Charlie Stross’s vision of the Coase theorem, as applied to publishing

Google or Apple have a suf­fi­ciently large cash pile that they could take out a major­ity stake in all of the Big Five – it would only take on the order of $10 bil­lion. Also bear in mind that the paper pub­li­ca­tion side of these orga­ni­za­tions could remain largely unaf­fected by this takeover, inso­far as they could still be oper­ated as prof­itable com­mer­cial busi­ness units. The focus of the takeover by Google would be on the elec­tronic side of the indus­try. The pur­chaser would effec­tively have acquired the exclu­sive elec­tronic rights to roughly 300,000 commercial-quality books per year in the US mar­ket space. They could pro­vide free pub­lic access to these works in return for a roy­alty pay­ment to authors based on a for­mula extrap­o­lat­ing from the known paper sales, or a flat fee per down­load; or they could even put the authors on pay­roll. The cost would be on the order of a few bil­lion dol­lars per year – but the ben­e­fit would be a gigan­tic pool of high-quality content.

From an author’s point of view, the ben­e­fits should be obvi­ous. Hav­ing your books given away free by FaceAp­ple­Goog­Book max­i­mizes your poten­tial read­er­ship, while retain­ing print roy­al­ties and some sort of licens­ing stipend from FaceAp­ple­Goog­Book should main­tain your income stream. Win on both counts!

Such a buy­out would amount to a whole­sale shift to a promotion-supported model for book pub­lish­ing. Google would pre­sum­ably use free book down­loads to drive tar­geted adver­tis­ing and col­lect infor­ma­tion about their users’ read­ing habits and inter­ests. Apple might use the enor­mous free con­tent pool as a lure for a shiny new pro­pri­etary iReader hard­ware device. Face­book could tar­get the authors, wheedling them to pay for pro­mo­tional place­ment in front of new read­ers. The real ques­tions are: is there enough money in a new shiny iReader device or the AdWords mar­ket (indeed, the adver­tis­ing indus­try as a whole) to sup­port the pub­lish­ing sec­tor as a pro­mo­tional loss-leader; and, would this get FaceAp­ple­Goog­Book some­thing they don’t already have?

There is more here.  I see Google as the natural purchaser here.  By having exclusive rights to book content for its search service, it would cement its dominant position in search for a long time to come.

You should note, however, that Stross is only speculating and he sees a real barrier to his proposed solution, namely:

The dis­mal answer [as to why this doesn’t happen] prob­a­bly lies in the mare’s tale of con­tracts and licens­ing agree­ments and legal boil­er­plate that under­pins the pub­lish­ing indus­try.

The pointer is from Ted Gioia.


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