Kindle Fire

Yesterday as I listened on the radio to NPR’s report on the “wild frontier of e-books” I connected the concept of public goods as introduced in Chapter 12 of the text. As reported by Lynn Neary in her piece, Kindle Offers Lending Library to Customers, Amazon is treading new waters in an effort to sell more Kindles – which in turn is designed to sell more books. In short, Amazon has created a lending library of books, available to Amazon Prime members for two weeks for free. Members can read (and perhaps in many cases just review and consider a purchase) books by authors and publishers without their permission. This is similar to the example given by Dr. Tufte in his lecture on externalities. Dr. Tufte instructed that individuals taking music from their MP3 players and uploading it are attempting to make a public good without the permission of the producers. The same is now happening on a much larger scale and not for the little savings of a few friends, but for the greater profits of Amazon.

In a type of follow-up report just today, NPR reported that Amazon is actually selling the Kindle Fire at a loss. Obviously there is more to Amazon selling the Kindle Fire at a loss so Prime members can access the lending library for free (perhaps a further loss). The lending library gives Amazons’ customers more exposure to books, that can subsequently be purchased, than they might otherwise get without a free look. However, authors and publishers are mad when they find out their books are included in the lending library without their permission. Author Robert Goolrick testifies that his new book "A Reliable Wife" would never ever have become a best seller without the support and hand-selling of independent book sellers. He says anything that weakens independent book sellers weakens the entire literary discourse in the country and he is all for a healthy and vibrant literary discourse. Additionally, author Brian DeFiore contends that giving away someone's creative work as an incentive to buy some other service or product – whether it's legal or not – certainly feels problematic. While Amazon might counter that exposure will ultimately drive book sales, which is good for both them and the authors and publishers, the concept of expanding these creative works into the realm of public good through a free lending library may become a disincentive to authors. In the meanwhile, Amazon's market dominance allows it to forge ahead without the need for consensus from its content suppliers.


Ethan said...

Kindle Fire

Kindle’s approach to selling the new product, the Fire, could lead them into trouble. Offering the book library for two weeks, without the author’s permission could be considered making the copyrighted materials a public good. The fact that it is a temporary trial helps Kindle’s position. The exposure of the books during the trial period should increase the sales of these books, increasing the author’s revenue.

Selling the Fire at below cost seems to be a common sales approach in consumer electronics. Many gaming systems have been sold below cost in the same manner. The company relies on the sales of the games to offset the loss in the gaming system. Kindle is using the same approach. They are selling the Fire at a loss and will rely on the sales of the e-books to generate profits.

Dr. Tufte said...

Would you believe that I kinda', sorta' don't know what to say about this issue?

On the one hand, creators have a right to their content. But, their business model relies on the supply chain limiting access, not on any exercise of monopoly power on their part. The part of the supply chain they actually control is the language the write in: if they wrote in, say, Greek, they could use translation as a barrier to entry just like they are using independent booksellers as a way to limit competition through the supply chain.

But they don't because that would be silly. If so, isn't it silly to make the same argument about traditional versus new channels of distribution?

On the other hand, prior to contemporary problems with intellectual property (which started with MP3s in the late 90s), there was evidence that rates of return to inventors were lower than those of the society that benefited from the invention. This is a symptom that calls for raising the former and lowering the latter. Protecting content creators is one way to do that.

Dr. Tufte said...

-1 on Thomas for no title.

Thomas said...

Thanks for the reminder on the title. Now herewith included!

Joe said...

There is a first time for everything! I actually noticed a grammatical error, and not only that, Dr. Tufte is the culprit: "control is the language the write in." Surely a typing error but I’ll take what I can get.

This is an interesting topic that I think demonstrates the power technology can have on the supply chain as well as the weakening position many content creators find themselves in. Maybe what is most revealing about each of these reports from NPR is that Robert Goolrick (one of the authors quoted as being concerned about Amazon’s increased market power) is in fact a Prime Member of Amazon! He does not want his book offered for free yet he has chosen to support the strategy by reading other authors’ books for free. I don’t fault him for it, I’m just saying that if anyone had reason to boycott Amazon’s new strategy it would be him.

This simply seems like a power play—Amazon gains more market power and simultaneously increases their publishing branches allure to authors. For this to be a win-win for authors and Amazon, authors have got to be hoping there are a lot of slow readers out there—two weeks is not that long.

sjenn said...

I'm not sure I understand the difference between being able to download a book free for two weeks, and checking out a book from a traditional library for two weeks. While I'm sure there are some technicalities that have not been discussed, I don't feel that these author's complaints are well founded. Amazon is surely paying these authors or their publishers a royalty or fee of some sort to have access to their books.

Joe said...

Actually there have been cases in which publishers were not even aware of one of their books being on Amazon's Premium Membership area until after the author had contacted them. Clearly there is a lot to work out here.

Dr. Tufte said...

+1 to Joe for spotting my mistake. I make a lot more of them than you might think.

Joe: I think the Goolrick situation speaks to the fact that no one quite understands how all of this is going to pan out.

sjenn: I don't see the difference either, but there is one, or this wouldn't work.

Joe: FYI - Amazon will sell you a reprint of one of my scholarly articles that isn't covered by copyright, even though you can download it for free.