Piracy of eBooks: A Growing Problem, Or An Opportunity?

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Piracy of eBooks: A Growing Problem, Or An Opportunity? [reviews.cnet.com]

Over the months I've received news of the occasional blog post and tweets, but more recently I popped open an alert to learn that my book was being pirated--both as a separate file and part of two larger Torrents called 2,500 Retail Quality Ebooks (iPod, iPad, Nook, Sony Reader) and 2,500 Retail Quality Ebooks for Kindle (MOBI).

I had the strange reaction of being both dismayed and weirdly honored that someone had selected my book to strip free of its copy-protection (DRM) and include as part of a collection of "quality" e-books, many of which were from very good authors.

If you're an author with little or no following, surely this is an opportunity. If you're an established author that relies on sales, it's going to hurt.

Should the established author fight, or ignore, and should the unknown author grasp this as an opportunity to get known.

Should authors add extras only available to 'paying' subscribers?

[Demaestro]

the value is the content of the research itself that took many hundreds or thousands of man hours to compile thus defining it's value.

Sure but that only speaks to the cost of creating the original. What I am talking about is the cost of copying that original.

In your example, if it takes $1,000,000 to research and author a report, then that report is worth 1 million + a profit margin.

So we have 1 paper costing 1 million dollars.

Now if they copy that report, said copy doesn't add to the cost of creating the report. The cost was still 1 million, but now there are 2 papers costing 1 million dollars, you now have double the inventory but no extra cost.

So we have 2 papers costing 1 million dollars to create.

Now what happens when the report is copied 1 million times? There are now 1 million copies that cost 1 million dollars to make.

If the market is big enough and you can sell 1 million reports what are you charging? What is the value of 1 of the reports? Is it $1 + profit margin or $1 million + profit margin?

That is why I asked this:

Would you still be willing to pay thousands for something that can be copied for less then $0.01?

When you build a car you can't copy the car for almost no cost... the cost to copy is real and so the car has a real value.

Mrs Hocking has it right... Penny Profit.... Million Volume. Cut out the publishers who do nothing but create copies.

[coachm]

What is the value of 1 of the reports? Is it $1 + profit margin or $1 million + profit margin?

You're getting caught in a kind of mental trap here about "value". The MARKET value of a "thing", which is basically what you get if you sell it, has very little to do with the cost of production, in our economic system, and that's where you get a bit lost.

The "market" value of a thing, which is what dictates pricing, demand, etc and determines whether companies can continue to exist is simply what people will pay. If people will pay one dollar for a report that cost a million to create, its value is one dollar and not a penny more.

Which then gets us to the issue, and that is how do buyers assess value? A complex question, but the obvious and accurate partial answer is on the basis of supply, and demand.

Pirating ebooks provides a virtual limitless supply of the "thing", driving down its market value. The Internet does that in a different way, even when it is legal. Having so much free content makes it almost impossible to sell content on the Internet, because of the perceptions that it's so plentiful.

[coachm]

Mrs Hocking has it right... Penny Profit.... Million Volume. Cut out the publishers who do nothing but create copies.

Indeed, and that's where this is going in the next year or two, and it's where my company is going. We've done really well with low volume HIGH margins over the last 15 years, and less well with the HIGH volume low margins offered by traditional book publishers.

Now, it's all changed. We control it all. Now, the issue is this: How is piracy going to affect the "new" publishing models? I have no idea. We'll be releasing all kinds of e-book formated material, both long and short in length, and we just started. No way to tell.

(bit of a tangent, sorry)

[Sylver]

When you build a car you can't copy the car for almost no cost... the cost to copy is real and so the car has a real value.

So according to you, the value of an item is based on its copy costs alone?

A car costs less than $1,000 to copy by the way, so, following your "logic", that should be the price, since nothing else matters.

What's a car? $500 worth of iron, $200 worth of other stuff. The CD player is a simple piece of plastic with 2 bits of metal stuck in it.

