Is There an ePublishing “Bubble”?

March 12, 2012

Last week, Nathan Bransford wondered if there is an “ePublishing bubble.” In his post, he links back to an article in UK’s The Guardian which argues “yes,” based on Hyman Minsky’s Financial Instability Hypothesis.

Great idea. Unfortunately, he only gets to the second of seven linear steps before making an argument that’s tragically flawed:

Following the disturbance, prices in that sector start to rise. Initially, the increase is barely noticed. Usually, these higher prices reflect some underlying improvement in fundamentals. As the price increases gain momentum, more people start to notice. Speculation thrives.

On first inspection, epublishing doesn’t appear to fit the model here, as it’s clear that the prices of ebooks are falling drastically (in the week of Jan 1, 28% of the top 100 ebooks on Amazon were 99p or under, and 48% were under £2.99). But that’s because we’re looking at this the wrong way round – from the perspective of the consumer. The ebook explosion is coupled with the rise of the e-reader, and the profits there are in the hands of the manufacturers. There has also been a fast turn around in these new technologies from Kindle to Kindle Fire, from iPad to iPad 2; and a brand new market of consumers for these products has appeared from nowhere. The change to cheap ebooks and self-published ebooks is a “change in underlying fundamentals”.

Um. No. By this logic, you can manipulate any profit-making enterprise to fit your hypothesis. The iPhone is a bubble! Poker and Riverdance were both bubbles! Except these weren’t bubbles, these are trends – things whose popularity gradually expanded, and just as gradually receded to levels that were more sustainable in the long term. Yes, as with the Gold Rush, most of the profits are made by the people selling the products and services telling you “how to do it.” Just as most of the profits were made in poker, and in Riverdance. In all cases, though, the post-recession levels of participation were still much higher than they were before the expansion.

A “bubble,” by contrast, requires unsustainable overvaluation that will be corrected suddenly and massively (a “burst”). Like what happened in housing last decade, or with the dot-com before before that, or the stock market in the 1920s. In all of these cases consumers were paying the higher prices. When consumers are shelling out for concrete products that makes their lives easier, that’s the opposite of speculation; it’s commerce.

Many people are arguing that the next bubble will be in education. Although there is some dissent with that argument, I find that one much more likely to stick. But self-publishing, though it may reach a peak in popularity, will not collapse in the same way the housing market did. It will simply reach a healthy long-term equilibrium, where some people succeed and others fail.


Writing the Hedgehog and Riding the Accelerator

July 29, 2009

Why the hell are we listening to famous screenwriters when they tell us how to break into screenwriting?

Lemme ‘splain my complaint:

During my long hiatus from social media (isn’t it funny how three months is a long time in this world …), one thing I did manage to accomplish was reading Good to Great by Jim Collins.

For those of you not familiar with the author or the book, Jim Collins looks at Fortune 500 companies that were poor or average performers for 15 years, who then turned themselves around to be extraordinary, by having 15 years of significantly-above-market performance.

Naturally, as one reads a book like this, one thinks of himself and how this will impact his life and his career and his business.

The Hedgehog Concept

The Hedgehog Concept is one of the main principles of the book.  Though the analogy is kind of dumb, the concept is simple and important:

  1. What are you deeply passionate about?
  2. What can you be the best in the world at?
  3. What drives your economic engine?

These three things comprise your company’s Hedgehog Concept, the idea being that everything you do should fit into this concept.

Phillip Morris is a great example.   Tobacco companies are not highly regarded in this country, so they’ve had a lot to deal with, and yet, they’ve managed to outperform the general stock market in spades.  The reason:

  1. The people who work for the company are deeply passionate about the product – cigarettes.
  2. That’s where they started, that’s where they made their money, and that’s what they could be best in the world at.
  3. Even through all of the “progress” that’s been made against tobacco, when Phillip Morris looked to diversify as a defensive measure, instead of just taking on any and every random opportunity that came their way, they defined their niche very clearly: “sinful” products like beer and junk food.  Because that’s what fit into their economic engine.

Writing the Hedgehog Concept

So now here I am, a lowly self-employed contract freelance writer.  Certainly, it’s what I’m passionate about, it’s what drives my economic engine, and it’s something that I could, at least theoretically, be the best in the world at.

The Technology Accelerator

Here’s where it gets interesting.  Later in the book, Collins talks about technology as an accelerator rather than a business model in and of itself.  During the Internet bubble, any company with “dot-com” in the name was instantly worth millions of dollars, even if they didn’t actually sell anything or have any plan for making money.  Those same companies disappeared the second that bubble burst, whereas the companies that used technology as an accelerator and applied it to their hedgehog concept endured.  The prime example here was Walgreens, which, for example, started filling prescriptions online, thereby advancing their already-well-defined hedgehog concept of hyper-convenient drug stores.

