The Future of the Publishing Industry and International Price Discrimination

Following-up on Perry's excellent post about the Supreme Court decision in Kirtsaeng v. John Wiley & Sons, Inc., I just wanted to offer some brief thoughts.  A couple months ago, I saw this post from economics blogger Tyler Cowen, titled "What does equilibrium look like for the book business", in which he offers the following predictions:

I expect two or three major publishers, with stacked names (“Penguin Random House”), and they will be owned by Google, Apple, Amazon, and possibly Facebook, or their successors, which perhaps would make it “Apple Penguin Random House.”  Those companies have lots of cash, amazing marketing penetration, potential synergies with marketing content they own, and very strong desires to remain focal in the eyes of their customer base.  They could buy up a major publisher without running solvency risk.  For instance Amazon revenues are about twelve times those of a merged Penguin Random House and arguably that gap will grow.

There is no hurry, as the tech companies are waiting to buy the content companies, including the booksellers, on the cheap.  Furthermore, the acquirers don’t see it as their mission to make the previous business models of those content companies work.  They will wait.

Did I mention that the tech companies will own some on-line education too?  EduTexts embedded in iPads will be a bigger deal than it is today, and other forms of on-line or App-based content will be given away for free, or cheaply, to sell texts and learning materials through electronic delivery.

Much of the book market will be a loss leader to support the focality of massively profitable web portals and EduTexts and related offerings.

Perhaps his take is a bit radical and speculative.  I can't say for sure what the publishing business will look like.  But I suspect that it will look very different than it does today.  Amazon and Apple are currently working on projects for resale of e-books.  That would be a game-changer for the publishing business:

Scott Turow, the best-selling novelist and president of the Authors Guild, sees immediate peril in the prospect of a secondhand digital thrift shop. “The resale of e-books would send the price of new books crashing,” he said. “Who would want to be the sucker who buys the book at full price when a week later everyone else can buy it for a penny?”

He acknowledged it would be good for consumers — “until there were no more authors anymore.”

Libraries, though, welcome the possibility of loosened restrictions on digital material.

“The vast majority of e-books are not available in your public library,” said Brandon Butler, director of public policy initiatives for the Association of Research Libraries. “That’s pathetic.”

Publishers will try to fight technology for as long as they can, but in the long run, I think, they will lose this battle.  Authors, by contrast, will do OK, I predict.  But the business model will look very different.  As Christian Haeberli noted in the comments to the last post:

Looks like there are authors and authors: Those who try to make a living of royalties, and (tenure-track) professors with secure incomes but having to "publish or perish" rather than selling their research outputs.

I think there will be room for different approaches.  You can write for free or you can write for money (I do both!), depending on your particular goals.

There are likely to be many more court battles about all of this. But the Kirtsaeng v. John Wiley case seems kind of outdated already.