How can they justify a $50,000 cost for a piece of equipment that uses barely $700 of materials and a few hours of production time?

To break even on costs, you need to take into account all production expenses, and of course add a profit margin on top of that.

Same thing applies to digital products. If it costs $1,000,000 to make, you could sell 1,000,000 copies at $2 a piece and do well.

However, if people figure "Hey, we could make 1,000,000,000 for nothing, so the price should be $0.001 and of course, the author can do without my $0.001, so I will just get a pirated copy", guess what! The author never sell 1,000,000 copies and he has to charge the honest people much more than $2 on account of all the freeloaders who decided to dispense with paying the piper.

[caran1]

For most manufactured products, the cost research and / or development are factored in the final sales price.

[ffar4df]

Oh wow, so many ignorant people in this thread. I'm just going to point out some pretty obvious things instead of picking on most posts here.

It might be against your morals, but it isn't necessarily against another person's morals.
It might be against your country's laws, but it isn't a violation where the infringement is taking place.
Computers are never going to get worse at copying things.
1 download doesn't necessarily equal 1 lost sale.
It's not theft to infringe copyright.
You wouldn't download a car.

On the other hand, I'm not exactly fan of people a) selling copies of things other people have made and b) sharing out copies of stuff made by artists, film producers, authors, etc. that are struggling. Those who already have huge monopolies on stuff like eBooks, films, music, games, software, etc. shouldn't have exclusive rights to copy their content in my option.

[graeme_p]

@Sylver you claim you can manufacture a car for $1,000? That is plain wrong. Cars are not made from raw materials in a few hours. They contain thousands of parts, many of which are expensive to make.

Have you looked at car manufacturers gross margins? Most of the cost of a car goes in parts and direct labour. Then take out the long run costs of manufacture (plant and equipment).

It might be that you can set up a car factory dramtiacally more efficient that, for example, Toyota's, but I somehow doubt it.

In economic terms the marginal cost of production of a car is most of its selling price, the marginal cost of an ebook is near zero.

[Sylver]

@Graeme: No, I claim that there is $1,000 worth of materials inside a car. Since we have already established that piracy apologists recognize no value in the time, effort and skills involved in writing an eBook, I don't see why you should grant any value to the time, effort and skills involved in producing a car.

Lots of parts, sure, but the only thing that distinguishes them from the raw materials is the work that people put in. Ignore the work, and you can go back to raw costs.

And if you want, using this ridiculous logic that work isn't valuable, you can even abstract it further and say that materials just come from the ground and are free too. After all, mining is just work, and it's already done, so why count it?

The real value of most things comes from the work and skill involved. In the case of digital goods, the work and skill happens mostly upfront, while with physical goods, the work is more evenly spread over the life time of the products.

Does it make it more right to pirate eBooks?

Sure, building a car involves more work than writing an eBook, but on the other end, I have never seen an eBook sold for $50k.

What is valuable is the work and the skill involved. Are you arguing that it's OK to steal when most of the work has been done upfront?

[robognome]

Good luck with policing this. fileserve, megaupload, hotfiles, rapidshare, filesonic, etc., then add one site to rule them all: filestube.com

All of these site can be used anonymously. Ditto for music, movies, tv shows or anything else that can be converted to digital form.

I think publishing and broadcasting both are headed for a major shift in their business model (if they survive at all in their current form).

Wonder why tv and movies are moving to in program product placement? You know, that scene where the lead actor gets in the car and uses the voice activated navigation or hands free phone, or opens up their apple laptop or ipad. Yeah it was kinda obvious but it will still be there in the pirated copy.

