Monday, February 1, 2010

eBooks, Piracy, and Stockpiling

Caleb Crain's excellent overview of what 2010 may have in store for book sales makes a very convincing case for the significance and likely effects of Amazon's decision this week to use a "nuclear" option on a recalcitrant publisher, Macmillan. Amazon caved sometime after Crain had posted, but his analysis of the move's importance and the background for it is very much still worth reading.

Crain argues that what is being fought over between Amazon and Macmillan is not, in fact, profits or even profitability (he says the way this particular argument is playing out is in effect a contest "to see to see who can lose more money" per book) but simply over who is controlling the "intermediary steps somewhere between the creation of a book and the reading of it," although I would change the phrasing to "whether publishing companies can retain control over those intermediary steps, which include negotiations over royalties, price points, and the strategy of whether and how to release eBooks alongside printed books." Crain's phrasing makes it sound like either side could potentially lose control, but that's not entirely accurate—Amazon has a lot to win but not much to lose; publishers could lose a whole lot, but they have very little (if anything) more they can win by facing down Amazon's demands—even retention of what control they have now does not exactly look like a prize the way things have been going. (Crain in a way acknowledges this earlier in the post.)

Crain also discusses Amazon's strategy for the Kindle, and does so very insightfully:
When Amazon first introduced its Kindle reading device, the reception was tepid. But Amazon improved the device in later models, and thanks to its aggressive low pricing on e-books, it now reports that the Kindle and e-books are selling briskly. In other words, with the money that it has lost by discounting e-books, Amazon has bought market share for its e-book reader and for itself as an e-book retailer. To put it still another way, Amazon sped up the American public's adoption of e-books by unilaterally lowering the American public's idea of what the natural price of an e-book should be.
Essentially, Amazon's decision to convince consumers that $9.95 is the right price for an eBook has backed Amazon into a corner, but it still has the publishers as a buffer between it and the wall. Any pressure from consumers on the price point, and it will be the publishers who get squeezed.

What also gets squeezed, or I should say what gets squeezed the most, is the ability of publishers to continue printing books on paper. As Crain says, "It may not be possible for a single company to publish e-books at that price and also retain the infrastructure necessary to publish ink-on-paper books." I added the emphasis, but I think it's pretty obvious that it has to be there: as I noted above, one of the forms of control at stake in this haggling over price points is the publisher's ability to determine how or even whether to release eBook versions alongside the printed product. If Amazon is committed to wresting control over price points for eBooks, it's also exerting indirect control over what the profit margins have to be for printed books to compensate for the losses incurred over eBooks. Being print-first (organizing one's whole production chain from acquisition to fulfillment around the print copies of a book) may end up being a luxury no publisher can afford.

That's the supply side, more or less. Being (at this point) completely unconnected to the supply side (knowing only a couple of people well who work in publishing and virtually no authors), I'm more interested in the demand side. Here are some thoughts:

One reason to oppose increased control for Amazon/increased pressure on printed books is a preference for (or fetishism of) the printed book. I find this less than convincing, especially when I begin thinking about the carbon footprint of my library (which isn't often, but painful when it happens).

Fetishism and environmentalism aside, though, I would imagine that a reduction in the number of books being printed each year (especially since any reductions would likely come for older, modestly selling titles rather than for new titles) will mean that used book prices will go up. (If the only way you're going to find a printed copy of, say, David Markson's Wittgenstein's Mistress is in a used book store, don't you think some used bookstores—especially the good ones—will know that?) That will be a bummer. (Okay, this is still kind of a supply question.)

Somewhat relatedly, Crain brings up piracy, making the assumption that piracy will correlate positively with increased eBook prices: $15 books will be pirated more than $10 ones. I'm not so sure this is actually the way it works, but it's really irrelevant if it's the way that publishers and Amazon (and Apple and the rest) think it works, because the way they respond will, if music companies are any guide, be far more predicated on how they think piracy works and how much it's hurting them than on how things actually function. If the perception is that piracy goes up with the price point, assuming that Amazon isn't totally successful and fails to force everyone (all the publishers and Apple and Sony) to assent to a $9.95 price point, the incentive will be high for everyone to make sure that their product isn't the one being pirated. This means DRM junk, much more proprietary file formats and more expensive proprietary hardware, and just many more headaches generally.

