Economics

The Coming Race

~ Cheryl ~ 2 Comments

If you need any further proof that we now live in The Future, consider this: The Economist is blogging about the effect of robots on labour markets.

Of course, like any good pundit, they hedge their case:

Of course, full human employment may not be a part of a sentient robot overlord’s grand plan. As always, politics constrains economics, and so it’s difficult to make good predictions about future labour markets without knowledge of the institutional environment the machines will put in place once they become self-aware and enslave humanity.

And no mention of Asimov, presumably because it is no longer necessary.

Buying and Borrowing

~ Cheryl

Paul Cornell was asking on Twitter this morning why people hate DRM so much. I can see both sides (I do own a publishing company now, after all), but from a reading point of view my complaint has always been that I prefer to own my books, not borrow them from a publisher who may be able to take them back on a whim, and who cannot be guaranteed to support the hardware and software needed to play them.

This distinction — that DRM’d books and music are effectively only licensed to the consumer, not sold — is a probably at the heart of a potentially explosive court decision that Nicola Griffith talks about here. The full story is in the Wall Street Journal (because big money is involved).

The case, brought by a group of producers who work with Eminem, argued that because the music on iTunes is licensed rather than bought outright a different, and much higher, schedule of payments to the artists should apply. A court in San Francisco (yay!) has agreed.

This being the American legal system, all sorts of shenanigans could take place before the defendants (Universal Music Group, not Apple) have to pay out any money. However, it could cause publishers (of books as well as music) to think twice about their contracts and exactly how they present their products to the public.

Wave Power

~ Cheryl ~ 1 Comment

Every so often my day job turns up stories full of sfnal awesomeness. Take, for example, this press release from the University of Arizona about generating electricity from waves — quantum waves.

Bergfield designed the benzene ring circuit in such a way that in one path the electron is forced to travel a longer distance around the ring than the other. This causes the two electron waves to be out of phase once they reunite upon reaching the far side of the benzene ring. When the waves meet, they cancel each other out in a process known as quantum interference. When a temperature difference is placed across the circuit, this interruption in the flow of electric charge leads to the buildup of an electric potential — voltage — between the two electrodes.

The great thing about this is not that scientists are doing engineering on the scale of a benzene ring, but that the technique, if the theoretical models work in practice, will generate significant amounts of electricity from waste heat. That will make an enormous difference to the efficiency of any sort of engine. It is really very exciting stuff.

So hats off and good luck with the prototype to Professor Charles Stafford, to Justin Bergfield, the doctoral candidate who is doing much of the work, and especially to Michelle Solis, the undergraduate who discovered the phenomenon on which all this is based.

Who says girls can’t do science?

Statistical Illiteracy

~ Cheryl ~ 6 Comments

In yesterday’s Guardian Cory Doctorow railed against the inability of the general public to understand statistics. His targets were people who spend a fortune on lotteries, parents who get hysterical about media-driven panics and ignore the fact that far more kids die in car accidents than from anything the papers get in a tizzy about, and so on. But that’s not the only place where statistical illiteracy causes problems. Even those who are supposed to be experts get things wrong. By coincidence, on the same day, The Economist was worrying about an excess of testosterone in financial markets, and the effect this has on understanding of risk.

You see, there’s a fair amount of research supporting the idea that, left to their own devices, men tend to be less risk averse than women. And The Economist has also turned up evidence that over the past 10 years, when rampant risk taking became endemic in financial markets, leading eventually to economic collapse, the proportion of women working in the US financial sector dropped markedly (in contrast to the rest of the US economy where it grew).

For a couple of years during that period I was working for a company that sold derivative valuation software, so I had direct experience of the sort of attitudes that were prevalent in the industry. I can’t claim that my experience is anything like a reasonable sample of attitudes, but I sure saw a lot of macho disregard for risk analysis.

Over at the BBC Robert Peston is talking about Lord Turner and the Basle III regulatory programme. Peston says of Turner:

So he is encouraged by the latest international agreement by central bankers and regulators, the so-called Basel lll agreement, that will force banks to hold more capital as protection against future losses.

