by Gary North
If you were an executive with a large book publishing company, and you were in charge of the college textbook division, how would you deal with this multi-phase problem?
(1) The bid/ask arbitrage opportunity: College students must pay 10 to 15 cents per page to buy new textbooks that cost a penny a page to print and deliver. College bookstores receive a mere 10% to 15% discount. This is the most captive market in publishing. It is the ultimate cash cow, and has been since 1946. Cash cows are tempting to milk.
(2) The technological revolution: A scanner costs $70. A copy of Adobe Acrobat Pro costs $450, but about $250 in a campus bookstore. With these two products, you can make a clear digital copy of any book: a PDF file.
(3) The World Wide Web: A document can be posted on-line, anywhere on earth, and can be accessed in seconds from anywhere on earth. Server space is cheap. For example, I have almost 100 books on-line, which costs me $5/month (www.freebooks.com). I could have 500 or 1,000 books on-line for that price. My server is in Germany, I think: www.1and1.com. All it takes for a search engine to find a searchable PDF file is an HTML link to the file. This can be posted anywhere on the site.
(4) The division of labor: A fraternity member could scan in a textbook in about 8 hours, depending on the speed of the scanner. Recently initiated members could be required to do this as part of initiation week. There are lots of campuses and lots of fraternities. They are bound by oaths of silence.
(5) Non-cooperating nations: The United States government posts a list of nations that are not cooperative on copyright issues. Pakistan is notorious. So, all it takes is a web hosting service abroad. A person can search for "web hosts" and a country's name.
(6) Off-shore mail drops: Arrangements could be made by anonymous mail through an off-shore mail drop: an offer of $200 in currency to register a site and upload the contents of a forthcoming CD-ROM, plus a promise of $200 per year in currency when the site is on-line. RSVP.
(7) CD-ROM technology: All of the PDF files of textbooks could be put on one CD-ROM. A local fraternity's in-house programmer could design the site to have the textbooks filed (linked) under course categories. This CD-ROM could be mailed — leaving no Internet trail of digits — to the cooperating web hosting service in a non-cooperating country.
(8) Proliferation: This could be done with half a dozen hosts in half a dozen non-cooperating countries. This sends a message: "Hire a lot of lawyers."
(9) Self-justification: The web hosts' owners could justify this psychologically — if they wanted justification — on the basis of bringing the latest textbooks to their poverty- stricken people. It's called doing well by doing good.
(10) Cost-benefit analysis: The cost of litigation in a foreign nation is high. The cost of setting up a new website off-shore is (say) $400 in year one, plus $200 a year thereafter. The perpetrators are unknown. Their country of origin is unknown. It would be difficult to prove damages. It would be even more difficult to collect damages. This is what economists call an asymmetric cost-benefit relationship.
My estimation: It will take longer to litigate a case than it will take to publish the next edition of a textbook. Win the case, and three weeks later, the site is back on line in another country.
At the top of the site is this message: Steal this site!
Call it an initiation ritual. It's more academic than a panty raid. It is a lot safer than hazing the newly initiated brethren. Haze the publishers instead.
If taken to court, the brethren could adopt this defense: "We thought we were helping third world economic growth, your honor — giving third world students a helping hand."
There are about 15 million full-time college students in the United States. They would no longer be a captive audience. How long would it take for word to get out? There would be blog sites monitoring the appearance of new sites, updated sites, moved sites, and the latest textbooks.
As a book-publishing executive, what could you do to stop this?
If companies are not forthright with investors about a practical counter-strategy, investors should conclude that the stocks of these firms are likely candidates for shorting.
There would be one great winner. Hewlett-Packard's toner cartridge division would become even more profitable.
The copyright laws are not going to survive in their present form. Neither is the publishing industry.
March 19, 2007
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