July 07, 2009

Paying the piper

Malcolm Gladwell begins his review of Chris Anderson's Free with a misconstrued anecdote and buries the lead to boot. Apparently James Moroney, publisher of the Dallas Morning News, is peeved about the royalties offered by Amazon to post the paper's content on the Kindle.

Newspapers, Gladwell incredulously reports Anderson concluding, "need to accept that content is never again going to be worth what they want it to be worth, and reinvent their business."

I wasn't aware that this conclusion was being debated by anybody. In any case, I'm not interested Gladwell's opinion of Anderson's book, except to say that I think Anderson is making an obvious point (and, yes, perhaps too glibly), and Gladwell is doing his level best to miss it.

To start with (as Anderson himself can't help quipping), Gladwell's review is free too.

But a long paragraph later, Gladwell marries that first anecdote with his thesis by concocting a straw man. Moroney was originally protesting Amazon's 70 percent cut on Kindle subscriptions. Then Gladwell tells us that "Amazon wants the information in the Dallas paper to be free."

As Clint Eastwood's Will Munny would put it, "Want's got nothing to do with it." I want to get paid the same rates that Gladwell gets paid, but that's not going to happen anytime soon.

The more important question Gladwell completely misses--despite it staring him and James Moroney in the face--is why Amazon can charge those usurious rates. The answer is easy: because Amazon has a monopoly (or when it comes to buying Kindle content, a monopsony).

And why does Amazon have a de facto Kindle monopsony? Because what we learn from history is that nobody learns from history. Especially, these days, publishers.

The RIAA spent the better part of the past twenty years insisting that CDs are king! And if they aren't, then any content produced by RIAA members is worth a gazillion dollars! And so must be locked up and DRM'ed like Fort Knox lest it fall into too many prole hands.

Of course, the cruel fact is that most musicians and writers make minimum wage at best. The RIAA exists to protect an aristocracy. Yet I believe in copyright protection (though reasonably limited to the life of the artist) and believe that ISPs can and should block file sharing ports.

But most content is not worth what the content producers wish it was. It sure isn't worth what I wish it was. And the actions of publishers to defend that fantasy are only making the situation worse.

It was Steven Jobs--not the RIAA--who married the MP3 player to a storefront and started making lots of money. Jeff Bezos added a twist: Amazon would do the same thing but use a non-proprietary format. So now it's the retailers--not the RIAA--running the show.

With the Kindle, I wouldn't be surprised if Bezos got the idea from Jobs: mash up a storefront and proprietary hardware and make the content creators come to him. Ironically enough, he can count on the Luddite publishing industry to enforce his marketing monopoly.

He dangles DRM before their eyes and they bite down hard. Hook, rod and reel. But at the end of the day, Bezos is the one holding onto the end of the pole.

If James Moroney doesn't like Amazon's terms, why haven't he and his fellow publishers deployed their own push technology? There are plenty of e-readers out there and a non-proprietary standard (ePub). I believe it again comes down to delusions about content value.

As a running-dog capitalist, I'm mostly fine with charging what the market will bear. The flipside of that equation, though, is that when the market can't bear so much, the price must go down. As with a housing bubble, that painful realization takes time to sink in.

By the time it does, though, book and newspaper publishers may find themselves again in the unenviable position of having the more technologically adventurous distributors and retailers dictate the terms to them.

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# posted by Blogger Joe
Bezos is a better businessman than Jobs which is why, once you break the Kindle monopoly, he'll distribute books DRM free. Point is that Jobs is wedded to hardware (iPod, iPhone, Mac), I suspect Bezos is wedded to moving goods, but as long as there's a monopoly to be had, he'll take it.
7/08/2009 7:19 PM

# posted by Anonymous Dan
They are both better than Mark Cuban who can't get past his amazing luck of selling his cool technology / bad business of Broadcast.com for $5 billion. He knows he was lucky and so he has become like the stereotypical affirmative action hire who is not quite sure if his success as anything to do with his merit.

He was against DRM before he was for it.

He was for "Free" before he was against it.

He's not quite as scitzo as Andrew Sullivan but he's getting close. (At least Cuban doesn't pass his time calling others moral reprobates and there is no reason to suggest he is one himself)
7/09/2009 6:41 AM