The downward spiral of ownership and value (happened to music, books are next)

http://www.librarything.com/blogs/thingology/2011/01/ebooks-the-downward-spiral-of-ownership-and-value/

by AndrewDucker • 16 years ago

50 76 16 years ago

erikstarck• 16 years ago

This goes beyond just the digitalization of media. In the age of access you rent more or less everything. Your car and your home (either directly or via loans), your music collection, library - maybe even your furniture and clothes: http://www.weartodaygonetomorrow.com

Huge opportunities for startups to be disruptive here.

JoeAltmaier• 16 years ago

New meaning for "a new lease on life!"

Perhaps we'll see "life lease" companies - I'll have the mid-level engineer package please!

DennisP6• 16 years ago

The article talks about how the music industry is shrinking, but says nothing about musicians. Musicians who embrace the new reality are doing fine. What the Internet is really doing away with is a giant industry that used to be useful, but now is merely parasitic.

The same is happening to the book publishing industry. We don't really need them anymore. Instead of giving $15 to a publisher who then gives $1.50 to the author, we can just give $1.50 to the author directly and be done with it.

In the process, we'll see lots of articles like this bemoaning the 90% shrinkage of the publishing industry, while actual authors make more money than ever.

bad_user2• 16 years ago

      What the Internet is really doing away with is a giant industry 
      that used to be useful, but now is merely parasitic.

That can go both ways: the Internet is also breeding a generation of customers that used to value and support music & books, but now is merely parasitic.

      we can just give $1.50 to the author directly

I'm all for eliminating middle-men, but free is still a whole lot better than $1.50; and when downloading hundreds of songs from PirateBay, that's several hundreds of dollars versus free.

     Musicians who embrace the new reality are doing fine.

Citation needed.

I would also love a functional gift economy, instead of one of scarcity ... but on the Internet a gift economy doesn't really work, because most users are not giving back. How many users of open-source software are giving back contributions and donations?

Even when your software is used by lots of corporations; you either have to beg, or your software has to be broken (in need of a fix).

And I quote from http://www.undeadly.org/cgi?action=article&sid=200603210... ...

     OpenSSH is in use by millions around the world 
     however the revenue stream just simply isn't there.

Music, books, software: all of them require effort and lots of it. Being able to work on such things full-time is wonderful; and if broken technologies/legislation like DRM are the only solution for it, then that will be the future.

greyman2• 16 years ago

"and when downloading hundreds of songs from PirateBay, that's several hundreds of dollars versus free."

No, it isn't several hundreds of dollars, since many people who are downloading from PirateBay would not buy the songs even if the free option wouldn't be available.

bediger2• 16 years ago

You're denying basic free market economics with an emotional argument. In a competitive market, the cost of a good tends towards its marginal cost of production. We get all excited as the cost of solar cells tends lower and lower, as the marginal cost of their production gets smaller. Do we "value" solar cells less because of this?

"the Internet is also breeding a generation of customers that used to value and support music & books, but now is merely parasitic."

To borrow a phrase, "Citation needed".

harshpotatoes• 16 years ago

This doesn't completely answer your question about certain music artists doing just fine, but might also be an interesting read.

http://blog.tunecore.com/2010/10/music-purchases-and-net-rev...

Retric• 16 years ago

For cost books have been competing with at cost books for a long time. The reality is reading 50$ worth of books takes far longer than listening to 50$ worth of music. So while I could download 500,000 books tonight I can read them fast enough for that to be a meaningful activity.

PS: At the sub 3$ a book range there is little reason to pirate. I tip waiters more than that let alone entertain me for a few hours.

kn0thing• 16 years ago

For authors with established audiences (at breadpig we stick to webcomics) the Internet has been a fabulous publishing boon. We're approaching 35,000 copies sold of xkcd: volume 0 (now available in meatspace!) and Randall is getting a majority of the profits.

Breadpig isn't the first publisher to do that, but it's going to be really hard convincing popular webcomic artists to take a typical book publishing deal.

And for now, there are still plenty of us who enjoy reading deadtree versions of our favorite webcomics - delicious irony!

RyanMcGreal2• 16 years ago

> The role of piracy. I think we know. And the trends are negative, for both readers and authors.

