Economics

Coronavirus – Day #38

~ Cheryl

Today I have: finished editing this week’s radio show; attended an online meeting (Diversity Trust work); finished writing an essay about a book on trans people in the Classical world; and done a batch of laundry. Pretty much a normal day of working from home.

Out in the supposed “real” world I have seen stuff on social media suggesting that government propagandists, or a marketing company employed by them, set up 128 fake Twitter accounts, purporting to be NHS staff for the purpose of trying to show that doctors and nurses support the “herd immunity” policy favoured by Cabinet hawks. Sadly I am unsurprised, neither by the dishonesty of it, nor by the incompetence with which the subtefuge was implemented.

Elsewhere the price of oil on US markets has gone negative.

A Day at the Seaside

~ Cheryl


This afternoon Jo Hall had a signing at the delightful Books on the Hill store in Clevedon. Being a loyal publisher, I went along to support her. This also gave me a reason to visit Clevedon, a seaside town on the North Somerset coast just south of Bristol.

One reason for wanting to go is that the town is the birthplace of Jan Morris, a pioneering trans woman and brilliant writer. I don’t think there is a blue plaque or anything. Probably you can’t get one until you are dead. But Jan deserves one.

Clevedon is most famous, however, for its pier, which the poet, Sir John Betjeman, once described as the most beautiful in the world. As you’ll see from the picture above, it is a funny-looking old thing. It was built in Victorian times when steamships were still a common means of getting along and across the Severn Estuary. (If you look under all those clouds you can just make out Wales, and with better focus you’d be able to see Newport.)

Perhaps the oddest thing about the pier is its height. Why, you might think, is it perched so far above the water? Well, it isn’t. Clevedon has a maximum tidal range of 47 feet, second only to the Bay of Fundy in Canada. It ought to be a good place to build a tidal power installation, but George Osborne decided it would be better to borrow billions from the Chinese to pay the French to build a new nuclear station down the coast at Hinkley Point instead. Presumably Brexit will put an end to all that and the government will re-open some coal mines instead. Get all those Welsh people off benefits and back down the pits. That’ll teach them to vote Labour, eh?

Which reminds me, my colleague Yaz did a great show on Wednesday, and among here guests were some people from Coal Action talking about this campaign. Aberthaw power station directly affects the air quality in Bristol, so it is a matter of concern to us as well as to people in Glamorgan.

Cory Wants to Be Free

~ Cheryl ~ 2 Comments

I spent much of today in Bristol where Cory Doctorow was promoting his new non-fiction book, Information Doesn’t Want to Be Free. He was there at the behest of the Festival of Ideas and the local branch of the Open Rights Group. I tweeted quite a few quotes from his talk so I’m going to be lazy and reproduce those tweets here.

https://twitter.com/CherylMorgan/status/603526296812068864

https://twitter.com/CherylMorgan/status/603527638276251648

https://twitter.com/CherylMorgan/status/603531627747217408

https://twitter.com/CherylMorgan/status/603536390719197184

Cory’s main question in all this is to determine how creative people such as himself can make a living in the digital world. He admitted upfront that being a creative person is not a great money-making proposition. Nevertheless, there are ways in which the world can be arranged which allow creative people to make a living, and there are ways that prevent them from doing so.

His central thesis is that the big media and technology companies are leaching all of the value out of the work of creative people, thanks to a combination of:

  • Technological curbs on consumer behavior (e.g. DRM, which locks you into the supplier you rented, rather than purchased, content from);
  • Market regulation designed to raise barriers to entry against potential competitors;
  • Legal bullying of consumers (e.g. punishing an entire household if one member of it downloads pirated content).

This is all fairly basic economics. The big media and technology companies have found ways to establish market dominance, and are now proceeding to “extract rents”, as economists say, on the back of that dominance. Often they will use “regulatory capture”, that is using their contacts in government to have laws passed that favor them and disadvantage their competitors and customers. As we have seen with the TTIP fiasco, governments on both sides of the Atlantic are firmly in the pockets of big business. The scary thing is that it is hard to see what anyone can do about it. With TTIP ordinary people, and even most politicians, have been prevented from having any say in what goes on.

It is worth noting that all of this makes very little difference to actual piracy. Illegal copying goes on regardless. What it does is put a stop to legal challenges to the dominant companies, sometimes by simply making competing with them illegal.

Kudos to Cory for adopting a policy of taking alternate questions from men, and from women/non-binary people. He says that if he doesn’t do this then his questioners tend to be almost exclusively male.

Naturally I ended up providing one of those questions, but I was pleased to see a young woman in the audience ask something too. She turned out to be one of the people from Hydra Books, our local anarchist bookstore (hi Anna!). Cory and I popped in for a coffee on our way back to Temple Meads, and I was pleased to find that they had several trans-related books in stock.

All-in-all, it was a splendid day. Thanks to Cory for being such an engaging and enthusiastic speaker, and for being so approachable.

Cory Doctorow in Bristol

~ Cheryl

This is a reminder for Bristol folks that Cory Doctorow is appearing at the Watershed tomorrow as part of the Festival of Ideas. Here’s some of the blurb:

Can small artists still thrive in the Internet era? Can giant record labels avoid alienating their audiences? Cory Doctorow examines the pitfalls and the opportunities that creative industries (and individuals) are confronting today — about how the old models have failed or found new footing, and about what might soon replace them.

