Jim Baen's Universe

Salvos Against Big Brother

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Books: The Opaque Market

Written by Eric Flint

In my last essay, I approached the question of so-called online piracy from what I called a "negative" standpoint—by which I meant that I was content with knocking down the arguments advanced in favor of DRM. In this essay, I want to turn the problem around and approach it from a positive standpoint, by examining the many ways in which a non-DRM approach to electronic publishing can help the situation of authors and publishers.

Let me start by making two flat assertions:

1) The market for books is one of the most opaque markets in existence, from the standpoint of its prospective customers.

2) For every dollar an author or publisher might lose from electronic copyright infringement—what's often given the dishonest and/or hysterical label of "online piracy"—they will lose at least a hundred dollars due to the opacity of the book market.

What do I mean by an "opaque" market? The concept is simple, and is closely related to the concept of information asymmetries as used by some economists. A lot of economic theory is based upon the presumption—the preposterous and absurd presumption—that the market is completely visible to consumers. To put it another way, applied to this topic, when Customer Joe or Jane sets out to buy a book, they know already all the books available on the subject they are interested in. Their choice between Books A, B and C therefore comes down to an informed choice based partly on price, partly on their preference in format (electronic or paper; and, if paper, hardcover or paperback), and partly on their own assessment of the relative talents and skills of the various authors who have produced books on the subject.

It's enough to state the proposition for anyone to see how ridiculous it is. In the real world, the situation is almost diametrically the opposite.

According to R.R. Bowker, the company that compiles the Books in Print database in the USA, in the year 2003 there were approximately 175,000 new titles published in the United States. That's one new book coming out about every twenty seconds. The figures for the UK are smaller but comparable—the best estimates are that more than one hundred thousand books are produced in Great Britain every year, in recent years.

That's at least a quarter of a million new titles in the English language, published every year. And in case you were wondering—given the endless yapping about "the decline of reading"—the number is increasing, not decreasing. Over the past half century, since the advent of television—which many doomsayers insisted would destroy reading—the production of books has increased four-fold. That increase is faster than the population increase, by the way. World-wide, we've gone from about a quarter of a million books produced every year to a million, which translates into an increase from one hundred new books for every million people to one hundred and sixty-seven new books per million people.

To put this yet another way, if you read one book a day, you would be neglecting to read several thousand other books.

Of course, in one relative sense, this is still picayune production. A quarter of a million new books in English, every year? Oh, pfui. Piker stuff.

Iran alone produces twice that many new automobiles every year. Worldwide, the annual production of new automobiles was about sixty-three million in 2005. For every new book produced in the world, there were sixty-three new automobiles that came onto the market.

Yet . . .

That poses no insurmountable challenge, for a prospective car buyer who's willing to put in a moderate amount of time to gauge the different products available on the market. Buy a few copies of Consumer Reports and similar consumer product magazines—maybe a book or two—and you're done. You can confidently march out there and buy a new car—which will cost you at least $15,000 and more likely $20,000 or $30,000—with a fair degree of surety that you've made an informed choice.

But you can't possibly do that with the much smaller number of new books produced every year—most of which will cost $25 or less, often much less.

The reason is obvious. Yes, there are sixty-three million new automobiles made every year, but there are only (in relative terms) a tiny number of models produced. The largest car manufacturer in the world won't produce more than perhaps two dozen.

Whereas every new book is also a new model. Not completely, of course, since most books are generically rather similar to other books in any given field or subject of interest. Still, it is in the very nature of the book market that each and every one of its products is unique.

You literally can't penetrate the obscurity of the book market. You'd have to spend every waking moment reading book reviews—and even that wouldn't suffice, because the book reviewers themselves, all of them put together, can't keep up with the production of new titles.

In short, the book market is just about as opaque as any market there is. I might mention, by the way, that this is not the least of the reasons that the fears of authors that they'll get "pirated" are almost always just plain silly. With the exception of a tiny percentage of very well-known authors like J.K. Rowling or Stephen King, the real problem authors face is that only a very small percentage of their potential customers have even heard of them—so how likely is it that the ravening hordes of electronic pirates are out there plundering their titles?

About as likely as a piano singer in a roadhouse bar in Oklahoma discovering that a pirated tape of her performance is selling like hot cakes all over the country. Just like they did to Maria Callas!—a delusion of grandeur upon which she piles more folly by demanding that the management of the bar has to physically search every customer who comes in to make sure they aren't carrying concealed recording equipment.

Sound silly—almost insane? Yet, that's exactly what DRM amounts to. A demand by every author who supports it—or their publisher—that their literary equivalent of a piano bar performance in an obscure roadhouse has to be protected from the customers by the electronic equivalent of a physical search.

Someone asked me once, in a debate, how I'd react if I discovered that one of my titles—maybe all of them!—had become widely pirated. I started by posing the most extreme case I could imagine.

