Archive for the “economics” Category

I watched with interest as Barnes & Noble released the Nook, an electronic book reading thing that’s pretty similar to Amazon’s Kindle.  I immediately thought of Microsoft’s Zune music player, released well after Apple’s iPod had pretty much conquered the world.  There are some interesting similarities and also some differences.

Dominant Design

There are several models of iPod, ranging from the no-screen Shuffle to the all-screen Touch.  As with mobile phones, each of these styles is pretty well-established and I think it’s safe to say that the last time either category got real innovation was when Apple delivered the iPhone and then the iPod Touch.

The dominant design of an ebook reader seems to have crystalized with the Kindle and to a lesser extent, Sony’s reader products.  Black and white e-ink screen, super-long battery life, small or absent keyboard, book-like leather covers optional, and so forth.  In this respect, the Nook, like the Zune, adds maybe some incremental improvement, but little of substance or lasting advantage.

Complementary Assets

Most people agree that the first iPods were not that great as devices, but that it was the iTunes store and the integration of the two that won the day for Apple.  This comparison is more interesting for the book readers.  By the time Microsoft released the Zune, the iTunes store was huge and dominant, and Apple computers were gaining share against Windows boxes on the back of iPod and iPhone sales.

In the book world, Amazon and Barnes and Noble have pretty much the same assets.  I don’t think I’ve ever seen a new book exclusive to either store, at least not with paper books.  Ebooks might turn out different, but at least for starters, it seems the two companies have the opportunity to offer the same media selection to their ebook reader customers.  Amazon’s store carries far more than books and music, and that might turn out to be important as they put more Amazon-dedication shopping machines into consumers’ hands.

Network Effect

If you can build a network effect into a product, you have a good chance at getting your users to do some serious marketing for you.  Social networks thrive on invitations, and they’re more useful as more of your friends join them.  Reading and listening to music are somewhat solitary pursuits (I would argue that the iPod and before that the walkman made music solitary when it had been quite social and that greedy music execs have prevented any device I know of having a second headphone jack) so it’s an interesting question how or if ebook readers can go viral.

Both Microsoft and Barnes and Noble tried making their challenger devices more social.  Microsoft’s “squirting” allowed you to send songs via wifi from your Zune to a friend’s Zune for three plays.  The songs you squirt are still available to you to listen to while they’re squirted and it seems you can squirt as many songs to as many friends as you like.  That seemed to have been too little too late.  Apple was allowing DRM-free downloads of some music, and three plays (with a three day time limit) seemed stingy.  Plus, with the wifi sending method (as cool as that might be) you have to be physically near your friend to squirt. And let’s not get into the wisdom of calling this “squirting.”

I speculate that Barnes and Noble did some focus research on heavy readers (like book clubbers, for example) and came up with a sharing feature that’s more like what we do with paper books.  As I’ve blogged before, I think lending and sharing paper books is a viral part of both reading and friendship.  With a Nook, you (the Nooker?) can loan an ebook to a fellow Nook owner (The Nookee?) for two weeks, during which time it is unavailable to you to read.  Seems pretty fair and similar to the reality of paper.  But then I read that Nook loans can be disabled on a book-by-book basis by the publisher, and even when enabled, allow only one loan of a given title – ever.  Not only does that fail to take full advantage of the capability of digital books, it adds a restriction that doesn’t even exist in the paper world.  Disappointing First Sale Doctrine Fail.

It seems unlikely that the Nook could win the day on the basis of the sharing feature, even if it did everything I want it to, but the hobbling of that feature looks like just another indicator that the Nook will go the way of the Zune – not gone, but forgotten.

I’m a big proponent of the rights of authors to profit from the sale of their work, but I’m also a fan of the first-sale doctrine that lets me give away, lend or sell my copy of that work once I legally acquire it.  So, while I am mindful that when I buy a used book (or borrow one) I’m not contributing to author royalties, I support used bookstores for several reasons:

• they make more books available to more people who are price-sensitive
• they are the only way to get books that are out of print
• sometimes, you find something interesting in a used book that you would never find in a new one: an inscription or notes, or a bookmark or some other ephemera

That last one, by the way, is something that future generations of digital book buyers will probably never know they’re missing.  See my recent posts on Kindle-related stuff for more on ebooks and intellectual property.  But it’s also worth noting that Google books, by scanning books, sometimes preserves this old stuff.  Check out page 8 of Google’s scan of a 1905 edition of Wuthering Heights for a taste.

