Felix Salmon

Ryan Avent’s 90-page Kindle single, The Gated City, is a bargain at $1.99. It was produced in close consultation with the Kindle Singles editor, David Blum — the gatekeeper who determines what gets chosen to be a Kindle Single, and what gets relegated to the long tail of Kindle Direct Publishing.

We’re running a great excerpt of Ryan’s book here at Reuters — it’s headlined “How home prices helped kill the first tech boom”. Basically, soaring home prices in Silicon Valley discouraged entrepreneurship, encouraged the flight of qualified workers to other locales, and meant that during the dot-com boom, Silicon Valley actually created fewer companies, per capita, than the country as a whole. With any luck, reading it (or other excerpts, here) will encourage you to buy the whole thing.

Meanwhile, last week Gothamist published its own debut 72-page feature story, in the same format — a 72-page e-book. After putting out a call for pitches in July, Gothamist publisher Jake Dobkin decided that the first $5,000 commission would go to Patrick Kirkland — one of the jurors in the infamous New York “rape cop” trial. He’s not a professional writer, and the story is a bit clunky at first, but he becomes very fluent during the crucial central part of the book, where he explains exactly why and how the jury managed to unanimously acquit both police officers of rape. As someone who found the verdict quite shocking, I can say that he convinced me, too, that the jury made the right decision.

Interestingly, Amazon’s Blum rejected Kirkland’s story as a Kindle Single, calling it “an interesting piece”, but not “right for Singles”. What difference does the rejection make? Well, the Amazon business model is that Amazon takes 30% of the proceeds of e-books, while the author/publisher gets 70%. That’s the deal Avent got. But if you just upload your book to the Kindle store, as Gothamist did, then you only get 70% of the proceeds if you’re charging $2.99 or more. If you stick to the $1.99 price point, then Amazon takes 70% 65%, and you’re left with just 30% 35%.

This is a serious incentive to get past David Blum’s velvet rope — not only will he help you with promotion, cover design, and the like, but he can also give you a much greater share of the proceeds for books sold for less than $2.99.

So when Gothamist published the book, it was $1.99 on iBooks, and $1.99 for the direct PDF download — but $2.99 on Kindle. And then things went exactly according to plan. Apple featured the book on the front page of the iBooks store, and Amazon — as it’s allowed to do — unilaterally cut the price of the book by 33%, to match Apple’s pricing. But it’s still governed by the initial pricing plan, so Gothamist gets 70%, rather than 30% of the current $1.99 price. (So, buy it!)

We’re still in the very early days of micropayments for books, but my gut feeling is that people are increasingly willing to pay small sums for shorter pieces in the 5,000 to 30,000 word range — much as they’re increasingly willing to pay small sums for apps. And the pricing models are, of course, still very much in flux. But if Amazon’s willing to give their Kindle Single authors 70% of the proceeds even after helping them with design and marketing, they should also offer the same deal to publishers who do all that work themselves.

Martin Niesenholtz, the head of digital at the NYT, clearly hasn’t been taking my advice when it comes to how to build a paywall. Instead, he’s pre-emptively cracking down on a tiny and financially meaningless minority of hypothetical readers who might want to find ways around his wall:

“We will take great pains to make sure that the first-click-free policy isn’t abused in any way,” said Martin Nisenholtz, the Times’ digital chief. “Google has been quite cooperative in terms of setting a limit for the number of free articles that can go in for any one day, so that you can’t just sit and engineer your way into a free use of the website.”

What this says to me is that the NYT is spending too much time designing its paywall, and is disappearing down rabbit-holes best left unexplored unless and until it becomes clear that they need examining.

The NYT‘s paywall is designed to be porous: readers coming in from some other site (Google, Twitter, Facebook, Reuters) will always be able to read the article they’re looking for, even if they’ve used up their monthly quota. As a result, it’s more of a navigation fee than a charge for content.

That’s fine—except Nisenholtz now seems to be backpedaling from that concept, and saying that he’s going to “take great pains” to crack down on people who read a lot of nytimes.com without paying the company.