This is good news. What they are talking about is what risk professionals call “capital adequacy”. Look at it this way: if you go into a casino, do you buy chips with the cash you have in hand and are prepared to lose? Or do you buy a pile more chips on a credit card on the assumption that you are not going to lose so it doesn’t matter if you don’t have the money to pay the credit card bill? A primary cause of the financial meltdown was that too many companies had bet more than they could afford to lose. Basle III is trying to stop them doing that.

Will it work? I’m skeptical. The reason we got into such a mess was that too many bosses and too many politicians, were not willing to look at the potential downside when they were on a big winning streak. The lure of big wins was just too great. A bit more statistical literacy would be a good thing all round. And possibly a bit less testosterone too.

More On Identity Economics

~ Cheryl ~ 2 Comments

A couple of weeks ago I pointed you at an article in The Economist on the subject of Identity Economics. It seemed to me to be a very promising way of approaching economic and social issues, though the implications of actually understanding it well were quite scary.

Tom Slee has also taken an interest in the subject, and has produced this lengthy essay reviewing the book by Akerlof and Kranton around which all of this discussion is based. Now I’m even more interested.

Most of Slee’s discussion is based on race, but towards the end of the essay he makes brief mention of Judith Butler and wonders whether Akerlof & Kranton’s theories can help us understand why some societies cling so desperately to the gender binary while others tolerate a more fluid approach. He also spends a lot of time discussing why people cleave to minority groups and outsider behavior even though it is apparently economically disadvantageous for them to do so.

It occurs to me that there is a very interesting study to be made of the trans community, in which people feel pressured to choose between joining mainstream society, with the attendant economic advantages but the ever-present danger of having a secret past, or joining the trans activist community which provides friendship and support but guarantees lifelong outsider status.

Of course in an ideal society people would choose to live in a way that felt comfortable and natural to them, and would be allowed to change their lives without fear of condemnation from both the identity group they have left and the one they want to join. Sadly, the real world doesn’t work like that. Economic and social pressures are always pushing us towards conforming in one way or another.

Coincidentally, Jeanette Winterson had a few things to say on this subject when interviewed at Hay over the weekend.

A Little Economics…

~ Cheryl ~ 4 Comments

… won’t hurt you, honest.

– Lynne Kiesling reports on a Chicago restaurant with an interesting approach to pricing. It sounds good to me. I like the idea of being able to get good food at a lower price because otherwise the posh restaurant would be half empty on a Wednesday night.

– Doug Elliott finds a very succinct explanation as to why information overload is such a pain (and spam so annoying).

– And at The Economist they are talking about the influence of tribalism on economic behavior. It seems that human beings are not rational after all (doh!). I’m pleased that people other than political demagogues are starting to think about this, but at the same time I worry that understanding it better is only going to allow people to manipulate us poor monkeys more efficiently.

Is Free Old-Fashioned?

~ Cheryl ~ 2 Comments

Over at the music recommendation blog, Fingertips, Jeremy is once again dipping his toes into the maelstrom of debate around issues of the value of digitally-distributed art, an issue that now affects stories as well as songs. Most of you are doubtless very tired of the whole discussion, but there are a couple of things about Jeremy’s article that are interesting.

Firstly, being someone whose web business is based solidly around pointing people at free music online, Jeremy might be expected to be solidly in the “music wants to be free” camp. However, he’s nothing of the sort. Indeed, he comments:

If nothing else, this insistence on a free music future seems an inexplicable diversion of good energy. Why are people more willing to fight for free music than to fight for a talented musician’s right to earn money from his or her handiwork? Why do people jump through hoops to invent alternative scenarios for musicians to make money, rather than fight to defend the value of music itself?

But the thing that caused me to sit up and think was his comment about how the idea that electronic copies have zero value is not some bright new 21st Century idea, but actually a very old 20th Century one, because it is rooted in the idea that something that has no physical existence can’t have value. Anyone in the IT industry whose family are always asking them when they are going to get a “real job” in which they “actually make something” will know exactly what he means.

