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 [Publetariat editor’s note: follow the ‘read the rest’ link at the end of this excerpt] 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.