That’s silly, for three reasons. Firstly, great pains tend to come at non-negligible expense, and there’s no point in spending significant amounts of money unless you think you’ll recoup those costs in extra revenues. In this case, Nisenholtz seems to think that (a) there will be a large number of people trying to find a way around the NYT paywall — and that (b) a significant proportion of those people will end up giving in and subscribing (as opposed to simply going elsewhere), if the paywall is made hard to get around. I very much doubt that he has any concrete evidence that either proposition is true, let alone that both of them are; common sense, then, would dictate that he wait until he gets such evidence before working on bolstering the wall.

Secondly, there are so many ways to get around paywalls—simply deleting your cookies generally does the trick—that there’s no good reason to believe the NYT‘s “great pains” are going to actually work very well in practice.

Finally, the less porous the wall, the more annoying it is—for subscribers and non-subscribers both. That’s simply the way that paywalls work. Strengthening your paywall sends the message that you don’t trust your subscribers, or your subscribers’ non-subscriber friends: you’re treating them as potential content thieves.

Why would Niesenholtz do this? Why won’t he just satisfy himself with raising revenue from loyal readers, rather than trying to prevent people from reading lots of stories? It should be flattering that some people want to read NYT content so badly that they will take the long way round the paywall. Instead, Nisenholtz seems to find it downright threatening. And one possible reason is hinted at by Rick Edmonds:

A Kindle subscription to the Times cost $19.99 a month, and Scott Heeken-Canedy, president of The New York Times newspaper, said that might be indicative of where pricing for full Web access will end up.

If by “will end up” he means “will end up eventually, after we’ve quietly raised the subscription price half a dozen times,” then Niesenholtz’s tactics don’t make sense. But if by “end up” he means “will end up being when the paywall goes live next year”, then they do.

$20 per month is a large amount of money for people to pay for a product they’re used to getting for free, and indeed it’s so large that most of the NYT‘s regular readers will simply refuse to pay it. In that situation, the subset of people who will pay but only if the paywall is a tough one might start becoming relevant.

Niesenholtz says that 15% of current visitors view 20 pages or more per month. But people won’t pay $20 to read 20 pages per month: that kind of money only begins to be worth paying once you start reading a few pages per day, or say 100 pages per month. Let’s say that 5% of current visitors fall into that bucket, and that of that 5%, only one in ten will actually pay $20 a month for website access. (I’m not counting print or iPad subscribers who get free access to the website with their other subscription.)

At that point, Niesenholtz is directly monetizing just 0.5% of his visitor base—a number which is small enough that grabbing a few people who otherwise like to find a way round paywalls could actually make a significant difference.

I think it would be silly to start the paywall experiment at a high $20-a-month price point. Somewhere between $5 and $10 would make more sense. But if the NYT really is considering making nytimes.com a $240-a-year product, then maybe that explains their newfound emphasis on cracking down on those who would try to get around it.

When a big new book comes out, the publisher has two choices. It can allow Amazon to sell the Kindle edition at a much lower price than the hardback, increasing the number of copies sold but possibly cannibalizing hardback sales. Alternatively, it can force Amazon to charge a high price for the Kindle edition, garnering a passive-aggressive note on the website saying “This price was set by the publisher.”

The result looks something like this. All the Devils are Here, published by Penguin Portfolio, is $16.99 on the Kindle; Decision Points, published by Crown, is $9.99. And in return for allowing Amazon to subsidize the Kindle price, it seems that Crown has agreed not to sell the book in Apple’s iBook store:

And here’s the tag cloud for the Kindle edition of All the Devils are Here:

It’s easy to overstate how representative the vocal protestors are, but it’s certainly clear that e-book buyers are price-sensitive. Has an e-book priced at more than $10 ever made it to the top of the Kindle bestseller list?

There’s been an awful lot of weird and unusual PR surrounding The Zeroes, by Randall Lane. My copy has a big white sticker on it: EMBARGOED, it says, until Tuesday June 29 — as though there is hot breaking news buried somewhere in the book. (It’s definitely not in the Vanity Fair excerpt, which came and went with barely a ripple of notice.)

