Why the Web will gut paid e-books and apps, and why free can pay for authors and publishers

Selling digital content at any price above zero is not sustainable: the Web is cheaper for readers, cheaper for writers and publishers, and far more discoverable and shareable than the squabbling hermit kingdoms of e-books and apps.  For both authors and publishers, the best strategy is to distribute for free and find another way to pay the bills. (Part 2 of 2.)

Back in 2008, I attended the Frankfurt Book Fair, our little Wikitravel Press stand in Hall 4.2 just around the corner from the main area for technical talks.  And whenever there was something about e-books on, suddenly the hall would fill with sweaty publishing execs in cheap, crumpled suits, craning their heads and hoping against hope to hear and believe the message of joy: “Printed books may die, but paid digital content will save you!  Just keep calm, carry on, and sell your books as e-books and apps instead!”

For a publisher, this vision of beauty is an immensely seductive proposition: keep your business model, keep your pipeline, keep your editorial process.  Sell a slightly-tarted up version of your print-ready book, turned into an ePub or .mobi or iOS app or whatever flavor of the day your snake-oil CMS merchants tell you need, and as a bonus get rid of all that tedious faffing about with print runs, distribution and unsold stock.  And now, 5 years later, it all seems to be coming together!  What could possibly go wrong?

Only one thing: for the vast majority of publishers, paid content is as real as green-haired fairy princesses, because the Web will gut the business model for paid apps and e-books.  There are three reasons for this.

First and foremost, you can’t beat the Web on price.  The price of a printed book has been established through decades of trial and error: it accurately reflects the cost of creating and distributing the physical book, the price the market will pay, the level of competition with other printed book publishers and the margin the publisher needs to survive.  The current price of e-books and apps, on the other hand, is entirely disconnected from the actual cost of creating and distributing each additional copy, which is essentially zero. If the same content, or at least substitutable content, is available on a website for free — and the Internet being what it is, the answer is usually “yes” — there will be relentless price pressure to drive those prices down to match.  Forget $9.99 e-books or even $0.99 e-books: the price point to beat is $0.00.

Second, the Web allows drastically lower overheads for connecting authors to readers.  Building e-books and getting them distributed, much less building mobile applications and getting them into the famously developer-hostile iTunes store, are arcane arts limited to expensive professionals wearing propeller beanies.  Any monkey with a keyboard, on the other hand, can hammer out and publish a blog or forum post, and while the vast majority of them deservedly sink without a trace, a truly original or insightful idea will go viral on its own merits.

Third, apps (eg. iTunes) and e-books (eg. Kindle Store) are walled gardens, and history tells us that walled gardens always lose.  Minitel, Compuserve, America Online etc all restricted the users to officially approved islands of inaccessibility cut off from the rest of the Net, and despite an initial run of success due to clean, well-integrated interfaces and lots of industry players taking advantage of easy ways to bill users, none could compete in the long run with the sheer breadth of content and what Technology Review‘s Jason Pontin recently dubbed the “linky-ness” of the Web.  Probably the simplest way to visualize just how crippling these walls are is to simply search for (say) *Paris* with your favorite search engine, and see how many links to apps and e-books you get back: you’ll find the answer is zero.

The forces outlined here are clear and inescapable, and they mean that it will gradually become harder and harder to profit simply by selling copies.  And once there are no copies to sell, and no bookstores to sell them to, the last justifications of a traditional publisher’s existence — sales, distribution and chasing up invoices — disappear, with editing, design and marketing becoming optional add-ons instead of mandatory parts of the package.

The solution?  Join the light side of the force, throw away your precious business model, and become a website yourself.

