What's New at End-of-Quarter?

With mid-year upon us, here are updates on a couple of ongoing stories:

• Hulu finally announced its long-rumored pay service, Hulu Plus. For $9.99 a month, you can get rolling access to full seasons of many new shows, as they air. And you also get access to more complete seasons of older (sometimes "classic") programs. How many people will pay for this in addition to their cable bills, which often include DVR service, which can duplicate the current-season offering on Hulu Plus? And how will the "classic" series offering compete with Netflix? Time will tell.

• Brad Stone reports in today's New York Times that Google will be helping independent bookstores when it launches Google Editions, its foray into the e-book market. A deal is apparently near between Google and the American Booksellers Association, which would make e-books available on the websites of independent bookstores via Google Editions. One staffer at Powell's Books in Portland is quoted as saying he thinks this will be a positive thing for bookstores, and that Google won't actually compete with them; though he adds, "I wonder how naive that is at this point. We'll have to see." Indeed. That Google embrace could become stifling.

• And, with that stifling Google embrace in mind, I'll note that we are still awaiting Judge Chin's decision on the amended Google Books settlement. I continue to hope he'll force more changes, in order to eliminate Google's unfair monopoly. Again, time will tell.
  

Windows Proliferate for DVDs

Following on their recent agreement with Warner Bros, Redbox has now settled with both Fox and Universal.

Under the agreements, Redbox will not rent Fox or Universal DVDs from its $1 rental kiosks until 28 days after the films are released on DVD. Redbox also agrees to destroy the DVDs at the end of their rental life, rather than sell them on the used market.

In return, Redbox gets better financial terms from the studios, and guaranteed access to greater quantities of DVDs.

This makes a higher-price rental "window" (for the likes of Blockbuster) common now across the majority of major releases, followed by the lower-price Redbox rental window. The studios also, of course, hope for increased sales of DVDs during this window, since they profit more from sales than from rentals.

Thus, the home video rental window has now been sliced in two. How many more windows will we see as movies make their way online?

End-of-Quarter Updates

With the end of the quarter upon us, here's a review of where we stand with some ongoing stories:

• Just days before Apple launches its iPad and associated iBook store, Amazon agreed to stop discounting the prices of e-books from two more major publishers. As The Wall Street Journal reports, both Simon & Schuster and HarperCollins will set their own prices under the "agency" model. This mirrors the deals at the iBook store, as well as those that Amazon had previously set with other publishers. Now we need to wait and see what the iPad does for/to e-books.

• While we're waiting on the iPad, we continue to wait on the Google book settlement. Judge Chin is presumably still pondering the possibilities, and we can but hope he will continue to be harsh on Google, demanding further improvements in the now-revised proposed settlement.

• And in good news for theater owners, audiences (so far) are willingly paying much higher ticket prices for 3D movies. As Variety reports, the upcharge for 3D tickets at many theaters is now as much as 50% of a regular 2D ticket price. Will audiences tire of a 3D "fad", and decide that movies are no longer the most-economic family entertainment option (as the industry has promoted itself); or will 3D become the new standard, as sound once replaced silent pictures, and color offed black-and-white? Only time will tell.

Reading Into The Vudu That Wal-Mart Do

It’s a lot more fun to Wal-Mart watch than it is to Wal-Mart shop. When you shop there, you have to worry about supporting a venture that is dicey at best for the greater economic good. When you Wal-Mart watch, you get to hypothesize about its complete lack of fear when it comes to using its size to squeeze impossible deals out of suppliers.

My latest Wal-Mart watching has to do with that hammerlock leverage. Wal-Mart just announced it’s buying Vudu, a startup which supplies movie rentals and purchases over the internet. Vudu has deals with all the major studios, including a large library of high-definition movies.

[read the rest of my column at digiday:DAILY]

Redbox accepts delayed access to Warner DVDs

As I wrote in an earlier post, the movie studios have been battling Redbox and its $1 DVD rental machines. Lawsuits ensued.

Warner and Redbox have just announced the settlement of their legal battle. The agreement delays Redbox's access to Warner DVDs until 28 days after initial release, creating a "window" for higher-priced consumer DVD rentals. In exchange, Warner reduces the price Redbox pays for DVDs, and also guarantees the larger quantity of discs Redbox sought.

Thus, just as consumers can buy a hardcover book early or wait for a cheaper paperback, consumers now have the choice of renting from higher-priced outlets like Blockbuster on the day of release or waiting 28 days for a cheap rental. Of course, Warner hopes that some consumers will choose to purchase the DVD instead, which would give Warner a greater profit.