"You mean, I walk into a drugstore and see that the latest copy of Time magazine has my face on the cover, with a title that reads 'Works of Eric Flint pirated worldwide!' and an article on the inside that tells everybody exactly how to do it?"

"Yes," came the reply, demonstrating that my opponent was no wizard at the art of debate. "What measures would you take?"

"Well," I said, "the very first thing I'd do is get on the phone and call my friend Mike Spehar. He's a retired Air Force pilot, and I'd want his advice on which brand of private jet I should buy to be able to commute easily from the villas I'd be buying in southern France, the coast just south of Barcelona . . . Hm, maybe a penthouse in Manhattan and another one in Paris . . ."

It was like shooting fish in a barrel.

In the real world, the only authors—or musicians, by the way—who get "pirated" in any significant numbers are ones who are already famous and enjoy top sales. (And all the "piracy" is likely to do, even then, is simply boost their sales. See my next essay for a further discussion.) The great problem faced by all authors—musicians are in a very similar position—is the opacity of the book market. The entertainment market in general, actually, even movies. Compared to that problem, all others are fleas standing next to mammoths.

It is therefore absurd for an author or a publisher to support DRM, when DRM not only makes the market still more opaque, but—worse yet—it removes the best tool any author has today to penetrate that obscurity, at least a little.

This is the reason that, for years, I have made it a policy to put every title of mine online, available for free in electronic edition, a short time after the title comes out in a paperback reissue. Whatever tiny number of sales I lose from that policy, I gain ten or twenty from the promotional value of being a much more visible author.

This is not rocket science. Nothing amazes me more than observing the tremendous effort that many authors go through to promote their work—at a large cost in time and money, as well—when those same authors adamantly refuse to run the "risk" that one or another of their books might get "pirated" electronically.

The most common form of promotion that science fiction and fantasy authors undertake is to attend science fiction conventions, of which there are hundreds in the United States every year. In some instances, they are invited to be the Guest of Honor or the Toastmaster for a convention, in which case the convention pays the cost of their travel and lodging. But, in most cases, the authors are paying for it themselves. And even if the convention is picking up the tab, the author is still losing valuable work time.

Figure out the math. Assume the cost of the round-trip travel averages $400 and the cost of the hotel room is another $200 for a weekend. Toss in $100 for food and incidental expenses.

That's seven hundred dollars. To make back that financial loss—remember my royalty figures in the fifth essay?—the author would have to sell a minimum of one hundred and eighty-seven books, over and above what they'd sell without that promotional trip. And that's assuming that he or she gets published in hardcover, and it also assumes that their hardcover sales typically exceed ten thousand copies per title, so they're getting the top 15% royalty rate.

In point of fact, neither assumption applies to most authors. For a new or midlist writer who is only getting published in paperback, where the royalties are eight percent of the cover price—i.e., sixty-four cents per copy sold, accruing to the author, assuming the standard modern paperback price of eight dollars—they would have to sell over a thousand additional copies of a book just to break even on that one promotional effort.

For the sake of promoting themselves and their work, science fiction and fantasy authors routinely accept—several times a year, as a rule, because they're likely to attend more than one convention—what amounts to a financial loss that's the equivalent of several hundred to more than a thousand paper books being stolen—yet they choke at the possibility that electronic "pirates" might swipe. . . .

Twenty copies? Maybe? In my opinion, the figure is more likely to be half a dozen, if that.

And thereby!—piling stupidity onto an inability to do simple arithmetic—they also deprive themselves of a promotional method that is far, far cheaper and probably at least as successful.

Admittedly, I can't prove it, because no one has ever done the kind of study that would be necessary to do so. (And never will, either, since the cost of doing such a controlled study would be well-nigh astronomical.) But I know damn good and well that every title of mine that I put up for free online—at no cost to myself in money terms, and only a minute cost in terms of my labor—generates more sales for me than any convention I've ever attended.

An aside, here. I attend at least half a dozen science fiction conventions every year—but I don't do it for the so-called "promotional value." I think that value is a mirage, personally, and I urge any author who thinks attending conventions is a smart way to boost their sales to consider the cold math I laid out above. To put it as crudely as possible, you can't begin to earn back the money you're going to lose by boosting your sales. Yes, attending a convention will boost your sales. Sure, it will—by maybe one or two dozen copies. Fifty or a hundred, at most, assuming you're the Guest of Honor and the center of attention.

But it'll cost you more than that to attend the convention in the first place, even if the convention pays your expenses. Yup, it's true—for the simple reason that, with rare exceptions, conventions want Guests of Honor who get published pretty often. And, for such an author, losing several days of working time in order to attend a convention is a financial loss that will exceed whatever extra sales your attendance stimulates. In cold-blooded economic terms, an author would be much smarter to just stay home and keep writing.