Except that the role of piracy is anything but clearcut. As Tim O'Reilly famously said in 2002 [1]: "Obscurity is a far greater threat to authors and creative artists than piracy."

Again and again over the past several years, we have seen both studies and anecdotal stories from artists finding that file sharing produced a net economic benefit. If "piracy" increases ten times and sales double, that still means doubled sales.

[1] http://tim.oreilly.com/pub/a/p2p/2002/12/11/piracy.html

tree_of_item• 16 years ago

The author quotes Tim O'Reilly and shows why he isn't necessarily correct.

> Don’t need to take my word for it. Just look at all the other industries that have gone digital. Take music. Physical music sales have been declining steadily for more than a decade, and while digital sales rise, they make up only a fraction of the loss. (They’re not even rising much anymore either.) Revenue from Pandora, Spotify, YouTube ads and the like are loose change next to CD sales declines.

> What’s the shortfall? All told, the United States recorded music industry is worth less than half of what it was a decade ago, and the downward slope is only getting steeper. Outside of the big markets, the declines are greater. The Spanish music industry fell 55% in the last five years alone. In China rampant CD copying and file sharing have left a nation of 1.3 billion people with a $75 million recorded-music industry. As a recent Economist report put it, the “worst-case scenario has already come to pass.”

Sales are not doubling everywhere. The industry has shrunk to a fraction of its previous size.

DennisP6• 16 years ago

He says "obscurity is a far greater threat to authors and creative artists than piracy."

The industry is another matter. Its main contribution is file distribution, a function which we can perform for free now. I expect the industry to ultimately shrink to zero, while authors and creative artists do just fine.

Over ninety percent of the money we pay for music used to go to the industry, and we thought that was fine because they were pressing all those vinyls and CDs. Now the industry thinks they still deserve that ninety percent, just because they used to press all those vinyls and CDs. Free markets don't work that way.

pmichaud• 16 years ago

I don't think those figures are really meaningful. What about the mushroom cloud of new and different bands who are all unsigned, all selling CDs and shirts, and booking shows, etc, while the giants fall? Those are the growth areas, not the giants. It's easier to measure the downfall of the giant and say that's what's happening to "music," but really what we're looking at is corporate revenue. We need a better way to measure the actual music industry, instead of just the dying players who used to dominate it.

RyanMcGreal2• 16 years ago

> The industry has shrunk to a fraction of its previous size.

And by "the industry" you mean the large corporations that don't create art (the artists do that) but extract most of the value of the art products that are sold by acting as gatekeepers to the market.

tel• 16 years ago

There's no doubt at all that the music market is transforming. I'm not sure why people are so surprised that it will probably transform into something smaller. The power shifted from music executives to musicians who always wanted something more genuine. It's necessary to consider that the number of music listeners who genuinely like some bands is a smaller market than anyone with a radio/tv/ear who could be pumped full of American Idol promotions and Top 20 Lists.

I think there will probably be oscillations, though. As whatever the new form of music takes more cohesive shape, musicians learn how to monetize it, consumers learn how to invest in it, the market will probably grow again. Not to it's previous towering height, no, but perhaps to a more efficient structure that actually does have bands making money relative to the value of their work.

I'm definitely pretty optimistic. Then again, I've also learned to love music in the middle of this transformation and have invested thousands of dollars over many years buying music from artists. I'm only tempted to search for torrents when I see people signed to bigger labels. After all, they're cushy right?

hxa72412• 16 years ago

But whether the industry is shrinking, or sales are down, is not really the question. That is really what the industries themselves care about. The important thing is whether we, the public, have sufficient production, which is a somewhat different thing.

And various measures show production has not fallen, in fact it has risen, significantly. One example: http://www.unifr.ch/controlling/seminar/2009-2010/oberholzer... . And does it seem like we have less music, films, books now? It seems quite the opposite to me. If we are currently living through 'the worst case scenario' and an industry 'a fraction of its previous size', we seem to be doing pretty damn well.

jimbokun3• 16 years ago

Did you see the chart where revenue from music sales for the entire industry is down more than half?

http://money.cnn.com/2010/02/02/news/companies/napster_music...