That 28-day window also gives Warner an opportunity to try to build up the market for video-on-demand, online streaming, and digital downloads -- all of which have the potential to provide larger profit margins than DVD rentals.

Although not mentioned in the press release, PaidContent and the New York Times (via AP) are reporting that Redbox has also agreed to destroy all Warner DVDs when demand drops for rentals from their kiosks. Until now, Redbox had been selling off used inventory at low prices, further diminishing demand for new DVDs.

Will Justice Be Done In the Google Books Case?

So which is it? Either (a) the geniuses at Google really don’t get it, or (b) they’re just playing dumb and hoping we don’t notice. Which do you think is more frightening?

The first version of the proposed Google book settlement received a scathing critique by the US Department of Justice, in which the DOJ told the Court to reject the settlement. So Google, the authors, and publishers crafted version 2, an amended settlement agreement ("ASA"). Last Thursday, the DOJ issued its critique of the ASA, asking the Court to push for additional changes, for many of the same reasons. [read the rest of my column, including some pithy quotes from the DOJ, at digiday:DAILY]

"Avatar" gross surpasses "Titanic". So what.

As dutifully reported by Michael Ceiply in the New York Times (and many other media outlets), the global box office gross on Avatar has now surpassed that of Titanic. Aside from giving Fox and James Cameron bragging rights, does this matter? And what do they really have to brag about anyway?

Ignoring for a moment the 3-D surcharge on Avatar tickets, let's look at how things have changed from December 1997 to December 2009:

• The average US movie ticket has gone from $4.69 (per the National Assoc of Theater Owners) to $7.46 (per the referenced NYT story). That's a 59% increase.

• For comparison, the cost of first-class postage went from $0.32 to $0.44, a 38% increase.
  

• The value of the Japanese Yen has gone from $0.00784 to $0.0111 (historical exchange rates per OANDA), an increase of 42%. And the value of the French Franc (since subsumed into the Euro, but you can do the math) has gone from $0.168 to $0.219, a 30% increase. Note that any increase in the price of tickets in Yen, Frans, or Euros would be in addition to the noted exchange rate fluctuations.

So we have the usual problem: even if a movie sold only the same number of tickets in 2009 as an older movie sold in 1997, the total box office gross would likely be up 40-60% (factors such as matinee pricing, child/senior pricing, and so on aside). Given that Avatar is up only1% from the Titanic box office, it has certainly sold far fewer tickets...not much to crow about, is it?

The NYT story says that Fox stated that 72% of worldwide sales came from 3-D screens, which tack a surcharge onto each movie ticket. This further decreases the number of tickets sold, putting Avatar far behind Titanic.

Why do I care about this? I don't. Except that I'm tired of the constant drumbeat every year, as mega-budget movies open and "set new records". The records are in inflated dollars, inflated exchange rates, and (in this case) 3-D surcharges. If the movie studios would report the number of tickets sold, we could track some version of "popularity". The dollar comparisons are nearly meaningless.

Ursula K. Le Guin on the Google book settlement

Ursula K. Le Guin recently resigned from the Authors Guild over the Google book settlement -- she says of the Guild, "you have sold us down the river." Her complete letter appears below:

18 December 2009

To Whom it may concern at the Authors Guild:

I have been a member of the Authors Guild since 1972.

At no time during those thirty-seven years was I able to attend the functions, parties, and so forth offered by the Guild to members who happen to live on the other side of the continent. I have naturally resented this geographical discrimination, reflected also in the officership of the Guild, always almost all Easterners. But it was a petty gripe when I compared it to my gratitude to the Guild for the work you were doing in defending writers’ rights. I went on paying top dues and thought it worth it.

And now you have sold us down the river.

I am not going to rehearse any arguments pro and anti the “Google settlement.” You decided to deal with the devil, as it were, and have presented your arguments for doing so. I wish I could accept them. I can’t. There are principles involved, above all the whole concept of copyright; and these you have seen fit to abandon to a corporation, on their terms, without a struggle.

So, after being a loyal if invisible member for so long, I am resigning from the Guild. I am, however, retaining membership in the National Writers Union and the Science Fiction and Fantasy Writers of America, both of which opposed the “Google settlement.” They don’t have your clout, but their judgment, I think, is sounder, and their courage greater.

Yours truly,

Ursula K. Le Guin

If I Ran the Google

(with apologies to Dr Seuss)

It's a pretty cool place, said young Kenny McDougal¹,
This place that they've given the wacky name Google.

