Weird Economics of Ebooks?

[mr ploppy]

Originally Posted by elemenoP

Did music piracy decrease when Apple introduced 99-cent song downloads? Any stats or articles about that?

I don't know about piracy, but music industry profits rose massively at that time. But I don't think that sort of pricing model would work with ebooks, except maybe short story collections. Who would just buy one chapter of a book?

[Kali Yuga]

Originally Posted by elemenoP

Did music piracy decrease when Apple introduced 99-cent song downloads? Any stats or articles about that?

Not that I know of. However, at least legit online music sales exist, which they did not before.

You can offer consumers your digital product without DRM and let them pay what they want (or download for free), and people will still pirate it anyway.

http://www.forbes.com/2007/10/16/rad...radiohead.html

The idea that availability or high prices "drive" people to piracy is very likely one of those things that everyone knows to be true... that turns out to not to be true at all.

[J. Strnad]

Originally Posted by Kali Yuga

Not that I know of. However, at least legit online music sales exist, which they did not before.

You can offer consumers your digital product without DRM and let them pay what they want (or download for free), and people will still pirate it anyway.

http://www.forbes.com/2007/10/16/rad...radiohead.html

The idea that availability or high prices "drive" people to piracy is very likely one of those things that everyone knows to be true... that turns out to not to be true at all.

As noted in the other thread, the Radiohead pay-what-you-want-even-if-it's-nothing deal required buyers to register their name, email address and mailing address. I wouldn't buy from an unknown website like that if I had to register that information.

From the article:

Garland argues that this kind of digital theft is more a matter of habit than of economics. "People don't know Radiohead's site. They do know their favorite BitTorrent site and they use it every day," he says. "It's quite simply easier for folks to get the illegal version than the legal version."

Still, Radiohead moved more that twice as many copies through their own website, at whatever price, than were downloaded for free from pirate sites.

Ultimately, very little can be deduced from this experiment about individual buying/pirating decisions, and I don't see anything to overturn conventional wisdom about why some people pirate. I'm sure there's a range of reasons and that, regardless of price and availability, some people will pirate incorrigibly.

[Kali Yuga]

Hey, wha'dya know. I'm not alone in my beliefs.

http://www.ifpi.org/content/section_...s/dmr2009.html

Bullet point #2: 95% of all downloads are infringing/unauthorized (as of January 2009).

Many people will be highly skeptical of the IFPI, and even I won't give them an extended defense. But the chances that they are off by an order of magnitude is rather slim.

Meanwhile, CD sales are still dropping (though they still make up 50% or so of the market), and artists -- especially less well known bands -- routinely assert that unlike 10+ years ago, they can no longer earn a living from recording sales.

So, a likely scenario is that the legit services are cannibalizing CD sales, while piracy is replacing at least some portion of download sales.

Originally Posted by J. Strnad

As noted in the other thread, the Radiohead pay-what-you-want-even-if-it's-nothing deal required buyers to register their name, email address and mailing address. I wouldn't buy from an unknown website like that if I had to register that information.

mmmmm

• People routinely give up their info at the drop of a hat. You and I may not do so, but many people have few qualms about such things. *cough* FACEBOOK *cough*
• Infringing file sharing isn't exactly a security-enhanced environment.
• I'm going to go out on a limb here, and suggest that Radiohead's fans are technically savvy enough to at least know who was running the site. Or do you think I'm giving those folks too much credit?

(By the way, you might want to re-read the last paragraph of the article....)

Originally Posted by J. Strnad

Radiohead moved more that twice as many copies through their own website, at whatever price, than were downloaded for free from pirate sites.

Actually, the article points out that after a few weeks, infringing downloads were likely to outnumber initial sales, since so much were presales. (Go ahead, re-read the article, I'll wait. )

The point is that even when you give it away for free and/or let people pay what they want, at a high quality, without DRM, without concerns about viruses and malware, and cut the publisher out of the deal altogether -- in other words, even when you resolve all the issues critics point out about the current system, people will still pirate your stuff. In huge numbers.

I'd say you can cautiously draw some inferences from that fact.

[Worldwalker]

An article from Forbes about whether large corporations' opinions are right or wrong naturally is going to lead to a predetermined answer. And when that article quotes an executive of a company that has every reason to support the established music industry and a professor who thinks that handing over your name, email address, and postal address (none of which you need to provide to purchase music offline) is a "small thing", it's even Forbes-ier. When the article headline includes "steal it anyway" (how can you steal something that's free, if it comes to that?) I think a certain amount of bias is revealed as well. So I don't think this counts as valid proof of anything, especially not a contention supported by someone who is firmly and immovably on the large publishers' side.