[EvertVd]

I always had and have a perhaps non-conformist view of intellectual property and copyrights.
Personally I hope that the Internet will force us to take a step into a direction away from these concepts.
Information should be free and accassible to everyone, regardless of where it comes from (your mind or my mind), publishing information should be as easy as possible and only workhours and materials actually spent should be paid (this also applies to singers, actors, designers, etc...so yes it also includes me).
I still get paid a small amount of money each year from a heuristic I wrote in the 90s which took me a little over two hours to write. It's nice passive income, but I also feel somewhat of a cheat because I get money from doing absolutely nothing and only because I was the first to think of it.
Once expenses are covered and everybody got his/her salary for the time worked, everything should be free to distribute.
But I know I am a minority. And I understand why, there is a lot of money to be earned by doing nothing.

[Status_203]

publishing information should be as easy as possible and only workhours and materials actually spent should be paid (this also applies to singers, actors, designers, etc...so yes it also includes me)

And should this rebursement for workhours and materials also apply to all the terrible singers, actors designers etc whose work is wanted by nobody but because they enjoy creating it they are happy to spend 14 hours a day on it?

If yes, then how are you going to get enough people to do the jobs that actually need to get done (and how do you fund these payments)?

If no, then how do you envisage sorting the wheat from the chaff?

[EvertVd]

I don't have all the answers to that. It will require a completely new way of working and thinking. But one that will become inevitable because the alternative is total and complete restriction on all information and media which opens the road to censorship, big brother practices and selective knowledge distribution.
Maybe not during our lifetime, but someday. Progress should be about requiring more freedom and individuality not about more restrictions and more rules and laws.
Our economic/commercial system is one of the most restrictive and non-progressive, inflexible systems which will need to change at some point if we don't want to grind to a halt when it comes to social freedom.

[Status_203]

Why are the only alternatives completely free or completely restricted? What's wrong with a balance?

I think the temporary artificial monopoly created by copyright is a good thing that allows those with a talent to entertain to take the risk that they can do so full time. I want to keep it.

I would like to see it dropped to a flat 30 years though. How many pieces of work would make a good profit in a longer timescale if they couldn't in the first 30 years? Let's go back to enriching the public domain a little. I'm against the term "intellectual property" because I think it does encourage many to think that what they produce should be solely theirs to do with what they will for evermore, in the same way as owning tangible items.

[EvertVd]

I am not saying it should be free. The problem as I see it is that the way people get paid for their jobs is unfair.
Why doesn't a bricklayer get paid royalties for the wall he made in the house you live in each month?

[Key_Master]

Because the brick wall isn't being mass reproduced and distributed by the homeowner for profit. If there was a market for it you can bet the bricklayer would have some say. On the other hand, the vaccine maker is getting paid royalties.

Intellectual property laws encourage innovation. Innovation might just save your life one day if it hasn't already. Without some protection, only the suckers will invest money into research and development. See how long that lasts.

[EvertVd]

Lets look at another example: tv-series. For example Startrek TNG, it is often posted on youtube and often removed because of copyright infringement. Why? All the actors were paid their salaries, all the costs were covered and all in all I bet everybody made some money from it or even a profit. So why are there still copyright/IP restrictions? Any money made of it now is pure theft/piracy in my opinion since there is no actual work/material in exchange for it any more. The whole series has been produced, manufactured and paid for.
The series is no longer mass produced (virtual copies made by connections on the internet is not mass production afaic) yet it is still illegal to watch it without paying for it.
Recently 3d printers have hit the market. somewhere in the future I don't think it impossible you can just point a device towards an object and make a copy of it just like you can make digital copies of music, movies, documents and software today. The only way you can "police" that while maintaining the current laws is by restricting our freedom and putting heavy checks on everything we do. As I see it, life (and social governments) should evolve to a point where we need less interference and control and the only way this can be achieved is by changing the whole concept of economics and finances. The base "law" we should aspire is that nobody has the right to interfere in the life of anybody else. And anything that requires extra policing or control or checking or etc. is counter productive in that area.

[Key_Master]

Star Trek is a multi million dollar a year business. Copyright violations are pursued because they dilute the market value of the entire franchise. Why buy a licensed copy of a DVD when you can get it for free on YouTube?