Riding the Accelerator

So now here I am, a lowly self-employed contract freelance writer.  Trying to figure out how the hell to use technology to accelerate my hedgehog concept when, quite frankly, I haven’t yet mastered some of the other practices (e.g., culture of discipline) required to make my hedgehog stand up, so to speak.

And yet, as I was reading the book, it became painfully clear to me.

Every industry is full of dinosaurs that fight the wave of change that is inevitable with the growth of new technology.  The entertainment industry is no exception.  Whether it was “talking pictures,” VCRs, TiVo, or the Internet, at each step there was a new opportunity for growth as distribution mechanisms became more cost-effective and widespread.  And yet at each step the networks and the studios have fought it like crazy, for the sole reason that they can’t imagine changing their business model to include these new technologies. (And these are the people we’re trusting with developing our creative content?)  The classic example was the Betamax case, which went all the way to the Supreme Court to determine whether VCRs, which allowed for recording of copyrighted material, should be outlawed.  The Supreme Court ruled for the defendants, and boy are the plaintiffs glad they lost – since video purchases and rentals quickly became a key component of their business model and they made more money than they ever had before.

With the rapid growth of technology, it’s becoming more and more obvious that another sea change is under way, and the current model for film/video content release will not remain the same for much longer.

In the last year we’ve seen an explosion in certain experiential technologies for movie blockbusters.  Whether it’s The Dark Knight on IMAX or Up! in 3D or Harry Potter with vibrating seats, people are willing to pay $13-$20 for an experience they can’t get at home.

However, I get the sense that people are losing interest in paying $10 apiece to go see a romantic comedy, when they can wait 3 months and watch it on DVD for a buck.  And although I have no evidence to support it, I suspect that people are starting to lose interest in paying $50/month for cable, when most of the shows they want are available 12-16 hours later on Hulu or on the station’s individual website.  Shows like Homestar Runner are offering you all their programming completely free of charge, and then make millions off merchandising revenues.

Add to this Moore’s Law, which says that data storage capacities double every 18 months, it’s only a matter of time before we could fit every movie and TV show ever made into a box that sits under our televisions or next to our computers.  What then?  How will we get our content?  Will television, complete with reruns and commercials still exist?

I don’t know.  John August freaked out about this back in January, and received 65 comments in response, and you can read the conclusion to this heated debate here. But this all brings me back to the complaint I started with: Why the hell are we listening to famous screenwriters when they tell us how to break into screenwriting?

For example: I’ve heard at least a hundred times that if you want to work in the film industry, you have to move to L.A., at least for some period of time.  And I’m finding that statement harder and harder to believe.  The world is so much smaller a place than it was even last year, before the Twitter explosion, and that was long after Diablo Cody won her Oscar from Minneapolis.

Technology is changing the world so completely, if we start to apply it to our hedgehog concept, I think we have to learn to take with a grain of salt everything we’re told by an earlier generation of artists, who were dealing with a completely different world than we are now.

That’s not to say that they’re wrong, mind you, or that we should all start writing webisodes instead of screenplays.  Remember, Phillip Morris still sells cigarettes (albeit under a new name, Altria) and Walgreens still has brick and mortar drug stores.  But I think we have an extra opportunity to exploit the things we’re passionate about, before blindly jumping into a game for which the rules have definitely changed.

The WTO endorses copyright infringement? Why? Because of online gambling, of course

July 17, 2009
Several months ago I was researching an article, and came across a book that discussed the ways in which IP laws expanded as distribution and copying becomes easier. In 800 BC, copyright wasn’t even on the radar, because copying stuff was so difficult. With the printing press and then photocopiers and then the Internet (skipping a few steps in between), became widespread, it became seen as necessary and/or appropriate to “protect” a creator’s right to sell and distribute his work.
The problem is, we’re not necessarily better off for the expansion of those rights. Look at the massive amount (99%?) of materials that are unavailable because they are out of print and copyright laws prevent them from being made available for free. Much of it is crap, but much of it, I imagine, is an uncharted goldmine.  And life plus 70 years, really, goes far beyond what’s “necessary and appropriate” for protecting a creator’s right to profit from his work, especially if he hasn’t been profiting off it for 60 of those years.
I’ll post that full article soon, since it was never published.  The one above points to a different situation, but I thought it was relevant to the topic and to the fact that our government has its head completely up its own butt when it comes to protectionist legislation.

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