Tag Archives: economics

Freeconomics and Futurismic

In lieu of anything more substantial for the time being*, anyone wanting to know where I’m coming from with my plans for Futurismic would do well to read Chris Anderson‘s piece at Wired about the economics of free:

“From the consumer’s perspective, though, there is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you’re in an entirely different business, one of clawing and scratching for every customer. The psychology of “free” is powerful indeed, as any marketer will tell you.

This difference between cheap and free is what venture capitalist Josh Kopelman calls the “penny gap.” People think demand is elastic and that volume falls in a straight line as price rises, but the truth is that zero is one market and any other price is another. In many cases, that’s the difference between a great market and none at all.

The huge psychological gap between “almost zero” and “zero” is why micropayments failed. It’s why Google doesn’t show up on your credit card. It’s why modern Web companies don’t charge their users anything. And it’s why Yahoo gives away disk drive space. The question of infinite storage was not if but when. The winners made their stuff free first.”

Actually, I think everyone should read that article whether they’re interested in Futurismic or not. But it explains why Futurismic will never have a pay-wall, for a start.

And it’s probably too much to hope for, but I hope lots of musicians who up till now have been chasing after a record label to sign them up and make them famous will take note of this bit:

“On a busy corner in São Paulo, Brazil, street vendors pitch the latest “tecnobrega” CDs, including one by a hot band called Banda Calypso. Like CDs from most street vendors, these did not come from a record label. But neither are they illicit. They came directly from the band. Calypso distributes masters of its CDs and CD liner art to street vendor networks in towns it plans to tour, with full agreement that the vendors will copy the CDs, sell them, and keep all the money. That’s OK, because selling discs isn’t Calypso’s main source of income. The band is really in the performance business — and business is good. Traveling from town to town this way, preceded by a wave of supercheap CDs, Calypso has filled its shows and paid for a private jet.

The vendors generate literal street cred in each town Calypso visits, and its omnipresence in the urban soundscape means that it gets huge crowds to its rave/dj/concert events. Free music is just publicity for a far more lucrative tour business. Nobody thinks of this as piracy.”

OK, back to the grindstone – this week is one of those crunch points where everything peaks at once. Which makes it all the more frustrating that I appear to have picked up some kind of minor illness from PicoCon**. Selah.


[ * Busy. Sorry. Unavoidable. Your patience is appreciated. ]

[** It’s OK, Farah, I forgive you – I couldn’t think of anyone I’d rather catch an illness from. 😉 ]

What can writers learn from Radiohead?

The news that UK band Radiohead have chosen to release their new album independently of record label support using an ‘honour box’ pricing scheme has set the internet alight. Is this a phenomenon that writers of fiction should be paying close attention to?

Thom Yorke of Radiohead

Lucky

The standard first response to this story has been “oh, but Radiohead are big enough (and rich enough) to be able to do this and not lose out financially.” That’s true enough, but the same model will (and indeed already does) still work for smaller artists.

The only overheads Radiohead have on that album is the money it cost to record and master it. No duplication, no distribution, no advertising, and no middlemen raking out the lion’s share of the revenue – which, believe it or not, shows signs of being quite considerable already, despite the fact that the option to get the download for free was available with the band’s blessing.

Now, granted, Radiohead have a strong brand already. None of the local bands in my town are going to make the same amount of news (or money) by releasing an album in the same way, because not enough people know who they are. But all bands make more money from touring (and selling merchandise at the same time) than they do from records, be they big or small.

Nice dream?

What Radiohead (and Prince, and others) have realised is that in a world where it’s impossible to stop people passing your music from person to person, you might as well accept it and use it to your advantage – let your music be a loss-leader advert for your other services, which in the case of musicians is live performances. If you can make some money back on the recordings, all well and good – and if you treat your fans with respect, they’ll be more willing to pay you.

So what does this mean for writers of fiction? Well, the publishing industry is not identical to the music industry, but there are similarities – especially when you look at the “play it safe” approach to developing new talent, leading to bookshops full of more of the same.

The big difference is that the “book experience” isn’t quite so readily reproduced electronically, and it will be some time before it can be, for various reasons. In other words, I’m not suggesting that fiction writers should abandon all desire to be published as novelists. But what I am suggesting is that new writers (and old ones) should be giving away snippets to build up their reputations and create a market for themselves.

No surprises

Publishers, as much as they may be sincerely interested in bringing great writing into the public eye, have a bottom line to look after. I don’t think it’s over cynical of me to suggest that, if given the choice between two debut novels of equal quality, a publisher is going to feel better about taking the gamble on the author whose name turns up more often in blogs, forums and webzines. That author has done part of the publisher’s job for them; he or she has demonstrated not just a competence at writing, but the will and drive to get out there and sell themselves.

Of course, I’m largely preaching to the converted here. But there’s still plenty of misunderstanding about these issues, particularly from the old guard of publishers and authors – witness the SFWA/Scribd spat, which I believe to have been done with the best of intentions, but on the basis of a decades-old understanding of the writer’s place in the modern market.