You know, I think he’s probably right. Go read the whole thing (especially if you are Jay Lake, Amanda Palmer or anyone else who thinks a lot about this stuff).

Betting on the Movies?

~ Cheryl ~ 1 Comment

It is not often that my economics and arts news feeds throw up the same story, but here’s one that definitely crosses the boundaries. As Mike Giberson at Knowledge Problem reports, the U.S. Commodity Futures Trading Commission (CFTC) has approved the establishment of a futures market in movie revenue. Derivatives traders will now be able to buy and sell futures based on opening weekend domestic box office receipts.

In Twitter Joe Hill described this as “betting on movie futures”, and to some extent he’s right because all futures trading is betting of a sort. However, the primary purpose of the market is to allow movie companies to hedge the risk of development by allowing them to take out insurance against a flop. They probably do so already, of course, but a futures market is, at least in theory, a better means of providing that insurance than approaching an insurance company, because the futures market is informed by the supposed wisdom of a whole crowd of investors.

What will be the effect of this? If they get it wrong it could be an awful mess, and let’s face it the recent track record of the derivatives industry is not exactly exemplary. If the market works, however, it may make studios more willing to take a punt on an experimental film, rather than always going for a safe bet. Or, of course, it may end up with Hollywood always producing the sort of movies that derivatives traders like. It will be interesting to see how it works, and whether the traders attempt to create ways of tapping Internet wisdom. If it does work, other forms of consumer entertainment could follow suit.

Late Night Linkage

~ Cheryl

Because I have booked 10 hours on the Day Jobbe today and have had #ALD10 to worry about.

– The music industry is considering a Trustmark scheme to indicate download sites that are not piracy. Worth checking out if you are an author worried about similar issues.

– MORAL PANIC! MORAL PANIC!!! The Telegraph says that Facebook causes syphilis. Mashable is more cautious, and I gather that Ben Goldacre is on the case, so expect something amusing on Saturday.

– Mega sale of old mimeo fanzines on eBay (mostly comics-related). Thanks to Forbidden Planet for the tip-off.

– Justine Larbalestier ponders one of the age old questions of the Internet (the one I tend to call, “Why do you see the fact that I don’t like the same books as you as a threat?”) She also considers forcing John Scalzi to wear a ballgown.

– The Economist does a daily blog post linking to interesting writing about economics. Today’s links included one to this post by Charlie Stross on the economics of book length.

– One of the more interesting presentations at the recent DEMO conference was about the use of quantum dots in camera phones. Mashable has a nice summary. I like seeing technology I first read about in SF novels finding its way into everyday life.

– Mind control: wear this simple helmet and you can control a computer just by thinking.

We Are All Communists Now

~ Cheryl ~ 2 Comments

Open Source Communism - image from Mashable page linked to in textDo you use WordPress to run your blog? If so, are you aware that you are part of a secret Communist plot to undermine the American way of life? According to Mashable and The Guardian, an industry lobbying group, the International Intellectual Property Alliance, claims that the whole open source software movement is anti-Capitalist, and therefore a threat to US Economic Hegemony the American way of life. Of course this is based on the batty idea so often espoused by the US right that “Capitalism” means “a very small number of very rich people, including myself, own everything in the world, and everyone else has to pay us for the right to use it,” and that the terms “oligopoly” and “free market” are synonyms.

Still, you have been warned. Cease your filthy Communistic sharing this instance. The FBI will be around shortly.

A Million Fuel Cells Bloom?

~ Cheryl ~ 12 Comments

Work on fannish projects ground to a halt this evening when I discovered my Google Reader account was full of links to an interesting energy story about a product launch by a Silicon Valley start-up. As some of you will know, my day job is in energy economics. Specifically I study electricity generation. So any new development in that business is of interest. Given that The Gubbernator turned up for the press conference, that Colin Powell is on the board of the company, and executives from the likes of Google, eBay, Walmart, FedEx and Coca Cola were on hand to express support, this could be a game-changer.