What a perfect talk to have 2 days before an Amanda Palmer concert!

The talk is from 12:30 to 13:30. Tickets are available here. I hope to see some of you there.

Today on Ujima: Comics, Bristol Pounds, Kids & Trans Pride

~ Cheryl

First up on today’s show was Lorenzo Etherington, the art half of Bristol’s highly successful comics creation scheme, the Etherington Brothers. Lorenzo and Robin work primarily on books for comics kids, but comics are comics no matter who they are aimed at. Lorenzo and I shared our mutual love of Calvin & Hobbes.

The next segment saw me talking to Steve Clarke of the Bristol Pound, our city’s very own currency. I restrained myself from talking economics. My thanks to my colleague, Judeline, for playing the part of the Woman in the Bristol Street.

You can listen to the first hour of the show here.

The second hour opens with a group of kids who have been working on the National Citizenship Project. Most of them were a bit shy, but they told me how they put together a charity fundraising event in just a week so they clearly have a lot of talent.

Finally I ran some of the audio from Trans Pride. It includes parts of the opening ceremonies — featuring Fox, Sarah Savage, Steph Scott & Caroline Lucas, MP — and an interview with trans model, Nicole Gibson. Judeline sat in to do her Woman in the Bristol Street thing again.

You can listen to the second hour here.

The playlist for today’s show was as follows:

  • Dance Apocalyptic – Janelle Monáe
  • Beat It – Michael Jackson
  • Simply Irresistible – Robert Palmer
  • 10 Out of 10 – Paolo Nutini
  • Let’s Dance – David Bowie
  • Lose Yourself to Dance – Daft Punk
  • Electric Avenue – Eddy Grant
  • Bright Side of the Road – Van Morrison

State Sponsored Piracy

~ Cheryl

Yesterday there was a bit of a dust up in UK social media on the subject of book piracy. As you doubtless know, all Wizard’s Tower books are DRM-free, and are available for sale all over the world. Aside from currency conversion charges, which are usually only a few cents, the books are easily available to everyone at the same price. I think this is the best way to encourage people to buy the books rather that get them for free from pirates, while accepting that piracy is inevitable, and understanding that some people genuinely can’t afford to pay the prices I charge.

Big publishers don’t see things the same way. At the recent Digital Book World conference someone said:

DRM and geolocating are crucial in pricing, so that lower priced books don’t bleed into the other markets

I don’t know who said that, but it was reported by someone from Flipside Publishing, so maybe Charles Tan knows. I find that sort of attitude very sad, but perhaps it is inevitable given commercial pressures.

As we know, big media companies are always lobbying government to strengthen copyright law and introduce ever more draconian anti-piracy laws. They believe that such things are in their commercial interests. From my point of view, on the other hand, implementing DRM and region restrictions would cost me more than they are ever likely to save, unless I did so by something like selling only through Amazon, which is unwise for other reasons.

The most interesting comments I saw in yesterday’s discussions came from the @Gollancz Twitter feed (presumably Simon Spanton). The tweets were as follows:

That a system as rapacious as capitalism would allow something as valuable as information to remain free is a forlorn hope.

Market forces will dictate that someone ends up having a financial interest in info. I want copyright owners to be in there.

This makes a lot of sense to me, and point was reinforced spectacularly today by Ursula K. Le Guin in this blog post via Book View Café. As you’ll see, at the same time as lobbying ferociously for better defenses for their own copyright work, big media companies are also lobbying for the right to steal work produced by smaller companies and individuals, on the grounds that it is too much trouble for them to find the copyright owner and pay for the rights. This is a particular issue for photographers who are regularly seeing their work stolen by major newspapers. Governments, as ever, are prone to roll over and ask for their tummies to be tickled when approached by a large multinational corporation. As a small business, and someone who writes online, I find this sort of thing just as worrying as torrent sites.

It’s Not Amazon, It’s You

~ Cheryl ~ 20 Comments

Well, not all of you, obviously. Some of you are very clued up on ebook issues. But the various Amazon fails that have happened over the past few weeks have brought home to me how many people who profess to be opposed to Amazon have in fact bought into the narrative that Amazon = ebooks and There Is No Alternative. Which is, of course, just what Amazon wants us all to think. Let me explain.

Some of the people yelling at Amazon are opposed to the whole idea of ebooks. That’s their right. I love paper too, and still buy lots of paper books. But, until such time as our electronics-based civilization collapses, ebooks are here to stay. If you don’t believe that, let me tell you a story about a man called Cnut.

A more reasonable complaint is that ebooks have Digital Rights Management (DRM), and people want to buy their books, not rent them. I’m very supportive of that position. But not all ebooks have DRM. Indeed, not all ebooks sold by Amazon have DRM. It is an option that you can select when you upload your book the store. None of the books published by Wizard’s Tower have DRM, no matter where you buy then. None of the books sold in the Wizard’s Tower bookstore have DRM. You can also buy DRM-free books from stores such as Weightless Books, Baen, The Robot Trading Company and Book View Café.

Then there’s the question of formats and readers. Amazon’s business plan is heavily based on trying to lock you in to their hardware platform. They want people to think that you can only buy ebooks from them, and you can only read them on a Kindle. That’s by no means true. If you have DRM-free mobi files then there are other ways you can read them, and the whole point of the epub format is that it is portable. An epub file should be readable on a wide range of different readers, including the iPad, Nook, Kobo and various Android-based tablets.

