When Amazon decided to try to fight publishers by telling them they were going to sell e-books at a fixed price ($9.99), Apple came in with their iPad and another e-book store to give publishers the option to sell books at a range of prices ($5.99 to $14.99).  The publishers balked, and Amazon cut their ability to sell on Amazon, causing some in-fighting until Amazon finally capitulated and gave in to publishers for some sort of variable pricing arrangement.

Lots of industry experts in publishing and tech have chimed in.  I think the best article I’ve read, but still far from reality, is author and ex-publisher Paul Carr’s article on TechCrunch “Hey, 1997 – Macmillan called, they want the Net Book Agreement back.”  Good job for Mr. Carr to point the fingers at the publishers, but he’s still off track on the reality of online publishing of any material.  The only people who are capable of understanding what will happen with the e-book market (and the e-music market, and the e-video market) are those who understand the Austrian School of Economic theory.  I don’t know, right now, of any Austrians who are addressing this particular event, but it’s easy to consider what exactly will happen in the future: prices of easily copied content will be forced to zero.

Austrians live and die by supply and demand.  Even with government laws and regulations that try to create artificial scarcity (copyright laws, for example), the market of content consumers will too easily be able to get around whatever scarcity the publishers create.  Usually that scarcity is circumvented through piracy.  As long as there is a near infinite supply of an item, the price will fall to zero for those who are unwilling to go through official methods to get the product.

It doesn’t matter how many steps publishers take to try to hamper the efforts of casual pirates (such as those who grab a movie or MP3 off of a torrent site), increasing fines, increasing threats, changing international laws to try to stifle the flow of information.  There is no way to stop this progress now that it has begun.

As any Austrian will tell you, the only way to make money in a market is to offer services or products that people want at prices that are aligned with supply and demand.  I didn’t say “at prices that people are willing to pay.”  Since the supply of electronic content is near infinite, content creators have to find new ways to generate income.

In terms of music, bands will eventually stop working on selling MP3s and likely just give them away for free.  The internet, and torrent sites, is the equivalent of a gigantic radio station.  MP3s will be downloadable for free so that musicians can show fans what their music is like.  In order to make a profit, musicians will have to charge realistic prices for their live performances, or off value added options to fans that are limited in supply.  How about giving away MP3s regularly for free, but offering fans access to a fan club website where they can interact with the band?  If they don’t pay for access, they can still appreciate the music they like.  If they love the band enough, they’ll gladly pay for fan site access or for tickets to the live shows.

The next step for bands to acquire a realistic income for the live performance work they provide is to get rid of the ticket brokers and move to an eBay-like auction site for concert tickets with proceeds from all sales going directly to the band, rather than the ticket brokers.  This will remove the “flat cost” that bands get when they sell tickets at a fixed price, which is a ridiculous idea (akin to Amazon trying to sell infinitely available e-content for a fixed price instead of zero).

But how would an author sell their own time if they just gave away their books?  That’s a difficult question.  Many authors today, amateurs most of us, are just blogging in hopes of getting pennies a day in advertising on our blogs.  It’s not very unique and there is a seemingly endless supply of blogs covering the same topics over and over.  If a blogger/author writes well and in a way that readers appreciate, there are numerous ways for these authors and bloggers to generate an income without charging for content.  One such way might be to allow readers to read their blogs for free, but interaction with the site comes at a monthly subscription.  You can read the blogs freely, but if you want to leave a comment and interact with other readers or the author, you have to pay.

The same case can be said for book authors — the difference between a blog and an e-book is slim, if not none.  Authors can release their e-book online for free (in parts, or wholly) and then offer readers the  opportunity to pay the author for online interaction with the book (in a private forum or through private comments).  Maybe the author’s website could show a limited amount of each comment left, hiding the rest so that readers are enticed into subscribing to read the whole list, and leave their own comments.

It’s crazy that musicians, authors and video directors want to cry about being artists, but then demand payment for something they’ve created.  Those who paint oil on canvas usually paint ahead of time with no payment until someone finds a reason to pay them for their limited-supply oil painting.  Only then do they get paid, but the oil painting is limited to one unique piece.  Supply and demand works.  Authors who create online content or content that is easily copied can also do the same thing: maybe offer readers access to limited supply content that is difficult to copy or where time is of the essence in offering value.  An author could offer subscribers access to previews of the next book in a series, or insight into the character development stage, things that others could login and copy but might be in such high quantity that it is easier to just pay the $2 or $3 a month for access to the site’s private content.

Regardless of what the end result will be for delivering income to artists for their unique services and products, rather than electronic products that are easily distributable, the reality is that no matter how much the distributors (Amazon, the publishers, even the authors directly on blogs) want to stifle the price falling to zero, it will happen.  It’s already happening at a record pace if you look at any torrent search site for current books and music and videos.  They can not stop the market, even if the market is considered illegal.

Authors and content creators  should be thinking of new ways to offer unique services and products immediately to their readers and fans.  There are unlimited options and ideas out there, and the day will come faster than expected when Amazon, iTunes and the publishers are just useless for distributing content that can already be distributed freely by others through legal and illegal means.

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