Optimistic

And, much as I hoped and called for (but am not taking any credit for), the genre scene is adapting to the new economics. Much as in music, it’s the fringe cultures that can afford to try out new models, because their communities are bound by loyalty and a sense of identity, and because the artists are going to keep on creating even if they can’t make much money out of it.

Hence the ongoing short fiction revolution – I was absolutely stoked to catch the news that Fantasy Magazine is giving up dead-tree magazine publishing, and moving instead to a weekly free-to-read online magazine model with occasional printed anthologies … and they’re increasing their per-word price for fiction at the same time!

Anyone can play guitar

So, what can writers learn from Radiohead? They can learn that things are changing, and where the big boys lead, they shouldn’t be afraid to follow.

OK, so you’re not Charlie Stross or Cory Doctorow – the Radioheads of sf, if I might mangle the metaphor – but Stross and Doctorow are breaking the trail ahead of you, making it progressively easier to follow in their wake.

Radiohead’s best advert for themselves is their music. As a writer, yours is your writing. So set it free – if people want to pass it around on your behalf, they’re doing you a favour.

Is Harry Potter hype bad for the book industry?

I’m allergic to hype of all kinds, but experience seems to show that it’s a fairly rare condition. Most people seem to enjoy the crescendo of excitement as a much-anticipated event approaches (Christmas, the HP7 launch, &c), and lap up the associated press coverage. Personally, the more I hear about something the more put off the entire idea I become.

But my curmudgeonly attitude is not the focus here. I instead want to argue that intense hyping of any book to this degree is quite possibly damaging to the long term health of the industry as a whole. But first …

An example of peripherary Potter bandwagonning

There’s just no escape, you see. Because of the way the media works, a hot topic gets leaped upon by all and sundry, no matter how tenuous the connection. Witness, for example, a social work researcher using the opportunity to plug the idea of discussing death with young kids. OK, it’s a laudable aim, I guess, but talk about blatant opportunism.

Of course, this is exacerbated by the way internet search engine optimisation works – everyone with a website wants a slice of the inevitable barrage of Harry Potter search traffic. Of course, there is no such cynical motivation behind this post. *cough* 😉

Signal and noise – items of genuine interest amongst the cruft

Along with the bandwagonners, there’s some pretty interesting articles riding on the coat-tails (or should that be cloak-tails?) of the Harry Potter hype-wave:

The spoilers issue

A great deal of the concern about the leaked copies and early reviews comes from readers concerned about ‘spoilers’. As I think I’ve said before, I agree with a number of other reviewers of my acquaintance in that, if a book can be ‘spoiled’ by a plot denouement ahead of reading it, it’s probably not much worth reading anyway.

That said, people do seem to have worked themselves up into paroxysms of angst over the possibility of finding out which character (or characters) die within the course of the story, regardless of how ambivalent and vague the alleged spoilers are.

But even this is baffling – if your enjoyment of a book is going to be spoiled by reading a review of it, then why the hell did you read a review of it? Maybe its just me, but that’s just bloody daft.

The perils of consistant overhyping

But I promised you a proclamation, and here it is – this degree of global frenzy over the release of a single book is really not a good sign for the health of the publishing industry.

“Oh, come on,” I hear you cry. “It’s getting kids into books!”

Well, it’s getting kids into Harry Potter books, certainly; but there’s little evidence to suggest that items outside the franchise (which probably come with a lot less hype and merchandising attached) have the same ability to capture the interest of kids who weren’t interested in reading beforehand.

“Well, it’s selling a lot of volumes, so Bloomsbury and Rowling are getting some good dollar. Surely you don’t begrudge them that?”

I begrudge them nothing. I think it’s great, in fact – I’d say that Rowling herself, a single mum who worked damn hard while on a benefits-level income to fulfill her dreams and write her books, is a far better role model than Harry himself, to be honest.

As for Bloomsbury – well, good for them, too. But they’ve gone and raised investor expectations. They’d better be able to keep on bringing out books that shift as well as the Potter saga, though – business is all about momentum, after all, and last year’s balance sheet only means anything when held up to this year’s.

Which brings us finally to …

“Well, what does the hype matter? If the books weren’t good, they wouldn’t sell, surely?”

Well, that’s a hard one to defy with facts and figures (though I suspect that’s more because I don’t have tham rather than that they don’t exist), so I’ll draw a comparison to another industry that fell into the hype cycle and bargained its future on relentless promotion of sequels of declining quality – hello, Hollywood.

The Hollywood Syndrome

Hollywood cinema is (literally) a text-book example of Chris Anderson’s ‘Long Tail’ economic hypothesis, and he’s got plenty of facts and figures to show that Hollywood movie viewing is in a steady decline. I think all but the least critical movie-goer might agree that the increasing desperation and shoddy quality of Hollywood product may have soimething to do with it.