Lane himself maybe hit on a slightly newsier story with an excerpt at the Daily Beast, where he’s “editor-in-large”, whatever that’s supposed to mean. In an article timed to coincide with the book’s publication, Lane talks about Lenny Dykstra, who may have made some slightly sleazy deal with a small company in California:

In the late winter of 2008, an entrepreneur named Richard O’Connor, who had become Dykstra’s favored adviser, introduced him to Shannon Illingworth, the founder of a publicly traded company called Automated Vending Technologies, or AVT, and the two quickly cut a deal. O’Connor told me that on March 25, 2008, Illingworth gave Dykstra roughly $250,000 worth of AVT stock in exchange for plugging the company on Cramer’s website, TheStreet.com, and promising to provide a personal introduction to Cramer.

This is a bombshell of utterly minuscule proportions, especially since Dykstra disclosed his long position in his column. And neither Lane nor O’Connor are particularly reliable sources when it comes to these things: Lane happily admits to lots of reasons why he has an animus towards Dykstra, while O’Connor, according to Teri Buhl, owes AVT $37,569.82.

But this non-story is getting a new lease of life — even making the New York Post — thanks to a threat from AVT to sue Lane for defamation. And lo, the lawsuit has now appeared — complete with an utterly stupid claim for $100 million in damages. Here it is, from Illingworth via Buhl:

AVT vs. Lane

This is basically all bluster and bullshit, written in particularly bad legalese which doesn’t even seem to have been proofread. There’s lots of talk of “untrue and false statements” but at no point does the plaintiff, AVT, bother to actually say what those libelous statements might be, nor how they might have caused anything like $100 million in damages. (The market cap of AVT is just over $30 million, and it hasn’t moved significantly in months.)

Whenever anybody launches a substance-free lawsuit with a stupidly huge number like $100 million attached, you know that they’re mainly interested in publicity. But this is where things get weird: why would Illingworth and AVT want to give free publicity to the book they claim is libeling them? And why would they carefully time the lawsuit so that it coincides exactly with the publication of the book?

I’m sure that both sides are loving whatever extra publicity they can extract from this lawsuit and I feel a little bit sleazy adding to that publicity myself. This is one of those spats you don’t particularly want either side to win. But I guess the good news is that we’ve come through the first tranche of serious and important crisis books and now we’re seeing the second tranche, where the crisis is used as an excuse for failed hype merchants to try yet another desperate attempt at self-promotion. The sleazy and litigious side of the American Dream, it seems, is impervious to crisis. Maybe in fact it thrives on it.

Yves Smith, of Naked Capitalism, has sent me a note to tell me how unhappy she is about the kindle pricing of her new book, which has a cover price of $30, an Amazon price of $19.80, and a kindle price of $16.50. Her publisher, Palgrave, is part of Macmillan, which just won a fight to force Amazon to sell e-books at more than $10, but part of the fallout from that fight is that books which cost much more than that on the kindle often get one-star reviews on the basis of their pricing alone.

Writes Yves:

You know my base skews heavily toward the type that buys on Amazon, and to top that off, as you would imagine, my book promotion is going to be more than usually web oriented, so that will maintain that skew.

I don’t know about you, but the vast majority of the time, if I see a book with an Amazon rating of fewer than four stars, I won’t buy it. And it does not take many one stars to drag an average down.

In principle, my sympathies are with Yves and Amazon here. Amazon wants to subsidize her book; she wants Amazon to subsidize her book; but her publisher, worried about kindle sales cannibalizing hardback sales, won’t let that happen, and is willing to risk bad reviews as a consequence.

My feeling here is that none of this matters a great deal. And the main reason is pretty simple: after about a year of kindle ownership, I’ve come to the clear conclusion that it simply isn’t suited for reading the vast majority of non-fiction. You might not even notice it when you’re doing it, but when you read a non-fiction work like this one, you tend to flick backwards and forwards a lot, skim past the bits you already know about, re-read earlier passages in light of later ones, that sort of thing. And that’s prohibitively difficult with the kindle, which is designed primarily for reading narratives where you start at the beginning and make your way steadily to the end. Truly narrative non-fiction a la Krakauer is fine, but “learn about the crisis” nonfiction just doesn’t lend itself to being read on the kindle at any price. If you’re the kind of person who reads footnotes, you will get very annoyed very quickly with the kindle whenever they start appearing.