But I think it is important to be clear on what eBook piracy probably will look like, and while I had some thoughts about this beforehand, reading this interview with a "Book Pirate" essentially confirmed my speculations. Behaviorally, book pirates will proceed much like I did when I first got my Kindle: they will load their hard drives with free stuff. I found mine in the public domain, as many others seem to have, but the process is basically going to be the same.

The principal difference, it seems, between at least the public rhetoric of piracy and the actual habits of readers (or of music listeners or of film watchers—these activities are identical in this respect) is that the assumption in the first case is that books or music albums or films are acquired to be consumed, but the reality is that the majority of what is acquired is not truly consumed at all. Rather, it is stockpiled. The bookcase or stack of books with more unread than read titles on it is a familiar image to most readers, as is the CD rack stuffed mostly with albums you haven't listened to in many years (if you ever did). Stockpiling is, consciously or not, the purpose of the vast majority of our acquisitions, whether that is buying new, buying used, receiving as a gift, borrowing from a library or friend, or downloading illegally. We acquire to store, not to use.

This is not an insignificant or idle distinction because it is stockpiling and not consumption that shapes the desires and habits of piracy. Piracy is, most simply and most frequently, accelerated stockpiling—not an attempt to avoid buying something we intend to consume (to read, watch, or listen to immediately or in the near future). As the book pirate says in the interview, "a download does not translate to a lost sale." It may, but it often does not, and that is in large part, the media industry's collective fault.

Mass culture hooked us on stockpiling: units cheap enough to buy without regard to need, constant advertising and prods to purchase for the sake of purchasing, a huge but barely differentiated menu of products—all these factors, the basic DNA of the culture industry in the classic sense, are now playing out under new circumstances as a desire to fill our hard drive with more music than we will ever listen to, television shows or films that we may never watch, and now with text files we'll probably never read.

Jacques Attali's bizarre little study Noise details some of the more abstract consequences of the economics of stockpiling (e.g.), but the concrete point that is somewhere in his analysis is that stockpiling is pleasurable in a way that even purchasing is not. The very process of searching for and acquiring difficult-to-find media—whether that is in the bowels of a used bookstore or on a bitTorrent site—is inherently pleasurable and does not diminish very much with repetition, or even with failure. You might always find it tomorrow, and if you find it today, there will be something else to find tomorrow.

Stockpiling, for better or worse, has been for some time now an independent source of pleasure, connected to but distinct from (or, one might say, in excess of) regular consumption. The convenience of downloading alongside or in conjunction with other forms of digital entertainment has only increased the pleasure of stockpiling as an activity. And the funny part of the logic here is that the efforts of companies to set obstacles toward downloading only makes the chase more interesting.

Before I start sounding like I'm advocating piracy, let me draw back and admit that I am not. I want to make a case, though, that the primary way we think about it—as a substitute for legal consumption—misses the point because what "legal consumption" consists of sorely needs to be re-theorized. We already stockpile ceaselessly, whether we've ever downloaded something illegally or not. It is a hugely significant aspect of the logic of consumerism, especially within the media and entertainment sector, and failing to differentiate it as an activity from other forms of consumption is a serious gap in our understanding of the dynamics of consumer and producer behavior.

Perhaps record and publishing companies do understand it; perhaps they realize that the behavior of their paying customers is largely about purchasing things that won't be read, seen, or heard, or will only barely be sampled. But if they know that, then they have collectively done very little to amend their strategies to taking advantage of this hoarding, stockpiling instinct. Perhaps stockpiling is the bad conscience of the culture industry—the truth that most of it isn't consumed in the strictest sense is the reality that most in the industry don't want to face. Like many other things, I doubt it is a luxury many can continue to afford.


Biblibio said...

eBook piracy currently looks like this: not much. And what does exist is on a very small scale and hurts no one. As someone who has downloaded a small amount of books illegally uploaded (where the majority were books that have already been paid for in another format, like paperback...) and seen the face of this evil piracy monster, the books uploaded online aren't exactly by struggling authors. It's a complicated issue but it's made worse by the publishing industry's terrible handling of eBooks and eBook prices. And the fact that consumers don't seem to mind the mess.