Anyway… I popped in to my local used book emporium, Rodney’s Bookstore, this week seeking a copy of Wuthering Heights for book club. (My desire to contribute to author royalties and publisher revenues diminishes with the deadness of the author.)  I found three paperback copies in totally different editions and varying conditions, priced from $1.90 to $4.80.

One was a standard-issue trade paperback, part of some classic series.  It was in very good condition and the most expensive of the lot.

Next up, a Kaplan SAT Score-Raising Classic edition, billed on the Harlequin Romance inspired cover as “The Classic Novel with 763 SAT Vocabulary Words Identified and Defined!” The definitions were on the facing page to the text, swelling this edition to over 600 pages.  The bold SAT words might be a little distracting, but this one was well-proportioned and a relative bargain at $3.80.

Finally, the highbrow edition.  A St. Martin’s Press press trade paperback with a heavy paper cover, boasting the 1847 text and essays from “five contemporary critical perspectives” namely, psychoanalytic, feminist, deconstruction, Marxist, and cultural criticism.  Wow.  The downside, marked in pencil on the flyleaf, “$1.90 AS IS ROUGH” It was beat up, but appeared complete and had no highlighting or underlining, which are generally deal-breakers for me when buying a book.

Each edition certainly had its merits, but until I got my purchase home, I didn’t know the extent.  Here’s something you probably won’t ever see in your Kindle.

PS I also bought the Kaplan edition, just for laughs, and just in case I need to look up a word.  What does “Wuthering” mean anyway?

The estimable Len Edgerly who produces a weekly podcast on all things Kindle ran a podcamp session called, “Will the Kindle save reading?” in which a group discussed the pros and cons of Kindle reading compared to paper book reading, and touched on some issues of intellectual property and digital rights management. I’m not sure if any progress on the question of saving reading was made, but I learned some interesting things that I’ll attempt to relate.

I learned that blog owners can add their blogs to Amazon’s store for download to Kindles.  People can pay to have blogs downloaded to their Kindles, and Amazon will kick 30% back to the blogger.  So far as I can see, the only benefit to the user of this arrangement is that the blogs will be available on the device even when a network connection is not present, but since they can be viewed free through a browser or RSS reader, I was pretty confused by the value prop.

I went to kindlepublishing.amazon.com to check this out and got sort of stuck at the scary terms and conditions, but I suppose this is another distribution channel for bloggers.  And at least for now, when the number of blogs in Amazon’s catalog is on the small side, you might get some incremental revenue and readers.  For me, this part was a dealbreaker, “You grant to us, throughout the term of this Agreement, a nonexclusive, irrevocable, worldwide right and license to distribute Publications as described in this Agreement…”

Book defenders in the group cited differences in the physical experience that were not necessarily deal-breakers, but definitely comfort-reducers when reading on a Kindle: in a paper book, you can immediately see how far into the book you are and easily flip ahead to see how far to the next chapter.  Another reader noted that she always reached for the upper right corner of the Kindle to “turn the page.” Somebody else pointed out the disconcerting “flash” when the Kindle turns a page.  Some said this was a necessary side effect of the e-ink technology, but I actually think it’s a design choice that maybe needs revisiting.

The group also covered some ground on the Kindle Orwell kerfuffle, which I also wrote about not too long ago.  But what I thought was most interesting – and Amazon execs would be smart to listen in – was the desire among bibliophiles (and authors and booksellers, both present) for some of the sharable and giftable qualities of paper books to translate to Kindle.

Apparently, you can’t buy a Kindle book for another user.  You can give a gift card, but the crowd thought that a poor substitute for giving a particular meaningful book to a friend.  I would love to see the ability not only to give a Kindle edition to a friend (either “fresh” from the store, or to transfer a book from your library to a friend’s like you can take a book of your shelf and give it away) but also to “inscribe” that gift the way some people do paper books.  Edgerly related a story where he met an author (was it Clay Shirky?) and asked him to “autograph” his Kindle copy of his book by making an annotation.  Since the annotation was typed and could have been anybody, Edgerly shot a video of the author “signing” the digital book.

When (and I saw when, not if) the Kindle gets a touchscreen, I hope this autograph/inscription feature gets included or added on.  The latter of course will be only if (and I don’t say when) Amazon opens the Kindle to third-party or user-created applications.

You can listen to much of the podcamp session at the Kindle Chronicles here.

Podcamp Boston #4 is coming this weekend.  It’s an “unconference” which means that anybody can give a session.  If you need proof, look no further than the fact that they’re letting me present.  I’m doing a discussion session with the estimable Gradon Tripp called, “Are you a Gates or Buffett?“on Saturday at 4pm in the ballroom.

