Digital Distribution

Books. In the dark ages they were hand copied by monks, and were so expensive only the wealthiest could afford them. Eventually movable type was invented, first by the Chinese in 1040, then again by the Germans four hundred years later. The price of books quickly plummeted. More people could get their hands on books, and thus more people could be taught to read, and thus more people learned to read, and thus more people had a reason to buy books in the first place. This brought about the Renaissance, and then the Industrial Revolution. Things got much better, much quicker, thanks to this revolutionary cheap way to produce and distribute media. Then, in 1969 the Internet was invented by the US Department of Defense, and then again by Al Gore in 1991.

Books. In the dark ages they were hand copied by monks, and were so expensive only the wealthiest could afford them. Eventually movable type was invented, first by the Chinese in 1040, then again by the Germans four hundred years later. The price of books quickly plummeted. More people could get their hands on books, and thus more people could be taught to read, and thus more people learned to read, and thus more people had a reason to buy books in the first place. This brought about the Renaissance, and then the Industrial Revolution. Things got much better, much quicker, thanks to this revolutionary cheap way to produce and distribute media. Then, in 1969 the Internet was invented by the US Department of Defense, and then again by Al Gore in 1991. Evidently all great inventions are invented more than once. You are probably familiar with this innovation, since you are using it to read this, but it makes movable type look like a room full of monks, and a room full of monks look like a room full of monkeys. Now the cost of producing and distributing the written word ? not to mention pictures, music, and video ? is virtually zero. One would think that this would lead to a similar hyper advancement of technology. It has. The associated drop in the price of books? Not so much. Why? Well, it has to do with copyrights, failure to learn from the past, pirates, fear of adaptation, and a healthy dose of economics.

Economics
The publishing business, regardless of media format, is just like any other business. It cannot exist without profits. This means that anything that makes money is good, and anything that makes more money is better. Everyone runs their business differently. When something comes along that allows you to cut costs, for instance, you have two choices. You can reduce the price, passing the savings along to the customer in hopes of a greater number of sales. Alternatively, you can keep the price basically the same, increasing your profit. Almost without fail, companies these days shoot for option B. Such is the case with print publisher Macmillan. They were not terribly pleased with the Amazon policy of pricing all e-books at $9.99. Official reasons included the fear that this was devaluing the e-book as a format, as well as threatening traditional sales methods by offering a cheaper alternative. The Internet heard all of this as “We want more money than that.” Money grubbing isn’t the only reason for needing a higher price. Larger companies may not be able to cut the price much because the majority of the cost of the book goes to paying for the overhead of having such a large company, not the manufacture and distribution of the product. Now naturally the actual motivation is difficult if not impossible to be sure of, but there are some things of which we are certain. Foremost is the fact that the cost of selling via digital rather than physical means is moderately to extremely less costly. Despite this, Macmillan wanted to list at a higher price than the loss leading one applied by Amazon. There was a struggle involving Amazon delisting Macmillan and Macmillan doing something called “Deep Windowing,” which means massive delays for digital editions. Finally Amazon had to cave. Macmillan holds exclusive rights to all of its books, so if Amazon wanted to sell them at all, they had to play ball. Now that a precedent is set, we can expect others to follow suit.

In essence, what we are seeing is economic survival of the fittest. A new way of doing business has arisen. One that doesn’t need the massive infrastructure that the old ways did. That means you can either adapt, attempt to halt progress, or wither away. The truly remarkable thing about what on the surface appears to be a power play by a publisher trying to shore up a dying business model with monopolistic tactics is this: Somehow Amazon, the largest retailer on the Internet, is coming off as the little guy being pushed around. The resulting bad PR for Macmillan is thus a remarkable achievement.