The product is essentially a cost-effective fuel cell. A fuel cell (very simply) is a device that takes in oxygen and a fuel, passes them over an active surface, and causes the fuel to combine with the oxygen creating electricity. Chemically it is the same as burning the fuel, but practically it has the potential to be much more efficient. Bloom Energy claims to have realized that potential. It claims to have technology that will connect to your existing natural gas supply and generate electricity for less than it costs to buy it from the grid.

Economically there are still questions to be answered. Google has been testing the devices, and claims to be very happy with their reliability and efficiency. Whether that will continue over a number of years, and in climates less balmy than California’s, remains to be seen.

Environmentally the jury is also out. The Bloom Box, as it is known, currently consumes natural gas and emits CO2. Because it does so much more efficiently than doing the same process in a power station it could drastically cut emissions, but it doesn’t do away with them altogether, not does it solve the problem of reliance on a limited natural resource. It is possible that the device could be made to work on a different fuel, for example hydrogen, but I haven’t yet found any discussion of that. Also the manufacture of fuel cells is a complex technological process that may involve other pollutants. One thing I can guarantee is that somewhere an environmental campaign group is busy putting together a press release denouncing the Bloom Box as a disaster for the planet.

Initially the devices will sell to business such as the ones that turned up at the press conference. The cost of electricity is a major headache for most businesses, and the current $700,000+ price tag puts the boxes well out of the reach of the average householder. However, the company will continue to develop the product, and economies of scale are bound to make manufacturing cheaper as the business ramps up. According to the Financial Times, Bloom hopes to have the cost down to $3000 in 10 years.

One other thing of interest is that the reaction between natural gas and oxygen has another by-product: water. This may be of interest to people in California which, as I’m sure you know, is a desert, and likely to become more so if climate forecasts are correct. I have no idea whether the quantities will be significant.

It is all too early to jump to any definite conclusions, but it does look like interesting times may be ahead for the electricity industry.

Mashable has a long report from the press conference, and Knowledge Problem has a good round-up of news links.

Some Random Linkage

~ Cheryl

A few things that caught my eye over the past few days.

– Interesting interview with Jeanette Winterson at The Guardian (she describes herself as “post-heterosexual”).

– The Independent discovers a new subgenre: Steampunk Romance (interestingly I’ve found a lot of hostility amongst UK fans towards steampunk, but I may just be talking to the wrong people – thoughts?)

– Fingertips talks about how a good artist can still sell albums in the age of free downloads.

– John Scalzi talks a great deal of sense about one-star reviews at Amazon.

– Charles A Tan rounds up some great posts about the Australian speculative fiction scene.

Further Amazon Thoughts

~ Cheryl ~ 10 Comments

Five days in and the war is still going strong. People are starting digging trenches and laying in supplies for a long siege. Meanwhile the chattering classes (which of course includes me) are offering punditry, and the blogosphere is outraged as only the blogosphere can be.

Economics bloggers have started to take an interest in the issue. Lynne Kiesling has a useful round-up of links. I’m pleased to see that other people agree with my intuition that this dispute is largely a problem of perceived value. Explaining the economics of the publishing industry isn’t going to get you very far with people who just look at the finished product.

We monkeys are funny creatures. At times of celebration we buy food in hampers and presentation boxes. The food inside tastes the same, and the fancy wrapping doesn’t cost very much. It generally has little value and gets thrown away after we have eaten. But we are willing pay a lot more for that fancily wrapped food because it looks special.

Heck, we’ll sometimes pay a lot more for a book because it is signed by the author, even though the making of it so was the work of mere seconds.

Like it or not, an ebook appears to many people to be of intrinsically less value than a nice, solid hardcover. In their eyes, the former should cost much less than the latter.