One of my favorite reading platforms right now is using the Kindle app on my Google Nexus tablet. The Nexus is nice and light, and the Kindle app is a better e-reader than any of the other Android apps I’ve tried. You need a little bit of technical skill to use that platform, and the (free) Calibre format converter, but it shouldn’t be beyond anyone reading this.

You don’t actually need an e-reader device at all, because there are cloud-based systems such as Ibis that allow you to read your books on any device that has a web browser. And sometime next year, if you have a smart phone, you’ll be able to get a Beagle e-reader for a ridiculously low price.

How about region restrictions? They are a real pain on Amazon, mainly because of the region-based rights contracts that the big publishers love. None of the books I sell in my store have region restrictions, and I’m proud of that. You can buy them anywhere in the world. But when I released Colinthology through my store I had people complaining that it was “unavailable” in the USA. I had to put it on Amazon before they would believe that they could buy it. I’m guessing that’s because my store prices in pounds, not dollars, but that doesn’t stop you from buying the books. Europeans do it, Australians and New Zealanders do it, and they don’t use pounds. PayPal will levy a small currency conversion fee, but it will only be a few cents per book.

Finally there’s the whole self-publishing scene. Some people have been saying that because Amazon is bad you should only ever buy ebooks direct from the author, or direct from the publisher. “Cut out the middleman!” is the battle cry. Folks, middlemen exist for a reason. Some authors are very good at selling their books, but others are bad at it, hate having to do it, and are very grateful to have someone else do it for them. Equally some publishers are good at selling books direct, while others don’t have a clue and end up either outsourcing to Amazon or being very corporate about the whole thing. Look, if Barnes & Noble do something bad people don’t yell ,”boycott independent bookstores!” So don’t do it when Amazon misbehaves either.

I get as angry about Amazon as the next person. But I don’t think you can fight them by trying to fight the whole idea of ebooks, or by buying into the meme that ebooks and Amazon are one and the same thing. The only way Amazon’s hold on the ebook market can be broken is if there are viable alternatives that people who want to buy ebooks can use. And that means that we have to recognize that alternatives do exist, and that those alternatives and often much better to deal with. The best way to strike back at Amazon is to encourage people to buy from their competition.

Update: Book View Café added to the list of sources of DRM-free ebooks. Any more?

E-Book Settlement – Amazon Wins Again

~ Cheryl ~ 7 Comments

If anyone was in any doubt that the e-book pricing anti-trust lawsuit was a case of capture of the legal system by Amazon, here’s the proof. Normally when there’s a class action lawsuit, the courts collect the money and parcel it out to the victims. Not in this case. The publishers who have agreed not to contest the case (Hachette, HarperCollins, and Simon and Schuster) are paying out, but that money goes to Amazon, and the only way that the supposed victims of the crime can use their money is by buying something from Amazon. Sure its convenient, but it doesn’t look good at all.

Off The Rails

~ Cheryl ~ 6 Comments

I’m doing this post mainly for the benefit of Kevin, who is very interested in rail policy, but today’s fiasco does have relevance to my day job as well. Lets start with a brief recap.

Many years ago the previous Tory government came up with a mad scheme to make a competitive industry out of passenger rail. I can’t see how this was ever going to work, but we are now stuck with it. Part of the process is that the Train Operating Companies have to bid for franchises to run the various routes. A recent franchise auction awarded the West Coast Mainline route to First Group (who run my local services) ahead of the incumbent, Virgin Rail. Sir Richard Branson and his colleagues were furious, insisting that the Department for Transport (DfT) must have got their sums wrong. They threatened to sue. And in the early hours of this morning the DfT finally admitted that they had made some fairly basic errors, and that the whole process would have to be reviewed, at massive cost to the public.

Exercises of this sort have been a staple part of my day job for many years, although in the field of energy, not transport. The possibility of making this sort of error gives me nightmares. I am keen to know what went wrong here.

Before I get to that, however, a quick comment on the public reaction. My Twitter feed this morning was full of calls for the re-nationalization of the railways. While that would certainly remove the need for any further franchise auctions, I’m a little bemused. This is a regulatory failing. If the policy wonks at the DfT can’t manage to run a simple franchise auction properly, how is putting them in charge of the entire network a smart thing to do?

(And on a related note, the Department of Energy Climate Change is in the middle of forcing through regulatory changes that would give them the right to micro-manage the UK’s energy industry. This worries me greatly.)

Anyway, back to the question of what went wrong. This afternoon the BBC’s Robert Peston came up with some more information (see here and scroll down). We’ve known from early on that the supposed errors were to do with inflation and passenger numbers, but not the precise nature of the errors. Peston says of the DfT:

First it unfairly discriminated against the incumbent, Virgin, by attaching far too great a probability to the projections by the rival bidder First Group that its revenues in the later years of the contract would be much bigger than Virgin’s.

This mistake was compounded in the department’s own internal forecasting model, which also attached too little risk to the possibility that passenger numbers and inflation would be significantly different from what First Group was projecting after 2021.

As a result, the government demanded too little guaranteed money for taxpayers from First Group.

What I get from this is that these “errors” are not actual technical errors, for example forgetting to include inflation in their calculations, but rather errors in the assumptions fed into the models.