You raise some excellent points here (especially regarding stockpiling - I'd never quite thought of it that way). I'm still trying to figure out the topic, but I'm not certain you should sound quite so nervous to come off as understanding piracy. It's actually not the terrible doom of literature publishers try to paint it as, nor is it exactly "stealing" (because stealing means taking something that belongs to someone else). It's strange and confusing and hard to legitimize, but given the tumultuous eBook world, I can't exactly demonize piracy just like that. To quote Facebook relationships: it's complicated.

Pam said...

Andrew, so glad you posted about this! I was just wondering if my whole perception of the Amazon/MacMillan kerfuffle was irredeemably colored by working in publishing. One thing though—you mention that publishers have "done very little to amend their strategies to taking advantage of this hoarding, stockpiling instinct." What advantage can be taken? What strategies did you have in mind?

As to the comment above, I have to heartily disagree: e-book piracy is stealing. I realize that downloading a digital copy doesn't seem like wresting a book out of the author's hands, but it is. By creating and proliferating free digital copies, you're degrading the value of the original book. On the other hand, I suspect that the people who pirate books had no intention of buying the stolen book in the first place (in which case: no lost sale), or they'll be so hooked by the reading experience that they'll legitimately purchase the author's subsequent releases (in which case: new customer!). So I don't find e-book piracy as much of a threat as, say, the bullyish policies of Amazon. But piracy is still stealing.

Oh, and just because I'm paranoid, all opinions on this are my own, not my employer's, blah blah blah.

Andrew Seal said...

Again, I think it is ultimately less important what piracy actually looks like (or really, what you're describing is what it actually feels like) as what the publishers perceive it to be.

That said, I think it is not very well understood that one of the reasons piracy does not feel like stealing is because it is already integrated into activities and behaviors that we are unused to think of as illegal or immoral--stockpiling is one of these behaviors, but so is borrowing/sharing with friends. While the actual socializing of most filesharing sites is minimal, the illusion that filesharing is sort of like borrowing a cd from your friend is strong. But the point is that piracy simply doesn't feel like a substitute for purchasing, but an extension of these other (generally positive) activities.

I've been finding some of the analyses of how the NYT should construct its paywall very insightful. Here's one which, at the end, deals with piracy very intelligently, I think.

Of course, now any new monetization strategy isn't just a unilateral decision--Amazon and Apple and Sony and B&N will have their say. So things are probably only going to become more complicated, but I do think that whatever strategies develop will have to take account of exactly how piratical behavior is structured--it's not all a way to avoid paying for something you use.

Anonymous said...

I agree somewhat. Perhaps what publishers should be more afraid of than ebook piracy is that the ease of purchasing any book at any time will make readers realize that they don't even need to pirate books; ebooks may have the potential to teach readers that the desire to stockpile books itself has become obsolete.

Personally I was ambivalent about the possibility of ebooks for a long time precisely because I could no longer envision a future in which I had a massive collection of books. However having now actually experienced the convenience of this system I am finding myself warming to the idea of getting rid of the clutter of physical books.

Daniel E. Pritchard said...

Amazon's pricing makes good sense for the Kindle, because you just paid $250 for an empty reading device unless you then go buy books. It's an investment - return issue: nobody wants to pay softcover price for an e-book after they pony up that much for the device.

You can charge more at, say, Google, tho because there is no initial hardware cost.

Bada-bing. I'm out.

Andrew Seal said...

I agree it makes sense for Amazon, but only as a short-run gamble that they will be able to squeeze publishers eventually to reduce the wholesale prices of eBooks. If Crain and others are correct and Amazon is losing money on (most or many) eBooks, then they can't possibly plan to cover that by just selling more and more Kindles. Eventually, enough eBooks will be bought at a loss to them that the profits from sales of the Kindle itself will be wiped out. They have to be planning on being able to adjust the wholesale price eventually. (Or else they'll have to switch to the agency model, which is apparently something they really don't want to do).

Daniel E. Pritchard said...


Right, and they are indeed losing on most sales from what I understand, although many public domain titles are available for free as well so maybe they aren't losing as badly overall as it sounds. Their hope was, as you say, to bully the market; it doesn't look like that is going to work tho and it will be interesting to see what their plan-B is. They're no dummies.