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industry has been celebrating the supposed defeat of Napster. The
Court of Appeals for the Ninth Circuit has affirmed the grant of a
preliminary injunction that may well have the effect of closing the
service down completely and ending the commercial existence of
Napster's parent (that is, unless the record companies agree to an
implausible deal Napster has proposed). But despite appearances, what
has happened, far from being a victory, is the beginning of the
industry's end. Even for those who have no particular stake in the
sharing of music on the web, there's value in understanding why the
"victory"over Napster is actually a profound and irreversible
calamity for the record companies. What is now happening to music
will soon be happening to many other forms of "content" in the
information society. The Napster case has much to teach us about the
collapse of publishers generally, and about the liberative
possibilities of the decay of the cultural oligopolies that dominated
the second half of the twentieth century.
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 offered for sharing among the network's listeners
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. Napster itself--as it kept
pointing out to increasingly unsympathetic courts--maintained no
inventory of music: It simply allowed listeners to find out what
other listeners were offering to share. Almost all the various
sharing programs in existence can switch from official Napster to
other sharing facilitators with a single click. And when they move,
the music moves with them. Now, in the publicity barrage surrounding
the decision, 60 million Napster users will find out about OpenNap,
which cannot be sued or prohibited because, as free software, no one
controls its distribution and any lawsuits would have to be brought
against all its users worldwide. Suddenly, instead of a problem posed
by one commercial entity that can be closed down or acquired, the
industry will be facing the same technical threat, with no one to sue
but its own customers. No business can survive by suing or harassing
its own market.
The music industry (by which we mean the
five companies that supply about 90 percent of the world's popular
music) is dying not because of Napster but because of an underlying
economic truth. In the world of digital products that can be copied
and moved at no cost, traditional distribution structures, which
depend on the ownership of the content or of the right to distribute,
are fatally inefficient. As John Guare's famous play has drummed into
all our minds, everyone in society is divided from everyone else by
six degrees of separation. The most efficient distribution system in
the world is to let everyone give music to whoever they know would
like it. When music has passed through six hands under the current
distribution system, it hasn't even reached the store. When it has
passed through six hands in a system that doesn't require the
distributor to buy the right to pass it along, it has already reached
several million listeners.
This increase in efficiency
means that composers, songwriters and performers have everything to
gain from making use of the system of unowned or anarchistic
distribution, provided that each listener at the end of the chain
still knows how to pay the artist and feels under some obligation to
do so, or will buy something else--a concert ticket, a T-shirt, a
poster--as a result of having received the music for free. Hundreds
of potential "business models" remain to be explored once the
proprietary distributor has disappeared, no one of which will be
perfect for all artistic producers but all of which will be the
subject of experiment in decades to come, once the dinosaurs are
No doubt there will be some immediate pain that will
be felt by artists rather than the shareholders of music
conglomerates. The greatest of celebrity musicians will do fine under
any system, while those who are currently waiting on tables or
driving a cab to support themselves have nothing to lose. For the
signed recording artists just barely making it, on the other hand,
the changes are of legitimate concern. But musicians as a whole stand
to gain far more than they lose. Their wholesale defection from the
existing distribution system is about to begin, leaving the music
industry--like manuscript illuminators, piano-roll manufacturers and
letterpress printers--a quaint and diminutive relic of a passé
The industry's giants won't disappear overnight,
or perhaps at all. But because their role as owner-distributors makes
no economic sense, they will have to become suppliers of services in
the production and promotion of music. Advertising agencies,
production services consultants, packagers--they will be anything but
owners of the music they market to the world.
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; though
each audience member will be paying less, the artist won't have to
take the small end of a split determined by the distribution
oligarchs who have cheated and swindled them ever since Edison. For
those who worry about the cultural, economic and political power of
the global media companies, the dreamed-of revolution is at hand. The
industry may right now be making a joyful noise unto the Lord, but it
is we, not they, who are about to enter the promised land.
Jason Epstein's Book Business: Publishing Past Present and Future is the third memoir of a major American life in book publishing to reach print in less than two years. It is at once a sign that the guard is changing and a recognition that the business has already changed. It is also, in the case of the 72-year-old Epstein, an opportunity to gaze into the crystal ball to predict the changes to be, something he has been rather good at during the course of his long career.