There’s a very important difference here. Getting your equations wrong is a serious error that no one should make. Using the “wrong” assumptions may be a result of a difference of opinion as to what the right assumptions should be. Often this is policy driven. I could tell stories, but I’d better not.

So what has really happened here? One possibility is that the DfT was persuaded to use a particular set of assumptions that benefited First Group and penalized Virgin. If that’s the case, we should be asking how that came to happen, and whether any undue influence was brought to bear. The other possibility is a change of policy. There has been a recent change in the Minister for Transport. This could be because Mr. Cameron got wind of the impending disaster and decided to fire the person responsible. Alternatively the new Minister may have a very different view of the future of Britain’s railways to the previous one.

The reason that I raise this question is that political views regarding the level of passenger growth are often at the heart of rail policy debates. In California it is not unusual for right-wing think tanks to predict disaster for rail projects on the assumption that improvements to services would result in zero increase in passenger numbers (because only poor people ride the rails, and then only when absolutely necessary — I mean, who would want to ride a train when he can be driving a stretch Hummer?)

It seems likely that First Group would have over-egged their predictions of passenger growth, simply because that’s the sort of thing a challenger for the franchise would do. However, whenever I hear a right-wing government talking about optimistic assumptions about passenger growth I always tend to worry that the car-is-god philosophy is working its way back into power. I look forward to seeing what Christian Wolmar has to say. This must seen like mana from heaven to him, given that he’s both the UK’s foremost rail journalist and an aspiring Labour politician.

Derivatives: More Maths Won’t Save Us

~ Cheryl ~ 2 Comments

Today’s Observer (the Sunday Guardian) has an interesting article about derivatives valuation by Professor Ian Stewart. You’ll probably know Stewart from books he has written with Jack Cohen and Terry Pratchett, and you may remember that for a couple of years I made a living from teaching derivatives valuation, so this is a nice confluence of interests.

Stewart, as I expected, has a good grasp of the mathematics of the Black-Scholes equation, and also does a fine job of presenting the issues to the newspaper-reading public in an accessible manner, though he necessarily simplifies a lot. If he’d just been writing for you lot he could probably have saved a lot of time and words by explaining that Black-Scholes assumes a normal distribution of price fluctuations and in many markets (in particular electricity where I work) that’s very obviously a bad assumption.

The real issue, however, is not in the valuation of individual derivatives, but understanding how those valuations can change with changing market conditions, and how the complex portfolio of instruments owned by a financial institution, and the other institutions with which it trades, can interact to amplify a disaster. There’s also the issue that any form of statistical analysis requires a very large number of instances on which to work. Something that works in stock markets may not work in the much more limited and exotic realm of more complex financial instruments.

Where I mainly disagree with Stewart is where he says, “The world economy desperately needs a radical overhaul and that requires more mathematics, not less.”

I really don’t believe that more mathematics will help. I worked for a company that was at the cutting edge of that sort of work. There’s a lot of research out there, and mostly it was getting ignored. In just about every training course my colleagues and I gave we made the point that understanding the assumptions on which your calculations are based is key to managing risk. This has been obvious ever since Merton and Scholes were involved in the Long Term Capital Management disaster.

The main problem was, and probably still is, that people simply don’t want to listen. It is like trying to tell teenage boys not to drive so fast. Having a better mathematical model isn’t going to help. If people can make silly money in the short term, and get out before everything goes pear-shaped; or rely on a government bail-out because they are “too big to fail”; then we’ll always have this sort of problem.

Local Currency

~ Cheryl ~ 1 Comment

So today I discovered that Bristol has its own currency, the Bristol Pound.

What!!??

Yes, really, and it is all legal. Of course the city isn’t actually printing money. That would cause people in Westminster to send the army in. What’s happening is that a local bank, the Bristol Credit Union, is issuing currency that is backed 1:1 by deposits of actual Sterling. You can buy Bristol Pounds from the Credit Union using British money, or you can accept them in change from local businesses.

Why would anyone do this? Well the idea is to keep money in the local economy. Unlike Scottish money, which at least in theory is legal tender throughout the UK, Bristol Pounds are only accepted by businesses that have signed up for the scheme, and they will mostly be in Bristol. The catch is that while you can buy a Bristol Pound for £1, if you want to turn it back into Sterling the Credit Union will only give you 95p. The only way it is worth £1 is if you spend it at a participating business. So there is an incentive to keep the money in the local economy.

I have to admit that my first thought was that Westminster would still object to this, but in fact the scheme is based on a similar system that has been running in the London suburb of Brixton for two years.

Right now the scheme is very new, so there are no actual businesses signed up. Clearly the effectiveness of the project will depend on how many places you can actually spend the money. My guess is that this will help small businesses most, because the national chain stores won’t let their local branches participate. I will be fascinated to see how this goes.

The other thing I want to know is what the notes will look like, because the £10 Brixton note has a picture of Mr. Aladdin Sane. (Bowie lived in Brixton for several years.) I’m guessing that one Bristol note will have a Banksy painting on it. Others will show Concorde, Brunel and the Cabot brothers. I want one with Anastasia Sixsmyth on it.

Online Price Checks Hit High Street

~ Cheryl ~ 3 Comments

There has been a certain amount of concern in the book business of late about a new initiative from Amazon. What they are doing is encouraging consumers to report the prices that are being offered by bricks and mortar bookstores so that Amazon can ensure that they are not being undercut by anyone. There’s a financial reward for consumers who participate.

