Throughout 2001, conflicts pitting established media giants against high-tech upstarts have focused the attention of publishers on new technologies and e-rights. This report reviews highlights of recent developments and concludes that the dangers of new technologies that bypass publishers of books may be overstated.

Napster Falls…

But Will “Bookster” Rise from the Ashes?

Although it centers on music rather than books, the Napster case is important to authors and publishers. That’s because the kinds of technologies used for trading music online are already beginning to be applied to electronic books.

Napster has, of course, generated reams of general coverage in major print media. As it relates to book publishers, one of the most alarming aspects was reported by Columbia University law professor Eben Moglen in The Nation on March 12, 2001: “The shuttering of Napster will not achieve the music industry’s goals because the technology of music-sharing no longer requires the centralized registry of music… that Napster provided. Freely available software called OpenNap allows any computer in the world to perform the task of facilitating sharing; it is already widely used.”

For publishers, this raises the specter of a Napster-like online sharing site for electronic books that might emerge in the future, using OpenNap-style technologies. Some e-books can already be found on peer-to-peer networks such as Gnutella. Moreover, some of today’s leading solutions for e-book copyright protection are intentionally designed to allow purchasers of e-books to lend single copies legally.

According to Dian Killian of the National Writers Union, “It all comes down to fair use. Before the Internet, no one cared if you loaned a music recording or book to your family or a small circle of friends. With Napster and e-books, it’s now technically possible to ‘loan’ a recording or a book to thousands and even millions of strangers.”

Electronic delivery of content in various forms is driving the development of new and creative ways to wring additional revenues from intellectual property every day. The downside is that innovative marketing and delivery methods are also raising new questions about ownership of rights, and compensation for both the author and the publisher.

Tree-Rights Not e-Rights

As discussed by Jonathan Kirsch in September’s PMA Newsletter, recent court rulings in lawsuits (Random House v. RosettaBooks and The New York Times v. Tasini) establish that online and electronic rights are separate from print rights.

These decisions need not pose serious problems for most publishers. They simply reinforce the need to schedule specific rights in publishing contracts, and to pay for them as appropriate. Many publishers already include electronic rights in their contracts, or simply secure “all rights” when they acquire new titles. Electronic rights for earlier titles may be negotiated on a case-by-case basis if necessary.

How the Book World Has It Better

“Liberation Musicology”–the article about Napster in The Nation–concludes with what sounds like an ominous portent for publishers: “What is most important about this phenomenon is that it applies to everything that can be distributed as a stream of digital bits by the simple human mechanism of passing it along. The result will be more music, poetry, photography, and journalism available to a far wider audience. Artists will see a whole new world of readers, listeners, and viewers.”

But let’s not forget the lessons learned in the music and film industries during the 20th century. When cassette recorders appeared, cynics claimed that the record labels were dead. Likewise, some said the VCR spelled the doom of Hollywood. Neither prediction proved true, and in fact, the home video market is now a major source of revenue for filmmakers. The Internet raises the ante, but the publishing game remains the same.

And let’s also not forget that publishers can have better relationships with readers and writers than the recording industry has with its artists and customers. Record companies are in danger for a couple reasons. For one, their artists feel alienated (given the chance to jump ship, many did so without hesitation). Also, their consumers have resented the huge markup on CDs (often many times the margin on a printed book), and some listeners rationalized online music “sharing” as a chance to recoup their losses.

The fundamental economics of electronic publishing make it possible for publishers to charge consumers less, and pay writers more. Publishers who adopt this philosophy may reduce the risk of piracy by readers, and increase the loyalty of writers–hopefully without costly litigation, before or after the fact.

Keeping Readers Honest

As “brick and mortar” bookstores know, a small number of consumers have always stolen books. Losses from theft are a standard factor in calculating bookstores’ operating expenses. Books with high prices seem more likely targets of shoplifters–online or offline.

When I chatted about electronic rights recently with three bright young graduate students, they gave me a familiar opinion–paying for online content is anathema to the spirit of the Internet. Pressed on the issue of fairly compensating writers and musicians for their work, though, the students allowed that a modest payment for use of online books and music could become the norm.

My experience as CEO of Unlimited Publishing LLC (www.unlimitedpublishing.com) reveals a related pattern. We publish books primarily in printed form, but recently began releasing e-books in cooperation with BookZone. We typically price the electronic editions below $5, while paperback prices are $11.99 to $22.99. In the planning stages, we learned that a substantial percentage of consumers–20% or more–who download an e-book later purchase a printed copy. As a result, we now view e-books as good tools to sell tree-books… not much different than free review copies given to journalists and VIPs.

Keeping Writers Loyal

Many conventional publishers admit privately that their relationships with writers are adversarial to some degree. Perhaps this is because many writers perceive their publishers as greedy, while few recognize that part of the income from every book sold must offset losses from books that don’t sell.

Consumer pilfering of books (whether printed or electronic) pales in comparison to the impact of returns of unsold copies for most publishers. Theft may account for a small percentage of losses–but return rates from bookstores of 25% to 35% or even higher are not uncommon. Interestingly, new technologies–such as Print on Demand and e-books–can dramatically reduce returns numbers, practically eliminating the publisher’s most painful problem. As a result, high-tech publishers can pay writers more, whether the book is made of paper and ink, or bits and bytes. For instance, we pay at least 50% of net from retail sales of printed books to clients, and BookZone pays 76% of revenues from e-book sales. Policies like these foster better relationships with writers.

What’s Ahead?

While copyright protection for e-books is still a concern, the potential to deliver books to consumers without waste may strike many publishers as nearly irresistible–whether the book is printed on demand or downloaded from the Internet. The price publishers must pay for the promise of these technologies is a willingness to change. Whether this means developing new production workflows, embracing new pricing and royalty models, or both, the benefits can outweigh the costs for the publisher of the 21st century.

This article is expanded from items published previously in print by BookTech Magazine and online by eBookWeb with excerpts used by permission.

Danny O. Snow is co-author with Dan Poynter of a book about new technologies for publishing and promoting books, titled “U-Publish.com.” He serves on the advisory board for “BookTech The Magazine” for publishers, and is CEO of Unlimited Publishing LLC, a Print-on-Demand book publishing service for professionals that also releases e-books in partnership with BookZone. For links to some of Snow’s previous articles, see:

http://www.u-publish.com/media.htm.

e-Content Resources

Visit the Web sites on the following list to learn more about current e-rights issues.

Jonathan Kirsch

General Counsel of PMA

http://www.kirsch-mitchell.com

“Liberation Musicology”

An article by Eben Moglen on Napster

http://www.thenation.com/doc.mhtml?i=20010312&s=moglen

Lloyd L. Rich

The Publishing Law Center

http://www.publaw.com

National Writers Union

Publication Rights Clearinghouse

http://www.nwu.org/prc/prchome.htm