[Personal anecdotal aside – walked past Blockbusters last night, and saw the cardboard promo-plinth thingy for some movie whose title now escapes me. Which isn’t surprising – the best blurb they could find to put on the thing was “dazzling special effects”. Wow.]

Of course, technological factors are at play with the Hollywood model – but as I’ve discussed here at length before, the publishing industry is approaching its very own technological singularity. It would be hoped that the industry will look at what’s happening to Hollywood, and realise that relentless hype is self-defeating, unless you can guarantee that the product will meet the expectations you generate for it.

Furthermore, publishing is already deep into the “play it safe with known successes” business model, which has been a Hollywood watchword for far too long.

Big hype is bad news

And therein lies my hypothesis – nothing flags up concern about product quality worse than relentless hype. If the book’s really that good, it’s going to sell just fine anyway, though maybe not at such a rapid rate on the week of release.

The content of the new Harry Potter bothers me not in the slightest – I have no interest in reading it (the first three were not my slice of pavlova, darling), and don’t really care whether it’s any good or not. But I do worry that the industry is far too desperate to make hay while the sun shines to think about tilling the land for future harvests.

DRM – what’s dumb for music is dumb for books, too

Thanks to Tobias Buckell, I caught another slice of wisdom from Eric Flint of Baen Books on the subject of piracy (though not the sort with ships and cutlasses, mind) and the genre fiction market:

“You literally can’t penetrate the obscurity of the book market. You’d have to spend every waking moment reading book reviews—and even that wouldn’t suffice, because the book reviewers themselves, all of them put together, can’t keep up with the production of new titles.”

(Yup.)

“In short, the book market is just about as opaque as any market there is. I might mention, by the way, that this is not the least of the reasons that the fears of authors that they’ll get “pirated” are almost always just plain silly. With the exception of a tiny percentage of very well-known authors like J.K. Rowling or Stephen King, the real problem authors face is that only a very small percentage of their potential customers have even heard of them—so how likely is it that the ravening hordes of electronic pirates are out there plundering their titles?”

And a little further on:

“In the real world, the only authors—or musicians, by the way—who get “pirated” in any significant numbers are ones who are already famous and enjoy top sales. (And all the “piracy” is likely to do, even then, is simply boost their sales. See my next essay for a further discussion.) The great problem faced by all authors—musicians are in a very similar position—is the opacity of the book market. The entertainment market in general, actually, even movies. Compared to that problem, all others are fleas standing next to mammoths.

It is therefore absurd for an author or a publisher to support DRM, when DRM not only makes the market still more opaque, but—worse yet—it removes the best tool any author has today to penetrate that obscurity, at least a little.”

That is, of course, the O’Reilly / Doctorow “piracy as progressive taxation” argument, but here it’s coming from someone who knows the industry of which he speaks from the beancounting end. And the music industry comparison is timely, what with plunging CD sales and corporate panicking making headlines. They’re failing spectacularly; publishing would do well to learn from their mistakes.

Further evidence from O’Reilly, via Doctorow (ZOMFG! H4X! k0nsp1r4cy!), in the form of a case study of sales and download figures for a non-fiction title whose free availability became a Digg headline:

“…what’s most striking (apart from the huge scale mismatch, in terms of the number of people accessing the content through the free online version), is that when the downloads spiked in January of this year from about 8000 a month to nearly 30,000 after the book’s free availability was noted on digg, we didn’t see a correspondingly sharp decline in sales. Of course, neither did we see any evidence that free availability of the book spurred sales. And as noted above, there is a sharp drop at about the time the download data starts that is likely unrelated to the downloads, even though we can’t entirely rule out the possibility that downloads had some effect.”

This is of limited relevance here – because popular fiction is a different kettle of fish to obscure geek tomes on the future of telephony, and because this is a case where a free, easy and perfectly legal source for the electronic version was made available. But even so, it’s worth noting that there was no sharp decline in sales.

Of course, the best way to nullify piracy, as Flint and O’Reilly have both said before, is to make the stuff freely available at source. Publishers have been reticent about this, which is probably no surprise – the economics of abundance is a pretty new phenomenon in creative works, after all – but the problems being experienced by the record labels should be sufficient impetus to start planning ahead.

And the options are there – even Google, those filthy copyright-infringing bookscanner types, are holding out a hand to publishers by offering them the chance to have branded portals to the content of theirs that Google makes available:

“Publishers can tailor the index of their search engine so that only books published by them show up in the query results, Google said Friday. As in the main Book Search site, these result pages give users the option to link to online shops that sell the listed books.”

Sure, Google gains from this. They’re not stupid. But publishers stand to gain, too – and while playing King Canute as your business dwindles might be a glorious stand for what you’ve always believed in, it’s ultimately an empty display if you’re in the business of getting good reading material in front of the eyes of readers. Go with the flow; it’s easier to adjust your stroke if you’re not swimming against the tide.