Now, it’s easy to fall into the trap of assuming that just because the vast majority of websites are free to access, they must also be free to produce, and hence it must be a losing proposition to pipe content that has been paid for into a free website.  This is, of course, a fallacy: the incremental cost of serving an additional reader via the Web may be virtually zero, but keeping any website of significance up and running is an expensive proposition. TripAdvisor, famed purveyors of travel information they notionally didn’t pay a cent for, had operating expenses of $338.5 million last year, a large chunk of which went into paying people to fish out the most egregious chunks of spam from their firehose of contributions.  In the dead trees publishing world, this is called “editing”, and while TripAdvisor’s focus is very much on quantity over quality, others may choose the opposite.

Authors in this new world will thus have a choice.  One option is to exchange risk for the certainty of a fixed but low paycheck and write work-for-hire for a website that monetises itself with any of the existing business models out there for the Web: advertising, transactions (brokerage), associated merchandising, etc.  In the world of reference publishing, including travel, work-for-hire is already the norm and these authors will see little difference — assuming, of course, that the companies they work for survive the transition, which is by no means a given.

The more exciting but financially dangerous choice is to strike out on their own.  If your main goal is to share your writing or ideas with the world, the digital world is your oyster: start blogging and promoting, and worry about money later.  If Karl Marx was publishing The Communist Manifesto today, would he make it a website or a $0.99 e-book?

If you already have a significant following and would like to turn it into a career, simply asking your fans for money may work, but the guaranteed advance revenue of Kickstarter-style crowd funding seems more appealing; Seth Godin recently just pulled in $130,000 in a few hours.  Cory Doctorow famously gives away copies of all his e-books and makes it back in increased print sales, a format which, much as we like it to diss it, will be around for a while, especially in the deluxe hardcover editions that fans love and authors earn well from.

Now here’s the catch: both these authors could easily charge for what they write, since some of their fans would pay to unlock the gate and pass through the digital wall to read their next book.  But they choose not to, since every book they lock away represents one less opportunity for a new fan to find them.

And if you are publishing your first novel, you would be a fool to barricade yourself in a digital fortress and hope that some greater fool is willing to take a punt on paying you even 99 cents, when there is an ever-increasing plethora of free alternatives.  Achieving fame as an aspiring novelist has always been a long shot, why sabotage your already meager odds for the 34 cents that are left over after Amazon takes its 65% cut?  As Cory says:

There has never been a time when more people were reading more words by more authors. The Internet is a literary world of written words. What a fine thing that is for writers.

Did you miss Part 1?  Check out Eat yourself or be eaten: a tale of two travel publishers.

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8 comments
  1. Bob Talbot said:

    It is a fascinating thesis and very logical that there are no protected markets or secret gardens to preserve or protect publisher’s profits and the price of any content will tend to zero, but it is a tad apocalyptic not to say simplistic, both for authors as well as for publishers of the dead tree variety and others. If the only way an author is ever going to make any money is to give away their work from their own website then what incentive do they have to write at all? Will it not just make publishers even more risk-averse and authors more frustrated with what is already a pretty dysfunctional market?

    The reality is surely that printed books will become the exception – that books will be e-published and read first and when judged sufficiently popular will be come available in print form – and that the e-book will become the premier format – with a price range that simply reflects demand but which is always tending to lower values? That publishers will (like mobile phone companies) have to progressively use techniques such as a Free Kindle with a years contract package of books or something similar, but it will be marketed as “A free Kindle when you sign up for a year of unlimited e-books”?

    Authors may have to settle for smaller advances and lower royalties but will have the advantage of competition between e-book publishers to list their work ie non-exclusive e-book publishing deals would become the norm and an author ‘s copyright becomes a tradeable commodity, with authors being listed on some kind of stock exchange just as companies are currently? eg Fred Smith, 29, copies std 5.2m Booker Prize Listed Share value $2.30 !!

  2. What is your evidence for this statement: “it [the price of a print book] accurately reflects the cost of creating and distributing the physical book, the price the market will pay, the level of competition with other printed book publishers and the margin the publisher needs to survive.”

    I’m not so sure that’s true at all. Besides, I think this misses the point that for the class of authors you seem to mean (self-publishing) you’ve omitted the cost of writing the book. Trad publishers don’t include that in their cost structure because they don’t bear that cost and they don’t, in the majority of cases, pay authors anything like the cost (in time and materials) of writing.

