This wouldn’t be so bad if the Kindle were more open

Bad news for Kindle readers, especially the less computer-savvy.

But it is worth noting at this juncture that Amazon appears to have made a business decision, at least for now, that “free” will play an increasingly limited role in the Kindle Store

Amazon certainly has a right to shift focus and resources from free and public domain books to the books they’re trying to sell.  But it’s pretty disappointing.  For many people, unfortunately, the Kindle is the ebook reader.  It’s done wonders in showing the non-technical part of the population that ebooks and readers are out there.  But it’s these very same non-technical people who are likely to get all their reading material from the Kindle store, which is of course what Amazon wants.  They’ve put up all sorts of hoops to jump through if you want to put other content on the Kindle.

And so these non-technical people are effectively cut off from public domain books, or books from other publishers who can’t or won’t play ball with Amazon’s restrictions on the Kindle.

Also disappointing is that Amazon doesn’t want to deal with free promotional titles.

The number of free promotional titles has been dwindling since August, and no new free promotional titles have been added this month despite numerous publisher requests to offer free titles.

There is no question that free promotional titles can grow your fanbase.  Two of my favorite science fiction authors reeled me in with free ebooks (here and here).  I’ve since not only bought books from them, but pre-ordered a couple.  Again, Amazon certainly has a right to do what they’re doing.  I’d just rather they chose not to.

Fortunately, it keeps plenty of room in the ebook market and the ebook reader market for others to come in and fill the holes.

Article:  Kindle Nation Daily: Honey, They’re Shrinking “Free” in the Kindle Store via Teleread.

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Using free to sell more

My last post got linked with a very flattering writeup on Techdirt, which is pretty awesome.  The conversation in the comments, however, is a bit disappointing.  A lot of people still think that giving away the infinite goods means you give away everything.  They think that by giving away the content, you make it impossible to make any money on anything related to the content.

This is completely untrue.  There many differences between scarce and non-scarce goods.  The important one here is that the marginal cost (the cost to make one additional unit) of a scarce good is greater than zero, while the marginal cost of a non-scarce good is either zero, or close enough to zero to no longer matter.

Cheap or free goods have always been used to increase the value of more expensive goods.  For example, I worked at Boater’s World in Annapolis in high school.  One of my managers used to tell the young associates, “Whenever someone drinks a soda or a beer on the Chesapeake Bay, I want it to be in a Boater’s World can coozie“.  He gave them away all the time to good customers, or to someone making a large purchase.  The can coozies are cheap – Boater’s World charges 99 cents, so I imagine they cost something like 25 cents.  But sometimes a free coozie is just the thing someone needs to decide to buy that expensive new fishfinder.  And it’s always good to have things out there advertising the name of your business.

Of course, Boater’s World loses some money by giving the coozies away.  But in return, they have a sale on a larger item, and a satisfied customer, and marketing materials out where people can see them.  Even if you make the false assumption that every coozie you give away is a lost sale, meaning the marginal cost to the store is 99 cents rather than 25, it doesn’t take many large purchases by happy customers to recoup the losses.

But does giving away the coozies prevent all sales of anything else?  Of course not.  It also doesn’t force Boater’s World and all of its suppliers out of business.  And this is a situation where the marginal cost of the giveaway item is greater than zero, so the store does take a real loss when it gives them away.  Imagine how much better it would be for Boater’s World if the coozies cost them nothing to produce?

Infinite goods and artificial scarcity

It’s no secret that I read Techdirt a lot. I think they have a lot of good ideas, and a good attitude about things.  A lot of the ideas behind Manfred Macx are ideas that Techdirt talks about all the time.

I was arguing with a friend about this article, which talks about creating artificial scarcity in place of something in infinite supply.  They give an analogy – what if we had Star Trek replicators for food, so everyone in the world could always have enough food, and no one would have to pay for it?  Who, then, would take this food away from the starving?  My friend argued that this would be terrible, taking jobs from everyone who works in the food industry.

Unfortunately, it’s not a very good analogy.  There’s no real substitute for food – people have to eat.  Whether or not you consider  high-fructose corn syrup to be food, you can’t escape the need for calories to survive.  For the analogy to hold, we’d have to replace the entire music industry, or the entire publishing industry, with something free. No one is talking about doing this.

A better analogy would be if the replicator only made tomatoes.  You could have as many tomatoes as you wanted, they’d always be perfect and delicious, and they’d always be free.  This would put tomato farmers out of business. But these tomato farmers could likely start growing something else instead.  And what happens to the rest of the economy?  Pizza and pasta restaurants suddenly find that a major ingredient in many of their dishes just became free.  Now, for the same dish, they can charge less, or buy higher quality ingredients, or make more profit.  And if you’re a really talented cook specializing in tomatoes?  Your skills are now in very high demand.