Consider the following scenario. Today the laws protecting intellectual property were allowed to expire. This was done in the spirit to deregulate the Internet and to promote freedom. Tomorrow, Google uses this new found freedom to transition from search engine to search repository. All cached material is stripped of identifiable information and all links are converted to point to cached material on Google's servers. Google is now the world's largest content farm.

That's a freedom I can do without.

[rogerd]

The new reality is changing publishing strategies. Seth Godin's new Domino imprint launched its second title, "Do the Work," with free electronic versions sponsored by GE. Why fool around with a shady download site when you get the real thing sent right to your Kindle?

All publications won't be sponsored and free, of course, but I think many books will be available in very cheap electronic versions in an effort to achieve higher volumes.

Or, much like movies, perhaps you intro at a higher price to get the folks that really want the book, then drop the price to spur demand and distribution.

[EvertVd]

You just made my point. A multi million dollar a year business? For what? A story, an idea. Really? Please try and explain that to the hungry child who is dying from AIDS right this moment somewhere in Sudan.

That's not a world/way of life I hope we will continue to support and maintain. I'd like to think we can (at least partly) transcend such silly concepts as money.

As for your Google example, that kind of thinking is exactly what we need to abolish. What would Google gain from becoming the worlds largest content farm in a copyright-free world? It's not as if they can monetise it, besides as soon as Google does that people will start using Yahoo instead (or any other search engine).
Nobody should have the right to withhold, restrict, censor or limit knowledge and information. And as a result of that other forms of media (like fiction) will have to follow suit.

[Key_Master]

rogerd, corporate sponsorship of intellectual property has been around for a long time. In fact, I have a handful of DVD's of top grossing films I acquired from cereal boxes.

Corporate sponsorship has it's disadvantages as well. As an example, an author I know had his latest book sponsored by a large company. The book is heavy on promoting products the corporation produces and receives poor reviews as a result. You get what you pay for sometimes.

The concept of low margin profits and high volume sales isn't new to the book publishing world. This is what is referred to in the trade as mass market paperbacks. Publishers will continue the practice in the digital world. It has little to nothing to do with piracy or intellectual property rights though.

EvertVd, I don't know what dying children in Africa have to do with Star Trek (and quite frankly don't care to know). But if you think Yahoo or any other site is going to subscribe to your Utopian beliefs about the free exchange of creative works, you've got a lot to learn my friend.

[EvertVd]

If you fail to see the connection between how your privileged and rich life is made possible by the fact that others suffer, then it is not I who has to learn a lot.
If you however mean that I still have to learn to live with the fact that humans are generally selfish and hypocritical #*$!s who don't give a damn about their fellow humans and their future, but still pretend they do, then you are right. But if you don't care as you say, then you should not contribute to ANY conversation and just be the unethical, a-moral person you claim to be.

The fact that a system does not accommodate certain people should not be made the responsibility of those people. It is after all the fault of the system.
There is nothing utopian about that, it is a simple matter of logic and compassion opposed to your world view of commercialism and capitalism.

As just one (of countless) example how your life and "our" economic views and systems influence peoples lives: [globalissues.org...]

[Key_Master]

;)

[rogerd]

Key_Master, I agree that heavy-handed corporate sponsorship is not a solution. But what if a GE (who sponsored the Domino book) opted to create a free business library and do a hands-off sponsorship of 100 books a year in return for some ads?

I think that the relevance to piracy is that the more prices approach zero, the incentive to pirate content goes away. Of course, the creators of the IP have to figure out how to make a living in that environment, whether it's a sponsorship payment that would be equivalent to traditional royalties, or making 25 cents each on a million copies vs. $2 on a much smaller number.

[Key_Master]

Corporate sponsorship can and does work in some situations. The deal would just depend on what the publishers, authors, and sponsors agree to.