Piracy
For many traditional industries, the primary fear of entering the digital arena is exposure to piracy. Back in the olden days, Piracy wasn’t so much of an issue. Seldom did you have a renegade monk making illuminated manuscripts on the side and selling them out of his room in the monastery. Likewise the printing press was a fairly specialized tool, so your average citizen couldn’t exactly start mass producing a book. The Internet has changed things. Computers are ubiquitous, and getting easier to use by the day. All it takes is a single click of the mouse or a few key presses and you’ve got a brand new copy of the file of your choice. A few more clicks and you can send it to anyone else on the Internet. And when something is easy, you stop thinking of it as illegal. Downloading pirated movies, music, and software has become the jaywalking of the information superhighway… although jaywalking on a REAL highway would be way more risky… so maybe the analogy needs work. Regardless of the metaphorical issues, the ease of digital piracy has got traditional media outlets terrified, and fear makes people do stupid things. Things like Digital Rights Management, or DRM.

DRM
DRM is supposed to keep anyone from using something unless they have already paid for it. This seems like a good idea, in theory, but it is full of holes. First, the people who had no plans to pirate… had no plans to pirate. DRM wasn’t necessary for them. The honor system was doing just fine in their case. The only thing the addition of DRM does for them is complicate matters, sometimes to a painful extent. It might place limits on lending, or prevent usage without an Internet connection, or any number of other annoyances that didn’t exist without it. Meanwhile, the people who WERE planning to pirate now have a speed bump to get over. And that’s all it is. The best DRM is cracked in a matter of months. Most is cracked in a matter of hours. This is because human beings can only interpret data when it is analog – light waves and sound waves. That means eventually everything you are trying to protect is going to have to become analog at some point. And once it is analog, it can go right back to digital, this time sans DRM. Industry folks refer to this as the analog hole, and it is pretty much inescapable until we start jacking our brains right into our devices. Games and programs have it a little easier, since they REQUIRE the computer as a go between, and you can inflict your will upon the computer. A similar issue exists, though. A computer needs a standardized way to execute your instructions, and that means that you must provide them with a method to render your copy-protected mess down into something it understands. If such a method exists, it is only a matter of time before pirates figure out what it is and clip out the middleman.

Price vs. Convenience
We have established that, if the item is desirable enough, there will ALWAYS be a free copy out there. So is that it? Game over? Is media doomed to die a slow and withering death at the hands of the bootleggers? Not necessarily. You see, when you want to get a pirated copy of a movie, for instance, you have to search for it. Once you find it, you usually have to go somewhere unpleasant to get it. Whether it is a dark, secluded alley in the real world or a shady site on the Internet, you are risking the same dangers. Chances are you are going to be exposed to viruses, thieves, pictures of genitalia, and potential legal trouble. This is, to say the least, inconvenient and potentially hazardous. Buying the item circumvents these threats, but is costs money and it often has DRM. Every consumer has a sliding scale of price and convenience. There is a maximum price and a minimum level of convenience we are searching for. If price is too high or convenience is too low, we seek other methods. Those methods are usually piracy. Thus, you could have a free and legal product, but if it is loaded down with so many rules, regulations, and limitations that it is painful to use, people will steal it anyway. Likewise you could have a completely hassle-free product, but if it costs an arm and a leg, people will steal it anyway. The secret is to maximize the convenience and minimize the price. It is an art, and some are better at it than others.

The New Distributors
Digital distribution already has a fairly long history, at least in internet terms. iTunes is a major success story and is notable in that, like many other notable stories of history, it is repeating itself. You see, iTunes wanted to sell all of its songs for 99 cents, and the record labels were eventually able to make them cave on the marginally higher price of $1.29, while other companies were slow to release their catalog to iTunes. Sound familiar? Even with the DRM they had at the time, companies were afraid that once a song was in a digital format, it would be eternally pirated and sales would vanish. This fear of releasing it conveniently ignores the fact that many computers had media players with the option to automatically rip CDs upon insertion, making the sale of CDs at least as dangerous as digital sales. Worse yet, iTunes eventually dropped DRM. Miraculously it did not destroy the music industry.

Video had a somewhat better start. Places like Hulu and Netflix are realizing that if you give people what they want in a way they can tolerate, they won’t have to steal it. Thus movies are being broadcast over the internet via subscription, and TV shows are being broadcast on the internet with the same ad support as they have on TV. In fact, the popularity of the free and on demand internet broadcasting is such that many channels have their own shows available on their own sites now.