Having said that, there have been some great posts out there, and real attempts to communicate on the part of authors. I guess this is coming as something of a shock to some of them. Obviously authors have fans tell them that their latest book is crap on a fairly regular basis, because no book pleases everyone. But unless they are poor George RR Martin they don’t normally get a whole pile of people telling them that they are greedy, selfish bastards who ought to be getting on with the important job of providing customers with what they want for as low a price as possible (preferably free). I really feel for Jay Lake, who has more reason than most to worry about his finances, and is brave enough to actually try to engage people. Here’s the sort of stuff he gets back from some folks.

Mind you, I have seen this sort of behavior before, and while getting called greedy when your livelihood is at stake must be painful, it is particularly galling when you have given your time and effort for free and people just assume you are making a fortune. Thankfully most fans, and most professionals, are well aware of how much volunteer labor goes into running a convention, but members of the World Fantasy Board and their hangers-on were still accusing us of ripping off members and stuffing our own pockets over the San José convention at-con when most of the attendees were going round saying what a wonderful time they were having, and even though they knew the money was all going through a non-profit that could only spend any surplus on other conventions and good causes like Clarion. (For the record, our surplus looks like being very low compared to past World Fantasy Cons, and even lower as a percentage of revenue due to the large size of the event.)

Anyway, back with Amazonfail, many people are starting to wonder where these sorts of attitudes came from. Jeff VanderMeer has some thoughts here. Some of what he says is undoubtedly right, but it is all too easy to point the finger at things like freebies. I don’t think this is the fault of people like Cory Doctorow, and I don’t think Jeff does either. The notion that consumers should only have to pay what they think a product is worth, not the economic cost of production (plus a reasonable profit margin if you are a Capitalist) has been around a long time. The current UK government regularly uses it as a stick to beat companies like utilities and grocery chains. Mandy is currently using a very similar tactic on universities. The idea that economics is some sort of dishonest voodoo, wheeled out like evolution to try to kid people into believing something other than what common sense tells them, gets used all the time. And the media always takes the side of the consumer, because it is mostly the consumers who buy their newspapers.

As an economist I am rather heartened to see so many people espousing the idea that discriminatory pricing is useful, and can be of benefit to all concerned in the long run, even though it might seem predatory in the short run. But I hope that all of the people currently so happy with the idea remember what they have said next time they are tempted to complain about similar practices employed by hotels, airlines, railways and so on.

Oh, and people, do stop calling it “discriminatory pricing”. Everyone knows that “discrimination” is a bad thing. Find some other term for it (“demand-based pricing,” perhaps), or you’ll keep losing the PR battle.

Meanwhile some people are trumpeting Apple, and possibly the rumored Google Tablet, as potential saviors. Anyone who thinks that Apple (and Google) are not in this game for a profit should read this.

And finally, if the whole thing has got too confusing, I recommend checking out the latest BSC Review column from everyone’s favorite Sodomite, Hal Duncan. Using brilliant historical research, and some linguistic skills he must have picked up at Ã…con, Hal reveals that the whole sorry dispute is actually about kitten hair rugs.

Hello, Hive Mind…

~ Cheryl ~ 24 Comments

It has been suggested to me that a good alternative to Amazon might be The Book Depository. The appear to have an excellent selection of books, and they deliver worldwide (whereas IndieBound is US-only). They say they deliver free, but of course their prices for individual books are slightly higher than Amazon’s because the delivery cost is built in.

Tero, who suggested them, is very happy with their service, so they can obviously cope with shipping to Finland. Does anyone else, particularly small publishers, have any experience of them?

War Continues: No One Dead (Yet)

~ Cheryl ~ 2 Comments

The online war between Amazon and Macmillan over Kindle book pricing has continued apace overnight. There was considerable cheering just before I went to bed when Amazon appeared to blink. However, as of writing this post, Macmillan books appear to still be absent from the Amazon US site save for the second hand market. Also the jury is very much out.

Scott Westerfeld has made a brave attempt to explain the economics, and what he says about publishing is pretty much true as I understand it (I always leave room to be corrected by Andrew Wheeler). However, I have enough trouble explaining the electricity industry’s issues with fixed and variable costs to young economics graduates. I really don’t expect the average book buyer to understand why the same book needs to be more expensive when it first comes out than a year down the road. They’ll just see that as gouging the fans.