They search and they scan, pulling info together,
You find what you wanted, no matter the weather.

They copied some books, then they copied some more,
But permission is first what they should have asked for.

They didn't, you know, ask permission from writers,
Who made so much noise that they sounded like fighters.

Then lawsuits went flying, from publishers too,
Shocked, Shocked were the Googlers, "oh what did we do?"

First, Settlement One², it raised quite a ruckus,
Alarming the judge and Department of Justice.

Then, Settlement Two³, even longer, appeared,
But it didn't do much, as we certainly feared.

Can Settlement Three⁴ be much further behind?
We'll see what the Copyright Register finds.

If McDougal ran Google, now what would he do?
Well first he'd admit that we made a boo-boo.

Not asking permission, now that wasn't right.
Lest doing real evil⁵ be the Googler's plight.

A selfish monopoly isn't for me,
We need competition, which we can all see.

With Google Books fixed, I could say, "This is groovy,"
Then move on the way to start scanning a movie?

The studios would squawk, as all Googlers should know,
This time ask permission ere you enter the show.

But lots of films out there are orphans you know,
Abandoned by owners whom nobody knows.

They're sitting in archives, these stories on reels,
Preserved for the future, but making no deals.

Jon Stewart made fun, on his show, of the archives⁶,
Dissing good folks making sure film survives.

Then work with the Congress to pass legislation,
To make films like these, maybe, wards of the nation.

The Google McDougal would thus make amends,
By being more open and acting like friends.

---------
¹ The Dr. Seuss book "If I Ran the Circus" features young Morris McGurk who starts the Circus McGurkus, and "If I Ran the Zoo" features young Gerald McGrew who starts the McGrew Zoo. So I needed a last name to rhyme with Google and a first name...a variation on mine

² The initial Settlement was tabled by the judge, after complaints from many parties including the Department of Justice, the Register of Copyrights, and yours truly.

³ The Amended Settlement, which made its midnight appearance this past Friday the 13th, made some adjustments; but still leaves Google with an insurmountable monopoly in orphan books.

⁴ Don't be surprised to see a Revised Amended Settlement in the future.

⁵ Google's motto (as you probably know) is "Don't be evil."

⁶ On the November 11, 2009 edition of "The Daily Show," Jon Stewart did an extended riff belittling professional archivists. If he hopes for any sort of legacy, he’d best be sure some professionals are taking care of his footage.

[first published in slightly different form at digiday:DAILY]

Google's Failed Midnight Confession

Minutes before the Friday midnight deadline, an amended Google settlement was offered in New York City, and on further review...it's not enough. Anyone involved in copyright, digital publishing rights, and the apparently unchecked run of Google toward owning what it wants without compromise in this plan had to be disappointed, if not surprised, by Google’s minimalist revision in its new filing, especially given its somewhat dramatic timing. Basically, the key point of contention was not changed. Google still wants to maintain a monopoly on the right to "orphan" books, the digital scans it makes of all books, and the right to sell subscription licenses to its library of digital books. These monopoly rights remain a huge problem, and they still appear to be an end-run around copyright law. [read the rest of my column, including a few good changes by Google, at digiday:DAILY]

Revenge of the Format Wars

I’ve seen more than a few format wars. Now I’m watching another one coming at the burgeoning category of e-readers and it astonishes me that businesses still have trouble learning a basic precept: Listen to your customer. Customers want simplicity, and a clear path to upgrades, and the comfort that they are not buying into a dead-end technology.

It’s not hard, is it? So why can’t businesses get it right? They have their own history to instruct them. [read the rest, including Beta vs VHS and HD-DVD vs Blu-ray, at digiday:DAILY]

Step away from the eBooks and no one gets hurt

I've got a column over at digiday:DAILY about how Google's Sergey Brin is trying to scare us into giving in to Google's book demands. Check it out. (And thanks to the folks at digiday:DAILY for the great headline, which you see above.)

More on the soon-to-be-revised Google book settlement

The judge overseeing the Google book settlement has set November 9 as the deadline for a revised settlement, taking the previously-proposed settlement off the table. But that won't stop me from a round-up of recent differing views on the settlement.

It was nice to see Lewis Hyde's essay in last Sunday's New York Times Book Review. He makes many of the same arguments I've been making against the proposed settlement: effective monopoly by Google, the payment of monies collected from orphan books to authors of other books, and more.

