27 July 2005

Gutenberg Redux:  Moving Towards Post-Scarcity Literature

by Steven Saus
My parish’s fiftieth festival is this year, and has an appropriately "retro" theme.  At the volunteer sign-up table were several 45rpm singles from 1955.  My son's comment was: "What kind of CDs are those?" 

Technology has changed the way we consume media in ways unimaginable to Edison or Gutenberg.  This has been most obvious with the music industry over the last century.  It has moved from sheet music through recordings, radio, cassette tapes, CDs, and MP3s.  Each change has had a large effect on the way music is created and sold.  A similar revolution has slowly crept up on Gutenberg's invention – though like the music industry, book publishers don’t seem fully aware of it yet.

"Using Fiction To Sell Fiction" outlines several different techniques book publishers are using technology to promote their wares (Vara).  They include fictional characters having "personal" websites, enlisting reviews from the blogging community, and creating interactive games (ibid).  All of these are extensions of the standard marketing formula; they are simply digital versions of window displays, book reviews, and commercials.  There is, however, one truly revolutionary tactic reviewed:  giving the content away.

Giving content away is counterintuitive to a basic understanding of capitalism.  This negative view is reinforced by lawsuits, public service announcements about “pirates, and the numerous Digital Rights Management (DRM) schemes to prevent e-book copying (Jenkins).  Yet giving content away seems to work in both music and in literature, and may boost real-world sales of the media (Oakes).
Entertainment media is essentially a differentiated market.  There are many similar products competing for the same discretionary money in your wallet.  It’s arguable that many of those products are of inferior quality, but that simply intensifies the need for differentiation.  Someone who has purchased several low-quality books from previously unknown authors will require a greater demonstration of differentiation before spending their money.  In other words, the opportunity cost for the consumer is high in terms of both money and time. 

Due to the vast size of the market and this high consumer opportunity cost, it's estimated that consumers in a brick-and-mortar store spend less than thirty seconds looking at the front and back cover of a book  (Poynter).  All of the "new" techniques are further attempts to overcome the obstacle of the consumer's opportunity cost.

Cory Doctorow, one of the profiled authors, has been giving away his novels for free over the internet.  It is a common practice for review copies of books to be given away, but they are relatively few in number (Varna).  This makes sense - it requires scarce resources in order to produce review copies.  This publisher opportunity cost is vastly reduced when distribution is done digitally over the internet.  It is reduced even further when no sales records, transactions, or DRM licenses need to be considered.  In turn, this reduces the opportunity costs for the consumer.  With no DRM, there's no special software for the consumer to load.  There's no inconvenient "checkout" process, or any concern about identity theft.  And, of course, it’s free.

As Mr. Doctorow points, he now benefits from negative reviews as well.  A negative review of his first novel exhorted consumers to "Download it for free from Corey's site, read the first page, and look away in disgust” (Doctorow).  Every consumer that did so paid more attention to the novel than would be expected to in a traditional brick-and-mortar store.

Where does the profitability come from?  Why would people pay for something they could get for free?  We must briefly look at the media to address this.

In the past, media companies have controlled the medium of transmission - from sheet music to hardcover books.  This naturally leads to a scarcity-based economy.  Technological changes have increased the efficiency of these industries, but scarcity has always been present.  With the advent of personal recorders and digital transmission, the content is no longer bound to the medium.  The scarcity of the content, or information itself is disappearing.  The Recording Industry Association of America's lawsuits against "file-sharers" and DRM on e-books are simply attempts to recreate the scarcity-based economics of the real world in a digital space (Ritholtz).

These efforts seem doomed to eventual failure.  The recent release of Harry Potter and the Half-Blood Prince is an excellent case study.  Within twelve hours of the book's release, pirated e-books were circulating on the internet, with pirated audiobooks not long behind (Dunstan).
There is a growing realization among content creators like Mr. Doctorow:  those who will pirate will do so.  They will not purchase your content.  On the other hand, lowering the opportunity costs for consumers by giving your content away provides an excellent opportunity to stand out in this differentiated market.  They will also be more interested in the rest of your work.  Baen Books found that releasing free electronic editions of previous installments in a series will increases sales for new books in that series – and also increases real-world orders of the older titles (Doctorow).

This is also borne out by Harry Potter and the Half-Blood Prince.  While the book was being pirated and distributed over the internet, the expensive hardcover broke single-day sales records (Gulf Times).  This parallels the release of the film Revenge of the Sith, where the quick release of a pirated copy didn’t stop record sales (BBC). It also reflects a general trend among music file-sharers:  real-world sales popular music is not hurt, and may even be helped by file sharing (Oberholzer, Strumpf).

These trends are explained by re-examining the consumer’s opportunity cost.  Once consumers have overcome that original opportunity cost, they tend to want the real-world product.  This is for a multitude of reasons, ranging from appreciation and a sense of fairness, or to simply have it in a favorite medium.  E-books are a complement to paper books in both the economic and conventional sense (Doctorow).
The efficiency of modern technology is unprecedentented - and unforeseen.  For the first time in human history, it is possible to almost eliminate scarcity in information distribution.   We cannot guess how far our technology will reduce scarcity; who could have imagined just-in-time stocking in 1950?  No one knows what forms our entertainment media will take; who could have foreseen the iPod in 1995? 
Book publishers are using these technologies in two major ways.  Most seem to be using it as high-tech window dressing.  Mr. Doctorow and those like him are instead exploring the possibilities of technology to transform the way business is done. 

Works Cited
 Bought Love is a Salaried Position - Political Both Dreams and People Crash Down - Inspiration Shadows of the Spine - wierd and funny stuff Walking is the Process of Controlled Stumbling - religion Idle Thoughts Are Often True - The Work of Others Moments are the Measure of Our Lives - life under the microscope Newness is Relative - information overload Perceptions do not Limit Reality - miscellaneous This Space Intentionally Blank - free mail lists
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Bought Love is a Salaried Position - Political Both Dreams and People Crash Down - Inspiration From Unlikely Sources Shadows of the Spine - wierd and funny stuff Walking is the Process of Controlled Stumbling - religion Idle Thoughts Are Often True - The Work of Others Moments are the Measure of Our Lives - life under the microscope Newness is Relative - information overload Perceptions do not Limit Reality - uncategorized goodness This Space Intentionally Blank - free e-mail lists Some Rights Reserved