This behavior is not confined to Amazon. ASDA (Walmart) is running a similar promotion for its UK supermarkets. And indeed it is a familiar problem to any online retailer. One of the reasons I don’t offer sales in the Wizard’s Tower Bookstore is because if I do Amazon is liable to reduce the prices on the books in their store to match, and then not put them up again when my sale ends. Unless you happen to be a big name publisher with enough clout to negotiate one of those “agency pricing” agreements then you have no control over what price Amazon sells your books for, and I only stock books by indie publishers. I can’t put them at risk.

Nicola Griffith has an interesting blog post in which she makes the point that what bookstores need to do is offer a better shopping experience than Amazon. But how do you compete? There’s exclusivity of course, but you can only negotiate exclusivity deals if publishers think you are big enough. Guess who qualifies. Amazon knows that they sell 80% of all ebooks, probably more than that for books from independent presses and individual writers, so actually giving Amazon an exclusive in return for better promotion might make good sense to individual publishers. It is also worth noting that one of the reasons why Amazon is so successful is that it has put a lot of time and effort into delivering a top class shopping experience.

It is a difficult problem, and one I certainly don’t have an answer for right now, primarily because I have neither the time nor the money to invest heavily in new ideas. Still, I’ll keep trying, and I do have some good bookstore news coming soon.

Beatts on Bookstores

~ Cheryl ~ 1 Comment

This morning over breakfast I listened to the latest episode of Alisa Krasnostein and Jonathan Strahan’s podcast, Live and Sassy. This featured an interview with the owner of one of my favorite bookstores: Alan Beatts of Borderlands Books in San Francisco. It is well worth a listen, if you are at all interested in the book business.

Alan talks mainly about the impact of ebooks, and Amazon in particular. The most notable point he makes is that if we, as readers, buy just 1 in 4 of our books online, without increasing the number of books we purchase, then most bricks and mortar bookstores will go out of business, because they can’t survive a 25% drop in turnover. The chain stores will go first, as indeed Borders already has, and independents will suffer a brief renaissance in their absence, but ultimately most of them are doomed.

Where I got most interested is where the discussion turned to “what next”. Assuming that bricks and mortar books stores do vanish, where will we buy books in future. Amazon obviously. ABE books for second hand? Oh, they are owned by Amazon. The Book Depository? Oh, they are owned by Amazon. See where I’m going with this?

Alan says that he thinks publishers will increasingly try to sell books direct to the customer. Gollancz’s SF Gateway ought to be a good example of this, except that it isn’t because they don’t sell the books themselves, just point you to Amazon. Angry Robot, with far fewer resources, managed to get the job done right.

Of course creating an online bookstore does cost. Alan says it is far too difficult for a small press. That’s not actually true. Lee Harris managed it for Angry Robot, and I used the same software to create my store. The problems here are twofold. First, there’s currently no off-the-shelf store software that does ebook purchase as seamlessly and conveniently as Amazon. Hopefully that will change soon (and indeed I’m working on something myself). The other problem is volume. Licensing the store software is expensive, and if you don’t have much turnover then you won’t make any money. One of the reasons I started a bookstore is to attract more customers and sell more books, because there is no way it would have been economic just selling my own books.

Alan also talks about websites that sell books through affiliate schemes. You can do that, and you might look like a bookstore, but it is really hard to make any money that way. If I sell books through a bricks and mortar store like Watestones they are liable to want 35% or more discount before stocking them. If I sell ebooks through Amazon they take at least 30%. My own store takes 15%, because I’m trying to help small presses. I’m not making money at that rate. Amazon’s affiliate scheme promises “up to 15%”, but you generally only get that much on big ticket items and selected best sellers. You normally get a lot less.

Also, as Alan mentions, Amazon has a patent on the way in which their affiliate scheme works, which makes it hard for other stores to do such things as well as they do. And of course if your “bookstore” is essentially just a front for Amazon then you are not really increasing competition.

There are a few people trying to do genuinely independent ebook stores. Baen’s Webscriptions, Small Beer’s Weightless Books, and my own store, are all examples within the SF&F community. But is it much more difficult to make this work than it is with a bricks and mortar bookstore.

How do you compete? On price? No, Amazon ruthlessly monitors rival stores and will reduce prices to match any offers. On selection? No, Amazon sells everything. On convenience? Very difficult, as Amazon has far more money and can develop much better software than you can. By being local? Well only if you live in a country without an Amazon store, and they are starting to expand.

The thing about online retailing is that it makes to very hard to differentiate yourself from anyone else. And that means that it is difficult to see any future for bookselling except direct from major publishers, or from Amazon.

As someone who has spent much of her career in economics breaking up monopolies, this worries me a lot.

Bookstore Arithmetic

~ Cheryl ~ 1 Comment

Yesterday I saw someone on Twitter encouraging his friends to buy Tim Maughan’s book, Paintwork, from Amazon. Now of course people are free to buy from whoever they please, but if you want to help British writers such as Tim who are publishing their own books, or going through small presses, I’d like to explain why you might want to order from Wizard’s Tower Books instead.

Amazon, being a very big company, is required to charge VAT on all ebooks it sells. (The UK government classes ebooks as “software”, not as “books”.) So before Tim gets any money you have to take off the government’s share. On a £2.14 book that’s 36p. Also, Amazon only gives Tim 70% of the revenue from his sales, so by my reckoning he gets £1.25 per book. (Correct me if I’m wrong, Tim.)