[mr ploppy]

Originally Posted by Kali Yuga

Not that I know of. However, at least legit online music sales exist, which they did not before.

You can offer consumers your digital product without DRM and let them pay what they want (or download for free), and people will still pirate it anyway.

http://www.forbes.com/2007/10/16/rad...radiohead.html

The idea that availability or high prices "drive" people to piracy is very likely one of those things that everyone knows to be true... that turns out to not to be true at all.

Unauthorised download sites get a lot more traffic than authorised ones, especially ones that only have one download available. A lot of the people who would have downloaded that from an unauthorised site wouldn't have known it was available legitimately too. It would only be people who were aware of the band in question that would go straight to them for it. For everyone else it would be just a case of there it is, might as well get it. Of the ones who listened to it after downloading it, some of those might like it enough to look them up, and they would be new "fans" that they wouldn't have otherwise reached.

[wannabee]

Originally Posted by mr ploppy

Of the ones who listened to it after downloading it, some of those might like it enough to look them up, and they would be new "fans" that they wouldn't have otherwise reached.

That last comment probably isn't far from the mark. iTunes sends out a newsletter every week and it includes a free song of the week. I've downloaded about 50 so far and bought a couple of albums because of being introduced to the new artists.

But I'd need a lot of books for that to work with eBooks.

[Worldwalker]

In the case of piracy, the question is not "how many downloads of X have there been?"; the question is "how many downloads of X that would otherwise have been sales have there been?"

For example, let's say that someone downloads a bundle of ebooks. It has 1000 books in it (from my brief examination of a torrent site a few months back, that seems typical). That person downloaded it in order to read a couple of books, and reads in total 10 out of those 1000 books. Does that count as 10 or 1000? For publishers (and Kali), of course, that would be 1000; after all, that's how many books there were. But if you're looking at it in terms of lost sales, the maximum possible number would be 10, because the person didn't read the other 990 books, and who buys ebooks they don't read?

Let's say our hypothetical illicit downloader reads 1 book per week, missing a couple of weeks for holidays to make the math easier. So, with that same ratio, they would need 5000 books (5 downloads) to find the 50 books they want to read. According to the publishers, that's 5000 lost sales at $15 apiece (the price we need to be "taught" to pay for ebooks), for a total of $75,000; they actually think that this person with an income of $25,000 would be buying $75,000 worth of ebooks a year if they weren't downloading them. But look at the numbers: 5000 ebooks are, at one book a week, 100 years worth of reading. A lifetime's reading. The publishing companies try to argue that this person would read that every year (and someone who does read 5000 books a year, in turn, actually reads thousands and thousands more of them!).

Or, my favorite example: teenage warez d00ds and Photoshop. As it happens, I just bought Photoshop CS5 a few days ago, so I know the prices. Your standalone copy of CS5 is $699, plus tax, and shipping if you want the disc. According to the Business Software Alliance, everyone who downloads a cracked copy of Photoshop is stealing $699 from Adobe. Now, look at your typical warez d00d: he's a teenager who uses his illicit copy of Photoshop to put stupid captions on his Facebook photos. Would he, in fact, have spend $700 on software to do this if he hadn't collected Photoshop from some torrent? Or would he, instead, have used MS-Paint? Do I need to answer that? Your typical teenager has a hard time saving up seven hundred bucks towards a car; he's not going to spend it on unnecessary software. Actual Adobe sales lost: $0.

I've been in the position of making my money off the sales of intellectual property. Of particular interest in this discussion, I had software available in both demo and full versions in the early/mid-90's, before the Internet was easily available to most people. People who were going to buy the software generally liked the demo; I don't think I heard from anyone who disliked the demo but liked the full product. The price was quite affordable; not free, of course, but not a barrier to purchase (and much cheaper, even then, than Photoshop). Comparing CompuServe demo downloads to full sales (I tracked where sales came from), I had a conversion rate of 7%. That was, by the way, considered good. This means that 93% of the people who tried the demo decided it wasn't for them. In terms of sales, 93% of the demo downloaders weren't going to buy it (because of time, place, and conditions, I can assume few if any were pirating it). 93% of the people who were interested enough to actively download the demo, which was by the way not a part of any bundle, decided they didn't want the software. So, had it been pirated at the time, out of 100 copies, only 7 would have been actual lost sales; 93, like those demos, were never sales at all.

You can't solve a problem unless you're addressing the correct problem. This is not rocket science. I'm reasonably sure the multi-million-a-year CEOs know that; they wouldn't be where they are if they didn't. When they go on about the "problem" as including the 93% (or greater, often much greater) that were never sales in the first place, you have to wonder what problem they're going after. I can tell you this, though: it's not the one they're telling us they're trying to solve.

