How gigantically humongous and intrusive is the federal government? A traditional measure is to look at the pages of regulations in the Federal Register, which is, by now, probably the world’s largest book collection. The problem with this approach is that it takes no account of how a single bad regulation can have monstrously deleterious effects.
Copyright regulation is a good example of this. There was no universal enforcement until the very late part of the 19th century, and terms were mostly short in the early days of this regulation. In the course of the 20th century, regulations became ever more tight and the copyright terms ever longer, so much so that today, the words you sign away to a conventional publisher are theirs to keep for your lifetime plus 70 years!
One standard argument for doing this is that noncopyrighted works will not be efficiently exploited. You have to assign ownership or else the resource will vanish into the ether. No one will care about it, and civilization will lose extremely valuable literary works. Our market for ideas will be impoverished.
Now, to me, this argument seems obviously false, but that’s probably because of my own experience in publishing. I’ve seen it happen — so many times that it is predictable — that once a work has fallen out of print but is still under some kind of protection, it is mostly neglected by the heirs. No one who “owns” the work has the incentive to bring it to light, while those who care about it fear the law or don’t want to pay some arbitrary price set by the owners.
Meanwhile, when a work is public domain, there are dozens of people bidding to get it into print. This was true all throughout history, actually. The reason American school kids in the 19th century read British literature is that it was not regulated in the United States, and therefore, it could be sold very cheaply and distributed very widely. It is true today: Whether music or books, the material in the commons is far more in demand than that which is regulated. And the demand leads to the supply.
In other words, the opposite of the conventional exploitation theory is correct. The copyrighted works drop from memory, while the public domain works last and last. But of course, this observation draws from my deep involvement in the industry, and we can’t expect academic scribblers to understand anything about how the world actually works in real life.
Publish and Perish – Clueless Publishing CEO’s Enjoy an Intimate Dinner (The Passive Voice) — Did you know 16 states also filed antitrust suits against Apple and the Agency Five (as they are apparently being called)? Hey, those AG’s gotta do something to get re-elected! Look below the excerpts for PG’s advice to CEO’s on how to meet without risking an antitrust lawsuit. Utterly ridiculous the obstacles and waste forced on the market by the state.
Absent stringent government protection or physical boundaries that protect the monopoly, the long-term effects of overly-dominating a market tend to weaken the company or companies involved. If competition is permitted, the bloated and inefficient monopolist can present an easy target for an innovative and flexible competitor.
PG’s conception of monopoly is not rigorous, however, and he overlooks the fact that what made Microsoft an aggressive monopoly is intellectual property, that government grant of monopoly privilege that has no place in a free market.
Cut in E-Book Pricing by Amazon Is Set to Shake Rivals (The Passive Voice) — The NYT article PG quotes is worthless, but read his observation at the end as well as the first comment on the post; they highlight an important characteristics of leftist critics of Amazon.
The Agency Model Sucks (A Newbie’s Guide to Publishing) — J.A. Konrath does the math to demonstrate that authors make less money under the agency model. It’s bad for customers and authors.
The biggest problem facing book publishing (The Domino Project) — Perfect for the publishers, not for anyone else, not even the authors they publish. Otherwise, I tend to like what Seth Godin has to say about publishing.
Jeff Bezos’s Top 10 Leadership Lessons (Forbes) — Big Publishers in particular, take note of how customer-centric Bezos’s leadership lessons are, and also how focused on adaptability and innovation.
Michael Stackpole, a traditionally published author who was one of the early champions of self-publishing ebooks, has an interesting post analyzing the settlement agreed to by three of the Big Six publishers — Hachette, HarperCollins, and Simon & Schuster — involved in the alleged ebook price fixing flap. If he’s right, the Department of Justice is going to be imposing more injustice than just preventing a little self-destructive collusive fixing of high prices. This is yet another among so many many many examples of the state stepping in to prevent something only to impose that very thing itself. Yes, it looks like the DoJ is going to prevent price fixing of one sort only to impose its own brand of price fixing. But hey, it’s only a bad thing when non-state entities do it, right?
