Wednesday, February 1, 2012

The demise of ebook indie authoring...?

Are ebooks just hyped tech waiting for the bubble to burst?

According to Ewan Morrison ebooks may be a hyped economic bubble just waiting to implode. Read his post in the Guardian:

As you may have already guessed, I disagree and let me tell you why.

Morrisons post is interesting due to mainly two reasons:
1. His points have somewhat of a sting.
2. His analytic part has grave errors in the respect of sorting and adaptation to his own views.

Let me elaborate. Morrison points out the 6 steps in the evolving and collapse of an economic bubble:

Step 1: Disturbance is the beginning of something new in the market. Something that changes the rules to such an extent that it has influence on other areas in the market. Historic examples of such change could be the industrial revolution, where the major improvement of the steam engine plays perhaps the most important part. With this new technology productions costs were lowered to the extreme lowering the prices so much that the market itself grew at an exploding rate. The vast number of people who could suddenly afford buying such things as underwear and fabricated dresses made industrial production rise to a level that had never been seen before and the movement up and down the social ladder had suddenly become ordinary.
There is no doubt that the development of ebook tech has such an effect, although not as important as the industrial revolution. Not even by a long shot. But still this development of new technology has revolutionized the publishing industry and will probably continue to do so.
So, this step IS happening, but it is not particularly connected to economic bubbles. It´s the building stone of any quantum leaps in the market, to put it simply.

Step 2: Rising prices. When the production apparatus can´t keep up with demand, prices will go up. This is one of the basic rules of the market, so nothing new here. But if the pressure of demand on production is suddenly raised to the extreme due to either a collaps in the production of life necessities or the result of successful hyping of certain goods, the result is first a steep rise in prices and then a sudden drop because more producers emerge on the market at the news of easy money. We have seen this in the market of mink fur when the Berlin wall fell and the Russian market was opened to Europe and USA. But in the case of ebooks it´s difficult to find evidence of rising prices. Morrison claims that the rise in prices is to be found, not on ebooks themselves, but on the devices you use for reading ebooks. This is simply not correct. Yes, the iPad is as expensive as ever before and hasn’t undergone the same fall in prices that most other computing technology in the world, but if you look any device aimed directly at ebooks, you will find the opposite to be true. The Amazon Kindle can be bought at a price as low as $79 and even the new addition of Kindle Fire is at $199 which is surprising when you think about the money they have spent on developing it. Other devices that are not aimed at ebooks, but have an ereader built in, usually provide this ereader for free. For free! I might be mistaken, but as I recall, for free has never been the result of prices going up!
You might argue that for my point to hold the average reader of ebooks uses these cheap or free devices. This is true and my claim is that the average reader of ebooks does use these devices. To back up my claim I can point to a survey done by who wanted to find out which ebook formats to bet on the most. The result was astonishing. The number 1 ereader being used by readers of ebooks was Adobe Digital! Need I say that Adobe Digital is freely available to download on their websites?
Furthermore it seems to be the strategy of Amazon to put their reading devices as such low prices that experts in the area of technology claims that Amazon must be tying dollars on every Kindle Fire being shipped to the consumer. Why would they do this? Because then they can control which products are being promoted on the device! But this also means that the plan is not to make profit on the devices. On the contrary, they aim at making a profit on the ebooks… And I would be very much surprised if we won´t be seeing Apple going in the same direction very soon.

Step 3: Hyping and broad production
This is the one point where I completely agree with Morrision. It is very common that when news of easy money spreads money gurus pilgrimages to the holy spot, in this case ebooks. This is already happening and has been happening for some time, but there a signs that the speed of it is slowing down a bit. The number of Indie Author is still rising, but there are fewer among them, whose quality is at best doubtful and the rise in numbers is not as steep as before.

