Legacy Publishing and Productivity

Legacy Publishing and Productivity

In the past, I’ve written about how above-market returns enabled by abusing the patent system can discourage investment (and thus patenting) in contraceptives. In this case, above-market returns gained through legal exclusivity extended far beyond the intent of the patent system raise the opportunity cost of investing in other, newer technologies.

When the returns from merely owning something exceed those of improving on it or investing in new things, we see a stagnation in growth. A corollary is that–all else being equal–we can increase investment by reducing the return on unimproved assets. This is true in patents, but it can be applied to other examples. A landowner can derive significant rents just by owning their plot, but if we taxed land value there will be incentive to use the land more productivity. Similarly, a bank may be inclined to “roll over” the debt of a “zombie” firm struggling to get by if circumstances make it more profitable than investing in a more productive upstart.

And we can also see this example in copyright law, as the New York Times points out in this recent article on Penguin Random House:

Another [way to keep growing year-over-year] is to keep publishing huge best sellers, which can be a gamble, and an expensive one. The company’s best-selling book of 2020 is the novel “Where the Crawdads Sing” — which came out in 2018. Other current top movers include the backlist titles “Becoming” (2018), “Little Fires Everywhere” (2017), “Oh, the Places You’ll Go!” (1990), and “The Very Hungry Caterpillar” (1969).

The books make money, but the trend is worrying. Every dollar plowed into printing and marketing older titles comes at the expense of discovering and promoting new writers, causing a sort of slow stagnation of literary culture. Talented English majors don’t accept underpaid jobs in publishing to move inventory; they dream of discovering the next James Baldwin or Alice Munro.

“They’re not going to have the next wave of books sitting in the backlist if they take away the lesson that they don’t need anything other than the big books,” said Michael Cader, the founder of Publishers Marketplace, a trade publication…

So far, it’s working. “We might be focused on the book we published 20 years ago instead of the book we’ll publish next week,” [CEO Madeline McIntosh] said. “When the outside world is very chaotic, you want the tried and true.” [Emphasis Added].

What we have here is the exact dynamic I discussed above. Now, a book published twenty years ago should almost certainly still be protected by copyright. “Oh, the Places You’ll Go!” published in 1990 is iffy, but “The Very Hungry Caterpillar” is over half a century old and, under any reasonable copyright regime, would be in the public domain.

Now, it should be pointed out that just because something is in the public domain doesn’t mean you can’t profit from selling it–there are plenty of firms selling the complete works of William Shakespeare–but given the fact that those firms must compete with zero-cost online downloads, their margins are smaller.

Penguin Random House is also doing quite well for itself: 

After a steep drop at the start of the pandemic, book sales not only recovered but surged. Unit sales of print books are up nearly 6 percent over last year, according to NPD BookScan, and e-book and digital audiobook sales have risen by double digits…

As the industry’s Goliath — as big as the four other biggest publishers combined, analysts say, with authors from Barack and Michelle Obama to Toni Morrison — Penguin Random House has fared better than some of its rivals. Of the 20 best-selling print books of 2020, eight (by far the largest share) are Penguin Random House titles, according to NPD BookScan. It has had 216 New York Times best sellers this year. Penguin Random House’s U.S. sales grew 5.2 percent in the first half of the year, helping to soften a global sales dip of around 1 percent, according to an earnings report from its parent, the German conglomerate Bertelsmann. Overall sales at several other major publishers — Simon & Schuster, HarperCollins and Houghton Mifflin Harcourt — all fell further, according to filings.

It should be noted that Penguin Random House is one of the four plaintiffs suing the Internet Archive over its Open Library. One of the items in the complaint was the reliance of publishers on “backlist” books. “Book publishers derive substantial revenue from backlist books,” according to the complaint, “which range from venerable classics like The Bell Jar [HarperCollins] by Sylvia Plath or Winds of War [Hachette] by Herman Wouk to works written only a few years ago, including bestselling works such as Eat, Pray, Love [Random House] by Elizabeth Gilbert and Commonwealth [HarperCollins] by Ann Patchett, all of which are Works in suit. Moreover, a great deal of the most successful children’s books, including many of the Works, are backlist books.” These figures, at least in the case of Penguin Random House, indicate that threats to the publishing industry caused by a robust regime of controlled digital lending are overblown.

If we could show a publishing industry struggling to keep its head above water, I’d be more sympathetic to any claims of alleged infringement. The bigger problem here is that we have an industry which, thanks to ridiculously long copyright terms, is doing well by not doing good.

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By |2020-09-29T06:34:31-07:00September 29th, 2020|Blog, Intellectual Property|