Law in the Internet Society
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E-book Self-Publishing: Instant Gratification, at What Cost?

-- By MiaLee - 20 Oct 2011

E-books are surging ahead as the preferred avenue for reading. In the first five months of 2011, U.S. consumers spent more on eBooks than they did on hardcover works. Borders shuttered after missing the e-book bandwagon, leaving Barnes and Noble scrambling to slow its losses as it throws more weight behind the Nook. Meanwhile, Amazon has captured the lion's share of proceeds, capitalizing on its first-to-market e-reader success, its massive distribution network, and its recently launched self-publishing program.

This paper examines some of the promises and peril posed by the for-profit digitization of books.

Empowered Authors, Embittered Publishers

The e-book market removes entry barriers for authors who have been hampered by or excluded entirely from the traditional publishing process. Since print publishers count on a small crop of bestsellers to recoup the losses from underperforming manuscripts, they extend advances to a select few. Authors who manage to land deals must then launch a marketing blitz to drum up in-person sales. For example, J.A. Konrath recounts the uphill battle he faced when his first hardcover novel hit stores. Konrath's publisher did not want to pay coop fees for an incognito to host official bookstore signings. Konrath instead cobbled together his own signings, and, when he graduated to an official book tour, squeezed in hundreds of extra road shows to make the long slogs cross-country more efficient.

A once-weary Konrath now sits comfortably at home while his Kindle sales drive tens of thousands of monthly profits in the background, a few dollars at a time. The same can be said for Amanda Hocking, who went straight from unsigned blogger to Kindle millionaire, pricing her works in the "impulse buy" range of $.99 to $3. Their success, however, is uncommon: to date, only 56 writers have sold 100,000 or more e-books on Amazon.

As some self-made authors take the reigns of their digital careers, spurned Big Six publishers strive to cannibalize their cut of e-book revenues. Displeased that more than eighty percent of Kindle titles have been priced at $9.99 or less, the Big Six joined Apple to pressure Amazon into replacing its wholesale strategy with their agency model. With wholesaling, Amazon bought titles at a bulk discount and set its own resale prices; under the agency model, publishers set list prices ($12.99+) and pay the online retailer a ~30% commission on sales. Amazon caved to the demands, but the Big Six/Apple bullies are now subject to a class action antitrust lawsuit for conspiring to fix prices.

Penguin also launched its own self-publishing platform last month, BookCountry? , which quickly garnered scathing reviews from Konrath and other authors. BookCountry imposes steep fees and meager revenue shares on literary hopefuls: joining requires a $99 to $549 outlay for formatting/design services, and rev shares drop 30% in comparison to Amazon's program because Penguin has re-inserted itself as an intermediary. Furthermore, Penguin restricts authors' DRM choices; whereas all Amazon self-publishers can choose to post their works DRM-free, BookCountry? prohibits DRM-free publishing for all works over $2.99 (which, incidentally, are the works that qualify for higher rev share).

These "frenemy" maneuvers by Amazon and the Big Six prompt consideration of how authors would fare if they chose instead to manage their own e-publishing cycles. In theory, authors could learn Photoshop or tag an artistic friend for design help, host their own websites through Weebly, and encode their own e-books with open source software such as Calibre. But in practice, I think few overstretched authors, especially those with limited tech backgrounds, would devote resources to creating their own book distribution networks when the alternative is paying a 20-30% convenience fee to access existing channels. Such channels have achieved a network effect that an emerging artist would struggle to replicate alone. No matter how well SEO-ed an author's Website might be, it won't bubble up to the first page of search results when would-be customers run a generic search for "books." The indie seller would miss out on Amazon shoppers "primed" to make 1-click purchases of cheap reads alongside their other goods. And if the seller tried to juggle both Amazon- and self-run distribution, she would be disciplined into not offering promos on her site that differ from her Kindle prices; one author learned the hard way that Amazon's algorithm searches other sites for free versions of one's works -- even excerpts -- and drops the Kindle price to match.

Commoditized Consumers

At best, dominant player Amazon offers aspiring authors an unprecedented chance to make a living from their creative talents; at worst, it and the Big Six seed writer dependence for their cartel's benefit. But how does the growing e-book market affect readers?

