name: Private Protection Co.LTD
Organization: Private Protection Co.LTD.
Address: NO.1111 Chaoyang Road, Beijing
City: Beijing
Province/state: BJ
Country: CN
Postal Code: 100000

Administrative Contact:
Name: Private Protection Co.LTD. Zhuhai Branch
Organization: Private Protection Co.LTD.
Address: NO.1 Meihua Road
City: Zhuhai
Province/state: GD
Country: CN
Postal Code: 519000
Email: ad9ad10c6983b7ffe00bb2a6fac1fdf4@domain-private.com

Dispute Contact:
Name: Todaynic.com,Inc.
Organization: Todaynic.com,Inc.
Address: 6B XIHAI Building, No.221 Renmin E Road, Xiangzhou District,
City: Zhuhai
Province/state: GD
Country: CN
Postal Code: 519000
Phone: +86.756-2281763
Nameserver Information:
ns3.01isp.com
ns4.01isp.net

As expected, Watch-Movies-Links.net is based in China, one of the largest violators of copyright. In doing research for my movie business plan, I learned China permits only 20 foreign movies to be shown annually in their country. If the tables were turned, and the best movies were always made in China, and the American government said I could only see 20 foreign movies per year—of which only a fraction were Chinese—I'm sure that I, too, would be a pirate without any ethical reservations. Since China is still under the yolk of communism, an ideology which divorces the individual from private property, I'm unsurprised when I hear Chinese citizens (proudly) call their country, "The nation of fake."

The ability for companies to brazenly violate copyright reminds me of the Hydra from Ancient Greek mythology. Hercules' Second Labor was to kill the Hydra, but "upon cutting off each of its heads, he found two grew back, an expression of the hopelessness of such a struggle". In this case, the MPAA, music companies, and the world's police are Hercules, and the Hydra is both the Pirates and the consumers who use BitTorrent. Try as they might, authorities can't seem to kill hyperdistribution. Shut down Napster? Here's BitTorrent. Shut down The Pirate Bay? They're up three days later. Shut down Watch-Movies.net? They switch domains. Sue consumers? You get a consumer backlash.

Why does piracy continue to flourish despite the continued assault from authorities? Because piracy at its core isn't a legal or technical matter, and thus cannot be solved with legal or technical tools. Piracy is in its essence a social problem only catalyzed by an unenforceable (and thus unrealistic) legal code and an astonishingly efficient delivery system. Rampant piracy is really just a symptom of users who want to consume content, and who aren't particularly interested in the hassle of paying for it. Sure, if it's easier to find content and pay for it than to download it over BitTorrent, they'll pay (thus the success of iTunes). But here's the bitter pill nobody wants to swallow: if a user goes out of their way to watch a pirated copy, they probably weren't a paying customer to begin with. Far from being a curse, users who watch pirated shows and movies and listen to pirated songs possess one unique benefit—a user who watches or listens to a pirated copy might like it enough to buy it on CD or DVD and/or recommend it to others... which is impossible if they never even watched or listened to it.

Sites like Hulu.com and ABC.com with its own media viewer show how the entertainment industry is evolving to come to viewers. Instead of not showing content online and "forcing" viewers into downloading episodes illegally, they're creating user-friendly parameters to make it easier for people to get the content they want, whenever they want it. The theory goes something like, if they're going to dally about with a mistress, at least we want to control who and where that mistress is... because we can make money off of that.

Lawrence Lessig makes an excellent point about copyright. The way the law is currently set up makes it too hard for providers to let users share, remix or use content. In an internet digital culture where sharing is the norm, copyright law is so restrictive that it's now stifling creativity. That's why I've become a fan of the Lessig's Creative Commons License.

My friend Nik said it best when talking about the pervasiveness of spam: "As long as you have a backwater country that doesn't crack down on spammers, you're always going to have spam. The only way to really fight spam is to manage it." Maybe one day, every country in the world will indeed have a police authority able and willing to protect the rights of every content producer around the world. I fear, though, that such a day will be long after my children have already grown up... and during that time, our culture will have since become accustomed to violating copyright as the norm.

