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Here we'll explore the nexus of legal rulings, Capitol Hill policy-making, technical standards development, and technological innovation that creates -- and will recreate -- the networked world as we know it. Among the topics we'll touch on: intellectual property conflicts, technical architecture and innovation, the evolution of copyright, private vs. public interests in Net policy-making, lobbying and the law, and more.

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In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline


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October 30, 2012

Two More Stories About E-Books and Business

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Posted by Alan Wexelblat

I'm finally caught up on my backlog of Copyfight stories and wanted to pair these two up. Both have interesting relationships to the current fast-evolving e-book marketplace.

When I talked to the New England Library Association earlier this month I urged the audience if they had any money in their libraries' acquisition budgets for this quarter to go out and buy the Humble E-Book Bundle. This absolute steal of a deal was on offer with a pay-any-price-you-want tag. If you paid more than the current running average for the bundle you got certain goodies, but regardless you got a great package of DRM-free e-books.

A natural question, then, is how did the economics of the bundle work out? John Scalzi, one of the authors featured in the bundle, took a back-of-the-envelope swipe at that question last week. Scalzi notes that his numbers aren't official, nor precise, but in general he got only about 1/3 of the raw income he would have seen had he sold the same number of e-book units through conventional channels. However, that's not really the whole picture.

Scalzi points out that the Humble Bundle had two salient effects that are hard to replicate. One is that it represented a very large number of units sold in a short period of time. This may happen when an author releases a new e-book but Scalzi's book in the bundle was not his newest volume; it was an older title that had already sold well. So getting a big burst of sales on an old title was a new phenomenon. Two, the bundle allowed him to sell the first volume of a series to a large number of readers. People who buy the first volume of a series are likely to pick up subsequent volumes and Scalzi reasons that he may get substantial uptick in sales of the rest of the series, for which he'll be paid the normal amount.

Most notably to my eyes is his calculation that people buying this e-book were not the people who would normally buy his books, as his weekly e-book sales didn't take a dip while the Bundle was on offer. This is very strong evidence that the readership for e-books is nowhere near tapped out, and that pricing is a significant factor in bringing more of that readership on-board. This is something that successful indie authors (see for example Joe Konrath) have been claiming for a while. But big publishers have been uniformly resistant to lower- and flexible-pricing models on the theory it would cost them sales. Time to look again, oh agency-price-raising-lovers.

About the time of Scalzi's post, Cory Doctorow tagged an open letter to e-book publishers on the current marketplace mess. The post, from Joanna Cabot of TeleRead, pleads with e-book retailers to treat their customers " a real person, and given the trust to use my purchased content sensibly, and with some allowance for real life."

The issue at its heart, is the DRM-encumbered misbehavior of e-book retailers such as Amazon and behind that the paranoia of e-book publishers. As Ms Cabot says, publishers "need to get over this idea of the ‘lost sale.’" If you listen to e-book publishers you'd think that all their customers were thieves just waiting for the opportunity to steal e-books. (I'm reminded here of Amanda Palmer's comment on how music execs view fans.) What Scalzi's numbers show is that Cabot is on the right track - given a chance to set a slider to zero and get e-books for free, people instead chose to pay something for the prospect of value. DRM-free value, I should repeat.

Where I disagree with Cabot is in the conclusion that if e-book publishers don't get a clue then readers will take their dollars elsewhere. When agency pricing was introduced and prices jumped 30% overnight there was not a commensurate fall in e-book buying. Sure, people bitched, but they still paid up. That's why I think that experiments like Scalzi's are so relevant - we need data to show that there's a bigger marketplace waiting to be captured and that it's in the publishers' interests to go after it. A good first step would be following Macmillan into the DRM-free lands, but that's only a first step.

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