The reason I go to conventions has nothing to do with money, and promotion is only an incidental factor. The reason I go is two-fold. First, I enjoy them. Secondly, the one great drawback to being a professional writer is that you spend your entire working life talking to yourself. I've found it's very good for me, emotionally and psychologically, to go off every couple of months or so and spend a few days talking to people I don't know, and whom I didn't invent, and whose reactions to me will be theirs and not mine.

That's well worth the money—but it's not the main way I promote my work. I do that online, by simply giving as many people as possible access to my books.

This is the way promotion has always worked for authors. It was not "invented" by the internet. All the internet and electronic publishing does is add another avenue to this way of promoting and advertising an author's work, and it is a particularly easy and almost costless avenue.

This ancient and most reliable of all promotional methods is called "fair use"—and, if you'll go back and look at my fourth essay in the December issue, you'll see that I said the following:

It's true that you can't predict the way any given little stream of water will flow across a sloping landscape, if there aren't any pre-existing water beds. But you can predict with absolute certainty that if you pour water onto a sloping landscape, featureless as it may be, it will all flow downhill.

So it is with fair use. No author—nor the cartoonist of my opening example—can know ahead of time which specific instance of fair use of his work will wind up personally benefiting him. But what all authors—and all cartoonists—can know for sure is that a society that allows a generous and expansive amount of fair use will produce the most expansive market for them all.

I said in that essay that I'd return to the subject of fair use from the standpoint of the benefit it gives authors as well as readers. And now, perhaps, you'll begin to see how it works.

Again, it's simple. The book market is so opaque that, willy-nilly, almost all book-buyers react by being extremely conservative in their buying habits. "Conservative," at least, in terms of which authors they're willing to spend money on, if not necessarily in terms of how much money they spend overall.

They simply have no choice. They have neither the time nor the money—especially the time—to do anything remotely resembling a thorough search of the market to see which authors they might like more than any other. They can't even do that in one corner of the market, such as science fiction and fantasy, much less the market as a whole.

So, with the exception of a few adventurous types, most readers stick with a small number of authors whom they've come to know that they generally like. They venture afield only rarely, for the good and simple reason that people are generally reluctant to spend money—and time, perhaps, even more so—on what amounts to a pig in a poke. Unless they have some reason to think they might enjoy an unfamiliar author, they will simply ignore them. For years, and years, and years.

I always urge every author who tries to argue with me on the significance of so-called "electronic piracy" to do a little experiment. Go to your nearest big bookstore and plant yourself somewhere that gives you a good view of the shelves where your book or books are located. Then, simply count the number of browsers in the course of an hour or two who don't even glance at one of your titles. Forget taking it off the shelves, looking at the back cover, etc. etc, and then putting it back. I'm talking about the potential customers who ignore you completely.

Try it sometime. What you'll discover is that for every potential customer who takes even a couple of seconds to consider your title, dozens will pass your books by without so much as a glance.

That's the opacity of the book market at work. The real problem faced by authors isn't theft, it's invisibility. For the overwhelming majority of their potential customers, they simply don't exist.

This is even true, by the way, for the best-selling authors, although not to the same degree. Just about every literate person today has heard of J.K. Rowling or Stephen King or Tom Clancy or Nora Roberts or John Grisham. But what percentage of their potential customers has never actually read them?

The answer is 90% and up, for even the best-selling authors. For one reason or another, even though potential readers have heard of the author—in many cases, in fact, because of what they've heard of that author—most of them simply don't consider buying their titles. And, in many cases, based on information which is completely inaccurate.

To go back to my experiment, what you will discover is that every author loses more potential sales in one day due to the opacity of the market than they'd lose from "electronic piracy" in the course of an entire year. That being so, it's simply common sense to look for any methods that improve your visibility in the market—and steer clear of any that make the opacity of the market even worse.

Like DRM.

I'll explore this further in my next essay, where I'll go into considerable detail showing how fair use has always been the author's best friend, when it comes to promoting themselves and their works. And I will demonstrate that:

1) There is nothing that is "new" or "unparalleled" about the so-called danger of "electronic piracy."

2) From the standpoint of the narrow economic self-interest of an author (or publisher), a generous and expansive attitude toward fair use is every bit as beneficial as it is to society as a whole.

3) Any author or publisher who supports DRM is, even in the narrowest terms of their own selfish interests . . .

Logically challenged. Most polite term I can use.

In the meantime, contemplate "invisibility" for the next two months. Try my little experiment—and then go online and spend the same hour or so trying to find pirated copies of your work.

And then, do some simple arithmetic, comparing your losses in one column to those in the other and extrapolating the result across a period of months and years. If you're still deeply fretful about "online piracy" at the end, I can only hope you never get caught in a burning building—since you'll obviously spend your time worrying about whether you're wearing the right color socks to be seen in public rather than getting out of the fire.

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