Kindle partnerships with libraries and schools can improve students' web-based reading comprehension and overall enthusiasm for literature in our tech gadget-obsessed society. As high school librarian Buffy Hamilton points out in the above article, the Kindle enables self-conscious teens to privately read different books without incurring their friends' ridicule. (It's too bad this literary squeamishness exists in our society, but at least the Kindle tries to help). Such partnerships would go even farther if Amazon would heed librarians' requests to relax the six-device sharing limit imposed on Kindle files.

More broadly speaking, critics bemoan the commoditization of literature. At the $.99 price point, books stop existing as cherished tomes, handpicked after an afternoon spent browsing curated titles at the local store, and assume new life as impulse purchases made because the cover art was flashy. The Kindle market place has been littered with spam, and with each additional purchase, the Web giant gains incremental knowledge of how to price discriminate among us. France and Germany have laws against selling books below cost to prevent this erosion of local culture, meanwhile, Amazon hawks its discount-bundled, price scanning app in an unabashed effort to divert in-person purchases back to its site.


The present e-books landscape encourages new authors and increases reader access, provided we are willing to cede digital autonomy to Amazon and the Big Six.


Old version

ready for editing*

Instant Publishing, on Amazon's Terms

Upon first blush, Amazon's pending elimination of middlemen publishers

Surely the mere fact that Amazon is going to compete with publishers is not the same as "eliminating" them?

appears to shift power into the hands of creators. Instead of trying, often in vain, to secure an advance investment from publishing houses, authors can check the box on a license agreement and start marketing their works within minutes.

But they can do that by putting an e-book on a website of their own, and Google will provide all the search access that they need. For Amazon to become important in that process, it will have to provide something more useful than the possibility of reaching a Kindle.

Creators can cash in on the whole of their natural property rights, and consumers can browse their way to the latest masterpiece they might have overlooked (were it not for the enthusiastic, single-click testimonials of your thousand closest Facebook friends).

Yes, that might be right. But in fact, as you will have noticed by now, Facebook members don't seem to be particularly given to recommending books to one another. The idea that the entire Internet is going to be held together by "Like" buttons surveilled from Facebook HQ is just a fantasy of the Surveillers.

But while statistical models have shown that increasing access to creative works results in the greatest amount of authorship, increasing reader access through Amazon will only strengthen Amazon's burgeoning monopoly on distribution channels. Amazon, in line with the increased profit-mongering surveillance of credit card companies and Facebook's Open Graph, continues to amass purchasing history knowledge and hone its ability to engage in perfect price discrimination against consumers.

They're discriminating "among" consumers. Whether they are also discriminating against them would require evidence we don't have and a finding I think we ought not to prejudge.

Amazon also minces no words in brandishing its arbitrary control over the royalties it offers to self-publishing authors. Self-publishers can either choose a 35% royalty rate or a 70% royalty rate. If an author chooses the 35% rate, there may be times when the author earns zero royalty because Amazon has decided it is "matching a free promotion on another sales channel." If an author chooses the 70% rate, Amazon warns, "you must comply with any other restrictions or requirements we may provide from time to time for the 70% Royalty Option in the Program Policies."

Is the implication that the ability to set prices proves "arbitrary control" of some socially destructive kind? Publishers too set royalty rates in adhesion contracts (at much lower levels) and yet they are in a competitive industry (in which agents also have a fixed arrangement). Magnatune offers recording artists an invariable 50/50 split (which, as you see, Amazon too considers the likely settling point, and is currently bracketing), but it's an almost-non-entity in the world of recording companies. You haven't, it seems to me, shown anything by showing that Amazon has a pricing proposition to put before authors.

So Much For Legal Redress

Coincidentally, the vague terms that Amazon forces authors to accept mimic the antitrust statute that is supposed to intervene when a company has succeeded in capturing a lion's share of the market, as Amazon probably will, if it hasn't already. If Barnes and Noble or another dwindling competitor were to survive long enough to try and recoup its lost profits through antitrust litigation, Amazon would presumptively breeze through the 3-prong ALCOA test and escape divestiture, receiving at most a slap on the wrist enjoining a few choice business practices. For example, Microsoft was forced to halt its practice of blocking the installation of competitive browsers by licensed manufacturers.