One of the real problems that Macmillan & co have here is that to most readers an ebook edition that they have had to rent from Amazon (because you can’t own a Kindle edition) is of considerably less perceived value than a nice, solid, beautifully made hardcover edition; and consequently they feel it should cost a lot less. The economics of the industry are of no interest to them. And while us old fogies might have been prepared to wait a year for mass market paperback editions, the “Want it NOW!” Internet generation is not going to wait a few weeks for a Kindle edition, let alone several months. And if they don’t get what they want, when they want it, they will yell and scream about how unfair this is and how the publishers EVIL! and FULL OF FAIL!!!! and no better than [rest of post deleted due to invocation of Godwin’s Law].

And maybe Amazon are right. Maybe releasing a cheap Kindle edition at the same time as the hardcover won’t cannibalize the hardcover market (which only appeals to quaint old fogies like me) and will shift sufficient extra copies to make up for the lack of margin. Maybe they are right.

But actually I think that they are just desperate the establish the Kindle as the industry standard (both for format and use of DRM) before Apple can get up to steam and provide serious competition.

So where as we now? Well, as I said, Amazon posted what has been hailed as a climb down. It includes this interesting comment:

We want you to know that ultimately, however, we will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books.

So, um, Macmillan are a bunch of evil capitalist bullies forcing Amazon to sell ebooks for much more than they are worth in order to line their filthy corporate pockets and pay their greedy authors to take their harems of model girlfriends on expensive, drug-fueled vacations to exclusive holiday resorts on private Caribbean islands. It must be true, just read the comments thread.

The idea that Macmillan is a bad guy because it has a monopoly over selling its own books attracted a great deal of laughter on my Twitter feed last night, and may yet give rise of a #badmonopolies meme. And yet it is a tactic straight out of the Faux News playbook. The rules are very simple. 1) The bigger the lie, the more likely it is to be believed; and 2) Appeal to your audience’s sense of entitlement. Like I said, read the comments thread. Just don’t be tempted to respond.

As of now, there is no sign of Macmillan books re-appearing for sale on the Amazon site. They may well do in the near future, but I’m guessing that Amazon will be whipping up the mob into deluging them with one star reviews and whatever other expressions of displeasure are currently possible on the site. The war isn’t over.

John Scalzi, who is a much wiser person when it comes to online communication than I am, has published a long analysis of all of the PR mistakes that Amazon has made over the weekend. He’s right too. They could have been a lot cleverer about the whole thing. But it is very clear from their “monopoly” post that they don’t think that they need to be clever. They are taking Glenn Beck as their role model. They don’t care. I have this mental image of the Amazon PR department dancing round a pile of Scalzi novels, sticking their tongues out and chanting, “Loser! Loser! One star reviews for you!”

The primary message that the Amazon post sends to me is one of contempt. Contempt for the publishers who supply them with the products they sell. Contempt for the authors who create that product. And most of all contempt for their customers whom they believe are too stupid to see that they are being manipulated. And that suggests to me, boring old fogey that I am, that they are not a company that I want to continue doing business with.

So, one of my jobs today will be to sign up for the IndieBound affiliate scheme and see what’s involved in making the switch. Hopefully it will be OK, though I’m already a little unhappy with them. I dislike having to sign up for a scheme before I can find out how the technology works. And I note that while they are admirably insistent that they don’t want to be linked to by sites that encourage discrimination on the grounds of race, sex, religion, nationality, disability, sexual orientation, or age, they make no mention whatsoever of encouraging discrimination on the grounds of gender identity. Maybe they are hoping to get links from The Guardian.

The Amazon Thing

~ Cheryl ~ 23 Comments

Remember this logo?

Amazon Fail

That was a dispute about bigotry. It was a dispute about Amazon restricting access to books based on their content, and the private lives of the people who wrote them.