Step 4: Accelarating prices reaches a maximum. Well, there is not much reason to comment here, as this is built on the notion of step 2…

Trin 5: Insider profiting
Insider profiting is when people inside an area make more money on new comers than on the actual market. That is: instead of making money by selling your product to the consumer, you make money on selling services and tips to new collegues on how to sell your product to the consumer. You might call it sector cannibalism, because most money is just shifting hands inside the sector than between sectors and the amount of money going in the sector is less than the amount going out. Mostly this happens when the more experienced realize that the gold they came for is not as abundant as they thought and to get at least some of the establishing costs covered they start giving new comers advise for money.
However there is one major difference between Indie Authoring and most other such money adventures: self publishing is, in itself, a cheap adventure. To establish myself as an ebook author, all I need is a computer and the internet… That´s it… Yes, if I want, I can buy all sorts of different services and there is no doubt that some scribblers fresh out of euphoria school will probably indebt themselves in those services. But here´s the thing: This has nothing to do with the concept of self publishing. This is just plain stupid! Will it happen? Yes, of course! Will it be hurting the pople involved? Definitely! But I seriously doubt it will have much impact on a broader scale. Remember, that most people with a dream to become an author never come even close to being able to publish through ebook format platforms, if they do not have at least above average writing skills and as such, most of them will be able to see through the doubtful promises of money scamming “service providers.”
Morrison claims that the establishing costs are not low and from an economic point of view, he is absolutely right. Being an Indie Author you do spend many hours marketing yourself and your books. You write books, you promote them, you blog, you participate in debating forums, you put links and pictures inside your emails and all of this takes time. And time, as the economists would say, is money. And if you´ve already spent money, one of the most basic rules of  economic behavior is, that you tend to spend more. Most of us know this pheanomenon from our trips to the mall. When we start spending money on the things we set out to buy, most of us come home with much more than we really wanted.
But what Morrison fails to realize is that most people don’t think like economists. Most Indie Authors don’t think of the time they spent on promoting their books as money used. They think of it as time spent on other things than family and friends. Spending money to compensate for that time just doesn’t comply. Or said in another way: to naturally think of time as money you really need to be a hard core economist. And it really shouldn’t be a surprise that an author being in a creative field of work, he or she is probably not much of an economist.

Step 6: Panic!
When you find out that your investment is about to be null and void you try to limit your losses and to most producers of goods this means: get as much of your stock out, because getting $1 per item is better than letting it rot in the warehouse. This is probably even stronger when we talk about ebooks, because all the goods you have in stock is worth absolutely nothing before you sell it. If you sell car parts or bread or whatever physical product you have a certain number in stock and when your warehouse is empty you invest money to fill it up. But digital goods are literally in unlimited stock, so if you think you can get 100.000 copies sold if you dump the price to $1 and know you have sold 10 copies at the price of $9.99 the better choice is obvious.

And I can´t in any way disagree with Morrison that this will happen. In fact, it already is happening. But here is the peculiar thing: Dumping prices doesn´t help! In fact, it usually make sales go down! What?
Yes, if you dump the price on your ebook, you sales will go down! Why?

Well, think about the way you decide what to buy and what to steer away from. Let´s say you want to buy a pair of shoes and you go to several stores to see what they can offer. You found just the right shoes in two or three stores. One of these stores tags the shoes at $1.99 and all the other stores tag these shoes at prices between $50 and $100. Do you buy the shoes in the cheapest store? Probably not, because you can´t help thinking that something must be wrong. Maybe the shoes are not original but cheap copies, they may be stolen or they may just be of very poor quality. The same goes for ebooks. To check if my claim is true go to any internet ebook store and find the 10 most sold ebooks. Then check the number 100 or the number 500 most sold. Is there a general price difference?

Coming to the end of this post I just want to say that Morrison´s post made me think and although he does have some very important points that we need to keep an eye on, this scenario of the demise of Indie Authoring is something I really cannot see coming. More likely we will see a fall in the number of Indie Authors before all of the above happens, because the very soul of ebooks and the internet is quick pasted. Unsuccessful authors will react before they spend too much money on their dream and most of them will instead just publish free or almost free books for a short time and then stop because no one will read it.

What is much more interesting is what will happen when it comes to the development of ebooks to be more complex and interactive, which is the subject of this post by Ted Summerfield, head of