09/10/07

Freeconomics: Radiohead vs. Publishers

As we all know, last week Radiohead did something interesting. I’d like to acknowledge that it was a very smart (and lucrative) thing for an established band to do - and to use it as an entry point into debate about the future of the book and its distribution online.

To recap, from our perspective what Radiohead did was:

• Cut their music publisher EMI out of the loop on sales of their new album “In Rainbow”
• Make the digital download of the entire album available at pre-order for any price any visitor wants to pay
• Sell a non-limited deluxe (and enhanced) edition for a lot of money that is the only physical manifestation of the album until the “terrestrial” publication next year.

This was clever because it:

• Got them a load of publicity - even more than a new album from Radiohead should get by many magnitudes;
• Re-bought them kudos with the digital “content is free” hipster lot, whilst offering added / exclusive value to the fans and collectors;
• Consolidated their position as innovators in the music business as well as (they hope) in their music
• Will probably still make them a load of money;

It’s particularly clever because the risks are quite small and the gains huge: the music industry has already lost the battle of control over distribution on the web (i.e. it’s all going to get ripped off) and is having to look to lots of new models to continue growth.

For good or bad, it’s now a given that music is freely available online. As a record company you either deny it and die, or accept it and move on - and look to non-piratable things and “experiences” such as merchandise - including luxury high quality box sets - and gigs to make money.

Publishing is not - yet - in that position. Whether it ever will be is another question.

What Radiohead have done is interesting for lots of reasons, and because it crystallises so much thinking we’re doing at the moment here. It’s not a perfect model, but as a starting point it’s a conceit worth holding onto.

The music business is - perhaps lazily - used by the publishing industry as a future-mirror of what will happen to them. Publishing talks about its “iPod moment” - i.e. the convergence of a device, a distribution platform and consumer interest making ebooks sexy - with equal trepidation and excitement.

My question is - is what Radiohead has done a desirable model that could be successfully replicated in the publishing industry? And - Can giving your digital content away for free, or close to it, be a sane or effective strategy for publishers in 2007?

(One immediate response is that it depends on what your strategic objectives are. But let’s assume they are to increase awareness of, and particularly sales of, traditionally published books sold through the existing (but diminishing in value) retail channels. And ideally increasing the value of those sales.)

Certainly, Radiohead have proven that if no-one mainstream is doing it, then there’s a huge PR win opportunity. Coupled with a sensible and joined up campaign, such a stunt could work for the innovating publisher. The PR frenzy won’t last forever, but it could be guaranteed to increase awareness of the first mainstream publisher to do this. But what will the impact be on the book trade after that? Will it have passed a point of “free-dom” of no return?

So, for now, making content free is a big splash, short-term gain, with the longer-term outcome dubious.

By long term outcomes we mean resistance from retailers, agents, authors, foreign publishers, and the overwhelming anxiety that such a move would be the first step in a slow-march to death by digital distribution.

Books will have an iPod moment - there’s lots to suggest that it’s about to happen, if it hasn’t already: that the iPhone is a great device for reading on; that Amazon will launch the Kindle reader on their distribution platform at Frankfurt; It has to be a given. More people will read words on portable devices soon.

Given that, doing nothing isn’t the right thing to do. Publishers need to be prepared, pro-active, and to have engaged and grappled with “this” to be ready when that moment comes. Hell, they may even want to “bring it on” themselves.

The underlying question is whether people will still read words off (paid-for) printed pages when they are reading off screen.

From where we sit, there is more “evidence” to suggest that digital distribution of books (generally in the “free PDF download” model) actually benefits awareness and sales, than there is evidence to suggest it damages it. Cory Doctorow does it; Tim O’Reilly (a publisher) does it; Seth Godin does it; lots of people are evangelical about doing it. (Our own James Bridle is putting his money where his mouth is and doing it with his new book.)

The summary of Cory’s article - and he’s probably more experienced than anyone in publishing on this - is: it doesn’t seem to harm his sales, and the proportion of people who find his work via the “free” route (and then buy it) is much bigger than the people who just call him an idiot. And the most comprehensive case study that I’ve found is on the O’Reilly blog, which frankly, suggests it’s OK, but hardly a massive runaway instant-bestseller tactic.

There is less evidence (I can’t really find any but would love to see some) to suggest that free distribution damages sales. The overwhelming position seems to be that it makes you money because it extends your reach, and you capitalise on that reach in the best way you can - by taking on paid writing, performing and other jobs as well as selling books. Or - as Radiohead have done, by making the physical edition really super sexy, desirable and collectable, ideally sold direct to consumers, with added value that you don’t get in the “free edition” or ebook.

But does it make sense? Is it really a sensible strategy for a publisher to adopt. To precipitate what could be a disastrous shift in their fortunes? As pointed out last week by Faris:

“giving the content away for free makes sense - as Cory points out e-books are “social objects” […] which gives you massive reach for no cost. And when it hits the right people, the audience that it’s right for, they will go and buy it because reading a book doesn’t work on screen. At least not until we get e-paper sorted out.”

This last point is vital. If and when e-paper, or the ebook/iphone “ipod moment” comes along - and reading on screen is pleasant - and the publishing industry has widely adopted a “free digital distribution” strategy - then what? Will that be the death knell for the industry, by its own hand, with everyone reading books for free, made freely available by the copyright holders?

It may be, if publishers haven’t found ways to add value (1) back into the book and (2) to their position in this value and distribution chain.

If the book continues to be a margin-shredded, poorly-produced paperback retailing at a couple of quid, then maybe. Put like that, a book sounds like something to consume (in any medium) rather than to own and collect. But people do still find it very hard to throw away even cheap books. I think this is something very interesting and worthy of more investigation.

But then again: the difficulty for publishers is being able to sell desirable - i.e. expensive - books at a price that people will pay in enough volume to allow the rest of the industry to survive. Upping the production values isn’t going to help that.

The question remains - should the publishing industry face up to digital distribution, or hope it will go away? Does facing up to it mean hurling itself over a precipice from which it can never return - but at the bottom of which resides a new model and indeed market that may just be better and hold triumph? Or does ignorance and inertia - the status quo - better serve the long-term goals of a publishing house and the needs of the authors?

Clearly, we believe that digital distribution of some kind is an inevitable and desirable outcome for publishers. So far, the timid release of “digitised” books, crippled with DRM and in far from readable formats, has hardly set the consumer market on fire. But should they wait for it to happen to them like “it” happened to music, or say: bring it on?

I’m less sure the whole time. Of course it’s about risks as well as opportunities, and from what I see, the risks perceived by publishers are not only the damages to the already slender sales of specific titles through Waterstone’s - they are another overall threat to their already bruised business.

In conclusion, the thing that is increasingly clear about the Radiohead thing is that it they have now totally cut their publishers out of the equation: EMI is now irrelevant, or will at best pick up the scraps. Radiohead - famously frustrated at their contracts - cut loose the people who “supported” them in getting to where they are today.

Could that happen to publishers? Does experimenting with new ideas - in good faith - make that irrelevance more or less likely to happen? Is maintaining the status quo a good or a bad thing, or just what you do?

These are the questions that I think every publisher must be addressing sooner rather than later - if they’re not already. Sadly, given the other pressures, these questions are probably much more important than they are given time for in most houses.

Posted by Peter Collingridge in Apt Studio work, Copyright, Future of the book, Publishing, Web.