On Self-Publishing

When it comes to judging a novel, I'll be the first to say I'm a harsh critic. As a storyteller myself, I have zero patience for writers who neglect to hook me with intrigue from the first few words. By "intrigue", it doesn't have to be very much, either. Consider the following books' opening sentences or paragraphs:

As I left the Kenya Beanstalk capsule, he was right on my heels. He followed me through the door leading to Customs, Health, and Immigration. As the door contracted behind him, I killed him.—Friday

Call me Ishmael.—Moby Dick

In eighteenth-century France there lived a man who was one of the most gifted and abominable personages in an era that knew no lack of gifted and abominable personages. His story will be told here. His name was Jean-Baptiste Grenouille, and if his name—in contrast to the names of other gifted abominations, de Sade's, for instance, or Saint-Just's Fouché's Bonaparte's, etc.—has been forgotten today, it is certainly not because Grenouille fell short of those more famous blackguards when it came to arrogance, misanthropy, immorality or, more succinctly, to wickedness, but because his gifts and his sole ambition were restricted to a domain that leaves no traces in history: to the fleeting realm of scent.—Perfume

In each case, a setup is established, some unfinished puzzle presented for the reader to engage in. The first sentence and/or paragraph invites the reader into another sentence, and then another, and soon they're buying the book to finish the second chapter.

All of this, however, is contingent on the reader picking up the book to begin with. If you read yesterday's blog about selecting screenplays, you'll know exactly what I mean.

I told that story to illustrate how the selection process works in the professional world, but as a consumer, we also winnow down our choices using a similar set of unfair criteria. When it comes to choosing books to read, the smallest details may seem petty and superficial to outsiders, but those criteria are still used—thus, all such details are crucial. 2 brads instead of 3? Dude... seriously? Yes, seriously. No detail is too small.

When I go to Border's and pick a book off the shelf, it's usually because the title caught my eye. That means it was not merely about a topic of my interest, but also the typeface on the cover was large enough, and perhaps set against a good background. Next I flip through the book to examine the typeface, the overall layout, and the quality of the paper. Maybe I'll look at the back cover. These are all quasi-subconscious acid tests taking place in about 3 seconds and the book must pass them all flawlessly before I even read the opening words. What I'm saying in a very long-winded way is: if you're going to self-publish a book, you've got to mimic the professionals—flawlessly. You must have a real ISBN, a functional bar code, reviews from known publications, etc. And we haven't even talked about the content yet.

But fine, let's say your "script" wasn't discarded: you've passed the "weight" test. Will your work pass the "3 page" test, too? Content is important, but its medium is equally important: there must be no typos, no dangling modifiers, no run-on sentences. Above all, the content must always go for the jugular without mercy. In brief, all writers need editors.

An editor was once visited by a writer asking for feedback about their manuscript. The editor responded diplomatically, "I think it needs to go once more through the typewriter." The writer, being a pro, scooped up his manuscript, said thank you, and rewrote his manuscript not once, but seven more times. The result was a bestseller.

Self-publishing is more affordable now, which means more people will do it than ever before. So when you pick up a self-published book at the bookstore, the question becomes, "if this book couldn't get published with a major publisher, why not? Wasn't it good enough?" And sadly, the answer 95% of the time is no. Why? Because writing, as opposed to filmmaking, is a solitary endeavor where reams of words can be strung together without anyone to sift and hone the material. By contrast, filmmaking must pass a series of gatekeepers before getting produced and distributed. For all the drawbacks of a film having "too many chefs", really bad films don't usually get produced because most people don't want to flush their money down the toilet. Even so, anyone can self-publish, and anyone does.

How, then, can you not be just anyone? In my opinion, self-publishing can work—even start careers—if certain conditions are met:

1. The content should be marketable to a certain audience. If it's a fairy story for the children of hippie parents, your market might be smallish, so be clear about how many people might want to buy what you're creating.
   
2. Do not be your own editor. Unless you know what a dangling modifier is, and when to use the subjunctive mood, let someone else proof your typos and improper language. More importantly, everyone needs someone else to read the words: the trick is finding that right person. (Some will have a great eye for what sells, while others may focus less on what is marketable and more on getting the message exactly so.)
   
3. Make the book's design look exceptional. If you have to, get a designer or typesetter to lay out your book. See my other blog post about this.
   
4. Make the book look exactly like a major publisher's book. Use a bar code, ISBN number, table of contents, index, etc. Give the reader no reason to doubt that you have a employee roster of thousands.
   
