Digital Vs. Physical Goods

[leebase]

I heard once that "if I can't sell it, I don't own it" -- it was actually in the context of one's body parts (like kidneys), but it's also certainly applicable to the discussion of ebooks.

When you bought a paper book, you clearly owned it. You could give it away, you could sell it. Everyone in your house could read it. You could donate it to your local library.

Digital goods (music, movies, books, software) are not sold, they are licensed.

Now, before we delve into the evils associated with this setup (and you'll find me in large agreement) - let's start by considering the challenge that content producers have in the digital age.

Content producers need an incentive for their work. Just as we all do. Authors (we'll use them to represent the entire content chain) get their income by selling books. All uses of a book outside of the first sale, do not compensate the author. Even so, a physical book is limited to one person at at time. When I finish a book and give it to a friend, I no longer have the book -- and I'm not going to give it away until after I've finished reading it. And after I'm done with it, there's a good deal harder effort required for someone desiring MY book to find me (as opposed to walking in a book store and buying off the shelf).

In the digital world -- without DRM -- a book is just a file. I can copy a file and sent it to all my friends and relatives -- all at the same time -- all while retaining the file for myself. Not only that, I can post the file online and give the whole world access to my file. It's not difficult at all for someone who's interested in my book to find my copy of the book. Every bit as easy as going to a store.

As you can see, it would be quite difficult for an author to make money from his efforts in a world where his work can be instantly distributed for free across the world to anyone who would want it without paying the author.

And thus the authors (again, as representative of the entire content producing chain) take measures (which we will discuss) to ensure (we know this is a goal not something perfectly attained) that they can be paid for their work.

And so, at the start of the discussion, we can see that digital goods HAVE to be treated different than physical goods. To not do so would change the financial equation for authors drastically, and could likely end the profession of book writing.

Lee

[KevinH]

Hi,

Your argument is very flawed. If it were true, then there would be no successful musicians/groups making any money. Yet they still do and lots of it.

If any publisher actually pushes the "license" versus "ownership" issue, they will soon get a very large class-action lawsuit filed against them for deceptive marketing/advertising and or a price-gouging lawsuit brought for charging "ownership" prices for "licensed" goods to be followed by charges of cross-collusion and price fixings (agency-model anyone).

If they push the license versus ownership issue then I would be willing to pay $1.00 - $2.00 per ebook, and not the $9.99 - $20.99 I am being charged today.

Also, assuming piracy is equivalent to lost sales is nonsense and that lack of drm or ease of copying results in increased piracy. Pirates never have and never will pay for their ebooks/music/software and therefore can not be counted as lost sales at all. I do not pirate, and never would as I want my favorite authors to actually produce more works. What actually keeps me from spending more money is DRM and this "license" issue. I think there are many many people like me. If they push the license issue, they will then actually see true lost-sales.

[leebase]

Originally Posted by KevinH

Your argument is very flawed. If it were true, then there would be no successful musicians/groups making any money. Yet they still do and lots of it.

Let's start there. Am I understanding that you feel that the ability to copy a file does not and cannot affect the revenue to the "author"?

I mean, we can delve in and explore the music industry verses the book industry to find where they are similar or different. But, can we first not ponder whether a digital copies of goods represent a conundrum for those content creators who wish to earn money by selling their content.

Lee

[Worldwalker]

Originally Posted by leebase

All uses of a book outside of the first sale, do not compensate the author.

That is also true of a bookcase.

I have here a bookcase I bought from IKEA the other day. I own it. If I want to sell it to you, I can do that. If I want to give it to my mother, I can do that, too. If I want to donate it to the church rummage sale, I have that option. None of those pay the creator of my bookcase anything. Should they?

[Ken Maltby]

Hmm... Perhaps the problem is the concept that those (children, wealthy) who "share"
are good/acceptable and those who wish to keep what they have been able to acquire,
are bad/greedy (Capitalists).

Personally, I wonder if the "author's" legitimate concern is as much of a problem as it
has been portrayed? I know there is a "sharing community"/"DarkNet" out there but I
wonder how much that activity effects sales? I know when I search for a book, I get
a listing of pay sites for the most part. Even "Inkmesh" will return such results for a
book currently in copyright.

DRM may be a valid response to a world full of people who have been raised to believe
that "from each according to his ability, to each according to his needs" or "To whom
much is given, much is expected". A responce to a world of "sharers", if not so many
actual "Torrent" sharers.

That DRM is an abysmal failure in that regard, and always will be, is beside the point.
The "Authors" fear and the existence of the torrent/darknet phenomenon, provides
enough motivation for its employment.