The only sales that count are sales you're going to make in the first place. If it's not a sale, then let it go because man, it's gone.

[J. Strnad]

I'm sure that the number crunchers at companies that claim X-many millions of dollars in lost sales know that the number is bogus. But that doesn't really matter, because the number isn't used to measure profit and loss, but as a propaganda tool to influence the public and allow legislators to pass bills favorable to that business, which they want to do because of campaign contributions from the business.

[murraypaul]

Originally Posted by Kali Yuga

Not that I know of. However, at least legit online music sales exist, which they did not before.

You can offer consumers your digital product without DRM and let them pay what they want (or download for free), and people will still pirate it anyway.

http://www.forbes.com/2007/10/16/rad...radiohead.html

The idea that availability or high prices "drive" people to piracy is very likely one of those things that everyone knows to be true... that turns out to not to be true at all.

And yet sites like allofmp3 prove that people are willing to buy music at much lower prices, rather than pirate it. So it isn't as simple as 'people will pirate whatever the price'

[mdmorrissey]

The revolution will begin when individuals can sell or lend their ebooks the way they can their paper books. I suspect this is purely a technology problem that will eventually be solved. If this does not happen, either because of corporate obstruction or technological complexity, I hope that some Big Bucks go into the library business. The only problem now with library ebooks is that there aren't nearly enough of them. The prices of ebooks of course HAVE to go down drastically, because there is simply no rational way to justify the high prices. The publishers (vultures) have to get that through their skulls. Libraries should be able to buy multiple copies at very low prices, and thereby serve many borrowers. This can all be done centrally, too, a la Amazon. It will happen, just a matter of time.

[Shaggy]

Originally Posted by Kali Yuga

Many people will be highly skeptical of the IFPI, and even I won't give them an extended defense. But the chances that they are off by an order of magnitude is rather slim.

You're joking, right? The chances that they didn't just make up the numbers out of thin air to support whatever agenda they have, is rather slim.

[Worldwalker]

I don't trust the Business Software Alliance's numbers on pirated software because I know how they derive them, and I know what their motivations are. They know that, for example, Linux users aren't using pirated Windows software ... but they make the assumption that a) all enterprise servers are running Windows or OS X, and b) they all should have purchased X number of programs. So, if there are Y servers, and the companies the BSA represents have sold less than Y*X programs, this means the difference is... no, not people who don't need those programs. Not companies that write their own software. And defniitely not the 70% or so of the server world that runs Linux. No, it can only be pirates! Now expand that to every computer in the world. Not to mention, their definition of "stolen" = "you don't have a receipt for it". I doubt if I have receipts for much of my software ... maybe floating around in my email somewhere ... so, despite the fact that I buy my commercial software and register my shareware, to the BSA I'm a pirate because I can't prove I'm not.

The IFPI is the music industry's BSA. Their goals are just as self-serving, their methodology is just as questionable, and their numbers are just as suspect. When someone known for defending publishers' (indefensible) positions says "there are pirates everywhere, look, the music industry says so!" my reactions range from a bewildered look to a nervous laugh, but believing the music industry is no more a possibility than believing the software industry.

The IFPI has an agenda: to get laws passed to support their member companies' current business model. Their entire purpose is antithetical to the interests of the consumer. So I have no difficulty at all believing that their numbers will say exactly what supports their agenda.

There are three kinds of lies: lies, damn lies, and statistics. Even if what the IFPI is saying is the literal truth, I have no doubt that they carefully selected those figures that would support their own case from a sea of numbers. It's what they're there for.

[mr ploppy]

Originally Posted by wannabee

That last comment probably isn't far from the mark. iTunes sends out a newsletter every week and it includes a free song of the week. I've downloaded about 50 so far and bought a couple of albums because of being introduced to the new artists.

But I'd need a lot of books for that to work with eBooks.

I've bought a few (real) books recently on the strength of short stories I've read in anthologies I've acquired. But I've also got a lot more short stories than I could ever read, so pushing free ones at people as a form of advertising would probably be hit and miss. Getting into anthologies with better known writers would probably be the way to go.

[mr ploppy]

Originally Posted by mdmorrissey

The revolution will begin when individuals can sell or lend their ebooks the way they can their paper books. I suspect this is purely a technology problem that will eventually be solved.

It would be very easy to do that, but then the publishers would be back in the position they are in with real books -- one buyer, several readers. The real money is in one buyer, one reader. If they priced them at second hand paperback prices (from Ebay/Amazon, not jumble sale prices), they would tap into an income stream that they are currently losing.