Because my business is very small, I don’t have to charge VAT. I’d like to charge less than Amazon, but I know that if I do that they’ll lower their prices to match mine, so I charge exactly the same as they do: £2.14. When you buy from me, PayPal takes a cut on the transaction. That can vary, but at a conservative estimate that’s 5%. I then give Tim 85% of the net revenue. So for a sale from me he gets £1.73 — 48p more than he gets from Amazon. That’s a 39% increase.

This doesn’t apply to people buying from the US, because Amazon US doesn’t have to charge VAT (and does its level best to avoid having to charge sales tax). But for a UK or European customer it makes a big difference to the writers and small presses that I deal with.

Here are a couple of books you might want to encourage people to buy:

Lawyers + Ebooks = Trouble

~ Cheryl ~ 4 Comments

Today’s news brought word of a troubling development in the USA. Hagens Berman, a “consumer rights firm”, has filed a class action lawsuit against Apple and several major publishers over the “agency model” system of ebook pricing. They allege that the publishers are Apple colluded to force Amazon to sell ebooks at an unfairly high price. In particular the suit says:

While free market forces would dictate that e-books would be cheaper than their hard-copy counterparts, considering lower production and distribution costs, the complaint shows that as a result of the agency model and alleged collusion, many e-books are more expensive than their hard-copy counterparts. According to the complaint, the prices of e-books have risen as much as 50 percent since the switch to an agency model.

I don’t think we need to go back through the economics of publishing argument again. There are plenty of places online that explain why paper, printing and distribution are not the major costs in (most) book production. Anyone who doesn’t believe that now doesn’t want to believe it.

Nevertheless, it is absolutely true that many ebooks are on sale at a higher price than the hardback edition, which to most consumers must seen absolutely crazy. Why is this?

Well, the “agency model” thing is essentially an agreement that means the publishers have the right to tell Amazon what price they want their books to be sold at. The same agreement does not apply to paper books. So when a new book comes out the publisher sets a price for the ebook, and Amazon puts the hardcover on sale at a lower price, which makes the publisher look bad.

How did we get into this mess? Well, when you sell a paper book through Amazon they have to buy it from you. You can suggest a higher price for the book, but Amazon reserves the right to sell the book for less. That’s OK, because they are paying you for the book anyway, so if they discount the price below the amount you charged, they take the hit rather than you.

So far so good, but what about ebooks? I don’t know what happens with bigger publishers, but when I upload an ebook for sale Amazon doesn’t have to pay me a cent unless they sell copies. I can recommend a sale price for the book, but they reserve the right to sell it for whatever they want. If they decide to put it on sale at $0.01 there is nothing I can do about it, save perhaps withdraw it from sale.

What’s more, while Amazon says I have no right to decide what price they sell my books at, they insist on telling me how much I can charge for them. Specifically, I am not allowed to offer the book for sale anywhere cheaper than it is available on Amazon. (Practically speaking, that means I have to charge more for them, because I don’t have to charge VAT on the books I sell and Amazon does.)

This law suit is all about market power. It claims that the publishers, and Apple, are conspiring to fix the price of books. Well, quite possibly they are. But so are Amazon. The suit claims that Apple wanted to keep the price of ebooks high while the iPad was still struggling to gain market share. But equally Amazon wanted to sell ebooks very cheaply in order to encourage people to buy kindles. Specifically, they wanted to sell them much more cheaply than publishers were comfortable with.

There are, I hope you will see, points to be made on both sides. The publishers, Amazon and Apple are all vying for market dominance in the rapidly burgeoning ebook market. From a consumer point of view, we don’t want any of them to attain dominance. As a small publisher, I don’t want any of them to do so either.

What worries me about this suit is that it sounds very much as if it is being brought on behalf of Amazon. It might not say that, and some people who bought expensive ebooks will get money back if they join in the action. The ultimate beneficiaries, however, will be Amazon, because they’ll be able to go back to a position of selling ebooks for whatever they want.

This is the way business goes in America at times — it is fought, not in the shopping malls and on the Internet, but in courts. The way that this case goes is likely to be in part a function of which side manages to fix the state in which the case is heard, and the judge who hears it. It is going to be very expensive, and it is going to result in a whole lot more flame wars over ebook pricing. And ultimately the people who suffer will, I fear, be authors, because this is going to make it even harder to make a living from writing.

Amazon and The Book Depository

~ Cheryl ~ 6 Comments

Yesterday’s Twitter updates brought the depressing news that Amazon is to buy up my second favorite online bookstore (the first being my own, naturally), The Book Depository. Reaction to this in my corner of the blogosphere has been pretty much uniformly negative, with many people suggesting that they’ll stop using TBD.

Meanwhile business-oriented news sites are trying to figure out what this is all about. Paid Content suggests that it is a question of expertise. While Amazon has largely followed chain bookstores such as B&N and Waterstones in focusing on the bestseller market, TBD has followed a more diverse business strategy, catering for a wide market and a diversity of tastes. By buying TBD, Amazon may be seeking to cover both bases.

The idea is given some credibility by the news that the two companies will remain independent. So it will be sort of like a hotel company owning several brands, each catering to a different segment of the market. I don’t think this will work. I think the economics of online retailing will inevitably favor a bestseller approach. While TBD might be happy with a less-profitable business model if it means it appears to be a viable alternative to, rather than a pale copy of, Amazon, once the two operations are overseen by the same board of directors it won’t be long before TBD is deemed insufficiently profitable and is wound up.

