Jul. 27, 2009

“Free” and the Future of Publishing

I had an interesting conversation on Saturday with Bruce Spector, the founder and CEO of a new web service called LifeIO. (See the end of this article for an explanation of what LifeIO is all about.) Bruce was part of the team that developed WebCal, which Yahoo! acquired in 1998 to form the core of its own calendar service, so he has been watching the web with an entrepreneur’s eye for some time now and he had an interesting take on the whole “free” debate and how it might apply to book publishing.

If you somehow missed the recent back-and-forth about Chris Anderson’s book Free, read the pro-“free” comments by Anderson, Seth Godin and especially Fred Wilson, and the anti-“free” perspective by Malcolm Gladwell and Mark Cuban, among many others. This piece by Kevin Kelly, not directly about “free,” is very good, too.

For the uninitiated, the issue boils down to this: The marginal cost of delivering a bit of information over the web — a song, a video, a bit of text like this one — is approaching zero. As a result, information is increasingly available, and consumers increasingly expect to get it, for free. So traditional “legacy” information-sellers like musicians or movie studios or newspapers, whose actual costs are very far from zero, have to figure out how to turn free-riders into paying customers — and fast, before they go out of business. Fred Wilson’s answer is “freemium“: you lure the customer in with a free basic service, then up-sell the heaviest users to a premium version of your product. As Wilson puts it, “Free gets you to a place where you can ask to get paid. But if you don’t start with free on the Internet, most companies will never get paid.”

How does all this apply to book publishing?

Here are some of Bruce Spector’s ideas. He is a great talker, though, and a summary like this doesn’t do him justice. Also, this was a private conversation, but Bruce kindly gave me permission to repeat some of his comments here.

First, book publishers are no less vulnerable than other old-line media industries to the tendency of information to squirt around the web for free. E-books will be passed around as promiscuously as MP3’s. You can bet on it. So book publishers should expect their customers to demand that e-books be, if not free, then radically less expensive than traditional dead-tree books have been.

That means the current approach publishers are taking is precisely the wrong one. Locking up your content with DRM and enforcing higher prices will not work for books any more than it has for CD’s or movies. You cannot resist the downward price pressure of the web merely by refusing to acknowledge it. The old business model simply won’t work anymore.

How, then, will Random House — and novelists like me — make a profit? After all, in a world where iTunes sells songs for 99 cents, even successful musicians can’t make ends meet by selling recorded music anymore. They have to tour relentlessly. But a novelist like me can’t cash in by touring. I can’t play nightclubs performing my work live. For a novel, the book is the performance; the reader performs it in her head. So how do I survive in a world of, say, five-dollar e-books?

The answer is right in front of our noses, says Bruce. The business model is long established and proved to work.

There are only two business models in the universe, he says: you pay or they pay. That is, the customer pays or some other sponsor pays. Cable TV has done a successful job of combining the two approaches. There are traditional “free” stations sponsored by advertising; basic-cable stations sponsored both by ads and user subscriptions; and premium stations supported entirely by subscription fees.

Publishers need to do the same thing. If “you pay” will not support a certain book, why not try “they pay”? Why not sell advertising on the book cover? Why not allow Coke or Pfizer to put their logo on my book with the slugline “The Strangler by William Landay, brought to you by Pfizer.” (Okay, maybe Pfizer would not choose to be associated with the Boston Strangler, but you see the point.) Why not an ad inside the book every hundred pages? Americans have shown beyond any doubt that they will put up with advertising in exchange for free entertainment.

Why stop with the occasional ad? Pfizer could, with just a fraction of its advertising budget, pay for all the books Random House or Knopf will publish this year in exchange for the right to brand them, just as advertisers sponsor all of NASCAR or the NFL.

Before you reject this as commercializing or coarsening a fine art, think about what it means for readers: every book for free, zapped to your Kindle on demand. Bear in mind the alternative, too: the extinction of traditional publishers.

You could take this even further — which of course Bruce is very happy to do. Why should I, as an author, sell my book only to traditional publishers? Why not open the auction to, say, BMW or McDonald’s? In a world of print-on-demand, publishers’ capacity to manufacture and distribute books is moot. A book is a digital file, nothing more. In the digital future, no printing presses or warehouses will be required. So why wouldn’t McDonald’s pay to own that ebook and reach all of Stephenie Meyer’s readers? Or Viagra to reach Elmore Leonard’s? (There’s a good game for your next car trip: match the author to the likeliest sponsor! I wonder, What are the demographics of my readers?) In a world of declining advances, non-traditional publishers could get into the game very cheaply. And books, I bet, would deliver a very desirable demographic to advertisers.

Will all this happen? Who knows. These are not predictions but prescriptions. The point is that “legacy” publishers had better learn to think this way. They had better study the jujitsu of “free” — finding inventive ways to monetize their product while offering it to customers for little or nothing — before it is too late. If readers will not pay enough for novels, maybe advertisers will pay for readers.

Here is a final speculation from Bruce which ought to warm the heart of any book lover depressed by the doom and gloom of the last year: there is probably enough money in an advertising-driven business model to support all the editors in Manhattan and all the novelists everywhere forever.

* Finally, a word about LifeIO, Bruce Spector’s new web service. LifeIO organizes all your online communications — email, calendar, contacts, RSS feeds, social networks, whatever — in a single, elegant dashboard. For those who know the frantic Whack-a-Mole feeling of clicking around to Twitter, Facebook, Gmail, Google Calendar, Google Reader and so on, LifeIO could be a great help. The site is currently in private beta, meaning it is being tested by invitation only, but it should roll out in the fall. To learn more, read this review at Tech Crunch.

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