I believe that there are more than enough honest book buyers who want to support
their favorite authors and know/feel that they should pay the author for his efforts,
to make those who would indiscriminately "share" ebooks a tiny minority. I also believe
that those who have sunk so low as to steal the ebooks, via torrent, would never have
paid for the books in any case.

DRM removal is a practice of those who have actually purchased the ebook, making it
a crime is so.. counterproductive, as to be insane.

The real crime is providing those copies of the file purchased to others. But - how can
that crime be effectively dealt with? (Sorry, I have no idea.)

Making a copy for my kid or for an aging parent, seems to be less of a crime, somehow,
but the "author" seems to see that as the loss of thousands of ebook sales, and "he"
could be justified in that (by the numbers). Certainly, we could agree that those who
would post a copy to the internet, are endangering the "author's" ability to sell his
wares to that same market. So, those who make such posts harm the entire ereading
public. They should be prosecuted with vigor. It doesn't seem to be happening, why?

My 2 cents worth.

Luck;
Ken

[leebase]

Originally Posted by Worldwalker

That is also true of a bookcase.

I have here a bookcase I bought from IKEA the other day. I own it. If I want to sell it to you, I can do that. If I want to give it to my mother, I can do that, too. If I want to donate it to the church rummage sale, I have that option. None of those pay the creator of my bookcase anything. Should they?

You can only give your book case to one other person. If you give it to me, you cannot give it to your mom and you would not longer have it yourself.

But what if you could just "copy" the book shelf? Not only copy it, but instantly transmit it every where in the world for free (or next to no cost).

Do you think Ikea could still have a business under such a scenario?

What if you could make copies of cars like you can ebooks/mp3's. How many could Ford sell if the person who bought a car could make an exact duplicate for free and distribute the vehicle across the world for free?


Lee

[leebase]

@Ken -- great issues. I'm deferring comment on the current DRM implimentations for the moment to conentrate on the "fair and reasonable" need for content creators to have protection.

Clearly I too see a distinction between letting your immediate family read a book you just bought and distributing said book across the internet. Depending only on the good will of one's customers -- is like saying no one should lock their cars or their homes because "most people are honest".

While some authors see more value in the "advertising" that free distribution of their product brings to them -- I would say that such a view is up to the author to adopt for themselves.

I love Baen and it's many authors that put out their books for free. But I don't think Tor is in the wrong for not buying into that model for themselves.

The very nature of digital goods verses "hard" goods requires that they be treated different. Whatever the solution will eventually look like, ebooks will never be EXACTLy like paper books. I think the whole "owning" vs. "licensing" will forever be part of that distinction.

Lee

[FF2]

I purchased the hardbound Lost Symbol from Costco. While I was doing other things and before reading it, I lent that book to about 5 other people. They were not relatives but close friends who I trusted would not abuse the book. Under your scenario, the published and author lost 5+ sales. I wrongfully deprived an author of sales he might have made?? Maybe two of those folks would have purchased. Maybe all would have waited for the paperback. Or they would use the library. No way to telling although there are probably methods to estimate.

So, now I purchase an ebook. But I cannot lend it to those same 5+ people? Would the lost sales be any different then the pbook example?

As already noted, I don't know the answer but something is not working right.

[mr ploppy]

Originally Posted by KevinH

Pirates never have and never will pay for their ebooks/music/software and therefore can not be counted as lost sales at all.

Not strictly true. The only independent research that has ever been carried out concluded that people who download unauthorised content actually spend more money on legitimate content than people who don't download. This suggests to me that most of the people downloading are actually just sampling or treating the internet like a giant global library and "borrowing" books that they don't value highly enough to buy.

Of course that won't be all of them, there will be a relatively high percentage of them that never buy anything, but most of those are just collecting files for the sake of collecting them. There is absolutely no way of making money from those people, except maybe through advertising revenue placed within your work, so there is no point worrying about them. Very little of what they download will ever be read anyway.

But to cut off all the samplers and borrowers out of spite just because they are getting something for free? That's just plain silly. Those people have the potential to become your best customers, but if you cut them off they will just download someone else's work instead. How do you benefit from that?

Writers (and other content producers) are already benefitting significantly from the lack of any second hand market for digital files. The unauthorised ebook market is nowhere near as large as the second hand book market, and never will be. Price ebooks at the level of a second hand paperback (after a reasonable period of time at full price if you must), and piracy will diminish to the point where it may as well not exist.

[leebase]

Originally Posted by FF2

Under your scenario, the published and author lost 5+ sales. I wrongfully deprived an author of sales he might have made??

Surely you lessened the probablility that the author could sell books to those you lent your book too. Was that wrong? Not at all.

Could you read the book while your friends had it? You could had it been an ebook. Could you and all of your friends have read it at the same time? You could had it been an ebook.