The current dispute is in some ways very different. It is an economic dispute between a retailer and a wholesaler. But it affects readers and writers all the same, and the fact that it can happen at all is worrying.

On the face of it, it doesn’t actually make much difference. If I want to buy a John Scalzi book there are plenty of places I can do so. I don’t have to go to Amazon. For Scalzi and his fellow authors it is somewhat more annoying. They won’t lose sales to existing fans, but they will lose sales from casual browsers who are looking for “a book” on Amazon. For the staff at Tor and other Macmillan-owned imprints it is very serious indeed, because it is going to mean a major hole in their company revenue. I’m not surprised that they are unhappy, though maybe they should be more angry with their management than with Amazon, because it is a fight I don’t think Macmillan can win.

What I guess Macmillan’s management was banking on is that there would be general outrage around teh intrawebs, just like there was over the LGBT issue and the removal of 1984 from Kindles. But in both of those cases it was clearly a dispute between Amazon and the consumer. Consumers were outraged, and said so. In this case Amazon has the consumers on their side. All they have to do is say, “you deserve ebooks for $9.99 or less,” and the masses will be out on the streets yelling, “vive la révolution!” Authors can complain all they like, but mostly what they’ll get in return is, “string the greedy bastards up from the lamp posts.” Because, just as “everyone knows” that Kevin and I have made a fortune from running Worldcon, “everyone knows” that once you are a published author your life is one long stream of expensive apartments, beach houses, private jets, cocaine and movie star girlfriends.

So what’s actually going on here?

Well, Amazon are in the retail business. They started out selling books, but now they sell lots of other things, and it can’t have escaped their notice that selling music is a darn sight easier than selling books. No warehouse, no logistics, all you need is a web site. Books could be sold that way too, and Amazon could make a lot more money, if only the damn book buyers would play ball. Unfortunately for Amazon, us book buyers have an irrational attachment to piles of paper. We say stupid things like, “it is easier on my eyes,” or even, “but I like the look of a shelf full of books.” So they need to persuade us to buy books electronically. One of the ways they can do that is by cutting the price.

With this in mind, Amazon says to the publishers, “we want to sell ebooks really cheap so that sales of ebooks, and incidentally our ebook reader, take off.” Macmillan says, “we’d rather maximize our revenue from ebooks than subsidize your hardware business.” And Amazon says, “Gee but that’s a nice little publishing business you have there, it would be sad if it were to accidentally get, you know, broken…”

There are two rather worrying things about this. The first is that a single retailer has become so dominant that it is able to bully a large, multi-national publisher in this way. That sort of market dominance is dangerous in any business. The second is the speed and efficiency with which Amazon can move against an opponent. As I said at the beginning, this is an economic dispute between two businesses, but exactly the same technology would be deployed against a new opponent for entirely different reasons (and indeed may have been already if you prefer not to believe Amazon’s protestations about a programmer error).

Personally I don’t have a huge stake in this. Despite what “everyone knows”, I don’t make a fortune out of Amazon. My income from Amazon links is around $10/month. I’d have no qualms about losing that. But I don’t have Amazon links on my sites to make money for myself, I have them there to encourage you lot to buy books. The best way to do that is to point you at Amazon. That’s true because they are a better book seller than anyone else. In my experience, they have what I want in stock, at a better price, and they deliver promptly without mistakes. (I note that I’m talking about Amazon US here, I gather from other people that Amazon UK is nowhere near as efficient.) Also Amazon’s affiliate program is more friendly and easier to use than anything else I have looked it.

I’m not a big fan of monopolies (state or private) and I prefer to see them broken down if possible. Therefore I would like to see Amazon have some decent competition in online bookselling. That’s especially true because Amazon appears to be wedded to the ambition to transform bookselling so that customers only ever rent books, they can never own them. I’d be happy to switch to using a different online store if I thought that they would provide as good a service, and be as easy for me to deal with, as Amazon are. It can’t be rocket science, surely?

Hell Comes to Helsinki?

