I have lost actual physical paper books many times over the years—loaned and never returned, accidentally left somewhere, dropped in the tub, left on a windowsill and rained on, literally worn out from re-reading. Many were lost when my house fell down. One was confiscated by a teacher. I’ve not yet lost an ebook.

Ever since copying and storing bits became virtually free, there’s been a lot discussion about various ways “content creators” (writers, artists, musicians, etc.) might earn a living: per-copy sales, advertising, patronage, etc.

Felix Salmon’s recent piece on How the New Yorker monetizes old content is an interesting contribution to the discussion.

Apparently, the New Yorker is producing ebooks, drawing from their vast library of articles by great writers. The ebooks are paid for by a corporate sponsor, and then made available free to electronic subscribers and cheap to non-subscribers.

Now, on the one hand, having content paid for by selling advertising to sponsors is one of the standard models. But this is a little different. The things are cheap to produce (no printing costs) and cheap to market (free to subscribers, making them more willing to pay for their subscription). The New Yorker only needs to find one corporate sponsor—presumably a small task, compared to the regular job of their sales department.

I wouldn’t be surprised to see the model spread into speculative fiction. I can definitely see sf&f magazines finding sponsors willing to cover most of the cost of editing and the acquisition of reprint rights (all pretty cheap). Making the anthology ebooks free to the subscribers of their electronic editions would make the subscriptions more valuable, and making them available cheap for non-subscribers would be great advertising for both the magazine and the sponsor.

I’m always glad to see any new source of money for writers, and any new channel for getting old stories in front of new readers.

Jay Lake gently suggests that just waving your hands and saying “Cross-subsidy” is not a complete answer to the notion of what Amazon thinks its doing, and that’s a fair point. I think Amazon’s real objectives have a lot to do with controlling the marketplace. By selling ebooks below cost they do several things at once; in particular, they make it expensive for anyone else to enter the ebook market for new bestsellers.

If they can establish the one true price for the ebook edition of a new hardback, and keep other booksellers out of the market by selling the books at a loss, they’ll soon be in a position to dictate terms to the publishers in the same way that big-box retailers dictate terms to their suppliers in other markets. (Clearly they were supposing that they were already in that position, else I don’t think the “disappearing buy button” fiasco would have happened. Fortunately, it looks like Amazon pushed too hard too early.)

I think the result of an Amazon victory would have been very similar to what we have seen in the big-box stores over the past few years: Consumers would enjoy low(ish) prices while suppliers would see ever-increasing pressures on their profits. (I’m seeing the publishers as suppliers here, although the profit pressure would pretty quickly flow on to authors as well.) Choice would decline as profit pressures forced all but the lowest-cost suppliers out of business.

So, I’m glad that seems to have been headed off, at last for the moment.

Having said all that, though, I think the cross-subsidy analysis is also correct. I think Gillette made its own razors to give away, but it wouldn’t have needed to. Nowadays it would surely outsource razor manufacture, but that wouldn’t be necessary either. It could just as easily announce that it would sell any razor that matched the specs for its blades, and then sell them for less than it paid its suppliers. (In fact, that might be a perfectly viable business model. Surely some shavers would go for a cool-looking limited-edition art razor and accept the resulting lock-in to Gillette blades, as long as the razor wasn’t too expensive.)

Toby has a good take on ebook pricing issues.

Very briefly, mainline publishing houses would prefer to go with a pricing model similar to the model for physical books, where books start at a premium price when they’re new and then are sold at gradually cheaper prices. Amazon, on the other hand, wants to sell a cheap(ish) $10 ebook edition of new hardbacks, because that’s a price point and market segment that drives sales of the kindle, but shows no sign of further lowering the price as cheaper editions of the physical book come out. (One supposes Amazon’s theory is that there are a lot of people will pay $300 for a kindle to read the latest bestsellers for $10, but many fewer who will pay that much to be able to read last year’s bestseller for $4.)

The whole issue (Amazon taking down the Buy button for most books sold by Macmillan imprints, etc.) has produced a lot of talk by non-authors about how publishers are obsolete anyway and authors should just produce and market their own ebooks. But that sort of talk just goes to show that they don’t understand that publishers are specialized venture capital firms (as opposed to specialized manufacturing companies).