5. Test your market and eliminate your overhead by doing a first run with a POD (print on demand) publisher. Lulu.com allows you to upload your book so you only get money when people buy. However, in exchange for you not having any monetary risk, lulu.com also keeps a steep chunk of the profits.
   
6. If you're willing to store and ship books, order in bulk from a regular printer: (a) Print 10,000 books for $10,000. (b) Sell them for $15 each. (c) Break even after selling only 667 books—everything else you sell is profit... which could be as much as $140,000.
   
7. Publish a 2nd edition with a big publisher. If your book becomes wildly popular and you'd like to establish some legitimacy by landing a contract with a known publisher like Random House, send them a copy of your newly printed book. Rather than approaching them as a struggling newbie, you're already a published author giving them an option to print a second edition. Plus, since you're already published, what more can they offer you that you don't already have? Yep. Mo-nay.
8. UPDATE: With the quick rise in popularity of eBooks, publishing strategy has a step predating print book publishing—publish an eBook first, or at the same time you publish a hard copy. Read J.A. Konrath's blog about Ebook Pricing, and why/how Konrath makes more money on eBooks than print books.

Here's a final calculation for you: 300 page book * 400 words/page = 120,000 words. Sound like a lot? It's not, really. Remember in college how they'd assign 5,000 word essays every two weeks? If you laid a year's worth of those essays back to back, you'd have about 120,000 words.

Publish a Book

A man once confided to Truman Capote: "I have a great idea for a novel—all I have to do is become a writer." Capote responded: "And I have a great idea for brain surgery—all I have to do is become a neurosurgeon."

Typesetting—really artistic typesetting—is like driving a car with everyone in the car looking at a GPS, except the driver. The passengers see where the driver is going, but they can't really see what the driver sees. When they finally look up and see the breathtaking view atop a high crest, they suddenly understand why they took an off-road to get there. Almost everyone thinks they'll be happy with $20 headphones until they try $250 headphones... and then they never look back. Typesetting is an art, and finding balance between the letters on a page is not as easy as most might think.

The look and feel of written words are my world. A book set in the right font, with precisely enough leading (space between lines) and tracking (space between letters), with no objectionable hyphenation breaks and no orphans or widows... such a book is like an exquisite melody delivering lyrics. As we all know, the medium can have a dramatic effect on the message.

Now, see if you can connect the dots:

I've been a writer for over 20 years, an editor, a typesetter and graphic designer for over 17 years, with a brief stint as a journalist to throw in the mix. I once hand-made small 20 page books of collected poetry for my friends in New York. I've even solved—on my own—how folio pages should be positioned on a printing press paper sheet so the book's pages will be numbered correctly when folded and cut. I'm the guy who moves a piece of type 1/1000th of an point because I don't like its proximity to another piece of type. And I write. A lot.

With those diverse skillsets, the natural conclusion is apparent: I should be a publisher. I've always had it in the back of my mind to publish a book. Not necessarily my book, mind you, just a book.

But books are serious business. You can't embark on publishing a book willy nilly. To return to our metaphor, you can buy $20 headphones, but if you know how great $250 headphones are, wouldn't you want to buy the $250 headphones?

I decided, then, to publish my own writing as a trial run to iron out the kinks. Perhaps I would continue publishing my own material, perhaps not. The idea was to learn the process. So I chose my two years of blog posts as fodder for my first published book. Here was my final design (this is only a chapter page):



Looks easy, but it wasn't. To create that page, I had to first make the Style Mockup, a road map for all design choices during production. Publishers never show the public how much work goes into creating their own style mockup. I agonized over my style mockup for weeks to fine tune it. But why would I go to all this trouble for my own book? Because you don't write a symphony, even your own, without using sheet music:



With the newer print on demand technology, more cost-effective ways exist now for self-publishing than ever before. And with online vendors like Amazon to level the playing field, anyone can compete now with the big publishers.

So if you have a book idea which you want designed nicely—i.e., not the usual Microsoft Word doc in Times New Roman, but something that actually might be sold at Border's—contact me. If I have time and the book interests me, then we could be publishing your book sometime this year!

(And yes, that means using real bar codes and ISBNs, and dust jackets, etc.)