How can you argue that piracy increases revenues when revenue for an entire industry is plummeting? Is there another chart somewhere that shows aggregate revenues increasing for some category of media that has been digitized? Is there revenue that that chart does not capture that more than makes up for the lost sales, and that is positively affected by piracy?

Goronmon• 16 years ago

Is there some reference that states music sales should always go up and never go down? Maybe music sales just spiked?

Also, how much of sales descreasing is because people no longer have to buy an entire collection of songs all at once (a CD, for example) and instead get to pick and choose their songs? I know my music purchasing habits have changed from when I was young. I rarely buy entire albums and usually just nab an individual song here and there.

_delirium6• 16 years ago

It'd be nice to have some more specific data. How is the revenue loss distributed? For example, is it that: the kind of artist who used to bring in $10m in revenues is now bringing in only $5m? Or is it: artists who used to make $50k are now making $0 or losing money? Or if both, how much of each? Or to look at it differently, how many artists in absolute terms are there in each revenue range? Also: how is the decline in total music revenues distributed between: 1) the major labels; 2) indie labels; and 3) self-released musicians?

Different people presumably have different preferences, but I'd be most worried about a decline in the total number of musicians above the "make enough to eat" threshhold, which may or may not be reflected by that data. I'm less worried by whether the top 40 musicians make $1m or $5m or $50m each, so if that's the main source of revenue loss, I would care less.

I've tried to find that kind of data, but it doesn't seem to exist, at least anywhere I can get to it.

lambda• 16 years ago

What evidence has anyone shown that music revenues are down because purchases are being displaced by piracy, as opposed to other reasons like people spending their entertainment time and money elsewhere (videogames, movies, TV, free content available on the internet), or people no longer buying replacement records or tapes as CDs are more durable, or people not on a format upgrade treadmill since they can easily convert from their CDs to whatever format they want for their MP3 players? I'm sure that some of the decline is due to piracy, but I don't think that you can blame it for the whole thing.

Also, I'm not terribly sympathetic to an industry which realized that it was losing sales to piracy, but took 8 years before it actually got around to offering what it's customers were looking for, such that their customers could actually pay for what they wanted. Napster was released in 1999, and while the fact that you could get music for free was nice, what was really appealing was that you could look for any song you wanted, find it instantly, download it, and stick it on your MP3 player. Since then, the music industry tried limiting the catalog of services (like Emusic, which offerred DRM-free MP3 downloads but had a lousy selection), or had incompatible DRM-encrusted services that meant that you would risk losing access to your music collection if you changed computers or MP3 players. It wasn't until Amazon MP3 came around in 2007 offering DRM-free MP3 downloads of a reasonably broad selection that they really offered anything at all competitive with piracy. Spending 8 years training consumers that piracy is not only cheaper, but also easier, more convenient, less hassle, and with a greater selection, and who's surprised that they lost customers in that time frame?

jfoutz• 16 years ago

There aren't many technical barriers to entry. That dramatically increases competition on the production side. It seems at least some sources are passing those savings on to you the consumer.

The price of a gallon of gas in dollars has roughly tripled in the last 30 years. The price of a CD has held constant or declined. New technology allows people to get hit singles at a much lower cost. a cassingle would be in the $6 range, now you can get just the one song for a buck.

I can't see how revenue could go up with the dramatic decline in costs. It's not diamonds or oil, there's not some scarce resource that can be controlled. Making music is so much fun people do it for free. The technical barriers to doing so are pretty much gone.

lsc2• 16 years ago

The thing is, persecuting some piracy but not all is part of a complete price discrimination model.

The idea is that the marginal cost of a copy of windows (or a electronic copy of a book) is zero. If the end user is unable to pay for a copy, it's definitely better for Microsoft (and, I believe, better for the publisher and author) for that user to get a free copy, understand it, and contribute to the reputation of the product as "the one to use" than for that user to use another alternate product. Where would Microsoft be if all the poor people just used Linux? in a world of hurt, I think. I believe the same could be said for book publishers and authors.

The problem, from the point of view of those trying to make money off this zero marginal cost good, is that if it's just free, many people who could pay for it would take it for free.

This is where enforcement comes in (and why it's in the interest of publishing companies to keep the penalties civil rather than criminal) If I have no money, generally, I'm going to be a lot less concerned about people suing me. You can't get blood from a stone. On the other hand, once I have some assets, suddenly the idea that you could take them away is a big deal, and maybe paying out a few dollars for insurance make sense.

