Monday, November 05, 2012

Predators and Producers: Whither Flat World

In what was probably an unintentional release of the information, Flat World Publishing made the world aware this weekend that it is ceasing distribution of digital textbooks without charge.

Readers of Campus Marketplace were the first members of the public to know, but "The company is making direct calls to many of its bookstore partners." Flat World CEO Jeff Shelstad told the publication that “while free access goes away, our mission to be fair and affordable remains as strong as ever."

A lot of people had banked on Flat World providing free access to textbooks, as it had promised to do.  "The only reason I gave Flatworld a chance was because it seemed like a great opportunity to try a text with no risk to the students," said one commenter on the Chronicle article. "I made the mistake of adopting before they changed their model with no notice to any of its customers."

To understand Flat World's change of philosophy, it is important to understand the company's business model. It is neatly summed up in an Inside Higher Ed article:

"Like traditional publishers, it commissioned and paid authors to produce high-quality textbooks, and to market those textbooks to professors to assign in their courses."

The idea here was that the free digital versions would lead colleges and universities to order print versions of the same works, and it would be via the print versions that the publisher made its money. What happened instead was that the world moved to digital more quickly than anticipated.

Inside Higher Ed again: "the shift in gears by Flat World Knowledge suggests that, for one company at least, providing free and open textbooks is not a viable business plan. While company officials hoped that they’d be able to persuade many of the consumers of the basic, free versions of its textbooks to pay for printed copies or versions enhanced with study aids and other add-ons, 'we don’t convert [from free to paid] as much as we used to,' said Shelstad, the Flat World co-founder."

Flat Earth represented the 'have your cake and eat it' school of publishing. It represented the idea that business models would not need to adjust to the digital reality, that you could take a traditional concept - like academic publishing - and simply add free digital content on top, as marketing and promotion perhaps.

It's the same model being embraced by the companies that are offering MOOCs, and it won't be long, as a commenter on the IHE article states, before they are offering closed open online courses. "Once we figure out the right word for 'much closer to free than we are now,' then we should let the folks at Coursera and EdX know. I think they'll probably need it in a few years, when MOOCs turn into MOCs, though at something less than the current cost of tuition."

There are ways to do free. Indeed, free learning resources will probably carry the day when the smoke clears. But they won't sustain traditional business models. Alex Osterwalder has a nice presentation on SlideShare that makes this point. Consider the alternative business models that can sustain free content:

- content is distributed for free, but once it reaches a certain threshold of popularity, it becomes commercial. This is similar to the NY Times model, which allows causal readers free viewing to a certain point.

- content is distributed for free within the context of an all-you-can-eat subscription model. Netflix does this, offering access to movies and television shows online for about $8 per month (in Canada), less than a third of the cost of one Flat World textbook.

- context is distributed for free, which stimulates demand for platforms and communications channels leveraging the content. This is what WordPress and Moodle have done, leveraging free software into hosting and consulting businesses.

So why couldn't Flat World have adopted one of these alternative business models?Because it focused on a way to sell the content it developed, rather than to leverage that content to motivate consumers to pay for products they actually would buy.

In Osterwalde's examples, consumers are paying not for the content directly but instead for free and online access to that content. It's the same thing they are paying for when they purchase computers or mobile phones and when they purchase internet accounts.

Subscriptions and services represent an intuitive addition to that business model; per-title fees for texts do not. But providing subscriptions and services require access to a lot of content, not a few specially-commissioned titles. And you have to devote yourself to building a platform rather than to simply focus on producing titles.

By structuring themselves as a traditional publisher, Flat World was not able to transition into a digital business model. This puts them on a path that now pits them as direct competition for traditional publishers, not an alternative approach. And while Flat World's Shelstad may claim to be able to compete on the basis of price, the company is now at best niche and at worst roadkill for the economies of scale.

That's one thing. Another thing is the licensing argument.

To begin with, I know Flat World published its work under the Creative Commons non-commercial license. At the same time, however, Flat World proponents such as David Wiley - not to mention other academic publishers in a similar context - have been arguing that authors need to publish their work under the "more open" CC-by license, which does not prohibit commercial use.

The logic of using CC-non-commercial is evident, and Wiley explained it during our debate in British Columbia: "Text book development costs a lot of money and they want to make those textbooks and they want to share, they're willing to share them with the world for free but they don't want to get undercut in the commercial market so they use this non‐commercial clause because as bad as it is, it's the best thing we have available." (p. 52)

Interestingly, this is very similar to my own logic in using CC-non-commercial in these pages. I don't want some commercial publish like Flat World to come along and take my content, enclose it, and start charging for access to it. I don't want the commercial pay-content industry to leverage its superior marketing and distribution capabilities to become the de facto vendor of what I had originally intended to be free and open content. So I use the NC license to protect myself.

