The creation of books is a cottage industry: solitary artisans or small teams labor away in private to produce eccentric products tailored to the recondite needs of an audience which may be tiny (in extreme cases of academic publishing, the reader community may number a couple of hundred, worldwide) and is in any event very small by mass media standards. Even a wildly successful global-scale bestseller is unlikely to rival the audience (much less the profitability) of a mid-ranking Hollywood movie. Publishing as an industry is only large because it is so prolific, with roughly 300,000 trade books published per year in the US (“Books published per country per year”); it may come as a surprise to realize that the global turnover of the publishing industry is around the $20 billion mark.
Moreover, much of this turnover is absorbed by the supply chain. Amazon alone has three times the turnover of the Big Five multinational publishing conglomerates (who account for 80% of the industry’s revenue). Publishing is, quite simply, not a very profitable industry sector – it’s labor-intensive, inefficient and the only reason we put up with it is (to paraphrase Winston Churchill) because all the alternatives are worse.
Part of the reason we put up with the system is because it gives authors (the “we” in this context) a mechanism for remuneration. Writing is hard brain-work. Worse, non-authors underestimate it. (Most people have the basic literacy skills to read a book, and also to construct a sentence or write a paragraph. Books are, to a first approximation, just lots of paragraphs strung together: “so why shouldn’t I write a novel?” thinks the lay reader. This ignores the fact that a novel is structurally different from a high school essay the way a wide-body airliner is structurally different from a balsa-wood toy glider: there’s a complexity angle that isn’t immediately obvious. But I digress.) So books and the labor that goes into making them are persistently undervalued.
The mechanism by which working authors currently earn a living is copyright licensing. We automatically own copyright – literally, the right to control copying – over material we have invented. If we’re successful, we license the right to make copies to a publisher, who sells copies to the general public and pays us a pro-rata share of their receipts (a royalty).
There’s an interesting paradox implicit in the copyright/royalty licensing paradigm, of course. The more expensive the product, the more money the author receives per copy – but the fewer the number of customers. Consumers are convinced that anyone can write a book: how hard can it be? So the idea of charging, say, $10,000 a copy for a novel strikes them as ludicrous, even if the work in question took the author years of hard work to produce. In economic theory, the term for the change in demand as the price of a product increases is the price elasticity of demand.
Books are problematic: it turns out that e-books in particular suffer a drastic drop in demand if the cover price exceeds a very low threshold – around $4.99 in the US market. This is considerably lower than the price of a mass market paperback, much less a hardcover: consumers, it would appear, value the information content of a book less highly than the physical object itself.
As an author I have two goals. I want to maximize my income, and I want to maximize my readership. But by seeking to maximize income per copy sold, I may inadvertently minimize the number of copies sold, i.e. minimize my readership. The two goals are not merely orthogonal; they may be in conflict.
Anyway, this brings me to an interesting thought experiment: what would be the consequences if a large internet corporation such as Google were to buy the entire publishing industry?
Bear in mind that Google or Apple have a sufficiently large cash pile that they could take out a majority stake in all of the Big Five – it would only take on the order of $10 billion. Also bear in mind that the paper publication side of these organizations could remain largely unaffected by this takeover, insofar as they could still be operated as profitable commercial business units. The focus of the takeover by Google would be on the electronic side of the industry. The purchaser would effectively have acquired the exclusive electronic rights to roughly 300,000 commercial-quality books per year in the US market space. They could provide free public access to these works in return for a royalty payment to authors based on a formula extrapolating from the known paper sales, or a flat fee per download; or they could even put the authors on payroll. The cost would be on the order of a few billion dollars per year – but the benefit would be a gigantic pool of high-quality content.
From an author’s point of view, the benefits should be obvious. Having your books given away free by FaceAppleGoogBook maximizes your potential readership, while retaining print royalties and some sort of licensing stipend from FaceAppleGoogBook should maintain your income stream. Win on both counts!
Such a buyout would amount to a wholesale shift to a promotion-supported model for book publishing. Google would presumably use free book downloads to drive targeted advertising and collect information about their users’ reading habits and interests. Apple might use the enormous free content pool as a lure for a shiny new proprietary iReader hardware device. Facebook could target the authors, wheedling them to pay for promotional placement in front of new readers. The real questions are: is there enough money in a new shiny iReader device or the AdWords market (indeed, the advertising industry as a whole) to support the publishing sector as a promotional loss-leader; and, would this get FaceAppleGoogBook something they don’t already have?
Perhaps we should ask why they haven’t done this already.
The dismal answer probably lies in the mare’s tale of contracts and licensing agreements and legal boilerplate that underpins the publishing industry. The 300,000 books/year figure points to 300,000 legal contracts per year. Contracts which in many cases ban advertising, or place bizarre constraints on licensing and sub-licensing and distribution through anomalous channels such as Edison wax cylinder reproduction rights and talking stuffed character toys. Untangling the e-publishing rights and renegotiating the right to distribute them for free in return for a flat payment would be a nightmare; only an algorithmic approach to massively parallel contract negotiation could succeed and such an exercise might strain even Google’s prodigious programming capabilities. And as an afterthought, why should FaceGoogleBook try to buy books so that they can advertise through them, when they can plaster advertisements all over the search pages that lead readers to the books, or the commerce sites that sell them?
Looks like my utopian future as a salaried Google employee churning out Creative Commons licensed, freely downloadable novels for my enthusiastic audience (enthusiastic because everything is suddenly free – in return for their eyeballs, of course) will have to wait.