Over at Slate, Tim Wu recently made his argument in support of the settlement. Wu argues that any monopoly obtained by Google would only be on books that are "unpopular" (orphan and/or out-of-print books), and therefore we should have no worries. In fact, an effective monopoly on orphan books would make Google the only source for a complete research library of books. Why search anywhere else, when you know Google has the only complete set of data? Google's expenditure on scanning "unpopular" out-of-print books is effectively a loss-leader (or charity?), almost disguising its grab at another monopoly.

In his final paragraph, Wu says, "It is Google's monopoly on Internet search that is valuable and potentially dangerous, not a quixotic project to provide access to unpopular books." What Wu misses is that the proposed settlement would give Google another "valuable and potentially dangerous" monopoly, this time in book search.

Finally, in today's New York Times, Miguel Helft reviews many of the objections to the Google book settlement. A highlight is a quote from Lawrence Lessig, author of Free Culture and Remix (among others), professor at Harvard, and a former supporter of the Google book settlement who now opposes it:

"I've seen these big powerful companies filled with people who drank the Kool-Aid. I really get the sense in which these people feel they are doing good. But I am always surprised by their failure to recognize how they will be perceived outside."

Copyright panics and name-calling

William Patry has a new book, Moral Panics and the Copyright Wars, which is driving me crazy. I disagree with so much of it (only one chapter in so far), I barely know where to start.

Patry is a recognized copyright expert, having published an apparently well-regarded multi-volume reference work on the subject. He drafted copyright laws while working in the US House of Representatives, and he's now Google's chief copyright expert.

He begins the book having already decided that the "copyright industries" (movie studios, record labels, book publishers, etc) are stupid, badly-managed, and don't deserve to survive.

He spends several pages discussing the "framing" of arguments, and how word choices affect the way people respond to arguments. He despises the use of terms like "pirate" or "theft" when talking about online file-sharing, as he believes that the use of such terms causes people to jump to the wrong conclusions.

Perhaps. But...

In the course of his first chapter, he likens the "copyright industries" to the old Soviet Politburo. And he compares the wisdom and actions of the "copyright industries" to Mao's ill-fated Cultural Revolution.

So it seems we should have no compunction about using the terms "pirate" and "theft".

Patry also spends several pages quoting Theodore Levitt's classic "Marketing Myopia" article, and arguing the stupidity of "push" marketing these days, when he says the internet has changed everything, and anyone with any brains gives consumers exactly what they want via "pull" marketing.

He says consumers want to download single tracks, while the record labels offered only albums on CDs, so it was only right and fair that consumers took matters into their own hands.

Let's see just what this means...

Say I want to buy just a single egg for a recipe, and the grocery wants me to buy a dozen. Should I feel justified in stealing the egg?

I know, some readers will object that the egg is a physical object, with inventory value, and that my theft would deprive the store of that value.

Well then, what about this one? I want a nice crisp hundred-dollar bill, but the bank won't give me one. Instead of stealing one, I could borrow a hundred from a friend, and make a copy at my own expense. Would that be OK? Like a consumer copying music files? It's not as though a single hundred would affect the economy, right?

Isn't theft still theft?

If I want to buy a single short story, but the bookstore has only a single-volume collection on the shelf, can I demand that they tear out and sell me just the one story that I want?

Of course not.

Just because the internet makes it possible to do something does not mean that it is right to do so.

Just because Patry (and many many others, of course) think that the record labels are badly managed by stupid people, to the point that Patry seems to think said companies should not even exist, does not make it right for a consumer to take matters into her own hands.

I'm curious to see if later chapters of Patry's book show clearer thinking.

Copyright Office and Dept of Justice critique Google book settlement

Two weeks ago, Marybeth Peters, the US Register of Copyrights, harshly criticized the proposed Google Book Settlement in testimony before the House Judiciary Committee. That same day, David Drummond, Google's Chief Legal Officer, testified with a combination of verbal sleight-of-hand, obfuscation, and apples-to-kumquats comparisons. Last week, the US Department of Justice filed its critique with the judge overseeing the Settlement.

The critiques highlight a key point I raised earlier -- that unclaimed royalties for "orphan" books will ultimately be distributed to those authors and publishers who sign up with a newly formed Book Registry. In fact, the DOJ argues that this creates a schism between the owners of claimed and unclaimed books, thus rendering the "class" which claims to have filed the class-action suit invalid.