The somewhat cryptic title used to have a clarifying subtitle but the podcamperati truncated it, so let me explain a little.  Gradon and I were pondering why so many people seem to want to start their own nonprofit organizations for causes that already have lots of existing NPOs.  (There are over 1.7 million NPOs in the USA)  There seems to be a real divide between people wanting to build their own social change solution and those who want to channel their energies (or monies, or both) into supporting existing social change solutions.  Sort of a build vs buy discussion like we get in tech companies all the time.

The framing device of Gates and Buffett refers to the two billionaires’ approaches to charitable foundations.  Gates used his massive wealth to create a new one, and Buffett decided to simply add his massive wealth to Gates‘ rather than establish another whole new foundation.  Both commendable acts, to be sure, but which model prevails for regular folks trying to figure out how to use their own meager resources for good?

In our podcamp session, we’ll kick that ball around, focusing on how social media can make those meager resources go a long way and how social technologies can mitigate the advantage previously held by incumbent organizations.  In keeping with the podcamp ethos, we’re not going to script or structure things too much, but I expect that there will be talk of Twestival, Uncharitable, Facebook Causes, Lance Armstrong, the Staley Foundation, and whatever else the crowd brings.  I hope you’ll join us.

I feel bad for whoever it was in the Amazon organization who first realized that they were about to remove 1984 from peoples’ kindles.  “Why couldn’t it have been The Bridges of Madison County or something?” they must have wondered.  They took back Animal Farm too, but that’s not as good a story.  Note to Alanis: this is ironic.

As you probably know by now, lots of people are hopping mad, some blame DRM, others say it’s obnoxious but perfectly legal, Amazon’s Bezos has apologized much better than most CEOs ever do, and adventurous spelunkers have decoded the Kindle license agreement.  I even found somebody taking the unpopular view that removing the ebook was a right and just thing to do.

I tend to side with intellectual property holders in these matters, even though I believe that they would be better off being less controlling, I have to support their right to a certain degree of control over their works.  Taking this view, I see the Kindle copies of 1984 as stolen property that should be forfeited or destroyed, because Amazon did not have the proper right to distribute them.  This still leaves some annoying wrinkles on the no-warning digital seizure of the “goods:”

It’s not really Amazon’s job or right to seize the stolen property, at least not according to the discussion in the comments on the Altantic blog that uses the (suspect) analogy of actual stolen physical goods.

Kindle users also lost any notes or annotations they had made on their copies of the works. I’m not really sure what these notes might look like without the underlying work but I’m troubled that they were lost along with the ebook itself.    It would make one heck of an excuse to turn in a late term paper, though.

Even if the action is just and right, it seems a lousy way to execute it. When a merchant makes an error that affects customers, it’s good practice to do better than replacement.  In my favorite example, when Starbucks messes up an order, they often redo it *and* give you a coupon for a free drink on top of that.  Amazon could have done more to patch things up, such as offering paper versions of the books at no extra cost, or providing a link to some other legitimate ebook source for those titles.

Leaving this example behind, I think both sides here are guilty of some wishful assuming.  Consumers happily ignore the license agreements and are shocked, shocked to discover that they don’t own their iTunes music or Kindle ebooks the same way they own their CDs and paper editions.  It’s not a totally unreasonable assumption, but lectors and emptors could cave a little more, don’t you think?  Merchants are taking advantage of technology to deliver some amazing benefits to consumers, but they’re also using those same technologies to maximize their profits thinking that nobody will notice or care.  Are we still shocked, shocked?  Ever-alert Cory Doctorow (an author, mind you) very sensibly asks Amazon to come clean on what the Kindle can and can’t (or will and won’t) do. Transparency FTW, but you have to take the time to read what they write, don’t you?

One last unpopular idea before I go: maybe renting isn’t all that bad.  This country puts a premium on owning private property, and I’m all for it, but sometimes other arrangements are good too.  People who own homes look down on those who rent them, but some economists think it’s just as good or even better in some economies.  Landlords and rental tenants have rights and responsibilities – and remedies and penalties – spelled out by the law.

Some people are happy to use public libraries or netflix to borrow or rent their media.  As long as the rules are clear, consumers can make an informed decision if they want to buy, lease, rent, or borrow their media through various channels and devices.  Maybe a future set of laws around the rental of intellectual property will provide a framework that works for consumers, vendors and authors alike.