Category Archives: Information Goods

Self-publishing and e-books

Posted on by

Hugh Howey writes,

Publishers can foster that change by further lowering the prices of their e-books. The record margins they’re currently earning are certainly seductive, but taking advantage of authors is not a sustainable business model. Hollywood studios had to capitulate to their writers when a new digital stream emerged. Publishers will likewise need to pay authors a fair share of the proceeds for e-book sales. 50% of net for every author is a good start.

There is much more, pointer from Tyler Cowen.

My best experience publishing was self-publishing The Three Languages of Politics.

My worst experience publishing was with Unchecked and Unbalanced. The publisher insists on pricing it not to sell on Kindle. I do not understand this. With zero marginal cost of distributing it as an e-book, I would think that the goal would be to maximize revenue. I don’t want 50 percent of the e-book revenue. I just want there to be e-book revenue. Publishers that are so stupid do not deserve stay in business.

A Solution to Biomedical Research Incentives?

Posted on by

I write,

In pharmaceuticals, the challenges with using the patent system are increasing. As Huber has pointed out, the nature of molecular medicine is changing. The system of rigid, blind clinical trials needs to be replaced by a regime of focused trials in which researchers learn and adapt as they go. Medical research may be valuable without producing a brand new molecule that cures a disease and thereby justifies a patent. It may instead focus on determining which combination of drugs will best treat a certain class of patients. A prize-grant would reward this sort of targeted research in a way that a patent cannot.

Uber $17 Billion?

Posted on by

The Seattle Times reports,

The funding positions the company at the front of a pack of Internet startups, at a valuation of about $17 billion, up from $3.5 billion in a financing last year.

Back in 1999, I started The Internet Bubble Monitor, a blog about that bubble. I tracked the absurd valuations of firms that had already gone public. This time around, it looks like the VCs want to front-run the public and bid firms up to absurd levels before anyone else can.

I would be curious to know what the investors think that the margins will be in the business in five years. Will Uber be able to collect $5 a ride? Fifty cents a ride? Maybe Facebook or Twitter will offer ride connections for free and hope to make a go of it on advertising revenue.

But, hey, I’m just an old man who doesn’t understand technology.

Question in the Comments

Posted on by

On this post.

“Perhaps the [record company] who makes a risky bet on a raw [artist], and who take the time and effort to train her, should be entitled to a small portion of her lifetime earnings as she moves on to more lucrative employment. That would create a powerful incentive for [record companies] to devote real resources to building the skills of their [artists].”

How’d that work out?

1. It worked out better for the record companies when they had a monopoly on the means of distribution. The Internet tends to undermine that monopoly.

2. Regardless of technology, the supply of people who want to be in the entertainment business seems to be highly elastic. And the nature of demand for entertainment (people want to like stuff in part because other people like it) tends to produce winners-take-most outcomes. So a lot of artists will make low incomes, and a few will get lucky.

3. I think that artists cultivate an image of being unusual and self-made. So they will not shout it from the rooftops that their skills reflect real resources invested by major corporations. But my guess is that if the Beatles had been so determined to think of themselves as original that they had never taken any suggestions from their producer, they would have been just been the WannaBeatles.

Did Jeff Bezos Join the Club?

Posted on by

Mathew Ingram reports,

Much of the media world has been waiting with bated breath since Jeff Bezos bought the Washington Post for $250 million last year, eager to see some sign of the Amazon founder and CEO’s hand at work. The first tangible evidence appeared on Tuesday, when the newspaper announced a major national subscription partnership that will offer free digital access to readers of other newspapers in major U.S. cities.

Pointer from Tyler Cowen.

Thirteen years ago, I wrote,

First of all, the “silo” model tries to maintain an anachronistic wall between the content in one silo and content in other silos. In the world of physical magazines, it certainly makes sense that a subscription to “Business Week” does not entitle you to read “Forbes.” Clearly, they are two separate physical collections of paper.

On the Internet, however, this distinction is not a physical necessity. Most consumers in fact pick and choose articles from a variety of online magazines. In contrast to the physical world, consumers can engage in extensive content aggregation without imposing meaningful costs at the margin.

…While I would not pay to subscribe to an individual online journal, I might be willing to pay to join a club that gives me access to a variety of journals as well as to helpful annotations. Annotations might consist of Lawrence Lee’s recommendations for articles on Internet marketing or Virginia Postrel’s comments on articles about policy issues.

A club could offer several different levels of membership. The most expensive membership could entitle you to personal chat time with famous authors. Or it could entitle you to 24-hour response time to inquiries that you submit to human experts. Or it could entitle you to use the most sophisticated indexing and cross-reference tools.

Bezos apparently is moving in the direction of the club.

Internet Bubble 2.0 Watch

Posted on by

Ryun Chittum writes,

Is the news going to become a $5 trillion industry? No. That would be one-third of the US economy. Could the news become a $500 billion industry? No. All advertising spending in the US comes to about $170 billion a year, and only a small portion of ad money goes to news organizations.

He is applying some arithmetic to Marc Andreessen’s claim that the news business will grow by a factor of 10 or a factor of 100 over the next couple of decades. Internet Bubble 1.0 was also vulnerable to arithmetic, as I pointed out in July of 1999 (i.e., when the bubble was inflating).

