THE FIVE MISCONCEPTIONS

The dictionary widget on my Apple dashboard defines the word “misconception” as: (noun) a view or opinion that is incorrect because it is based on faulty thinking or understanding. I had hoped that my previous post on e-books would be my last, at least for a while, since I am of the firm opinion that all this e-book talk is the classic tempest in a teacup. But all this zany business over the weekend between Amazon and Macmillan brought it all back up again. The blogosphere went into a full-on panic spiral, and all these goofy assertions were raised and discussed and argued over . . . why?

I’m going to try to break it down into five key misconceptions. . . .

The Silliest Misconception: Amazon (or Apple) is or will be a monopoly.

Starting with the goofiest one first, which is that Amazon effectively has a monopoly on the e-reader/e-book market and if they don’t, that is their sole aim, and they are well on their way to making that happen, again, if it isn’t already the case.

If, like me, you recognize that monopolies are a bad thing, you’re probably really worried that this has happened or will happen. Rest easy, folks.

According to an R.R. Bowker survey outlined in the Publishers Weekly article “The Nook Arrives,” the Kindle accounts for about 25% of the e-book marketplace. Since e-books are maybe 1-2% of the total publishing business, that means the Kindle is firmly in control of 0.25-0.5% of the total publishing business. I wasn’t able to come up with a clear percentage of the market a company would have to control to be considered a monopoly as defined and prohibited by the Sherman Anti-trust Act of 1890, the Clayton Anti-trust Act of 1914, or the Federal Trade Commission Act of 1914, but I think we can all stipulate that less than 1% is hardly a monopoly.

In that same R.R. Bowker survey, the iPod and iPhone combine for 24%, and if you correct for the fact that not all Kindle books are sold by Amazon and not all iPhone/iPod compatible books are sold by Apple, they basically have the same share of the business, which is actually dominated (42%) by desktop or laptop computers. No one has a monopoly on either the device or the software format.

Now, I honestly can’t speak to whether or not either or both of Amazon or Apple are trying to become monopolies in any marketplace, but it really, really, really is safe to say that as of right now, neither of them are, and both have a very, very, very long way to go before they get there—and the SEC and FTC won’t let them do it, anyway.

I have no doubt that Amazon wants you to buy a Kindle and download books from their site. Apple wants you to buy an iPad and download books from their site. Building something and offering it for sale is not inherently an act of evil, nor is it a warning of monopolistic aims.

The Business Model Misconception: All e-books should or will be the same price.

The argument at the heart of the Amazon-Macmillan dust-up is Amazon’s one-price policy that sets the price of a Kindle edition at $9.99. Macmillan wanted more like a consignment split and the ability to set their own prices. I think Amazon over-reacted by taking Macmillan’s books off sale for however short a time, especially since this one-price policy is both silly and already really not actually happening. But then we heard all sorts of accusations from the blogosphere of price fixing, and other shifty if not technically illegal practices directed at both Amazon and Macmillan (and by extension the community of publishers).

I get that Amazon wants to make sure that their expensive single-use device has lots of software available for it, meeting the wide-ranging demands of the largest possible number of potential customers. The Kindle without a book to download into it is useless, and it only starts to be useful if a pretty huge number of books, in a wide variety of subjects, are available. The Kindle needs content, it needs it now, and at a price that’s competitive with paper books.

Again, this is not an act of evil, nor is it the big bad loss-leader that destroyed music retail. It’s okay if publishers, including Macmillan, set a manufacturer’s suggested retail price (MSRP), and it’s okay if any retailer, big or small, takes that as it actually is: a suggestion, not a mandate. Since authors are traditionally paid a royalty based on MSRP, and discounts are likewise based on that, everybody’s getting paid, but it’s the retailer who’s setting aside some profit in order to discount the book and drive customers into their store. The $9.99 Kindle book is a lot more temporary and less dangerous than Wal Mart’s deep discount on best-selling hardcovers, since Wal Mart doesn’t depend on books for its survival the way Amazon does. That pricing devalues books in a way that they may not recover from—in a way that CDs never did recover from—and that’s something we should be wringing our hands over more than the jittery, temporary little e-book price war. Until and unless one of the e-book players actually reaches “monopoly” status, they’ll be fighting it out, and since it’s clear that no one will become a publishing monopoly, that competition will continue. Ultimately, everyone, including Wal Mart, has shareholders they have to satisfy, and shareholders don’t like it when you sell something for less than you paid for it.

It’s going to look pretty chaotic out there while several players jostle for their piece of the expanding e-book marketplace, but eventually those prices will find a new plateau and we’ll live to tell the tale—exactly the same way it shook out in the music business: different, but not necessarily worse.

The Destructive Misconception: Creative content should be free.