And there is still a demand for the people who bring the tomatoes from the replicator to your table.  There is still a demand for the person who stews and cans the tomatoes, or dices and seasons them.  And all the other food items, the ones that aren’t in infitnite supply, still need people to produce, process, and distribute them.

This is what’s happening in the music industry, and starting to happen in the publishing industry.  Some parts of the industries are finding their functions obsolete.  Instead of looking at the money they could save with electronic distribution, and what good use they could put that money to, the industry is seeking new laws and regulations to limit the infinite supply so business can continue as usual.

Even if every single song, book, and movie was distributed digitally for free, there would still be a need for the music, publishing, and movie industries.  There would still be demand for editors, producers, marketers, and all sorts of other services that these industries have always provided.

Reasonable people aren’t calling for the abolition of the music, publishing, and movie industries.  They’re just asking these industries to look to the future, and stop trying to limit supply to protect obsolete business models.

Edit to add:  This post has been translated to Spanish by a reader.  My Spanish isn’t good enough to read the whole thing, but the parts I understand look good.

Digital distribution – doesn’t anyone get it?

This has nothing to do with ebooks directly, but everything to do with the same old problems of creating and distributing non-scarce content.

Jeff Bewkes, CEO of Time Warner, thinks the solution for online television is “asking online users to verify they subscribe to some form of pay TV before they get to watch content on other platforms. Whether consumers pay through their cable company, the telephone company or a satellite provider doesn’t matter. This, Bewkes says, will preserve a robust environment for video by making sure that no matter where it is watched, it continues to benefit from a dual-revenue stream of subscriptions and advertising.”  Check out the rest of the article.

The problem here is that, once again, the distributor is looking to preserve the old ways of making money without a thought to how to provide more value to the customer.

You know why Hulu is great?  They provide easy-to-access, totally free video online.  They show commercials, but not many of them, and they try to make the ones they do show count.  Most of them are a little longer than your typical tv commercial, but usually quirky and just more interesting than your average commercial.  I’ve found myself actually paying attention to commercials on Hulu.

And of course, the big content providers are constantly trying to kill Hulu.  In the end, they probably will, making everyone worse off than before.

So, why won’t this “dual revenue stream” model work?  First of all, it will be impossible to implement with anything resembling the convenience of Hulu.  How do you prevent sharing of accounts?  That is, me and 1,000 of my friends get one cable subscription, and share a user id?  Well, what the cable companies will do is limit the number of computers you can use, or limit the IP addresses, or something like that.  Inevitably, this will prevent legitimate uses of the service.  For example, in my house we have four computers regularly in use – my personal laptop, my work laptop, my wife’s laptop, and the desktop hooked up to the tv.  Can my one cable subscription allow me to watch on any one of those?  If so, how can it prevent me from giving my user id to my neighbor?

What’s really absurd is the underlying assumption that, without subscription fees as well as advertising revenue, quality video content just can not be produced.  Think about all the television shows that only have one of those – HBO series, for example, or anything on regular network television.  Are these shows of substandard quality?

The next revolution in the way we watch video content won’t come from Time Warner, or any of the other big content providers.  They have too much invested in the old ways of doing things, and are terrified to embrace the new.  For the most part they seem afraid to even try to understand the new.

Online video isn’t about convincing people that “if content has value to them, it’s worth paying for”.  That’s utterly irrational.  Online video is all about taking something in infinite supply and using it to increase the value of things that are finite.  Until the content providers realize this, they will always have to crush the Hulus of the world out of existence before they show people that there’s a better way to do things.

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Guaranteed cash up front, everyone might win

The industry needs to understand that a) fans are always thirsty for more content, b) there’s a lot of content to give, and c) this is not the time to be cheap.

What industry are we talking about here?  Obviously it doesn’t matter.  It happens to be the music industry, but the idea applies to anyone who deals with distributing content.

iTunes Pass, as the article says, is a great idea.  You pay now, and you get everything the artist releases in the future.  It guarantees a payment up front, some of which Apple might even pass on to the artist.  And, since we’re talking about infinitely copyable digital content, there’s no “loss” when the new content is released straight to the customer who has already paid.  Being paid up front means the risk is lower for the content to come – not only is there already money to go towards production, but there is a better sense of the demand, as well as committed fans who may be eager to pay for related goods.

There’s even a small chance that fans win here, too.  If a model like this is successful, and the content companies realize that they don’t have to collect money for each and every transaction, maybe we’ll see some real change in the markets.