This is all very breezy, but I don't understand what it means. How do Amazon's contract terms "mimic" the Sherman Act? Are you actually suggesting that Amazon is going to capture "the lion's share" of the book publishing market? On what basis do you reach that conclusion, what forecasts by whom predicated on what data? At first glance such a claim seems utterly unbelievable. Do you have some smaller market, say in vanity e-book publication likely to move next to no units, in which you think Amazon may develop some sort of dominance? Or are you talking about the market to send files to the closed platform called "Kindle," in which this sort of vanity-press dreck is merely the filler you need to keep a full catalog and prove to the book publishers that you don't need them the next time you're trying to decide how to price e-book rights in your deals with the Big Boys?

It is impossible for any court proceeding, operating on a years-long discovery timeline, to keep pace with the rate of innovation, the speed of which can invalidate presupposed operating costs and consumer expectations overnight. For instance, the D.C. Circuit in US v. Microsoft considered the burden on software support staff and scarce hard drive space that would occur if PC manufacturers had attempted to bundle an alternate browser that would compete with pre-bundled IE.

Why is this relevant? What antitrust lawsuit are we bringing?

Section 2 investigations of single firm conduct rarely occur. Yet imagining a hypothetical case against Amazon, the judicial analysis would proceed as follows:

Prong 1: What's the market? The court would arbitrarily create classes of substitutable products and geographic restrictions. The Government would argue that Amazon has throttled the market for eBooks, Amazon would counter that the market should be defined more broadly, perhaps, as “any good for sale between $.99 and $3.00 through an online distributer of products, both electronic and tangible.” The court would bluntly reapply their calculus used in parsing the market for raw materials manufacturing in the 1940s -- where the marginal cost of supply a good was greater than zero -- to the market for data, where the marginal cost is zero.

No. The discussion would be about whether "the e-book market" exists independent of the book market, in which Amazon is a trivial participant.

Prong 2: Does Amazon have a monopoly on that market? Maybe. Something in the range of 60-90% will do, a percentage based on one of Judge Hand's footnotes in ALCOA.

Really? Every file containing a book on the Web is part of the e-book market, and Amazon doesn't have 1% of that market.

Prong 3: Did Amazon engage in any pernicious conduct to achieve that market? Procompetitive justifications would be lobbied: if Amanda Hocking can make a living off of volumes of impulse clicks, then so can any other author that's enterprising and lucky enough to go viral. The court would take a cue and decide not to punish Amazon for its success in increasing marketplace efficiency.

Not "pernicious." Conduct which creates an unreasonable restraint of trade. And the question would be, what conduct? You have not indicated what conduct it is that's supposed to constitute either conspiring to create or acting illegally to maintain a monopoly.

Decentralizing as a Personal Choice

Since our judicial system underpins a capitalist society that rewards profit grabs over freedom of information, the inefficiency of creative work distribution through mainstream commerce channels is primed to continue. The strongest recourse against the tide of corporate control, therefore, seems to stem from personal efforts to resist the lure of instant gratification, forgo the benefits of network effects, and spread knowledge through decentralized means. For authors seeking publishing alternatives to Amazon, there are many self-publishing outlets that advise you on competitive pricing but allow you to set the ultimate price on your own. For conscientious readers, stay tuned for the Book Liberator. The Book Liberator will enable individuals to digitize collections in the same manual manner as employees who were tasked with building up Google Books, minus the downsides of allowing Google to scrutinize your reading habits and insert ads at every turn.

No, as to the Book LIberator, which was really an effort to induce manufacturers to produce simple non-destructive book scanners—which seems now to have happened. Because we also now have superb free software for cleaning up and preparing scans made even by mobile phone cameras, as well as all the other software we need to make superior e-books, the whole issue is now moot.