Where do I even begin on this one? Didn’t we all think this was going to end with the massive lawsuits against Napster? Well, if anything it’s gotten worse. The concept of “pirating” creative content (music, movies, books, etc.) has become a part of the daily lives of millions of people, many if not most of whom don’t even realize they’re doing it. These aren’t thieves sizing up a convenience store, fingering the loaded guns in the pockets of their hooded sweatshirts. These are average ordinary people who would never in a million years walk into a Barnes & Noble and shoplift a copy of the new James Patterson audio book on CD, but will happily download it from whatever site a quick Google search sends them to. They don’t even get that it’s illegal, much less that it’s immoral, unethical . . . all that stuff that somehow just seems to fuzz out in the consequence-free glare of an LCD monitor.

If you steal a book that I have written you are literally taking food out of my children’s’ mouths, and out of the mouths of all of the children of all of the people who depend on that book to make a living—and there are more of those people than you think, believe me. Oh, yeah, and none of us are rich, and even if we were, we could only have gotten rich if people value our creative efforts, only deserve to get rich if what we do attracts a paying audience. None of us deserve to be stolen from.

Don’t you dare ask any of us to do this on a volunteer basis, unless you’re willing to do your job for free, and so is everyone else. Short of the establishment of some kind of goofy communist “utopia,” which is never going to happen, I can’t pay my electric bill with stats on how many times a PDF of Whisper of Waves was downloaded. If I create something of value and you want it, payment in full is required at time of service. You just don’t have a right to free stuff. Not books that cost upwards of a million dollars or more to produce, not pop songs that can cost as much as that, too, and not copies of a $100,000,000 movie. If you take it for free, and more people do, too, you will find yourself at a point—very soon, mind you—where the books stop publishing, the pop songs stop playing, and the movie feed is turned off.

You have absolutely no right to free content.

Yes, you too.

The Asshole Misconception: Everyone but me is greedy.

Ah, now that I’ve called you a thief, your response is that I’m some big rich greedy bastard who just wants to soak you for money. Me, and Amazon, and Macmillan, and Apple, and everybody else who isn’t you. First off, if you’re illegally downloading free content, it’s you who are the greedy, unethical one, not me, so live with that. If you think $9.99 is too much for an e-book but don’t expect to get it for free, now we can have a conversation.

I tend to think that e-books should be priced the same as the most current paper edition of the same book. So when the book is out in hardcover at, say, $26.95, the e-book edition should be $26.95, but when the $7.99 mass market edition is released, the e-book should go down to $7.99. I think the business is largely in the process of adopting this model, or one very close to it. This makes the most sense, as it avoids devaluing literature (or call it “printed entertainment” if you struggle with calling Twilight or I, Alex Cross “literature”).

Printing is expensive, and paper costs fluctuate wildly, making publishing a business with razor-thin profit margins in the best of times. If we can be allowed to make up a little of that on the e-book, it will help us survive to find the next Harry Potter, the next Da Vinci Code, or anyway, the next book you want to read.

It is not a sign of rank greed that someone asks you to pay for something of value. At $9.99 for a Kindle edition, $26.95 for a paper hardcover, or $7.99 for a mass market, believe me, no one is gouging you. We’re making single-digits profits at best, and as many as 90% of the books published in any given year make no profit at all.

If you think $9.99 is too much to pay for an e-book, don’t buy them. If enough people feel the same way, and e-book sales stop growing or dwindle, trust the marketplace to react to that and come back at you with $8.99, then $7.99, until the business is either proven untenable (and that will happen long before anyone gives up and just gives it to you for free) and disintegrates, like, say, the marketplace for typewriters, or we find a new e-book “sweet spot” that satisfies consumers, publishers, and retailers alike.

The Highlander Misconception: It’s come down to Amazon vs. Apple, and there can be only one.

We should be able to get through this one in fairly short order. Amazon and Apple are certainly set up to be two of the major players in the e-book marketplace—no doubt about that. I also think it’s easy to assume that we have seen only the beginning of this head-to-head competition between technology powerhouses. It’ll be fun to watch—unless the iPad has a nice Kindle application, the iBook store offers Kindle editions for sale, and Amazon sells the iPad and various apps and e-books. If that happens, and I’d be willing to bet good money it will, then everybody wins and you decide whether or not you want the more expensive but more versatile iPad or the less expensive but single-use Kindle, and either way, you’re reading your favorite authors (who are getting paid for their trouble) on your chosen device.

I know, part of me wants to watch a VHS vs. Beta slugfest, a Pepsi vs. Coke battle to the finish, but the bigger part of me recognizes that it really isn’t going to happen. Both Amazon and Apple will have successes and failures. Amazon is going to have to learn some hard lessons from the 1984 debacle, and this latest kindergarten slap-fight with Macmillan—and they will. Apple tends to let their first adopters help them de-bug their latest device. I learned after buying my orange first-generation iBook to give them a healthy waiting period before buying a new Apple gizmo. This time next year the iPad will be smarter, better, and the same price (just you watch).

Ultimately, what I hope everyone gets out of this is that everything actually really will be fine. Fine for authors, fine for publishers, fine for Amazon and Apple and Mobipocket, and everyone else.

Except maybe brick-and-mortar bookstores, but I’m trying not to think about that.

—Philip Athans