Sometime in the past, Amazon filed a patent to bring conceptual advertising to ebooks. Conceivably, at some point in the future, we'll have to pay to remove advertising from our favorite free ebooks. I mean, could you imagine the spicy ads a romance novel would generate? I think ad supported ebooks have the capacity to generate far more income than traditional publishing does. Personally, I can't wait.

[Bert36]

@Evert: In the end no matter what you believe in or no matter how moral or ethical someone is, we all will choose whatever is best for ourselves. The majority will always be that group of people that find cohesion in their common goal for personal gain.
I agree with your views on the subject but please remember that you are as much a part of it as any one else. Even if you don't want to be or know you are. The "system" as you call it (very '70s term ;-)) doesn't allow for what you envision. I hope it will change one day, but opposing it will only bring you anger and frustration.

In keeping with star trek: "The Borg Collective is like a force of nature. You don't feel anger toward a storm on the horizon. You just avoid it."
And remember, that legal and illegal are just concepts, and subject to a common view which changes with time.

[rogerd]

To underscore my earlier point, I just saw that on Amazon's Top 50 digital best-seller list 15 were priced at or less than $5, and 7 were $.99 titles from the same thriller author named John Locke.

Will the ultra-cheap ebook become a major business model? I can't see Dan Brown or John Grisham adopting it in the near future. But the cheaper the ebook is, the less sense it makes to try to avoid paying for it.

[Key_Master]

rogerd, I just checked it out and was surprised at how many were priced over $10. Some of the lower priced ebooks are actually mass market paperbacks in digital form. For some of those on the list, you can get the physical book cheaper than the ebook.

[SEOTranslator]

OK, I'm an author. And I DON'T want my work to be pirated.

On the other hand, I live in Spain. There is here a special tax on CDs/DVDs, DVRs and yes, even hard disks to compensate authors for "piracy". So people think it's OK to pirate things because every time they buy a blank DVD they pay money, supposedly for the author. So they do not see it as a crime. I should also add that in Spain it not a crime to make a "private copy" of somebody else's work - it becomes a crime when you sell it.

So we have here the situation where legally everybody is allowed to make a private copy, and on top of that the government charges a tax that is then given to author's associations. Unfortunately, the money is spent first to run those associations, then distributed by the number of registered sales that each author makes. It comes down to that big selling authors get almost everything and guys with small sales -such as myself- get a few cents. The system is obviously flawed.

From my point of view, there are several ways to prevent piracy -and I've had a reasonable success with that-. Of course, for this approach to work you need to be an indie (self-publisher). The first one is to make the e-book so accessible and so cheap (and that means, not using DRMs, because that will cut very deeply in the cost) that people don't bother trying to get it for free. The second alternative is to GIVE the ebook for FREE, but asking for a donation -up to the reader- if he liked it. I've received that way donations ranging from a few cents to sixteen dollars (which is significantly more than what an author gets as IPR rights, which is usually 3-4% of the book price). Of course there are people that are not going to pay anything, but the ratio of people donating/downloading is actually surprisingly high. I've tried both methods and as a not widely read author I earn more money than through traditional publishing.

This obviously does NOT work for the traditional publishing or big selling authors - but for us that are not millionaires it is a way to make more money than we would otherwise. Forget DRM - it's useless and cuts into your profits. If you sell an ebook for $4.99 with DRM, you can easily sell it for $1.99 without DRM, and it will be also less pirated, so you will earn more money. And $2/sold copy is something that NO editor will offer you, unless it's a very technical or scientific work. But then, the book price would be close to eighty or ninety bucks.

But piracy can be also an opportunity. Write a nice ebook about whatever subject you want, insert a lot of links to resources, tools etc and make sure that those links point to your affiliate sites. Then MAKE SURE it is pirated - upload it yourself to some torrent and similar sites. When people read the pirated copies and click on the links, you are also getting a stream of visitors, and probably a significant number of conversions and associated commissions... ;)