    Regardless, when the web hasn’t put the price of music to 0, why do you think it will do that with books? Or anything else, for that matter. I buy products via the web all the time and they aren’t free. I have two short stories on my website that are available for free. They sell quite nicely at Amazon and elsewhere for .99 and I disclose that they are free at my website.

    Why would you search for “Paris,” a hopelessly broad search term since it’s the name of one of the most beautiful cities in the world, and expect to find ebooks in the top search? On the other hand, if you google “Paris eBooks” the results are highly selective — in that that tops results are, indeed, eBooks about or concerning Paris.

    I would agree that there’s a walled garden effect, but it’s not so much vendor as format. Besides, to use AOL or Compuserve you had to pay money just to be there. It’s not at all comparable to Amazon or any book vendor. Anyone with a web enabled device can get to Amazon and become a customer. for 1 product or a hundred. Whenever they like and at no cost except the purchase.

    What would be better is if the eBook format were standard, period, and any device, Kindle, Nook, or what have you, could read that book. That’s the walled garden — file format.

    I’m guessing from this article that you’re not aware that the trend among self-publishing authors is away from .99 and toward higher prices. There are ample sources on the web where authors discuss this and the data that demonstrated higher priced eBooks did better.

    Lastly, I can tell you quite bluntly that self-publishing has transformed my writing career. I am now making more money from my self-published books than I do from traditionally publishing. I don’t mean a few hundred dollars. I mean several thousand dollars. I am not alone. There are many many traditionally published authors, like me, who are looking at the money from self-publishing and looking at their NY contracts and not signing.

    All of which is to say that while there is absolutely a place for free, the web isn’t gutting eBooks. Quite the opposite. Thank you for an interesting perspective.

    • jpatokal said:

      Re: “evidence for this statement”, are you serious? That’s market economics 101: sellers (publishers) charge the highest price buyers (readers) let them get away with. For printed books, that price has a floor set by the real cost of production and distribution; for e-books, that real cost is zero, and hence prices will trend towards that as well. And we are most definitely seeing this happen for music as well: heard of Spotify?

      The goal of a traveller is to find information about a place, not a particular format for that information. If I want to find the best cafes in Montmartre or the opening hours of the Eiffel Tower, I will google precisely that, not “best cafes montmartre ebooks” or “opening hours eiffel tower ebooks”. And even if somebody does, the content of the paid e-book will most likely not be visible to Google, and thus won’t show up in the search results!

      Sure, there is an opportunity right now for authors with an established dead trees following to sell digital copies to fans that have already been trained to pay for printed copies — this is why the average age of the e-book buyer is 44. My contention is simply that by doing so, you will cut yourself off from the next generation of readers and place yourself at a disadvantage when competing against authors who share their work for free.

  3. gluejar said:

    Karl Marx probably wouldn’t be able to publish his manifesto as a website, because it would be traceable to him and all its readers would be tracked and monitored. A free ebook delivered via torrents, person-to-person sharing, and file-locker sites would more likely be the technology of choice. EPUB ebooks are simply websites packaged for portability.

    Another disadvantage of websites is their ephemeral nature. A travel guide should be a website, but a great work of literature should last more than a few years.

    At Unglue.it, we’re trying to create a kickstarterish way to cover the fixed costs of ebooks so they can be distributed for free. Come and join us!

    • jpatokal said:

      The Communist Manifesto was signed by both Marx and Engels. The distribution of ideas while trying to stay anonymous is an entirely different problem, and not one which concerns the vast majority of authors out there — it would be particularly hard to make any money in any way while doing so!

    • markg said:

      If Karl Marx published his manifesto today, no matter where he published it, he would be a featured thinker in every mainstream university. Wait that’s been done. For decades.

    • jpatokal said:

      I don’t usually approve pingbacks, but this one’s actually worth reading!

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