Here is Stackpole’s breakdown of the settlement provisions:
For a period of two years,
Publishers will not be able to set a restricted retail price for their product.
Retailers will be able to set their own price for an ebook, but they cannot discount the bookbelow their own discount. (In short, the retailer cannot sell ebooks at a loss.)
Publishers cannot “retaliate” against retailers during this time.
The “favored nation” status that prevented a publisher from selling at a lower price to one retailer over another is gone.
The Agency Pricing discount of 30% off the top that retailers pay publishers can remain in place.
There are compliance procedures being set in place (that I don’t bother discussing) so the government can make sure that the publishers are complying with the agreement.
That’s right. Provision #3 fixes an arbitrary minimum price —a price floor. Retailers like Amazon will not be allowed to sell ebooks below the price they pay publishers for them; they will not be allowed to sell at a loss. For two years. And apparently there is yet more intrusive bureaucracy being set up to monitor compliance with these new regulations for the ebook market. It’s another shovel-ready Obama jobs program!
The federal government is also going to prevent publishers from requiring retailers sell their ebooks for a certain price. In other words, it bans the agency model. Now, I’m no fan of the agency model, and I think it’s self-destructive for publishers to adopt it in order to screw their customers with high prices so that they can prop up their dead-tree book business model for a while longer. But I don’t think they should be prevented by law from doing so.
Stabilization is Chaos: “Monetary policy all over the world has followed the advice of the stabilizers. It is high time that their influence, which has already done harm enough, should be overthrown.”
— F.A. Hayek, 1932
The federal government is also going to prevent publishers from retaliating against retailers for the prices they set. Also, no more contracts that stipulate publishers can’t sell to other retailers at a lower price. In other words, the state is going to short circuit the market process by preventing publishers from putting any kind of meaningful pressure on retailers and vice versa. No jockeying for position in the ebook market. Forget letting consumers decide and the best business model win. The United States federal government prefers stasis — the maintenance of a status quo of its own making.
But wait, there’s more. Stackpole does the math and argues that far from preventing publishers from fixing high prices for consumers, the settlement will actually disincentivize both publishers and retailers from setting lower prices:
Jeffrey Tucker recently discussed the Department of Justice’s decided to launch antitrust litigation against Apple and five of the Big Six publishers — Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster, but not Random House — for alleged price fixing. Three of them — Hachette, HarperCollins, and Simon & Schuster — decided on the same day to settle straight away. The alleged sin was that Apple and the publishers decided to go with the agency pricing model in which the publishers get to set the prices for their books in the iBooks Store, while Apple takes a 30% cut.
As you’d expect, I’m with Jeffrey Tucker in believing that price fixing, collusion, cartels should not be illegal. In a free market, these practices are not stable and will end up harming the companies in the long run if they dissatisfy customers. What I want to highlight in this news post is not what so much what libertarian justice has to say about the matter but some bad economic-tech journalism about the business side.
I recently read this article on Mashable by Lance Ulanoff, the site’s Editor-in-Chief:
And if Steve Jobs really thought Amazon screwed up in alienating major publishers by not adopting the agency model, he was clueless as well. Amazon is WINNING.
Jobs pushed the agency model on the publishers? I don’t think so. They preferred that model but couldn’t get Amazon to go along with it without Apple’s help. It’s the screw-your-customers model and it wouldn’t have been good for the publishers over the long haul. They want high ebook prices so that they can hang onto their outdated IP-dependent business model of selling paperbacks and hardcovers in big-box brick-and-mortar stores for as long as possible.
That antiquated business model is particularly insane in the United States. The origin of the current wasteful publisher/brick-and-mortar bookstore relationship is fascinating. The strip-and-return system has its origin in the Great Depression (thanks Fed!).
Get this: The federal bureaucrat who last month started the litigation against Apple and book publishers for ebook pricing is the same person who, back in the stone age, represented Netscape in its lawsuit against Microsoft.