What’s more, the phenomenon of angry one-star reviews will I think fade away pretty quickly: they’re a response to the change in prices more than they are a response to the price itself. If the price for a kindle book goes up from $10 to $17 without the product changing at all, that’s annoying. But if it was never $10 to begin with, the annoyance is much lower.

Obviously, the number of kindle versions of Econned sold will be lower at $16.50 than it would be at $9.99 — just as I doubt many people buy kindle versions of books which are more expensive than the ink-on-paper versions. But a substantial proportion of the people who would have bought at $9.99 but won’t buy at $16.50 are people who will now just buy the hardback instead — and I’m pretty sure they’re going to have a better experience that way. And that should make Yves happy, not angry.

Why was Josh Tyrangiel hired to be the new editor of BusinessWeek? One reason, the pundits agree, is that he successfully dragged Time — another weekly — onto the web. Ryan Chittum writes about “his eye-popping numbers at Time.com”, with pageviews rising from 400 million in 2006 to an estimated 1.8 billion this year, while Marion Maneker says that “he had tremendous success in building Time.com’s Web traffic over a few years”.

I’m an admirer of Tyrangiel too. But it would be depressing if Bloomberg’s brass hired him on the basis of his pageviews, because Time.com is an object lesson in how not to boost traffic. Reading Time.com is an exercise in frustration: the stories there are hugely painful to read. Barely-relevant links to other stories interrupt the flow on a regular basis; slideshows are everywhere; and in general it’s almost impossible to get through a whole story without being forced to visit multiple pages in doing so. Revealingly, no one’s talked much about Time.com’s uniques over the past few years, just its pageviews.

The last thing that Bloomberg should ever want to do with BusinessWeek.com is use such tactics. It might make sense for Time.com to operate in the CPM-driven junk-mail paradigm, where revenues rise with pageviews and therefore you maximize the latter to maximize the former. But BusinessWeek’s high-end readers won’t and shouldn’t put up with such shenanigans.

Tyrangiel’s job at BusinessWeek.com will be to build strong bonds with the readership — to make them loyal readers and to constantly exceed their expectations of what a website can deliver. That will help give Bloomberg the prestige and glory it wants from its consumer-media operations, and will also allow Bloomberg’s business-side staffers to position themselves happily at the high end of the market, selling relationships with readers rather than simply eyeballs-by-the-million. If BusinessWeek.com becomes half as annoying to read as Time.com is today, it will have failed, and Bloomberg is going to have to be careful to make sure that Tyrangiel undrinks the pageview Kool-Aid he quaffed so gluttonously at Time.

Dear Henry,

I’m not annoyed by you! How could I be, when you call me the “king of financial bloggers” no fewer than four times in one piece? I think you’ve created a powerful, innovative, and disruptive franchise in The Business Insider, which employs some very smart people and publishes some great journalism — even if sometimes it’s neither checked nor correct. I’m entirely happy that you’re out there hiring people even as most publications are doing the opposite, and I wish you and your investors the very best of fortune.

My blog entry yesterday was not about you qua entrepeneur; I just thought that if you were going to get into the business of publishing earnings estimates for technology companies — exactly the business you were banned from by the SEC — then it might be worth mentioning the ban as you did so.

In fact, the blog entry wasn’t really about you at all, as you might have surmised from the picture at the top and the lead paragraph, which were all about Michael Whitney. Maybe you could answer my questions where Bloomberg’s Judith Czelusniak didn’t: do you think it was OK for Bloomberg to hire Whitney and not disclose his past? If not, would it have been OK for Bloomberg to hire Whitney if they had disclosed his past?

I suspect that the differences between us are not particularly great, and that we believe that while such episodes aren’t necessarily disqualifying when it comes to hiring journalists, they should definitely be treated transparently. At the margin, the necessity of disclosing such things might well lead media organizations to pick an experienced out-of-work journalist instead: that clearly doesn’t apply in your case, where you’re the hirer rather than the prospective employee.