Whether such a commitment to resisting data conglomerates will gain traction remains to be seen. Righteous though the cause may be, I have my reservations. The point-and-click mentality has made us complacent. Author Nicholas Carr has reflected on how our reliance on the Web has stunted our capacity for close reading and rewarded lazy surfers with information once reserved for the enterprising. Even James Vasile, creator of the Book Liberator, admitted the challenge underlying his noble project to bloggers at GOOD: “You have to turn the pages yourself.”

I think you're missing the point of James' remark, which is ironic. The cost of non-destructive scanning using any camera available is more than that you have to turn the pages yourself. Once for each book in the world, some human being has to be prepared to do some new work, to make a good scan that renders every page of text and every illustration fully as well for digital viewers as on the page (a skill much less exacting but not entirely unlike printing or photographing). In addition, people may want, over time, to correct the optical character recognition layer accompanying the scanned images. These OCR layers provide for searchability, and are used if you want to take out quotations (which of course DRM'd proprietary e-books don't allow at all), and if users want to collaboratively remove the inaccuracies all OCR has, become in time perfect textual representations of the images of pages they accompany. Only the page turning work (and some of the scan prep) is changed if you destructively scan the book by debinding it and putting the pages through a sheet feeder. This is how I digitize most of my books. But as I, and many of my friends, and you, and eventually basically everyone in the world uses mobile phone cameras to digitize books which are then prepped and produced by better and better free software, all the existing books in the world will become immediately available to everyone everywhere through sharing. (This is the important part of the whole freeing of published works, which you don't even touch upon here since you are considering only a small fraction of the small fraction of new books joining the immensity of all published matter.)

Once everything that has ever existed in print has been scanned into a great free library, new books will only be published in ways consistent with the free library's formats and practices, because what is newly contributed to the world is always only the merest measurable sliver of what thousands of years of writing has produced.

So I don't understand why this smallest segment of the small segment that is the new should detain us much in our overall analysis of what is happening to printed information. That's not to say there isn't something this part of the process can teach us. But you need to be clear about what your thesis is, what the real world facts are that make your thesis interesting to discuss and consider, and how the implications of your idea are related to the larger context in which all of this is going on.

I wrote this draft trying to grapple with a couple of ideas:

1. Convenient technology is popular technology. Popular technology generates revenue -- and, inefficiencies aside -- it drives the American economy of attempting to monetize information distribution. Authors can set up their own independent websites to distribute their works. But, if an author focuses in the least on trying to earn a living from her works, she will be drawn to the practical opportunity to distribute her works through Amazon, a mainstream network that has already done the work of attracting millions of potential readers and streamlining the viewing/search/payment process for those readers.

Not every author is going to have the tech-savviness to set up his own website and payment network. I can attest to this from personal experience -- prior to law school, I was the second employee of a company, BigTent, whose mission is to give trusted community groups (local parenting, social, hobby, etc. groups) an all-in-one set of tools to organize and strengthen their groups online (think: Yahoo on steroids). We had so many hurdles in user adoption. We catered to an older demographic that didn't grow up with computers and Internet access. As a result, we had to deal with an enormous information gap in getting our customers comfortable with and/or excited about learning new technology. Group leaders wanted to spend their precious spare time connecting with their group members, not worrying about the nuts and bolts of a new communication system. We touted our privacy controls, our 256-bit encryption on every page, our dedication to not broadcasting sensitive information in Facebook newsfeeds; a few appreciated these deliberate choices, but most focused on the end results of implementing the technology (i.e., will I have a more meaningful connection with my group?), and not the means of getting there.

2. Many of our class discussions have focused on the consequences of centralizing data in for-profit networks such as Facebook. I wanted to play out a hypothetical situation where Amazon centralized enough eBook data to raise antitrust concerns.

3. I want to assess: what is a pragmatic option for an aspiring author in the 21st century to share his creative works and make an honest living doing so? I'm not saying that an author's primary motivation is making money, but it is still a motivation. Creators still have to eat. So from that perspective, I want to explore how new mechanisms of self-publishing pose both benefits and risks to authors, to readers, and to Internet society at large.

I'll take a stab at revising soon.

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r14 - 22 Dec 2011 - 09:54:13 - MiaLee
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