Simon & Schuster's Michael Korda got the triumvirate rolling in 1999 with Another Life, gossipy and entertaining and novelistic, like the books Korda often publishes. The New Press's André Schiffrin--famously ousted from Random House's Pantheon Books, the once independent imprint his father started--followed suit more recently with The Business of Books, the kind of polemic he has sometimes featured on his list [see Daniel Simon, "Keepers of the Word," December 25, 2000].
It's not surprising, then, that the tone pervading Epstein's memoir--which began with a series of lectures he gave at the New York Public Library, formed two essays in The New York Review of Books and was coaxed into a book by Norton president Drake McFeely--is cool and elegant and full of the gravitas of a man who wanted to be a great writer and instead ended up publishing many such, Morrison and Mailer and Doctorow among them.
He arrived at Random House in 1958, having deemed it time to leave Doubleday when he was prevented from publishing Lolita there. While at Doubleday he had founded Anchor Books and with it the trade paperback format in America. He retired as Random's editorial director in 1998, and during the four decades in between started the Library of America, a unified series of reprints of great American literature; The Reader's Catalog, a kind of print precursor to Amazon; and The New York Review of Books. He had a reputation as a brilliant editor but went beyond that to envisage change and make it happen, and in the process made himself into a pillar of the New York intellectual establishment.
"If I have any regrets, I can't think what they are," he declared during an interview recently, sipping homemade espresso at his large kitchen table in an opulent downtown apartment that could double as the upscale set for one of Woody Allen's Manhattan tales. He still edits authors he's been associated with but now does it from home. He prefers to be based there rather than in the Random corporate offices, wishes to put space between himself and an "increasingly distressed industry" mired in "severe structural problems." Prominent among them are a chain-driven bookselling system that favors "brand name" authors and often returns other new books to their publishers after only a few weeks on the shelves, before the titles have a chance to establish themselves; and a bestseller-driven system of high royalty advances that often do not earn back the money invested, a system that ratchets up unrealistically high sales expectations for new titles overall, and in so doing makes it increasingly difficult to publish certain kinds of books.
One-third of the way through his slim text, Epstein writes that his career has demonstrated an "ambivalence toward innovation." Ambivalence also pervades this elegiac book. Perhaps it is inevitable when a man looks back to his youth and forward to a future in which he will not play a major part, even if he is hopeful about that future. Perhaps, too, it is inevitable when confronting the distress signals of an industry he has spent his life in and clearly loves. Epstein shares his visions of a publishing future liberated electronically, but that future harks back to a deep-seated nostalgia, a longing for what was. His book seems to predict that technology in the form of the Internet will restore to the book business a certain lost rightness from the past.
His first chapter, like Dickens's Christmas tale, moves back and forth among past, present and future in an attempt to limn the larger changes of the past fifty years and what may yet unfold. The rest of the book is chronologically structured. It follows Epstein's career and the transformation of publishing from primarily small-scale, owner-operated enterprises rooted in the 1920s "golden age" of Liveright and Knopf to the "media empires" of today, which are forced to operate within an "overconcentrated," "undifferentiated" and fatally "rigid" bookselling structure. Now, he says, "there can't be Liverights or Cerfs because the context is so different. Roger Straus is the very last of them," and even he has sold his company to the German firm von Holtzbrinck.
Publishing must return to being "a much smaller business again," Epstein is convinced. "It has to, it's a craft and can't be industrialized any more than writing can. It's about to undergo a huge structural shift and there's nothing the conglomerates can do about it. The marketplace has shifted out from under them: the system of big money bestsellers defeats the possibility of building a sustained backlist. And without a sustained backlist, publishing cannot function in the long term. Providentially, just as the industry was falling into terminal decadence, electronic publishing has come along."
Epstein is in no way predicting the demise of print. Rather, his future is predicated on a kind of universal electronic Reader's Catalog, "much like Amazon" but far beyond it, "multilingual, multinational, and responsibly annotated. People will access it on their computers at home, in the office, and in kiosks like ATMs. It will be possible to browse those books, and downloading technology will eventually solve the problem of making it possible to buy those books. They won't exist in print until they're actually bought.