You say that you’ve disclosed everything in great detail in the past — this is true, and in fact I linked to one such disclosure. I feel that the disclosure should be a permanent thing, easily available to new readers, especially when you start revisiting ground extremely similar to that which you trod as a securities analyst. It’s not a major difference.

I think we’d have a much more substantive disagreement if you defended Bloomberg’s failure to disclose Whitney’s past, or Thom Calandra’s failure to disclose his own past when selling his new newsletter; I look forward to reading your views on them. But as it is, I think you might be overreacting to my piece slightly.

Best,

Felix Salmon, KFB

The indispensable Abnormal Returns has a smart post up on aggregation:

Aggregators, investment or otherwise, are not the cause of the downfall of traditional news gatherers like newspapers. They are simply a sign that people are hungry for information and analysis presented in an efficient manner. For better or worse, that instinct to seek out order in an increasingly complex world is here to stay.

Of course, the news media has been trying to present information and analysis in an efficient manner for centuries: there’s nothing new there. The difference today is that the internet has brought thousands of different news sources just one click away, and so there’s demand for a new layer of editing. Newspapers have always needed editing to put the focus on the most important news, but different readers want different kinds of news and no one editor can be all things to all people.

On the internet there are thousands of people sifting news through their own particular filters, and some of them, like Abnormal Returns, prove to be extremely popular. That’s partly because they’re simply very good editors, and partly because they’re not artificially constrained in the way that newspaper editors are: they can link to anything they like, not just the product of one news shop; and they can ignore important-but-boring stories in favor of the ones that people actually want to read.

It’s almost impossible for newspaper editors and publishers to compete with that — which is exactly the reason why they should instead be embracing it. Either you can encourage people to read your news, or you can discourage them. Everybody needs some degree of help navigating the vast ocean of news and commentary which is produced every day, and no sensible publisher will come to the conclusion that cracking down on invaluable navigators is a good idea. Instead, they should be encouraging them as much as possible. As the late Sy Syms might have said, an educated news consumer is any publisher’s best customer.

Well done to Henry Blodget, who is now allowing anybody to republish his content for free, by embedding posts from his site. Like this:

This is a great idea, and something I’ve wanted to do for a while. Bloggers want their stuff read by as many people as possible, and there’s no need to force your readers to come to your own site before your readers can do that.

Henry, by doing this, is allowing his most engaged readers to pick and choose their favorite articles and put them on their own sites — it’s free advertising for him, it gives him reach to a large number of readers he otherwise wouldn’t have, and it shows a real embrace of the medium, and a desire to reach readers in the manner most convenient for them. All of that is a great way of building a business.

There’s been talk of publishers doing something like this for some time, often with ads embedded along with the copy, but this is much simpler and easier, with no embedded ads (except of course for the prominent branding for Henry’s own site). I hope it’s a great success, and widely copied.

One of the best travel books ever written (indeed, one of my favorite books, period, ever) is The Surprise of Cremona by Edith Templeton. Unfortunately, it’s not easy to find: your best bet is to track down the 2003 Pallas Athene paperback with an introduction by Anita Brookner.

If you go to the Amazon page for that book, you’ll find there are “7 new” copies for sale. The cheapest is $20; the most expensive is $166.18. Woody’s Books, for instance, is selling the book for $27.50 — plus a $125.79 “sourcing fee”, plus $3.99 shipping from New Jersey — $157.28 in all.

On the other hand, if you check the book out on Amazon.co.uk, you’ll find “6 new” copies for sale, including Woody’s UK, which will sell you the book for £12.99, plus a sourcing fee of just £0.01. Shipping, to the US, is £3.08, for a total of £16.08, or about $26.51 in dollars — less than the sticker price on the US book before the massive sourcing fee. And yes, the book is still shipped from New Jersey.