There are simply different realities for paper books and ebooks that impact an author's ability to make a living selling books. In the ebook world, you could have "lent" the book to 500,000 simultaneiously -- not just your personal 5 friends.

Originally Posted by FF2

Maybe two of those folks would have purchased. Maybe all would have waited for the paperback. Or they would use the library. No way to telling although there are probably methods to estimate.

So true. Every borrowed book does not represent an actual lost sale. However, the ability of an ebook to be copied and distributed widely to the whole world for free certainly threatens the ability of authors to make money selling books.

Originally Posted by FF2

So, now I purchase an ebook. But I cannot lend it to those same 5+ people? Would the lost sales be any different then the pbook example?

The ability to lend a book to a reasonable amount of people is certainly an issue that is in need of being solved. As I said in the original post, I'm going to be in agreement with folks on lots of these issues.

I also think that authors have a right to be paid for their work and to secure their work from theft. Digital files cannot be treated exactly the same as physical posessions.

Lee

[whitearrow]

Then why have iTunes and Amazon dropped DRM for music?

Because they learned the lesson that if you price something reasonably and put it in a format that consumers can freely shift between their own devices, the motivation for file-sharing drops substantially. Nothing will ever drop it to zero -- including DRM (which I would argue increases it) -- but substantially enough that creators can continue to profit.

[jbcohen]

My ownly troubble with DRM is when I did something stupid. I will admit that I bare some resposnbility for doing something realy dumb. I had just gotten a new ebook reader from Borders and bought an ebook to go with it from Barns and Nobles. Did not realize that the reader coudl not understand the ebook becuase B&N had encrypted it. Now I do not intend to re-broadcast it at any point, do not intend to re-sell the book do not intend to give it away. I simply want the value I paid for I want to read it and the DRM won't allow that. Like the dead wood book I bought it, I want to read it, then put it in my collection, don't intend to do anything illegal with it. DRM won't allow me to have the value I paid for.

I'm venting here.

[Kali Yuga]

I don't think we will ever have a clear answer to whether or not DRM actually works. It simply isn't possible to set up a viable test.

That said....

Originally Posted by KevinH

Your argument is very flawed. If it were true, then there would be no successful musicians/groups making any money. Yet they still do and lots of it.

Revenues for the music industry have nose-dived in the past few years, and musicians are having a much tougher time making any money from recordings. Although there are numerous reasons for this, it's screamingly obvious that wide-spread copyright infringement is responsible a substantial chunk of those lost sales.

I concur that the "1 infringing download = 1 lost sale" is likely incorrect. But that hardly proves that "1 infringing download = 0 lost sales."

Originally Posted by KevinH

If any publisher actually pushes the "license" versus "ownership" issue, they will soon get a very large class-action lawsuit filed against them for deceptive marketing/advertising....

Uh, no.

With at least some ereading platforms, it's pretty clear you're dealing with some type of licensing situation. Read the EULAs one of these days.

Nor is there currently any evidence of price-fixing. It is not illegal for a single publisher to fix a price at a retail outlet -- as evidenced by things like the Apple App Store, Google Android Market, Smashwords, Amazon CreateSpace, all of which allow the developers / publishers to set prices.

Nor is there a single shred of evidence that the publishers collaborated in secret to set book prices with the intent of squashing smaller competitors. Rather, multiple retailers -- including Google and Apple -- freely initiated, offered and accepted publisher pricing controls.

[Kali Yuga]

Originally Posted by whitearrow

Then why have iTunes and Amazon dropped DRM for music?

Because there was so much music piracy, especially after releasing DRM-free digital versions for decades (CD's), that DRM became rather pointless.

If it was a genuine usability revelation that led to this decision, you'd see it across the board -- music, movies, ebooks, apps and the like. Instead you have both of these companies exhibiting all sorts of controls over their devices. Hmmmmmmm.

Dropping DRM hasn't caused digital music sales to go through the roof, by the way.

[screwballl]

Originally Posted by Worldwalker

That is also true of a bookcase.

I have here a bookcase I bought from IKEA the other day. I own it. If I want to sell it to you, I can do that. If I want to give it to my mother, I can do that, too. If I want to donate it to the church rummage sale, I have that option. None of those pay the creator of my bookcase anything. Should they?

That refers to first use statutes.

For the reference to this thread, and the quoted text, you can take the bookshelf apart, cut pieces and make a copy of it to sell, give away, or whatever, which essentially makes it the same as sharing or copying digital files. Many physical items can be copied (albeit with physical work), the same the digital files can be copied using digital work. You do the physical work to copy the bookcase, you do the digital work to copy the file...

Either way it is the same thing and tends to carry the same legal consequences, especially if you try to represent the bookcase as an IKEA and not your own work which is the only essential difference of physical versus digital.