"There is no room on the Internet for middlemen, who sell the same product as their competitors, competing on the basis of price and service, and in so doing eat up their margins." Epstein is of course speaking of the Amazons and B&N.coms of today. "I think Amazon can't be here that much longer," says the man who sat at this same kitchen table doling out advice to its CEO, Jeff Bezos, a few years back.
As for brick-and-mortar stores, "the chains aren't tenable, either. They never were. The superstores have become what the old mall stores were. There are far too many of them, Waldens with coffee bars, and they will shrink. Stores run by people who love running bookstores will arise spontaneously like mushrooms and find a way to stay in business once the chains begin to recede."
And the conglomerate publishers? "I think they can show some financial progress for some years by cutting costs and cutting out redundancies, but eventually they'll find themselves with expensive traditional facilities that are increasingly irrelevant. They'll have to offload many functions on to specialist firms. In the end, they in turn will look for a buyer if they can find one. They should have noticed that the previous owners were all too happy to sell."
Meanwhile, authors will have found a way to bypass their publishers by going directly to the web. People will start independent authors' websites. Books will be much cheaper. Authors will have a much larger share of the revenue.
Stephen King has already gained notoriety in trying to do so. But the spectacular starting bang of Riding the Bullet, done in conjunction with his publisher, Simon & Schuster, attenuated when he tried to serialize online a novel, The Plant, on his own. A downturn in paying customers for the later chapters led King to abandon the project. Asked about this, Epstein insists, "It's like the days of the early cars that ran off the road into the mud. People said cars would never work. Well, one of these days e-publishing will work."
Of other experiments now being tried Epstein is openly dismissive, and he sees a kind of Darwinian process filtering chaff from grain. Mighty Words and similar online publishers "don't know what a book is," he contends. "But people know what a book is. Human beings are designed to distinguish value, and in my opinion that problem will take care of itself."
He disregards the tremors that have gone through the publishing houses ever since B&N.com announced it was getting into the business of publishing books. Barnes & Noble Digital was formed the first week in January to compete with the new electronic subsidiaries of traditional publishers, which are bringing out digital versions of new titles readable on PCs or dedicated devices, as well as original works specifically created for electronic distribution. In addition, they are digitizing backlist and out-of-print books that can be reprinted in very small quantities in a process known as print-on-demand."It's yet another premature entry," says Epstein. "B&N's publishing experience is limited to a remainder operation. That's entirely different from bringing out original works."
While Epstein criticizes the proverbial naysayers' laughing at those early cars stuck in the mud, at the same time he cautions, "I don't think an author who has worked hard to create something of value will want to risk it in the electronic format at this point." He says bookstores will wind up selling new titles at much lower prices than is now the case, $10 or so, but "can't figure out" how that will be done in the black. His predictions are compelling, but they are also much too vague--for instance, he sets out no time frame or actual mechanics for what he believes will transpire.
The bloat of the superstores is something publishers have worried about for years, almost from their rollout. This holiday season's flat sales at the three biggest chains; the margin-slashing of Amazon; and the re-energizing of the independent stores through a marketing program called Booksense, which includes web-based retailing, all serve to illustrate Epstein's points. Borders went so far as to put itself on the block, but found no willing takers. Recent murmurs about B&N's CEO Len Riggio entertaining a buyout offer from media conglomerate Gemstar-TV Guide International, which has aggressively entered the e-book technology market, did not result in a deal but also were more than simple gossip.
The past twenty years have seen the RCAs, MCAs, Advance Publications and the like learn their lessons and abandon book publishing, as Epstein has noted. Other conglomerates have already tried to offload their publishing components and in time will try again. But it also can't be ignored that companies like the German-based Bertelsmann (which acquired Bantam, Doubleday Dell and Random House and consolidated them) and von Holtzbrinck (which has bought Holt, St. Martin's and Farrar, Straus & Giroux) have their roots in the book business itself. They are therefore not as likely to exit the scene as Epstein would have us believe.