Consumers, especially those in countries without a local Amazon affiliate, appear to be mainly worried about pricing, in particular TBD’s famous “free shipping” policy. I have seen suggestions elsewhere that this is an illusion — what they do is check which country you are logging in from and adjust book prices accordingly. In any case it seems unlikely that Amazon will want to compete with itself, especially given the lengths it goes to in order to try to prevent publishers from ever offering a book for sale at less than you can buy it for on Amazon. The only thing slowing down price matching will be the time needed to build the IT systems that enforce it.

That brings us to the question of competition law. As The Guardian notes, the deal is not yet done. Regulatory approval is required. I can’t see the Office of Fair Trading doing anything. There wasn’t really any serious competition in the UK anyway as we have a local Amazon affiliate and prices were probably matched already. Besides, Tory government. Other countries may see things differently, but whether the EU has jurisdiction over the matter isn’t clear.

One other thing does spring to mind. Amazon has recently been closing affiliate accounts in various parts of the USA because state governments have been imposing local taxes on internet sales. California was the latest to go. I don’t know what the situation with US residents signing up to affiliate schemes with TBD is. My own TBD affiliate account is in US$, but is linked to the Wizard’s Tower PayPal account which is UK-registered, so it isn’t a good guideline. Does anyone know? Could this be Amazon exploring a loophole in US tax legislation to allow them to continue running affiliate schemes?

Laws Are Just the Start

~ Cheryl ~ 1 Comment

Via the excellent Lauren Beukes on Twitter I discovered this presentation, produced for The Economist, which looks at the economic opportunities for women in 113 countries around the world. By far the most startling thing about it is the discovery that, although most Western countries have laws prohibiting discrimination on the grounds of gender, many of them do little or nothing to enforce those laws, with the result that women in those countries are no better off.

This is a point I have been banging on about for some time with regard to other human rights legislation. Having laws is all well and good, in that it sets an example regarding how people are supposed to behave. But it is often all too easy to ignore such laws. In particular HR departments are often adept at finding ways to remove people from employment, or refusing to hire them, without triggering a discrimination case. And I say this as someone who has lost two very well paid jobs in such ways.

Laws cannot change how people think, they can only encourage them to think differently. As long as a minority group is commonly viewed as inferior or dangerous in some way, discrimination against that group will continue, and has to be fought.

People and Money

~ Cheryl ~ 11 Comments

Running Wizard’s Tower is proving interesting and educational in a number of ways. Unsurprisingly, I have discovered that I am not a very good salesperson. Making stuff is no problem. Persuading people to part with money is quite another. Some of that is personal. A Welsh Methodist upbringing drums into you that asking for money for anything except charity is a bad thing to do. And for very obvious reasons of personal history my self esteem is not exactly stellar. However, there are also techniques to be learned, and that’s interesting in a different way.

One observation that I would cautiously advance is that the behavior of human beings en masse is very different from their stated individual behavior on the Internet. No matter how much people may rail against the evils of commercialism, much of it works. I suspect, for example, that it is much easier to sell things if you price them at a ridiculously high mark-up and then offer periodic massive sales than if you were to price them closer to cost, no matter how “evil” such behavior might seem.

The other thing I am learning is that there are all sorts of delicate balancing acts to be negotiated between reminding people to buy and not being irritating. I’m currently erring on the side of caution, I think. Of course it may simply be that what I’m doing is utter rubbish and no one wants to pay for it, but that way lies surrender and I’m not prepared to give up on life just yet.

Here’s an interesting concrete example. I tend to think that it is better to ask for money in return for something than to ask for money for nothing. Hence I’d prefer to have people buy ebook editions of Salon Futura than donate money. But that falls down in a couple of ways. Firstly many of you don’t have ebook readers, and while you can read epubs on a PC, you might as well read the website. Secondly it requires you to actually go to the store and make a purchase. That’s work. It is easier to persuade people to pay money if you make it easier for them to do so.

(This, incidentally, is one reason why most people will still buy their Kindle books from Amazon, rather than from independent retailers like me, even though the Amazon ones are DRMed and mine are not. Buying through the Kindle shop is easier, because the book downloads automatically.)

So here’s a question for you. If I were to offer a £1.49 monthly subscription to Salon Futura, via PayPal with automatic billing, would any of you sign up? It is cheap — only £1.49/month — and easy — sign up once and not have to worry again. Of course you wouldn’t have to do it — the magazine will still be available for free online. But it would help pay the bills if enough people do it.

If you don’t want to comment about it here, but would be happy to pay, email me. I want to get a good sense of whether this is worth doing before offering it. Thanks!

What’s In Store – The Magazines

~ Cheryl

Aside from Dark Spires, the only things I have in store at the moment are copies of Clarkesworld and Salon Futura. I don’t expect this state of affairs to last. I’m actively talking to small presses and individual authors about stocking their books. In the meantime, however, let’s talk about the magazines, because I’m sure that there are some people out there who are thinking: “Charging money for something you can find free online? What an outrageous ripoff!”

Well, that’s certainly one way of looking at it. The other way is to say that it is giving you an opportunity to pay for something if you can afford to do so, because if nobody pays then it won’t keep going for long.

