On The Dark Matter Of The Publishing Industry

Recently there were a pair of revealing eruptions in the world of ebooks and the volatile book publishing industry more generally.

The first was the announced demise of Oyster, an ebook subscription startup based in New York and backed by $17 million in VC funding.

While the announcement of Oyster’s shutdown is remarkable for its lack of transparency, apparently after its sun sets, Oyster’s excellent e-book reader expertise will be transferred to Google in the form of its founders and probably some of its tech or even the entire company, but perhaps not its pricey ebook contracts with publishers.

Ebooks hoisted on the publishers’ petard

Apparently, Oyster’s subscription model involved paying “full retail price” to publishers when a customer crossed some threshold of engagement with an individual ebook they were reading through the subscription service (Oyster also had an ebook store but it hasn’t figured much in any of the reporting). It seems the tech was so well-made and the site’s UI so slick that more people were signing up, sticking around and reading more ebooks than the publisher contract side of the equation could sustain.

Essentially, it looks like Oyster was losing money every time a subscriber read more than two books in a month.

In other words, ebook reading with Oyster’s tech turned out to be *too good* for the business model to sustain it, because structurally it relied on people reading just enough ebooks, but not too many.

I suspect the publishers analyzed Oyster’s offer in what must have been some pretty time-consuming negotiations and dinner parties, and, seeing that Oyster would be unable to pay for the customer’s effective per-book discount (which is the whole point of a subscription service) if it were to succeed, they concluded its failure was guaranteed one way or the other.

If the fancy tech failed to get people reading ebooks, then there wouldn’t be enough subscribers; and if it succeeded, then it would have too many overactive subscribers.

Since the failure of any digital-reading endeavour is openly greeted as a success by the incumbent paper-based publishing industry and its traditional supporters, I imagine the decision to go along with Oyster in the first place may have inspired a few toothy grins in midtown Manhattan publishers’ offices.

Now, there were some very smart people backing Oyster, and I suspect that a) they correctly saw that awesome tech would succeed in driving ebook reading, b) they had some kind of plan to monetize their user base, but ran into the common problem of being unable to finance a longer runway than they hoped for, which happened because c) their West Coast-y VC-style optimism prevented them from fully internalizing the wilfully destructive, cynical recalcitrance of the incumbent publishers who, perhaps knowing what they were doing, forced Oyster into senseless, self-sabotaging ebook contracts.

After all, this is an industry that will actually charge nearly the same amount for ebooks, which cost effectively zero dollars to replicate and distribute, as it does for the ones whose replication involves killing trees and shipping products around on pollution-belching trucks, activities which do cost money (not to mention their many unpaid-for externalities).

This failure to make a workable subscription business around ebooks was greeted with great fanfare from the usual suspects.

Indeed, there is apparently a general morale boost spreading throughout the paper book universe. One hero, or rather, one owner of four bookstores in England, was recently quoted saying: “The ebook threat is evaporating before us. The print book seems virtually indispensable at this present time and booksellers have a fantastic opportunity here now to seize the moment.”.

“Digital Schadenfreude”

There was more bad, meaning good, news to come. The next day, the New York Times gleefully reported that ebook sales were down in general. The surprising news was predictably greeted with what Mathew Ingram memorably called “a whiff of anti-digital Schadenfreude”.

Problem was, the news wasn’t just untrue, it was obviously untrue.

Essentially, the numbers the New York Times article was based on were limited to just 1,200 publishers, all of them being what are euphemistically referred to as “traditional” publishers — meaning “doorstopper” paper codex publishers whose business is essentially composed of a highly structured web of legal arrangements that historically evolved to maximize profit from the various physical characteristics of, you guessed it, the paper codex.

The title of this awesome takedeown of the whole shameless episode says it all: “AAP Reports Own Shrinking Market Share, Media Mistakes It for Flat US Ebook Market”.

It was like the “traditional” publishing industry just pretended the ebooks being traded outside its own grumpy universe didn’t exist, because their “traditional” methods of tracking couldn’t see them.

Here’s what we really found out in the last couple of months: ebook sales for traditional publishers in the US declined because they raised ebook prices, driving readers to buy and read non-traditionally published books, shock horror; and an ebook service that succeeded technologically was undermined by contractual negotiations over commercial distribution rights that were inherently flawed.

The so-called “Shadow Industry” for ebooks is growing at the expense of the traditional book publishing and selling, ISBN-based, universally trackable contractual infrastructure. “Shadow” books don’t have their rights bought up and traded around like so many credit derivatives, like traditional books are – or perhaps maybe we should start call them “subprime” books instead.

Big Crunch, Big Bang

The real problem with all that dark matter for conventional publishers is that it may make up most of the ebook universe. That said, metaphors about textual dark matter or a “Shadow” ebook industry actually fail to capture the dramatic nature of what is happening. Perhaps it would be better to say that a new, parallel universe of publishing is forming, even as the old one starts to collapse.

To truly understand what the laws of the collapsing “traditional” publishing universe are really like, I’d suggest reading this amazing essay by Bodó Balázs, which shows how, almost immediately after the modern print industry got going, it was quickly covered by a complex web of rent-seeking, anti-competitive regional legal structures, which is to say, political machinations dominated by those with some purchase upon the social and economic hierarchy.

If you want to know how things could get so bad, that people who consider themselves to be champions of publishing could make the giant, obvious and embarrassing mistakes they’ve made about their own industry in the past couple of weeks, just think of it this way:

Traditional publishers no longer use the system to make money selling paper books; rather, they are using paper books to make money from the system.

That wouldn’t necessarily be a problem for a social set of people holding all the power and influence over an incumbent web of rules, except that in this case, the publishing industry’s system *evolved around the externalities of paper.*

The problem with their legacy universe is that you just can’t *control* digital things the way you can paper things, and that’s the real reason the traditional publishing industry is cutting off its nose to spite its face when it comes to ebooks. It’s precisely what DRM represents: an absurd and pathetic attempt to recreate in the digital realm a command-and-control system that profits off the characteristics of *paper.*

To be clear, what I’m saying is that traditional publishers actually make their money not from the traits of novels, or biographies, or any other kind of *text:* they make their money from bundles of paper that can essentially be seized or held up at the border, or be pulped, or burned, or just deteriorate in ways a digital file can’t.

The new universe that’s developing is entirely free of these nets, except where companies like Amazon try to fling them on authors who have internalized their traditional oppression, like they do with the exclusivity conditions in KDP Select.

That’s the real secret of the new and rapidly expanding universe of new publishing, which we are still struggling to name properly: it’s already flown by all the old nets.