The Freeconomics of eBooks

Article in the NYT re the inexorable rise of the eBook, Kindle style. Its worth linking to for this quote alone:

Do you remember what it was like back in the old days when we had a New Economy? In the 1990s, jobs were abundant, oil was cheap and information technology was about to change everything.

Then the technology bubble popped. Many highly touted New Economy companies, it turned out, were better at promoting their images than at making money — although some of them did pioneer new forms of accounting fraud.

I suspect we will find that The New Economy 2.0 will have its own share of stars of fraud and flop.

However, I do take issue with some other thoughts in the article. Firstly, this:

In 1994, one of those gurus, Esther Dyson, made a striking prediction: that the ease with which digital content can be copied and disseminated would eventually force businesses to sell the results of creative activity cheaply, or even give it away. Whatever the product — software, books, music, movies — the cost of creation would have to be recouped indirectly: businesses would have to “distribute intellectual property free in order to sell services and relationships.”

For example, she described how some software companies gave their product away but earned fees for installation and servicing. But her most compelling illustration of how you can make money by giving stuff away was that of the Grateful Dead, who encouraged people to tape live performances because “enough of the people who copy and listen to Grateful Dead tapes end up paying for hats, T-shirts and performance tickets. In the new era, the ancillary market is the market.”

Except that it is not a "free" transfer from goods to relationships - as we explained in our articles in FreeConomics Part I and Part II, if your free lunch is usually being paid for by offset funding, and / or by your data being chained up, there is a price to pay. What is often forgotten in the "rush to free" discussion is that by and large, if another piper is paying, they will want to call the tune at some point. That bit of the bargain is too often neglected by the Freeconomists - but not by Ms Dyson, I note .

Also, making money from T shirts as a famous band (with all that Big Label spend gone in already) like the Grateful Dead is one thing - being further down the Long Tail means its a lot tougher, and this has become clearer in the interim as the network power law has just allowed the rich to get richer.

The scary thing is I find myself arguing these economics with the NYT author who is none other than Paul Krugman. Hmmmm. Second thing I'd take issue with is this thought:

According to a report in The Times, the buzz at this year’s BookExpo America was all about electronic books. Now, e-books have been the coming, but somehow not yet arrived, thing for a very long time. (There’s an old Brazilian joke: “Brazil is the country of the future — and always will be.” E-books have been like that.) But we may finally have reached the point at which e-books are about to become a widely used alternative to paper and ink.

That’s certainly my impression after a couple of months’ experience with the device feeding the buzz, the Amazon Kindle.

Not the bit about eBooks being the perpetual next year's technology (along with the mobile internet), but the bit about the Kindle replacing books. I don't buy it (literally).

We've done a lot of work on e-Readers in the last two years or so, and there are 2 things that they are still struggling with:

(i) The kindle generation is still too small creen and not natural light enough for most people to find reading an easy pleasure. A few road warriors reading papers they'd otherwise have to read on laptops yes, the mass market - unlikely yet according to our analysis. We need to await the next generation of displays

(ii) Price point - not just of the Kindle, but of total (legal) ownership. Despite the price cut, its still $359.00. And the reduction in price of the average books in eBook form is - according to the Amazon Kindle site for say Clay Shirky's "Here Comes Everybody" - a whopping great reduction apparently from S25.95 to $15.42 - except that elsewhere on the Amazon site the actual book is only $17.43 Hardcover. Somehow a $2.00 reduction for a zero dead tree edition does not seem to be that great a deal. I need a lot of those to (c 180 in fact) to justify the $360 outlay!

Unless you were thinking of going to BitTorrent for Clay's book, which we could not condone as that, after all, is Piracy. Or the inevitable future, as Esther Dyson would have it ?

Better get started printing those T Shirts, Clay