Recall that Microsoft was trying to give away its Internet Explorer to computer users for free. Netscape went nuts and got the government to clobber Microsoft for being so nice to consumers. It put the company through litigation hell and even demanded that Microsoft change its operating system code to untie it from IE.
The person’s name is Sharis Pozen, and she is acting head of the Justice Department’s antitrust division and a political appointee of the Obama administration. She claims that she is threatening state violence against Apple and publishers for pricing collusion — and that it’s her job to protect consumers.
Interesting. She began her career trying to protect the rights of an old-line company to rip off consumers. To her, a price of zero was unfair competition. She was sure that a browser should be a paid product. The progress of history flattens that argument. Today, dozens of companies beg you to download their browser for free. Browser use is all over the place, sort of like a free market. There is no Microsoft monopoly, contrary to the overheated predictions.
Given that history, one might suppose she would retire from public life and maybe go into flower arranging or something. Instead, she is still at it. Last year, she denied a proposed merger between T-Mobile and AT&T that would have improved your cell service. This year, she says that a deal between publishers and Apple is harming consumers, so she has to act.
As you may have heard, the Department of Justice is looking into opening an antitrust case against the Big 6 publishers and Apple for allegedly colluding to set prices via an agency model which the publishers set the prices for their books in the iBooks store, not Apple. They were then able to put enough pressure on Amazon to coerce it into accepting the agency model as well, which it had previously resisted. This is why you see ebooks being sold on Amazon for $9.99 or more nowadays.
Now, there’s a contingent of publishers and authors who fear change and have grown complacent and dependent on their IP-based, physical distribution model; they tend to see Amazon as an evil corporation out to destroy publishing, bookselling, and writers.
Scott Turow, president of the Authors Guild — does anyone else find the idea of an authors guild disturbing, like modern-day feudalism? some would say the same about the Big 6 publishing houses — recently wrote an open letter speaking out against the antitrust investigation and in defense of the agency model. Quelle surprise! Though it’s ironic to see someone defending big corporations against antitrust investigations who, under normal circumstances (i.e., ones in which his bottom line isn’t directly affected), would probably be in favor of antitrust suits against monopolistic big corporations.
Anyway, Turow types some rather outrageous falsehoods about Amazon. Indie powerhouses Barry Eisler and Joe Konrath1 do a pretty god job of showing how ridiculous Turow’s claims are. Richard Lea summed it up on Twitter with question that makes up the first half of this blogpost title: “Can a bookseller destroy bookselling by selling lots of books?”
I do disagree with Eisler and Konrath on one thing, however, and that is their opposition to the collusion between Apple and the Big 6 publishers. As a libertarian, I don’t have a problem legally speaking with collusion, or price fixing. Without government support, cartels are unsustainable. Of course, believing some practice shouldn’t be illegal doesn’t mean I approve of said practice.
Full disclosure: Both men recently made publishing deals with one of Amazon’s new fiction imprints but were extremely successful self-publishers beforehand and are still self-publishing other work. ↩
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In July, Amazon announced that Kindle book sales had surpassed hardback book sales. Analysts pooh-poohed this milestone as paperback sales are far greater than hardback sales. But now Kindle book sales have overtaken paperback sales as well. Amazon is now selling more digital or ebooks in its bookstore now than physical print books. We’ve reached a turning point in the way people read books.
There is still a ways to go, however, for ereader owners are still buying print books and ereader ownership is still not mainstream. While the adoption of ereaders is spreading, even at an accelerating pace, a recent survey of book shoppers shows that only 21% own one. I don’t own one yet, though I hope to buy an Android tablet in the next year or so.
I’m not sure print books will ever go the way of the dodo. Print books will increasingly have collector value. Some people may still prefer reading them, if only out of nostalgia for a bygone era. There are ways to add value to a print book as well: high-quality production, handwritten signatures, personal notes, and so on.
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