Now, obviously, suing a poor person is still a pain in the ass for the poor person, so you can't sue /everyone/ who pirates your work, but for those with assets, just suing some can get the fear juices running enough that they pay for nearly all their software.

The IRS uses a very similar model; they trust you to calculate and pay the correct taxes, and then they check some small percentage of returns, and heavily punish people who cheat.

randall• 16 years ago

The only case where I can think of an example of this might be Photoshop or design software. I think many-a cash-strapped-highschooler pirates Photoshop, then picks up some good design skills, and in turn forces his/her professional workplace to pick up a copy of Photoshop.

Hardly a data "smoking gun," and obviously software is different than media, but potentially food for thought.

Charuru• 16 years ago

Except that the role of piracy is anything but clearcut. As Tim O'Reilly famously said in 2002 [1]: "Obscurity is a far greater threat to authors and creative artists than piracy." False dichotomy much? I'm now an avowed ebook pirate, and my ebook library has ballooned seriously over the past 3 years. But I'm reading less than I did 5 years ago, when I used to frequent bookstores.

maguay2• 16 years ago

There's another way to look at it. eBooks sales, whether in Kindle, iBooks, or another marketplace, end up with similar dynamics to the App Store in iOS. People have paid $0.99-$4.99 millions of times over for apps such as Angry Birds that would have sold far fewer copies as a $19.99 boxed PC or game console game. I think eBook readers actually encourage buying books, and for the vast majority of the public, it's so easy to do that they'll do a lot more impulsive buys than before.

Additionally, as DennisP mentioned, if the author is actually getting more money from it, then we're just doing away with a middleman. That's what lot of startups are trying to do right now, after all, and it's a great opportunity. For creative writers, musicians, or designers and coders, there's more chance than before to get your content out there and sell it more seamlessly than before. That can't be all bad!

ghaff• 16 years ago

The (hypothesized--I think it was Tim O'Reilly who has written about this) issue though is that, with books, time is much more of a limiting factor with books than with songs or simple iThing games. Even if an author makes substantially more per copy with an eBook, there's a limit in how many more copies they'll sell even at a much lower price; people only have time to read so many more books.

I'm not arguing it's all doom and gloom but, as the article discusses, I hear a lot of reflexive "Give it away; you'll gain visibility and make money somehow." I heard that plenty as a consultant by people trying to get me to speak or write for free and it mostly didn't work then either.

forensic2• 16 years ago

Since the invention of e-books and digital audiobooks I probably buy 3-10 times more of these.

Audiobooks in particular, of the on-demand variety where I can instantly get them on my iPhone through the Audible app, have led to me reading a HELL of a lot more. It's easy and convenient.

eBooks also help because I buy more books and search through them. I can also read them on mobile devices while I take a shit in public washrooms.

Right now I am in the middle of:

* 2 non-fiction audiobooks

* 3 fiction audiobooks

* 4 standard ebooks

I task-switch between these 8 products based on my mood. I could never carry around 8 dead trees or fit 5 audiobooks onto my walkman. It just wouldn't happen.

Digitization has led to me spending way more money on authors. In the past I would just get dead trees from libraries or friends, or not buy them because they were too much money.

Now that I can get an audiobook for an ~$8 audible credit I try out new things way more.

That I can instantly buy an ebook I need for ~$10 means I read a lot more. If it's 2am and I want to read some particular book, I can instantly get it, I don't need to put it on the shopping list and waste so much time finding a bookstore and standing in line and searching through stacks of shelves.

I spend more time reading/listening and far less time deliberating, searching, planning, and waiting.

chc2• 16 years ago

This is anecdotal, but my experience is that the limiting factor for most readers is just having a book to read. If I have a book with me that I really want to read, time magically appears to read it — books fit very well into those little gaps that are otherwise wasted. But I don't have time to think about reading, so if I don't have that book with me, I'm not going to look for one. The easy availability combined with guilt-free impulse-buy prices on ebooks solves that.

