The merits of the ebook antitrust case

16. April 2012 · Categories: Politics

After reading through the complaint from the DOJ, it details a lot of hard nosed bargaining between the parties, but not a lot of behaviour that constitutes anti competitive behaviour. The commission model is a valid way to sell books, and for ebooks it makes sense to stop giving volume discounts and ask for a fixed compensation per unit sold. And we have seen that with the App Store the commission model can create a vibrant and very competitive market place.

There are two issues though that warrant scrutiny.

The Most Favored Nation clause

In the Most Favored Nation (MFN) clause, the publishers promise to adjust their prices on the iBooks store to match the cheapest available price on any competing platform. This is highly unusual, because the end effect is that the publishers would help pay for and monitor to actively match the prices on the Kindle, effectively guarding Apple from price competition.

I regard this clause as wrong, and it should be replaced by a more common MFN clause: the guarantee that wholesale prices to Amazon are not lower than those for Apple.

The Insistance on forcing Amazon to adopt commission pricing

There is nothing against forcing Amazon to accept per unit pricing for ebooks actually sold, but insisting on them to adopt the same sales model as Apple is using is only possible by collusion. The problem here is of course that the publishers want to protect other formats, especially the hard cover, from ebook competition, and that they are afraid that a prolonged period of discounting by Amazon will reduce their pricing power over the long term by changing pricing expectations. Here the publishers have gone a bit too far, and they should have been content with insisting on per unit pricing, now that there is no longer inventory to finance and manage. But it would not have been out of character for Amazon to fight very hard to keep volume discounts and other old style gimmicks to keep its purchasing prices lower.

The long term strategic goal is of course to reduce the chance that Amazon will become the gate keeper for ebooks, and that the publishers will become powerless against its pricing power. And here the case is completely silent, even though the actions can be easily understood as a move to prevent Amazon from becoming a way too dominant buyer.

One important problem is the tendency of Amazon to pursue very aggressive pricing, sometimes even predatory ones. The best way to guard against this is to have laws that limit the ability of players to pursue such pricing. The conceptually easiest would be to restrict a players ability to raise prices again after it has destroyed competitors. If we force retailers to maintain margins for at least 10 years after they have driven competitors out of business, then they would think twice about using too aggressive pricing, because they would need to maintain them for so long that they will really hurt.

And also I wonder why the US still insist in not raising sales tax from Internet retailers. It is really stupid to subsidize something that effectively cuts local employment. It really is time to change the US tax system to make sales tax a federal tax and give the states / counties a larger proportion of income and wealth taxes.

Why no direct sales?

What is so strange about all of this is that there is another strategy to fight back: Offer all books in ePub format, and sell them directly to customers via the web. But why is it not considered viable? Are publishers so afraid of copying that they insist on copy protection, which has been dropped in the music area without problems? Are they afraid of colliding with the printed book? But in a few years the ebook will have replaced the paper back and a lot of hard cover sales, publishers need to prepare for this future. And the only way to ensure that the device sellers will not become the gatekeepers to the books will be by adopting an open format, selling in this format, remove copy protection so that customers have a chance to switch without losing access to their library, and ideally establish an online sales operation.

And switching to ePub without any copy protection will completely remove the competitive threat of a Kindle lockout, as users would be free to move all their books to a competing platform. Also forcing everyone to support ePub as the canonical format for ebooks will mean opening up the Kindle, and allowing publishers a way around Amazon, as users would then be able to load new books onto their Kindles even when purchased from a competitor.

Locking your smartphone

12. April 2012 · Categories: Software

Recently there was a reminder what happens when you lose your smartphone and how curious and even even criminal we can be if given the chance and feeling that we are not being observed.

Of course the study was self selecting for bad behavior: Honest people tend not touch others people property so the people picking it up tend to be either more curious or more circumspect. But this is important to keep in mind: The typical person picking up a lost phone is nosier and/or less honest, so your chances are worse to get it back.

The problem however is the cavalier attitude to security that all phone makers share. If you set a pass code, there should not be any bugs that would allow you to break it, short of disassembling the phone chip.

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A 4 Inch iPhone?

11. April 2012 · Categories: Software

The most convincing case for a larger iPhone screen I have seen has been made by modilwar. I do not remain convinced though because of two issues:

  • If we assume that a larger screen will result in an extra home row of app icons, then this will result in us no longer being able to reach all of them one-handed with your thumb (go ahead, try it, the top row will align with the top of the speaker grill). And more importantly, it will also break one-handed reach for the navigation buttons typically found at the top.
  • It doubles the number of iPhone UIs that have to be maintained. This might not be that big of an issue given the huge installed base, but it remains my conviction that Apple prefers one great program to two merely very good ones, and the two formats would be similar enough that one of the two would become a bit of an afterthought in the mind of developers.

On the other hand, it would make sense to extend the touch area beyond the screen to support extra gestures, as webOS has pioneered. This would be great mostly for games played in landscape orientation, as you would obscure less of your view with your fingers, and it would improve detection of system wide gestures, especially the show messages gesture.

Update: It seems that Apple considers a screen with 1136×640. This will mean that the new iPhone would have a bit more height so that you can still easily press the home button. To get an impression of the size, the larger screen would extend a bit farther than the current speaker grill on the 4S, with the base unchanged.

I am curious how you will be able to access the controls on that screen, it will be at the upper limit of what I can reach with one thumb, and even then only if I do not hold it very tightly. I have the impression that it will be too large for many women to use comfortably in one hand, so I wonder if some controls will get moved to make them more accessible.