~ Cheryl ~ 2 Comments

Via Lynne Kiesling I discovered this story about a data center in Helsinki being located underneath Uspenski Cathedral so that the waste heat from all of the computers can be used to keep the neighbourhood warm. Like Lynne I am impressed by Finnish initiative when it comes to environmental issues. But then I wondered which one of my Finnish friends had come up with the idea of putting something very hot in a cave beneath a church…

Come on, own up, I know it must have been one of you.

AFP On the Economics of Art

~ Cheryl ~ 10 Comments

Amanda Palmer has a new blog post up responding to the storm of interest in her post explaining why she asks for money online. As expected she got a few idiots insisting that she provide music for them for free, or that she “get a proper job,” but the vast majority of the respondents appear to have made interesting points, and Amanda replies to many of them. I’d like to pick up on a few points that are relevant to us book people.

Firstly, lets get this out of the way:

ASKING FOR MONEY FOR YOUR ART IS NOT SELLING OUT

Sadly, it bears repeating, because people keep forgetting it.

And you know, this is absolutely a class issue. The idea that artists should not charge for their work presupposes that they are either independently wealthy or that they are supported by someone who is. It is exactly the same argument that was fought over professionalism in sport. Anyone who is good enough should be able to make a career in art.

Secondly, Amanda notes that what is right for her is not necessarily right for others. In particular she says that for people like Lady Gaga the big record company route is exactly the right thing to do. This is correct, and the same will be true for books. You won’t see Neil doing what Amanda does, except in support of her.

As markets become more global and more transparent, the power law effect becomes even more marked, and the number of major celebrities in each field becomes smaller. Amanda can’t compete with Lady Gaga in the celebrity stakes, and nor does she want to, because she doesn’t produce the same sort of music. It is the same with books. You won’t find M. John Harrison trying to compete with Dan Brown for the celebrity author market.

But market concentration means that the retail business is becoming less and less interested in mid list artists — whether they be in music or books — and that means that people like Amanda, or Cat Valente, or Tim Pratt, have to turn to more direct means to make a living.

One thing that didn’t come up in Amanda’s post was any accusation of “self-publishing”. Musicians self-publish all of the time. So is it right for them but not for us?

Well, not exactly. Like Cat and Tim, Amanda is not new to publishing. She has been through the record label process and worked with other musicians and producers. Tim and Cat have been through the big publisher process and have worked with editors. In all three cases the artist in question has learned enough to have a good idea of when something is polished enough to be presented to the public. If, on the other hand, your work has never been near a professional editor, and you only take feedback from friends and family, the chances are that your fiction probably isn’t ready for the public. Not always, but mostly.

So I don’t see anything wrong with writers self-publishing the way that Cat and Tim are doing. If they are good enough then it will work for them. Nor do I have any objection to them, or Amanda, asking for money. Because I think it is the way things will have to go in the future. We are already in a position where many of the really good SF&F novels that come out are produced by small presses that can’t get their wares into high street bookstores. Even big names like Tor can’t get their entire catalog into bookstores. It will only get worse from here.

So for good writers to make money we need to find other ways to get them paid. Self-publishing is one. Paying good rates for online fiction is another. Which is why Clarkesworld pays SFWA rates for its fiction. And why we, like Amanda, ask you to give us money. To quote our donations page: “Every dollar donated to Clarkesworld Magazine goes into our fiction, non-fiction and art budgets.”

Economics Update

~ Cheryl ~ 1 Comment

There’s more on the Nobel Prize for Economics over at the Wall Street Journal and The Economist. I’m slightly less pleased about Williamson now. I’m sure he’s right that there are areas where vertical integration isn’t a bad thing, but in electricity it tends to get used to destroy what little competition is actually possible. Given what people are writing about Williamson, he’d look at each case separately, but other people tend to go with “vertical integration is OK”, which can be dangerous.

Elsewhere Lynne Kiesling would like it to be known that she’s more of a libertarian than a Libertarian which, given the behavior of some self-styled Libertarians, is entirely understandable.