Extra anecdote: My girlfriend has always been an avid reader, but since she got a Nook, I'd estimate her book purchases have doubled because she can just buy a book at midnight while she's sitting in bed or when she's stuck home sick or on her lunch break.

robryan2• 16 years ago

It's interesting to see where things go, will piracy lower the quality of new books being turned out or will it breed a generation of authors just as talented as those in the past that are willing to get by making a significantly smaller amount than they would have a generation ago.

I can't really say that the declining music sales of the last decade have effected the quality of music being put out in any noticeable way.

I guess the longer term problem is that it's creating a next generation that know no other way but to freely obtain content without contributing anything back.

hessenwolf• 16 years ago

Books of artistic or academic value never made much cash, to my knowledge. Detective books - well, they can have Dirk drink a bud light and talk it up for half a page for all I care (and many fictional detectives already do express brand preferences every five pages). So no great change.

Perhaps they can start writing by hand, copying the world of painting and sculpture, in which people happily 'invest' in products which have nominal future cashflow potential other than future speculation.

metageek• 16 years ago

The article cites the decline in music sales, but ignores the fact that a large part of the music sales in the 90s was people buying CDs of albums they already owned--an artificial bubble which burst independently of any increase in illegal copying.

jimbokun3• 16 years ago

Your exact point happens to be addressed in an article linked to from the article under discussion:

http://money.cnn.com/2010/02/02/news/companies/napster_music...

"It's also a bit unfair to compare the 2000s with the 1990s, since the '90s enjoyed an unnatural sales boost when consumers replaced their cassette tapes and vinyl records en masse with CDs."

"But industry insiders and experts argue that the main culprit for the industry's massive decline was the growing popularity of digital music."

Also:

"Last decade was the first ever in which sales were lower going out than coming in."

oiujyhgtfrt2• 16 years ago

The music industries real problem is not having a new format that they can resell you all the same albums on for 5x the price.

Or it could just be piracy!

For example UK cinema attendances fell from 1.6Bn/year in the 1940s to 55M/year in the early 80s - this was entirely sue to people seeing the future of being able to download movies - and not due to the crap films produced in the 70s and 80s.

lionhearted2• 16 years ago

I think we'll see more serialized, short length, low price point works. Will someone pay 99 cents for 20-30 pages of a well-crafted story? I think probably yes.

I'm thinking of something like "Harry Potter and the Methods of Rationality" - obviously Yudkowsky can't sell that because of its fanfiction nature, but something of that quality level, I think I'd pay a buck to read 4-5 episodes of it. Especially if I got hooked by the first 10 chapters being free.

This should bring lots of new opportunities, especially for fiction writers. Hopefully, less fluff and more density too. Would you pay $2 to read a highly polished 20 page manual by Steve Blank? I would. Hopefully this becomes a way for content producers to get paid to craft high quality, dense content... I think this could lead to something of a revolution in quality, dense, though shorter content.

lsc2• 16 years ago

The thing of it is, the author usually doesn't get much of the cost of the book. If the author could sell as many copies of an e-book on their own as they could with a publisher, they would usually be making as much or more charging one dollar a copy, I mean, if they got to keep all of that dollar.

lionhearted2• 16 years ago

Agreed. I think the author's cut will settle in at between 60% and 90% for a short piece like that. Combine with instant purchasing via Wifi or 3G, and I think it'll emerge as a business model. The $1 to $3 range is really impulse buy territory, around the price for a coffee. I reckon we'll see more of that model coming up.

DennisP6• 16 years ago

Stephen King did exactly that, though he screwed up the incentive. He released a new book one chapter at a time, allowing each chapter to be freely distributed. He charged a dollar for each chapter download, but it was optional. He asked only that 75% of downloaders pay a dollar.

Where he screwed up: he promised to finish the book if his targets were met for the first two chapters. Naturally, for the first two chapters, they were. People were paying extra just to make sure. But after two, donations dropped dramatically. Ultimately, King broke his promise after seven chapters.

Nevertheless, he netted half a million bucks for an unedited novel that he didn't even bother to finish.

loewenskind5• 16 years ago

That's a shame. He should finish it, eat the hit and then be smarter next time. Sounds like he could make a lot more this way if he doesn't destroy his credibility.

forensic2• 16 years ago

Wikipedia says he broke his promise because he "ran out of stories" not due to payment

conjectures• 15 years ago

that's a case study to keep hold of.