Article: Why iTunes Pass is a Great Idea.

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Something to sell, something to give away

I love Techdirt.  Many of the ideas I present here are based on (or, honestly, stolen from) things I read there.  If you don’t read Techdirt, you should.

Here’s a good article to start on.  It helps that it’s about both my favorite band and one of my favorite concepts.  Nine Inch Nails has made a lot of money recently since ditching the record label and experimenting with new ways to sell music.  Giving away MP3s and other digital content and selling collector’s editions, cds, dvds;  Recently they’ve made concert footage available for people to mix and edit and do whatever they want.

This concept of taking things that you can copy as many times as you want and using them to promote the things that can’t be easily copied, the things still worth paying for, is the future of most media.  TV, movies, books, music – new technology means that you can do so much more with your content, things that weren’t possible even a decade ago.  It just takes a little innovation and good ideas on how to make people want to give you their money.

Take the example of two of my favorite authors, Charles Stross and John Scalzi.  I became fans of both by reading novels they were giving away in electronic form for free.

I first read Stross’ Accelerando a few years ago.  It was, and still is, available as a free download.  Since then, I have had a beer with Charlie, and read most of his books.  I own probably half of them (including a paperback copy of Accelerando, though that’s because I inadvertently put it on my Amazon wish list, and someone bought it for me for Christmas).  I will continue to buy his books as they come out.

I first read Scalzi’s Agent to the Stars at about the same time.  It, too, remains available for free online.  I have not had any personal contact with him, but not because I couldn’t – his blog is widely read, and he really communicates with his commentors.  I haven’t spoken with him because I haven’t really had anything to say, though I read his blog regularly.  I own a few of his books, too.

Both of these authors gave things away for free, connected with fans, and made me want to buy their books.  Will this work all the time, for every author?  Well, maybe not in exactly the same way.  But the model has so much possibility.  Eventually, no one will pay to simply watch a movie or read a novel.  People will still pay to see a movie in the theater, or see a musician in concert.  But the content itself will be free.  Some people won’t be able to make any money any more, and that’s unfortunate.  But many will, and some will make much more than they ever thought possible.  In the end, society will be better off.

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How much should you charge for an ebook?

The proper price for an ebook in relation to a printed book is an increasingly common debate.  It’s very difficult to put a price on something that you can give away as many times as you want without losing anything.

Publisher Walt Shiel offered these thoughts: “. . .We publish all our e-books with a coupon for a discount (equal to the e-book purchase price) applicable to the purchase price of the print edition.”

It’s nice to see publishers realizing that ebooks can be used as promotion for print editions.  But even this is not a sustainable business model.  The day will come when printed books are merely collectors items, something to keep behind glass.  What will ebooks be used to sell then?  Some authors might give away ebooks to promote speaking tours, seminars, or some other sort of access to the author. Some could use them to promote limited print editions, such as signed copies.

And for some, this will be enough.  But there’s a limit to the number of collector editions anyone can sell, and many authors aren’t interested in public speaking or teaching.  It’s different for musicians, in the same boat in terms of distributing digital content, but much more likely to do live performances, and therefore able to give away content to promote concerts.

The search for an effective business model for ebooks and the next generation of readers will continue.  The music industry may be a good guide, but the solution may come from an entirely unexpected source.

Article:  Ongoing Reader Debate: Why Are E-Books So Expensive? – GalleyCat.

Using digital goods to sell your other content

When the time comes to sell infinitely copyable goods, like MP3s or ebooks, some try to legislate away anything that hurts the business.  Others, like iLearningGlobal, take advantage of manufacturing costs that go to nothing and work to sell scarce things.

Sales people and sales managers can learn how to sell, stay motivated and focused when they listen to MP3 and videos from legends in the sales industry, including Brian Tracy, Harv Eker, Scott Siebold and Mark Victor Hansen. New videos, ebooks, MP3s and articles are added each week. Each member can view as much material as they like, for one low, fixed price of only $79.95 per month.

They allow unlimited downloads of the things already created, where the production costs are already sunk.  Then they use that to encourage future payments for non-scarce goods, like custom training help and materials.  $80 a month seems pretty high, but this is the business world, where these costs are tax-deductible.

“If companies cannot find the time or resources to train their personnel, iLearningGlobal can step in to help,” Snow said. “Now there is no excuse for not training your sales people so companies can beat the recession.”

Neither the press release nor the website mention the costs for the custom training, but you can be sure it will be more than $80 a month.

From:  Sales Training Doesn’t Have to Suffer During Rough Times as Affordable Distance Learning Library Features Topics from Leading Sales Trainers.