When elephants fight…

Even a casual perusal of my little corner of the web is enough to convince most people that Copyright – and the abuse thereof – is a subject that is dear to my heart. So it was with much interest that I read about the ongoing spat between Macmillan (the publishing house), and the on-line giant, Amazon. Here’s the story so far:

  • Amazon buys e-books from publishers at 50% of retail price, and then sets the selling price – typically $9.99.
  • Macmillan decide that they want to “go to an agency model” which allows them so set the price and reduces Amazons “cut” to 30%. They also want to raise the price of e-books to around $15.
  • Amazon removes the “Buy” buttons from ALL Macmillan products – e-books and print – from their site.
  • Amazon later reverses their decision, calling it a “Capitulation” to Macmillan’s “Monopoly”.

Macmillan’s reasoning for wanting to raise the price of e-books is so that they can bring them out at the same time as the Hardback edition without cheap e-books cannibalizing hardback sales.

This makes sense.

They also claim that this arrangement allows them to reduce prices later.

This does not make sense, as they conveniently forgot to mention that they can already do that.

Most of the commentary that I have seen on the subject has been from the writing community. Most of it favors Macmillan, and has vilified Amazon as evil incarnate.

I respectfully disagree. Sort of. Partly.

For centuries, the publishing industry has used the tried-and-trusted Author->Publisher->Wholesaler->Retailer->Customer business model, and for physical books, it still works well. But that business model is not appropriate for electronic media. Why? Because there are no production and distribution costs involved. In theory, an author could write, edit and publish an electronic book and sell it direct to the public.

When I buy a paperback, I can sell it or give it away. It is my property. No-one can take it from me. With an e-book, I am stuck with it. I cannot give it away to someone else (though this is technically feasible, no publisher will enable such functionality unless a gun is put to their head). Even worse, if the publisher decides to yank paid-for content from the customer’s device, there is nothing that the customer can do about it – shame on you, Amazon, for that, if nothing else. So the value proposition is radically different, and no matter how hard you try, the the old rules cannot be made to fit the new .

In spite of this, publishers like Macmillan still insist on clinging grimly to their old model; why? Perhaps it is because like their cousins in the Music and Movie industries, “That’s the way we’ve always done it”. And we’ve all seen just how well that’s working out for them…

I am a firm believer in the free market, but it must be remembered that copyright is a necessary distortion of that market in order to reward creativity and not “kill the goose that lays the golden eggs”. Technically speaking, Amazon is right: Publishers hold a monopoly, as far as copyright is concerned. That is as it should be.

Publishers like Macmillan seek out new talent. In partnership with the authors they help to produce, develop and market their products. They represent the authors. They do their job well and are very good at it.

Retailers like Amazon provide a mechanism to sell stuff. They seek out markets and shift boxes. They also handle returns, complaints and post-sale support. They do their job well and are very good at it.

Amazon is not evil; neither are the publishers. Both are looking after their own interest, and either is free to do business on their own terms.

  • Macmillan believe that they should set the price, since they are the publishers and the books are their “property”.
  • Amazon believe that they should set the price, since they are… Amazon (well, it works for Wal-Mart!)

They are both, of course, wrong – we, the consumers, set the price with our decision to buy. Market value is “what a willing buyer would pay a willing seller”, but the copyright monopoly distorts that equation.

This whole fight is about who fits in where, and who gets to set the price.

Here’s a case in point: Recently, Amazon put “Dark Side of the Moon” MP3 on sale for $2. I’m not a Pink Floyd fan, but at that price I snapped it up. I would NOT have bought it at the full price of $5. Amazon made money, and so did the artist – money that would not have been made if the publishers were allowed to set the price. The way I see it, I set the price with my buying decision.

I love the idea of e-books, but I do not not own en e-book reader. Why? Cost the reader and the content are both too bloody expensive and DRM requires that I surrender too much freedom for my liking.

  • I would pay $3-6 for an e-book; at that price I would buy one or two every week.
  • At $10 I might buy 3 or 4 a year.
  • At $15, they will never see me – I’ll just visit the library instead.

Returning to the Macmillan-Amazon incident, In theory, Macmillan should set the price. In practice, they will set their prices higher than I am willing to pay. And then, whey sales do not live up to their over-inflated expectations, they will take a leaf out of the RIAA and MPAA’s books – and blame Piracy for their own inflexibility. Come on guys; it’s only ones and zeroes…

Which leads to an African Proverb that most accurately describes this “kerfuffle” as one pundit put it – though I prefer the term “brouhaha”:

“When elephants fight, it is the grass that suffers “

Background Reading:

http://www.authorsguild.org/advocacy/articles/the-right-battle.html

http://www.huffingtonpost.com/susan-piver/the-macmillan-vs-amazon-t_b_444879.html

http://www.businessinsider.com/henry-blodget-hey-john-sargent-ceo-of-macmillan-books-screw-you-2010-1

http://pubrants.blogspot.com/2010/02/amazon-macmillan-kerfuffle.html

http://bits.blogs.nytimes.com/2010/01/29/amazon-pulls-macmillan-books-over-e-book-price-disagreement/

http://www.guardian.co.uk/commentisfree/2010/feb/03/amazon-macmillan-kindle-books

Now reading: Second Variety, by Philip K. Dick

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