CWuestefeld• 16 years ago

Musicians have always relied on other revenue sources. Performance is the big one, but merchandise and licensing matter too. Authors don’t have the same options. Dickens engineered a profitable reading tour of the United States, as new-model enthusiasts always point out. But how many authors could do that today?

The author never really addresses his own question, leaving us to assume that authors couldn't generally support themselves through reading tours.

I just finished "reading" (by way of audio book, while sitting in traffic) a biography of Mark Twain. He's relevant here in two ways.

First, he ushered in a new publishing model, wherein his books were sold by subscription, with sections serialized and delivered periodically. That's pretty alien now (except in some sci-fi magazines), but it shows that the economic realities of the times can dictate major changes in the book publishing business model.

Second, due to bad investments, he nearly went bankrupt. He was able to dig his way out of insolvency through a giant world-wide lecture tour. Apparently there were a great many people, across the entire planet (including many out-of-the-way places you'd never think of) who were willing to pay good money to see him lecture (this wasn't readings, but lectures). So it's clear that at least some authors can make a very tidy profit from lecture/reading tours.

Trivia note: OP mentions Dickens on a reading tour. It happens that Sam Clemens' first date with his future wife was to see Dickens reading.

EDIT: fixed wrong word, "novel" where I meant "model".

ckcheng• 16 years ago

> books were sold by subscription, with sections serialized and delivered periodically

Isn't that like what Manning does with its MEAP (early access program)?

http://www.manning.com/

henryfarbles• 16 years ago

Most comics are still distributed that way as well.

drblast• 16 years ago

Of all the literature produced by the current system in the last century, how much of it is actually valuable in the sense that having it is a great boon to society?

How much of that would not have been produced had the publishing industry not existed? I'd wager that authors would still produce literature regardless; you'd have to be insane to write a book with the sole intention to live off the proceeds. It hardly ever happens NOW. You could make more money cleaning pools.

The loss of the entire publishing industry is not necessarily a great disaster.

Like publishers, the music industry never produced culture; it marketed the latest fad to teens relentlessly. That's a live-by-the-sword, die-by-the-sword business model. When teens decide you're no longer cool or necessary, there's no alternative but bankruptcy.

Now, if I could actually find physical copies of great new music that isn't compressed all to hell for not-outlandish prices, I'd buy it in quantity. But that's not what the music industry is selling.

Same for publishers; these people aren't providing the same value they used to, which is to cull through the crap and only offer the good stuff to the customer. The Internet does that for me now.

As for the financial incentive for the author to write, I really don't care. A patronage system could work. Public funding could work, and might even cost less than enforcing copyrights.

But nobody owes anyone else a living, least of all the middleman between the author and the audience.

If we're really worried about piracy and the book is that great, only sell paper copies. Self-publishing makes that possible too.

hxa72412• 16 years ago

The article seems confused, or stuck in obsolete ways of thinking.

The real purpose is not to pay for 'books'. It is not to 'protect' author's 'rights. It is not to have 'ownership. The purpose here is to pay for production of books. Production does not essentially depend on 'ownership' or 'rights' at all.

Books are data. You do not 'own' data in the normal sense. It is an abundance, it is infinitely copyable. Gluing together the ideas of books and ownership no longer makes much sense. And similarly for 'rights': they were a practical means of funding production in a material world, but now they are not.

It is somewhat reasonable to observe the apparent lack of confirmed business model for funding book production in an internet world. But the undertone that we are slipping into doom and dread is funny when you think about it. Are we losing something? Has the internet taken something away? No, it has given us something. We do not have less now, we have more. So, we need new ways to organise ourselves and production. Why is that such an impossible thing to imagine? We can build the internet, but we cannot re-arrange what we do a little? We should have at least an iota of confidence in human capability.

You hardly even need optimism: simply look around. We have had at least a decade of 'piracy' of music. Oh no! Surely the world must have collapsed! Ask yourself: do you have less music to enjoy now than before? I very much doubt it. There is more music now than ever.

This whole 'end of the world' fantasy is largely just industry FUD. Stop perpetuating it, and instead celebrate the internet and think of ways to use it to do more than before.

The downward spiral of ownership and value (happened to music, books are next)

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