What fits between the iPod Touch and the iPad

05. April 2012 · Categories: Software

Because of the huge gap in the size of the iPod Touch and iPad, 37 to 290 cm2, people are always wondering whether there is room for a device in between these two sizes, with the most popular speculation reserved for a 4:3 iPad with iPhone dpi ( 7.8″, 188 cm2) and a doubled 3:2 iPod Touch ( 7″, 146 cm2).

I find it unlikely that such a device will appear, for the following reasons:

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D800 Ergonomics

03. April 2012 · Categories: Photos

The Nikon D800 is a great camera with respect to the photos it takes, but it has a few issues with usability. The problem is that to a large extent the camera has not yet arrived in the iPad/iPhone age, and still tries to do everything in body, instead of allowing us to use our much more usable touch screen phones and iPads.

Indeed the manual controls are pretty ergonomic, apart from a few issues:
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The beef with Readability

03. April 2012 · Categories: Copyright

There are two points of criticism with Readabilty:

  • First that they link to their own reformatted copies of content. This is bad, and in violation of copyright law. But they seem to come around and change this.
  • Secondly that they promise to pay 70% to the content creators. They do not keep this promise, because they keep the money if not claimed by publications within a year. They should then distribute this old money among those publications that have actually registered.

But these can easily be solved. And we will see from their reaction how serious they are and if these shady sounding practices were a mistake.

The true problem however lies with the publishers. It is their decision to provide layouts that are not well suited to reading, in the name of serving the advertising gods. But honestly advertising needs to remain rare enough that it will not become clutter and so profoundly ignored, and it really was this advertising overload that gave rise to Readabilty, Instapaper and other reading tools. Without dynamic pages caused by advertising we could even actually use our browser to do proper offline reading.

Canada joins the penny free world

02. April 2012 · Categories: Politics

Canada has decided to drop its penny. The Dutch have stopped using their 1 and 2 cent pieces like forever, and it really makes shopping more comfortable. Well, actually it stops to matter as we move to a cashless society, I sometimes take weeks to refill my cash reserves now.

Taliban und die offene Gesellschaft

07. June 2009 · Categories: Politics

Kürzlich habe ich mal wieder Popper’s Klassiker in den Händen gehalten, “Die offene Gesellschaft und ihre Feinde” (Bände eins und zwei), nach der Lektüre eines sehr interessanten Artikels bei der BBC. Erschreckend ist mir dabei bewusst geworden, wie sehr sich das Programm der Taliban dem Programm der Nazis ähnelt. In beiden Fällen ist der Versuch zu sehen, mit der modernen Welt fertig zu werden, mit den Umwälzungen und Unsicherheiten die aus dem Wachsen des Individualismus sich ergeben. Und zwar nicht etwa, indem man den Menschen in dieser für sie schwierigen Zeit, in dem ihre alten Gewissheiten sich verlieren, beisteht, sondern indem man die Moderne mit Macht und Gewalt zurückzudrängen versucht. Da jedoch jene Unschuld in der die Menschen bereit waren, ihren Platz nicht zu verlassen, nicht mehr zurückkommen kann, sehen wir im Gegenteil einen starken Terror, der jeden freien Gedanken auszulöschen versucht, und der sich über die ganze Welt erstrecken muss, da jede Form der Freiheit irgendwo auf der Welt wieder zurückstrahlen würde.

Gleichzeitig ist dies jedoch auch ein Aufruf an den Westen, auch bei sich zu Hause für mehr Unterstützung für diejenigen zu sorgen, deren Weltbild and Achtung am zusammenbrechen ist. Die tatsächlich vorhandene Diskrimierung von Muslimen ist gefährlich, da sie der Taliban zuspielt. Hier sind wir alle gefordert, um Strukturen zu schaffen, um die Bildung zu verbessern, so dass wir allen im Land eine Perspektive bieten können.

Copyright extensions

20. February 2009 · Categories: Copyright

Again, again, we are here, discussing copyright extensions. Simple question: Why should society create an artificial monopoly on intellectual property? To reward people doing this work. How high does this reward need to be? High enough for people to be willing to do this work, to be motivated to do the work.

Let us see how much people get from a limited copyright. We compare the revenue stream from the copyright to the money they would get if they invested it at a certain rate. Now an invention will normally be most popular when conceived, and become less valuable over time. To model this, we simply add the rate of decline in popularity to our investment rate. So we treat 5% investment rate and 5% annual decline in revenues as a 10% alternative investment rate. This will give us the following table to see how much of the overall revenues you get from an invention or a copyrighted piece:

Interest Rate
1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
Duration
in years		 10 9.5% 18.0% 25.6% 32.4% 38.6% 44.2% 49.2% 53.7% 57.8% 61.4%
20 18.0% 32.7% 44.6% 54.4% 62.3% 68.8% 74.2% 78.5% 82.2% 85.1%
30 25.8% 44.8% 58.8% 69.2% 76.9% 82.6% 86.9% 90.1% 92.5% 94.3%
40 32.8% 54.7% 69.3% 79.2% 85.8% 90.3% 93.3% 95.4% 96.8% 97.8%
50 39.2% 62.8% 77.2% 85.9% 91.3% 94.6% 96.6% 97.9% 98.7% 99.1%
60 45.0% 69.5% 83.0% 90.5% 94.6% 97.0% 98.3% 99.0% 99.4% 99.7%

Table: Current value of a limited revenue stream compared to CV of the perpetual stream

It is quite interesting to see how quickly compound interest is reducing the value of an invention. I believe that 75% of the value to the inventor / creator and 25% to the public is more than a fair split to encourage innovation, and with a 5% depreciation rate which I believe to be pretty generous (many companies do not start projects that promise at least a 10% return), that would mean that 30 years are the correct duration of a copyright.

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