In other words, the same book, from the same US-based seller, being shipped to the same US address, costs either $26.51 if you buy it on Amazon.co.uk, or $157.28 — pretty much six times as much — if you buy it on Amazon.com. There might be a good reason why Woody’s is doing this. But I don’t think it reflects particularly well on Amazon.

We know that BusinessWeek is for sale. But is there a good chance the print magazine could die completely? That would seem to be the subtext of Keith Kelly’s column today, in which he writes:

OpenGate, at least on paper, might be considered a likely candidate as well. However, even with magazine veteran and acting CEO Jack Kliger on hand for the management presentation from McGraw-Hill, OpenGate might not be able to absorb the estimated $40 million in subscription liabilities that would come with the 900,000-circulation weekly.

What’s a subscription liability? It’s basically all the money which BusinessWeek has already been paid, in subscription revenues, for magazines it has yet to deliver. It’s a liability because if it can’t deliver the magazines, BusinessWeek would have to refund its subscribers their money, or somehow try to fob them off with an equivalent product.

One would assume that the winner of the BusinessWeek auction, which is currently being conducted between nine different potential acquirers, would intend to continue to publish the magazine weekly. If they do so, however, the subscriber base isn’t really a liability at all: it’s an asset, to be treasured. The only time you start worrying about things like “$40 million in subscription liabilities” is if you’re thinking about going web-only, or biweekly, or something like that. Which would be especially difficult given the name of the book.

So for all that numbers in the $35 million range have been bandied around as the purchase price for BusinessWeek, that might just be the headline number, which would then be offset by a “refund of subscription liabilities” or the like. We might yet end up with another $1 purchase price.

This isn’t the first time that Bernie Madoff’s lover has tried to make money by taking dirty laundry and printing it:

After the affair ended, Weinstein rebuilt her emotional life with her husband… She took antidepressants. They began to run a commercial laundry trade publication.

Apparently the two are still together. Commercial laundry trade publications: they’re just like marriage counselors, but cheaper.

Vernon Smith is a true giant in the world of economics, and his memoir has now received a rave review from Tyler Cowen (who admittedly might be biased, given that Smith is a fellow at Cowen’s Mercatus Center). So the obvious question about the book is this: why was this wide-ranging memoir from a Nobel laureate self-published?

There are lots of possible reasons: Maybe Smith just can’t be bothered to deal with agents and editors and publishers. Maybe he didn’t want to share the profits. Maybe the book is so idiosyncratic that no publisher had any interest in publishing it. Or maybe, contra Cowen, it just isn’t very good. I must say that I do now want to find out — and the fact that Smith will personally get a significant part of the amount I pay for the book does make me more likely to buy it.

It’s one of the most eagerly-awaited books of 2009, and it features “a bizarre tangle of motives and passions whose cast of characters includes surfers, hustlers, dopers and rockers, a murderous loan shark, a tenor sax player working undercover, an ex-con with a swastika tattoo and a fondness for Ethel Merman, and a mysterious entity known as the Golden Fang”. More generally, there’s a “splendid cast of characters [which] includes villains, a few heroes, and a lot of people who look very, very foolish”, including “the goats and the few who saw what the emperor was wearing”.

Oh, wait, I’m conflating two different books. But really, wouldn’t “Inherent Vice” be a much better title for Michael Lewis’s crisis book than “The Big Short”? And when is Pynchon going to start writing about finance?

Richard Pérez-Peña has the story: the IHT archives, which disappeared back in March, are reappearing. Finally. But the story is a little odd:

“Obviously, it was never our intention to make this stuff disappear,” said Marc S. Frons, chief technology officer of New York Times Digital.

The plan was to move all the Herald Tribune articles since 1991 to nytimes.com, but that turned out to be more complicated than expected. And rather than wait, executives combined the sites first, knowing that for a while, The Herald Tribune work would be missing.

Presumably, when it comes to the “executives” in question, the buck stops in this instance with Frons. So if he didn’t intend to make the stuff disappear, then why did he make the switch, given that he knew that the work would disappear? And why didn’t he say anything in public at the time? “Rather than wait” doesn’t even come close to providing an explanation of what exactly happened here and why — although it is great news that the IHT archives are back.