The critiques also make clear (as I have argued) that the settlement is a boon for Google in that it grants an effective monopoly on orphan books. No other company could obtain the same access without following in Google's footsteps: wholesale unauthorized scanning, followed by a lawsuit, followed by a settlement. Google actually seems to agree with this, stating "nothing in the settlement prevents anyone from doing what we have done." Google then attempts to evade the "monopolist" term by noting that the proposed Book Registry could "license to third parties to the extent allowed by law" [my emphasis]. Note, however, that what Google would gain from the Settlement is not "allowed by law," so that Google's monopoly is written into the settlement.

Google claims to be a new entrant to the book market with "zero market share". While Google may not yet be selling books, it is certainly selling ads placed next to book excerpts, which is how Google makes money in the first place. Google also claims that it would be too expensive and time-consuming to track down the owners of unclaimed books and negotiate with them; but it's hard to accept that Google's genius engineers and billions of dollars couldn't resolve this problem.

Google also claims that the proposed book registry's job "is to go out and find rightsholders." But that is certainly not the case. The registry has no incentive to find rightsholders. In fact, it has a dis-incentive: the fewer rightsholders who register at the registry, the more unclaimed money there will be; and that unclaimed money will first be used to pay expenses of the registry, and then the remainder will be distributed to those who did register. As the DOJ puts it, "The greater the economic exploitation of the works of unknown rightsholders by Google and the Registry, the stronger the incentive for known rightsholders to retain the unclaimed revenues for themselves."

Some choice quotes from Ms. Peters:

• "We realized that the settlement was not really a settlement at all... Instead, the so-called settlement would create mechanisms by which Google could continue to scan with impunity,well into the future, and to our great surprise, create yet additional commercial products."
• "the proposed settlement would give Google a license to infringe first and ask questions later"
• "To allow a commercial entity to sell such works without consent is an end-run around copyright law as we know it."
• "The question of whether a book is in-print (generally, in circulation commercially) or out-of-print (generally, no longer commercially available) is completely inconsequential as to whether the work is entitled to copyright protection under the law."
• "certain provisions of the proposed settlement dramatically compromise the legal rights of authors, publishers and other persons who own out-of-print works."

And a few from the DOJ:

• "The Proposed Settlement seeks to implement a forward-looking business arrangement rather than a settlement of past conduct"
• "[the Proposed Settlement allows] the control of prices for orphan books by known publishers and authors with whose books the orphan books likely compete."
• "Under the Proposed Settlement, competing authors and publishers grant Google de facto exclusive rights for the digital distribution of orphan works."
• "only Google would have the ability to market to libraries and other institutions a comprehensive digital-book subscription."
  

I'm shocked, shocked to find that the studios and Youtube are talking

It would have been a dereliction of duty by the executives at the studios and YouTube were they not talking. How can this possibly be a surprise? Why was it played as signficant "news" in the Wall Street Journal and the New York Times this week?

Of course YouTube is desperate to have legitimate big-name programming -- they need it in order to charge for advertising and/or charge for viewing. They have certainly been talking to (or trying to talk to) the studios for some time now.

And the studio execs are not stupid (having been one, and worked with them, I can vouch that many of them are actually very smart). They know YouTube has a huge audience, and they would of course love to monetize that audience. So it's reasonable to assume they've been talking as well.

So, given that we assumed they're already talking, is there actually anything to report? Are the talks leading to anything? Well, as the Times put it, "One studio executive... said the issues still to be resolved were pricing and the timing of YouTube releases." Right. This is like saying that the only unresolved issue remaining between Flat-Earthers and NASA is the shape of our planet. Come on, people.

And it took three reporters at the Journal and two reporters at the Times to bring us this "news".

(By the way, if any readers don't get the reference, the "I'm shocked, shocked..." quote comes from Casablanca, when Claude Rains' character, Capt. Louis Renault, feigns surprise at something he knew full well was going on.)

Disney, Marvel, and Howard the Duck's pants

It was announced today that Disney is acquiring Marvel Comics (subject to a Marvel shareholder vote and various regulatory reviews). Key result? At long last, Howard the Duck may be able to take off his pants.

You don't know Howard the Duck? I refer not to the best-ignored, misbegotten George Lucas movie of that name, but to the brilliant comic book series, originally written by Steve Gerber.

In the 1970s, some execs at Disney raised concerns that consumers might confuse Howard the Duck (a cigar-chomping, jacket-and-tie wearing, wise-cracking duck) with Donald Duck (a sailor-shirt wearing duck). The Disney lawyers threatened Marvel, who agreed to make some changes, key among them being that Howard would henceforth wear pants.

Now that Disney will control both Howard and Donald, maybe Howard can finally remove those confining pants and re-expose his tail feathers in all their glory.