Perhaps the most compelling argument for digital distribution, though, is Valve’s Steam service. Steam establishes what should have been logically clear from the start. If you don’t have an inventory, and you don’t have production costs, and you don’t have distribution costs, sales can be monster money makers. Common is the sale that manages to reach the magic “impulse” price, where the consumer buys it just because it is so cheap. This is an actual example from our staff.

Couple that with the fact that you can play any Steam game you own on any computer with a Steam client to log into and you have got the absolute perfect combination of price and convenience. The iPhone’s app store proves the concept works for applications as well.

A Practical Example
Recently one of our intrepid young contributors here at Brainlazy wrote a novel and decided he wanted to get it published. His first attempt to do so was via the traditional means. This is a massive and painful process that involves getting a literary agent, who in turn gets a publisher. If you make it through both screening processes there are revisions and edits and all manner of other manipulations necessary before, eventually, books are printed. These are given to a distributor, who then gives them to retailers. In the event that any are sold, retailers, distributor, publisher, and agent all take a slice before you see any money. The whole endeavor is time consuming and hit or miss, and a year of attempts left our aspiring writer with two dozen rejections, mostly form letters. So he looked to self publishing. Here the traditional method involves hiring a copy editor, then sending the resulting manuscript to a publisher for a series of proofs, then finally the purchase of a run of books. Every step costs money, and in the end you still have to sell the books. Print On Demand reduces the size of the run to “as many as people order” and prevents the need for storage, but the cost per book is so high that you either have to make your book cost a fortune or only earn pennies per copy.

But wait, our writer is an Internet contributor. Up until now all of his words have been digitally distributed anyway, so why not make an e-book? It turns out Amazon has a nearly painless system in place to get yourself on the Kindle. Within three days the book was for sale to anyone with one of Amazon’s devices. DRM is optional, our author went without, and pricing is user-controlled. What about the others, though? What about Nook owners, or those with Sony Readers? Well, that’s where Smashwords comes in. This is a web site that publishes and sells DRM-free e-books in pretty much every format under the sun. The requirements are a little more stringent in order to ensure a consistent result across all formats, but a little work with word processor had the book up in under a day. This method offers even more control, allowing things like coupon creation and user definable sample size. People without dedicated e-book devices can even use their browser. What’s more, it distributes to Sony and Barnes and Noble, among others, provided you meet the structural requirements of their “Premium Catalog.” Unlike traditional publishers, both Kindle and Smashwords allow non-exclusivity, so you can publish on both and anywhere else you like. There is also no contract, and you retain all rights to your book, so the future of your work is open and free of legal complications.

The disparity between the old and new methods is telling. A year of trial failed to provide the author with the privilege of making a nickel a book in the traditional method. Via digital distribution it was 4 days between starting the process and making his first sale. You can see it for yourself here. We’ve even got a coupon for you for half off, if you feel like supporting it. Enter VD45J at checkout.

If our aspiring author’s story is in any way typical, there is good reason for traditional print companies to try to squash e-books as a whole. For an author, they are an attractive, efficient, cheap, and simple alternative to the print media gauntlet, and have the capacity to reach at least as large an audience. For a consumer, they can be affordable, flexible, and easy. When properly applied, the same can be said of all digital distribution methods. The sooner the old guard can get on board, the more likely they will survive the change. After all, there isn’t much of a mass market for hand-copied religious writings anymore, is there?

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About Phawx

Reviewer and Idea Man extraordinaire, Cary Golomb plays the role of jack-of-all-trades behind the scenes as a part of the Brain Trust and ownership of the site. At 11′ 7″, Cary is the tallest man ever to win the Boston Marathon. He is a large, predatory reptile known to attack livestock and drink their blood. Witnesses of his handiwork claim he is able to drain a cow of all of its blood and most of its internal organs in less than 30 seconds. His name literally translates to “The Goat Sucker.”