Undoubtedly, many of Epstein's electronic dreams are prescient and will one day come to pass. The companies that first turn them into reality, though, will likely be turning out works in the professional, scholarly, reference and educational sectors rather than in the trade world he knows so well. But although the Internet will change book publishing profoundly and in ways even Jason Epstein can't predict, other forces are at work as well and shouldn't be ignored.
A couple of years ago a brilliant and rich entrepreneur who also happens to be a profoundly bookish man devised a model, not unlike Epstein's nostalgic vision, of devolved companies publishing real books that share a central financial source. It is called the Perseus Group. It is still in its early days, far too soon to know whether it will last. But Epstein's longing for a more civilized, human-scale publishing business is shared by many. The Internet may help bring it about, but it won't do everything.
Bill Gates for President--next time. Now that we've gotten used to
millionaires running for the presidency, why not a billionaire and a
self-made one at that? At least Gates is aware that the biggest problem
in the world is not how to make some Americans even wealthier but how to
deal with the abysmal poverty that defines the condition of two-thirds of
Odd as it may seem, it took the richest man in the world in a dramatic
speech last week to remind us that no man is an island, and that when
most of the world's population lives on the edge of extinction, it mocks
the rosy predictions for our common future on a wired planet.
Gates shocked a conference of computer industry wizards with the news
that the billions of people who subsist on a dollar a day are not in a
position to benefit from the Information Age. He charged that the hoopla
over the digital revolution, which he pioneered, is now a dangerous
distraction from the urgent need to deal seriously with the festering
problem of world poverty. Gates, who has donated an enormous amount to
charity, also made the case that private donations alone will not solve
the problem, and that massive government intervention is needed.
"Do people have a clear idea of what it is to live on $1 a day?" Gates
asked the conferees. "There's no electricity in that house. None. You're
just buying food, you're trying to stay alive."
The "Creating Digital Dividends" conference he addressed was one of
those occasions in which the computer industry indulges the hope that as
it earns enormous profits, it is solving the major problems facing
humanity. The premise of the conference was that "market drivers" could
be used "to bring the benefits of connectivity and participation in the
e-economy to all the world's 6 billion people."
As reported by Sam Howe Verhovek in the New York Times, Gates, who was
the conference's closing speaker, doused that hope by denying that the
poor would become part of the wired world any time soon. In a follow-up
interview, Gates amplified his view of what occurs when computers are
suddenly donated to the poor: "The mothers are going to walk right up to
that computer and say, 'My children are dying, what can you do?' They're
not going to sit there and like, browse eBay."
Gates, who has long extolled the power of computers to solve the
world's problems, criticized himself for having been "naïve--very naïve."
He has shifted the focus of the $21 billion Bill and Melinda Gates
Foundation from that of donating Information Age technology to meeting
the health needs of the poorest, beginning with the widespread
distribution of vaccines.
The New York Times reported that Gates "has lost much of the faith he
once had that global capitalism would prove capable of solving the most
immediate catastrophes facing the world's poorest people, especially the
40,000 deaths a day from preventable diseases. He added that more
philanthropy and more government aid--especially a greater contribution
to foreign health programs by American taxpayers--are needed for that."
Given that Gates is presumably the biggest of those taxpayers, that is
the most provocative challenge to the complacency of the
"free-markets-and-trade-will-solve-everything" ideology that dominates
the thinking of both major parties. US foreign aid to the poor
represents a pathetic fraction of our budget, while we devote ever larger
sums to building a sophisticated military without a sophisticated enemy
in sight. Yet those misplaced priorities went totally unchallenged by the
presidential candidates of both major parties.
Poverty is the major security problem both within and without our
country. These days the have-nots have many windows to the haves, and
resentment is inevitable. It is the breeding ground of disorder and
terror, and it is absurd to think that a stable new world order can be
built on such an uneven foundation.
One of the ironies of the wired world is that those terrorists in
their remote mountain camps are wired into the Internet, which has
facilitated the coordination of their evil plans. The terrorists have all
the laptops and cellular phones they want, but they depend for their
effectiveness on recruiting from the ranks of the alienated poor who
don't have medicines, food or a safe source of water.