Speaking of the Internet news bubble business, Tyler Cowen points to the soft launch of vox.com.

Personal-Brand Journalism

Posted on by

The Washington Post (hardly a disinterested spectator) looks at the phenomenon, focusing on Andrew Sullivan.

It’s not clear that Sullivan’s relatively slow start as his own boss says much about the prospects for others who want to do the same, says Rick Edmonds, the media-business analyst for the Poynter Institute, a journalism education organization. Greenwald, Silver, Mossberg and the others, he notes, have deep-pocketed backers who can afford to sustain years of losses and experimentation.

I have thought about the issue of “Information wants to be free but people need to get paid” for close to 20 years now. Here are my views, as articulated in 2001.

One alternative that cannot be exhausted soon enough is banner advertising. I have been eager to see this concept die since it first was introduced in 1995. Another alternative that I believe should be euthanized is the subscription model for individual periodicals. The marginal cost of distributing the publications online is zero, so subscription models are very difficult to sustain. Finally, there is the alternative of micropayments, meaning small payments for access to particular slices of information. I am now persuaded by Clay Shirky’s argument that the mental transaction costs involved in micropayments are too high to make micropayments workable.

Ultimately, I think that a new form of content aggregator might get away with charging for subscriptions. The Washington Post is a content aggregator, but it is based mostly on its legacy model. On the Internet, you could become a very different aggregator. You could negotiate with individuals and publications around the world to obtain the ability to bundle their content into a subscription service. As a consumer, I might pay $10 a month to a service that offers me everything I like to read. But I am unlikely to pay even $2 a month to read just on blogger or to get behind one newspaper’s paywall. As I put it in 2001,

For an economic model, I continue to recommend the idea of “clubs.” A club would provide content aggregation, recommendation, and annotation services. Journalists would be paid by clubs, rather than by individual publications. For a consumer, joining a club will provide access to value-added services relative to online content. Most of the articles that you are able to read when you join a club may be freely available without joining the club. What your membership fee would give you is better access to individual authors, as well as to indexing tools and cross-reference tools. Some of these tools would be provided by community members, as in the Amazon book lists. The raw content is not what you are paying for. The haystack is free. But if you want help finding the needle, you have to join the club.

Over the years, I have become a bit less optimistic about the “club” model and more inclined to predict an outcome in which journalists require patronage for support. In some sense, Andrew Sullivan is using a patronage model. However, I think that patronage is most likely to come in the form of support from a few wealthy donors than from a broad base of subscriber-donors.

Are $20 Bills Getting Picked Up?

Posted on by

Don Peck writes,

I spoke with managers at a lot of companies who are using advanced analytics to reevaluate and reshape their hiring, and nearly all of them told me that their research is leading them toward pools of candidates who didn’t attend college—for tech jobs, for high-end sales positions, for some managerial roles. In some limited cases, this is because their analytics revealed no benefit whatsoever to hiring people with college degrees; in other cases, and more often, it’s because they revealed signals that function far better than college history, and that allow companies to confidently hire workers with pedigrees not typically considered impressive or even desirable. Neil Rae, an executive at Transcom, told me that in looking to fill technical-support positions, his company is shifting its focus from college graduates to “kids living in their parents’ basement”—by which he meant smart young people who, for whatever reason, didn’t finish college but nevertheless taught themselves a lot about information technology. Laszlo Bock told me that Google, too, is hiring a growing number of nongraduates. Many of the people I talked with reported that when it comes to high-paying and fast-track jobs, they’re reducing their preference for Ivy Leaguers and graduates of other highly selective schools.

The article is about data-driven personnel practices. It reads like something out of Average is Over.

The Newspaper Business

Posted on by

The newspaper business is going to die within the next twenty years. Newspaper publishing will continue, but only as a philanthropic venture.

That was me, writing in 2002.

“We’re in a post-profit era for newspapers,” Mutter says, noting the not-entirely-economic reasons behind recent rich guy purchases of the Globe and the San Diego Union-Tribune, not to mention the Koch brothers’ interest in the L.A. Times.

That is Lydia DiPillis, writing on August 5 of this year. She claims, however, that the Washington Post is not a charity case, even though she uses the term “money pit” to describe its current business condition.

Nothing is ever Democratized

Posted on by

So says Nick Pinkston.

Did inkjet printers democratize printing? Does Amazon have a bunch of HPs printing off their books? No way – they have very specialized machines doing this, and the same is true for everything in engineering. Remember that old saying: “Good, Fast, Cheap – pick two” – this applies to all engineering problems. You optimize for “good” and “fast”, and this comes at the expense of “cheap” – which means it’s not democratized (few people can own it).

…
you may democratize prototype-grade 3D printers, but then others will be make huge, fast printers that are able to beat your per-unit cost by an order of magnitude – but at high capital cost.

Pointer from Tyler Cowen.

His skepticism about 3D printing sounds right to me. But the claim that nothing is ever democratized sounds too strong. Computers became democratized. Internet access became democratized. In some sense, wealth has become democratized.

What I mean by democratized is that lots of people were able to use them to be productive. Not everyone, of course. And if people look at their well-being primarily in comparison to others around them, then a democratized increase in well-being is mathematically impossible.