It helps to understand the situation better if you also read this post from The Hill, a blog about things to do with Congress, which people were linking to on Twitter today. In it Colleen Doran explains some of the bad things that are happening to comics creators right now, which she sees as a direct result of piracy: people scanning comics and posting them online for free.

There are all sorts of arguments that could be made about this, and I’d prefer it if the comment thread didn’t degenerate into a flame war about piracy. There’s not much new to be said on the issue these days. I would, however, like to make two points.

Firstly, laws are not going to stamp out piracy. Prohibition did not stop people from drinking alcohol; the “war on drugs” hasn’t stopped people smoking dope or snorting cocaine; “just say no” campaigns don’t stop teenagers from having sex. If something is possible, and it looks like fun, people will do it.

Secondly, the proposed new law that Doran is talking about is not targeting individual pirates, but rather piracy as a business. It is one thing to share your ebooks with your mates. It is quite another to make a business of pirating thousands of ebooks and making money off advertising on your web site.

So one way of looking at what is happening with online magazines is to say that we are pirating our own stuff. Given that it is inevitable that anything worth having is going to appear for free somewhere, we might as well get the traffic coming to our own sites, so that we get the ad revenue instead of the pirates.

That’s not the end of the story, however. Because what we really want to do is pay creators — writers and artists — good money for good work. Clearly not everyone can afford to pay. That may be because they are kids, because they are out of work, or because they come from poorer parts of the world where they can barely afford to get online. I’m OK with that. Salon Futura has readers in places like Vietnam, Bosnia and Egypt. I don’t know who those people are, but I’m pleased they are reading my magazine and fairly sure that they would not be doing so if they had to buy it from Amazon.

Some of you, however, can afford to pay. I’ve lived in California. People there think nothing of adding 15% to restaurant bills, or dropping a couple of bucks to a bellhop or maid in a hotel. Is it really too much to ask to pay a few dollars a month to keep the likes of Clarkesworld and Salon Futura going? Possibly it is, but now you have the choice. You don’t have to pay “too much”, but you don’t have to pay “too little” either.

Sorry if I’m banging the drum a bit here, but this is the way the world is going. If we want writers, artists, musicians and so on to continue to entertain us, we have to give them money for what they do.

What’s In Store? – Dark Spires

~ Cheryl ~ 5 Comments

Now that I have this smart new online store, I should talk a bit about what we have for sale. We have a whole lot of issues of Salon Futura and Clarkesworld — I’ll talk more about them tomorrow. I’m also already in discussions with a couple of other small presses about stocking their books. But right now the only book we have on offer is Dark Spires. That’s actually a very important test case. Here’s why.

A week or two back I got into a frank exchange of views with Lavie Tidhar on Twitter. Lavie had tried to say something that, in 140 characters, lost all nuance and came out insulting. We sorted that, but his basic point was that US small presses appeared to him to be much more commercially focused than British ones. As I explained to him, this is nothing much to do with intent, and even less to do with national temperament, but everything to do with economics.

If you set up am SF&F small press in the UK (or Australia, as I’m sure Alisa Krasnostein will testify) your chances of paying SFWA professional rates to your authors are not good. You are unlikely to be able to get into shops (which in the UK means into Waterstones), and shipping to the rest of the world is horribly expensive unless you are a big operation like The Book Depository, so your market is really small. Most of your sales will come at conventions, and sales will be numbered in hundreds rather than thousands. As you are not getting economies of scale on the printing, you’d need to charge far more than the market will bear in order to pay your writers well. PS Publishing manage this by making really high quality books, but I don’t have the skills for that. I can, however, make ebooks.

With electronic publishing the whole game changes. I don’t have to pay the printer, or for shipping. And I can sell to anyone in the world. The first ebook sale for Dark Spires was to someone in Australia! That would never have happened with just a print edition.

So suddenly I have the prospect of a great many more sales. And with that I have the potential to pay my writers substantial royalties. Being able to do that would make me very happy. And for my part, ebook sales will help subsidize Salon Futura, which will also make me happy.

Of course there is still the issue of persuading people to buy the book. I’m not going to wax lyrical about its chances in awards, because it is not that sort of book. Dark Spires was not created to compete with the blockbuster anthologies produced by the likes of Ellen Datlow or Jonathan Strahan. It is not chock full of star names. Rather it was created with the specific intent of showcasing writers from a particular part of the UK. If you want an analogy, it is rather like doing a book using only writers from the Sacramento area and the rest of California north of the Bay Area (complete with a rather rural focus). So you get one or two big names (of whom, for us, Liz Williams is probably the biggest), and a whole bunch of people whose work you may never have read before. Also, because the stories are all locally based, you get some unusual subject matter.

Persuading readers to take a chance on new writers is not always easy, but the ebook is priced at £2.99, which is less than a pint of beer. Hopefully that will encourage people to give it a try. I do, after all, have the whole international SF community to sell to, and if only a small fraction of them buy the book I will still be able to pay the writers a lot more than I could with just a print edition.

In case any of you are concerned about ebooks, I’ll repeat what I said in comments yesterday. There is no DRM on my books. I can’t magically take them back or change them remotely. You can lend them to your friends. And you don’t need an ebook reader to view them. There are plenty of free software packages that will allow you to read them on your PC. See here for more details.

Hopefully a few more of you will buy the book and enjoy it. Then, once I have proved I can pay well, I can start approaching other writers with confidence.