By any standard, the proposed merger of America Online and Time Warner, currently under review in Washington, is enormous. Even in this era of mega-mergers, the marriage of the world's largest Internet service provider (ISP) and the largest media conglomerate (which directly controls almost one-fifth of the nation's cable subscribers and which, through a relationship with AT&T, has a stake in another 30 percent) stands out above the rest. What we don't see, however--or rather won't see, so extensive is the web of mergers and acquisitions, joint ventures and "co-branded properties" that ensnares the mass media today--may be the biggest story of all: the transformation of the Internet into a collection of commercially driven "walled gardens."
Given cable's clout (roughly two-thirds of all households currently subscribe), the broadband networks that AOL-TW, AT&T and other cable operators are in the process of introducing will very likely become the Internet delivery platform of choice for most Americans in the years to come. Wireless and satellite broadband transmissions are still two to three years off, and even if the phone companies' new digital subscriber line (DSL) connections manage to maintain their small broadband market share (roughly 20 percent), cable's fatter pipes will allow it to win the race to deliver the rich-media content of the next-generation Internet.
While the basic structure of the Internet itself won't change--it will range as far and wide as ever--the means through which subscribers gain access to its varied resources, using systems modeled on cable's closed video platform, will gradually constrict. New forms of interactive television, offering what amounts to "Internet Lite" via proprietary set-top boxes, will substitute ease of use for freedom of choice, featuring what AOL-TW euphemistically refers to as "next-generation branded content." Over time, as cable broadband takes hold, the Internet for most Americans will evolve into what media historian Ben Bagdikian predicts will be "the biggest shopping mall in the world."
Before he bought his way into the cable market, AOL's Steve Case was a leading figure in the movement to break the cable industry's stranglehold on the growing broadband market. But on the day AOL became an owner of cable with the announcement of its merger with Time Warner, that changed. In the words of TW's Gerald Levin, "We're going to take the open access issue out of Washington and out of City Hall and put it into the marketplace." In other words, AOL-TW, AT&T and other cable giants will remain the Internet's ultimate gatekeepers. In the absence of new regulatory safeguards, there's nothing to prevent cable operators from narrowly defining the Internet experience for their subscribers in any number of ways. The cable ISP, for example, can determine both the "start page" at which the user's online travels begin and the onscreen "real estate" and navigational menus, in which the user makes programming choices. It will even be possible for network operators to manage online traffic to expedite the delivery of affiliated content while relegating competitive material to second-class service.
Unfortunately, the FCC under chairman William Kennard has thus far taken a hands-off position. FTC chairman Robert Pitofsky appears to be much more keenly aware of what's at stake. In the next few weeks, the FTC and the FCC will decide what kinds of conditions, if any, need to be imposed on the merger. Although formally opposed to the AOL-TW alliance, a coalition of consumer and public interest groups has asked that--if it is to be approved--there be at least two basic safeguards. One would require AOL-TW to agree to a policy of open access and nondiscriminatory transport, insuring that competitive ISPs and websites would have a legal right to use the company's broadband pipes--including the set-top boxes that will become the crucial link between cable's past and interactive television's future. The other would cut the ownership ties between AOL-TW and AT&T. Without new cross-ownership restrictions, these two affiliated companies would have a chokehold on high-speed Internet content and distribution.
Open access to the broadband Internet is essential if we are to insure that a diverse range of voices has a chance of reaching out to citizens in the new era of high-speed communications. And once such access is secured, public-interest, nonprofit and other alternative voices must be prepared to offer interactive programming that will make a difference. For in the new world being created by AOL-TW and others, that kind of programming, free of brand identification, product tie-ins and other e-commerce opportunities, simply won't be on the agenda.
Once upon a time there was a struggling young California band. Its music was too loud and its image too unpolished for MTV.
The pace of recent events made one of the most significant rulings in
the history of American antitrust law seem like an anti-climax.
This article is adapted by permission from Database Nation: The Death of Privacy in the 21st Century (O'Reilly).
Judge Thomas Penfield Jackson's factual findings in United States v. Microsoft, released November 5, spell the doom of Microsoft as we have known it.
The recent CBS-Viacom-bination--at $37 billion, the largest media deal ever--mirrored previous purchases, like Disney's acquisition of Capital Cities/ABC and Time Warner's taking of Turner Broadc