Hollywood battles discounted DVD rentals

In my recent post about the pricing of e-books, I mentioned that 20th Century Fox (among other studios) has concerns about the $1 per night DVD rentals offered by Redbox kiosks devaluing their movies in consumers' eyes. Fox proposed withholding their DVDs from Redbox until 30 days after the initial release of a DVD. Two additional chapters in this story (as reported by PaidContent):

1) In response, Redbox sued Fox.

2) And, going a step further than Fox did, Warners now proposes a similar delay in providing DVDs to Netflix.

Expect more battling lawsuits as each party tries to assert its power and control over pricing and availability.

The first-sale doctrine allows the purchasers of copyrighted works to dispose of them as they see fit: sale, rental, gift, garbage. That is what originally allowed stores to rent video tapes.

Thus, some Redbox employees are now buying DVDs at retail outlets in order to stock their vending machines. Warner and Fox have no recourse over this tactic; but, given the price-points, this is not a long-term solution for Redbox.

I'm all for the efforts to keep the prices of movies and books from dropping. After all, I've made my living in the entertainment and media business for decades. And I'm writing a book.

But I do see the arguments (especially in this economy) for making some prices somewhat lower.

Anti-trust and other regulations prevent the studios, publishers, and retailers from getting together in a room to discuss this. So we'll continue to see individual companies pursing various tactics, until an unofficial consensus is reached.

Pricing atoms vs bytes: paper vs e-books

Book publishers list the official retail prices of their e-books the same as their newly-published hardcovers (for example, $25.95 for The Girl Who Played with Fire by Stieg Larsson). Retailers pay roughly 50% of the retail price for their books (the actual discount varies based on volume and other factors). While Amazon and Barnes & Noble compete to offer lower prices on the hardcovers (now $14.27 to $16.86 for Larsson's book), they don't lose money on them. With e-books, they take a different tack: the price is $9.99 at both Amazon and B&N, meaning that they lose money on every sale. (That's only $2 more than the list price on the mass-market paperback, which won't be published until March 2010.)

In effect, Amazon and B&N are turning an old marketing ploy on its head -- they are giving away the blades to try to sell more razors.

While publishers collect the same wholesale price regardless of the ultimate retail selling price of the e-books, they are not happy about the e-book pricing. For decades, books have appeared first in hardcover, followed many months later by a cheaper paperback. If you want the book immediately, buy the expensive hardcover; if you can wait, buy the cheaper paperback. With Amazon and B&N e-book pricing, it is now possible to buy a brand-new book at nearly the paperback price.

The publishers' concerns are two-fold: (a) the $9.99 price will devalue books in the eyes of consumers, and (b) at some point Amazon and B&N will tire of losing money on e-books, and will then pressure the publishers to reduce the "official" retail prices on them to the price consumers have come to expect.

There is a reasonable argument to be made that the price of an e-book should be somewhat lower than the paper book, because there are no manufacturing or distribution costs. On the other hand, the consumer is still buying the ability to read the book, regardless of the format. Some have argued that the paper versions remain much easier to read, with crisper type and higher contrast; others point to the convenience and lightness of the e-book reader device. On the whole, there may be balance here.

I suspect that publishers would not be averse to a small reduction in the price of e-books, perhaps in the range of $2-$5 off the retail price of the hardcover. However, this would also cut into the royalties payable to the author of the book -- author royalties are typically a percentage of the retail price-point.

From the book-buyers' point-of-view, the publisher and the retailer are middlemen, standing between the reader and the author. Perhaps if the savings in "manufacturing" e-books could lead to an increase in author royalties, then book-buyers would be more amenable to the limitations inherent in the e-book format?

Note of Interest: The movie studios are facing a somewhat similar problem now, as several of them are refusing to provide DVDs to Redbox, which offers $1 DVD rentals from its vending machines. The studios are concerned that the $1 price would devalue the movie in consumers' eyes. 20th Century Fox, for example, is proposing a delay of 30 days after a movie's release on DVD before it would be available for Redbox $1 rentals.

Pixar 10, Wall Street 0

A few months back, I chastised Wall Street analysts (who were unable to mind their own store) for trying to become movie critics by predicting that Pixar's Up would be a flop.

They were wrong. Again. But at least one has apologized for the error.

As Brooks Barnes reported in yesterday's New York Times, analyst Richard Greenfield of Pali Research admitted to being "dead wrong" in predicting that Up would flop.

If only Wall Street were as forthcoming about all its mistakes.