Friday, May 18, 2012

Dead-Tree Luddites by Genevieve LaGreca, Ludwig von Mises Institute

The Ludwig von Mises Institute has an awesome piece by Genevieve LaGreca about how the powerful publishing industry has enlisted the Department of Justice to run online book publishers out of business. The analogy she uses is brilliant as well as a timeless classic about how government and special interests seeking protectionism attempt to squash a technological competitor.
Imagine you're living in the 15th century. You're witnessing a revolution that will profoundly change the world. This revolution doesn't involve swords and cannons but rather words and books. The cause of this upheaval is the most important invention in more than a thousand years: the printing press, by Johannes Gutenberg.

Within a few decades of its launch, you see the printing press transform the field of bookmaking in ways previously unimaginable. Printed books are far easier, faster, and less costly to produce than the books that had preceded them, which had to be laboriously copied, one page at a time, by hand. In the time it takes to copy one page by hand, the printing press can turn out hundreds or thousands of copies of that same page, thereby making it possible for the first time in history for almost anyone to own books.

Within a century of its creation, the printing press will spread throughout western Europe, producing millions of books, spurring the economic development of industries related to it, such as papermaking, and spreading literacy and knowledge around the world. The printing press will make possible the rapid development of education, science, art, culture — and the rise of mankind from the medieval period to the early-modern age.

Let us further imagine that not everyone in the 15th century is happy about this innovation. Unable to match the benefits of the printing press, the producers of hand-copied books are outraged. The scribes are being put out of business. The penmanship schools that train the scribes, the quill makers that supply their pens, and the manufacturers of the stools and drafting tables that literally support them are seeing a drop in sales. The hand-copied books are now priced too high to compete with the Gutenberg press, so their publishers are experiencing no growth, with no new capital coming into their industry. The sales force for the hand-copied books is also in despair, with their customers now ordering the new printed books from the Gutenberg people, and their lost income being money they can no longer put into their communities. Alas, the monopolistic monster, the printing press, is taking over.
The hand-copied-book interests complain bitterly to the Great Sages at their Hallowed Council of Justice. "Sires," they cry, "you must stop the predatory pricing and scorched-earth policies of the Gutenberg press. It's wiping out the competition. How can this be in the public interest?"
Imagine where human civilization would be without the Gutenberg printing press, probably the most revolutionary invention in all of human history.  The printing press was the Internet of the 15th century and like the Internet today, it enabled the mass distribution of low cost information.  But technology today has also created new markets for new electronic products and some of the hottest and most successful consumer driven products are electronic books that sell for $2.99
Fast-forward to the 21st century, and we see another revolution that is turning the book industry topsy-turvy — the transformation from printed books to electronic ones. This revolution is spearheaded by a modern-day Gutenberg,, the pioneer of the ebook, the Kindle device for reading it, and the online marketplace for publishing and selling it.
What Amazon has accomplished is truly amazing. With Kindle, it has eliminated the industry middlemen who come between the writer and reader of a book — from agents to publishers to distributors to wholesalers to brick-and-mortar bookstores. Kindle has also eliminated the need for a physical inventory of books, with its high printing, warehousing, and shipping costs. These innovations have resulted in far less expensive books now available to consumers. And the new marketplace of ebooks has been especially advantageous for self-publishers unable to get their books accepted through the traditional channels, who now have an avenue open to them for reaching customers directly.
The popularity of these ground-breaking innovations is enormous, with Kindle books now outselling the combined total of all paperback and hardcover books purchased from Amazon.
Without any middlemen or gatekeepers, with virtually no costs involved, and with self-marketing possible through social media and other Internet channels, electronic publishing is creating a robust market for new writers and books. For example, one novelist who was unable to find an agent or publisher has self-published two of her novels on Kindle. With her books priced at $2.99 and with a 70 percent royalty from Kindle, she earns approximately $2 per book. She is selling 55 books per day, or 20,000 books per year, which amounts to sales of $60,000 and royalties to her of $40,000....
The low pricing of ebooks, scorned by the traditional publishing interests, is the emerging writer's new ticket of admission into the book industry. While readers may be highly reluctant to risk $25 in a bookstore to try a new writer's hardcover work, they are buying the ebooks of new writers priced at or around $2.99 on Kindle. Writers are finding their fans and making money at these prices, and readers, judging by Amazon's "customer reviews," are happy with these low-cost books.
Read the entire article here
Ludwig von Mises Institute 

It's hard to imagine where we would be today if the 15th century scribes succeeded in banning the printing press as unfair competition. But that's what precisely is happening today as traditional book publishers declare war on a technology highly valued by consumers. Consumers get a lot more book bang for the buck, read a lot more books and are probably even better educated.  But that didn't stop the war on electronic book printing. LaGreca details what happened next. 
"Book Publishing's Real Nemesis" by David Carr cites the recent antitrust suit brought by the Justice Department against five publishers and Apple, charging they engaged in the price-fixing of ebooks.
And who's the leader of the pack trying to blast us back to the Middle Ages? None other than the New York Times!
Leading the charge back to the Middle Ages is the New York Times. Two articles appearing on the front page of its business section on April 16, 2012, illustrate what happens when the Luddites (i.e., those hostile to technological development) meet the statists (i.e., those who look to achieve their ends through government force).
Consumer driven free markets are verboten! The Luddite monopolists are making their demands and using the Department of Justice and taxdollars to do it, probably because they had no case in a civil court that would have tossed their lawsuit.

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