Ironically, Wiley's argument against the NC clause was precisely that NC makes it impossible for publishers to do this. As he described it, "I want to print this stuff out, I want to do this service for people, I, if I'm going to spend all my time doing that and I'm not going to be growing my garden or doing whatever else, I'd like to at least be able to eat off of that activity, and your non‐commercial clause is morally reprehensible because it means that I can't make a living trying to help people get access to this material. That's the morality argument around non‐commercial."

This may seem to be a contradiction, but it's not. Here's what publishers such as Flat Earth want: they want access to your content for free, or for as low a cost as they can manage, and they want to be able to sell it for as much as possible. So it's good for them if authors make their content freely available, while at the same time they restrict the possibility of commercial reuse of the same content (ideally by eliminating the CC-share-alike clause).

This is what I've always argued commercial publishers want to do. I have always argued that theirs is a model based on enclosure - that they would take free and open content and make access impossible unless you paid them money. And that's what Flat World did here - it dangled its open content out there to lure people in, and then slammed a paywall on it, midway through the academic year, trapping people who had thus been enticed.

I think there are many ways Flat World and its proponents could have created a viable business based on free content.

First of all, I think it's time that the community recognizes that 'free content' means content you can download, remix, repurpose, share - but not sell. That the 'free as in libre' sense of free is meaningless without 'free as in gratis', because without access to the content you have no freedoms at all.

So I support Flat World's use of CC-NC, just as I support MIT OpenCourseWare's use of the NC license, and the rest of them - and that why, indeed, I am inclined to view suspiciously initiatives that are asking people to donate content under a CC-by license. They are just waiting for their change to pull a Flat World - to convert from a free-access to a paid-access model.

After all, who wouldn't pay $10 a year to use Wikipedia? Right?

Second, I think that Flat World could have found its sustainability niche if it had structured its offer around the idea of providing services for users of online textbooks. Services such as hosting, streaming, maybe even printing. Services such as authoring and editing and proofing. There is much more money to be made helping people create free content than there is in charging people for content.

They could have learned, for example, from Simon Fraser University's Public Knowledge Project. This is an initiative that has been around since 1998, has employed some 40 graduate and undergraduate students over the years, and has just launched its Open Monograph Press. As PKP's John Willinksy says, "We have worked hard to create a virtual publishing-house-in-a-box, which, in the hands of publishers and scholars, will give life to a new generation of learned books."

In general, let me say this: there are two types of commercial enterprise, two types of business, and they are: predation and production.

The predation model thrives on scarcity and shortage. It seeks barriers in production, or creates its own, in order to stimulate greater demand and higher prices. It thrives on hardship and want, and fails in the face of abundance and prosperity.

The production model thrives on abundance and plenty. It removes barriers in production, or enables new production, in order to stimulate widespread availability and lower prices. It thrives on prosperity and generosity, and attacks hardship and want.

Production model companies make things possible, while predation model companies make things impossible. A production model company enables sharing; a predation model company prevents it.

The predation model depends on legal mechanisms to force compliance - it depends, for example, on court-awarded monopolies, copyright and trade restrictions, prohibitions against production, and similar mechanisms. While predation model proprietors champion the principles of the free market, they rely on artificial scarcities to stay in business.

Today's predation-model proprietorships include journal and textbook publishers, who rely on cheap or free academic labour paid for by public grants and/or universities, and required textbook purchases in college and university educations.

But we've seen the model in the past, from the original corporate charters granted by monarchs to grant enterprises monopolies over trade and production of certain goods, from the ownership of land and agricultural production in the 1600 and 1700s, to the energy and transport charters of the 1800s and 1900s, to the communications, media and entertainment giants of the 1900s and 2000s. And with proprietary seed stocks and other biological goods being produced in the 2000s we are seeing an enclosure of biology and life itself under commercial ownership, creating, once again, scarcities where none existed.

The production model focuses on helping people produce rather than forcing them out of the market. At each stage of its history, the production model has had to break the predatory monopoly that preceded it.

The opening of the new world ended the proprietorship of feudal lords and fiefs, as a person need no longer depend on a landowner to create crops, but could now emigrate and own his or her own land. And as millions did, the serfs in one land after another were gradually freed, and predatory land-ownership became productive agriculture. And starvation, once common in those lands, was effectively ended.

Where once only charter corporations could undertake business and commerce, the rise of such professionals as accountants, lawyers and clerical staff enabled families and small businesses to flourish. The financial and business services industry was, in the first instance, part of the production model.

In a similar manner, the rise of the automobile and the creation of the road network ended the transportation cartels created by the railroads. For many years (and even today) the automobile has symbolized freedom - and this is not merely a metaphoric freedom, but one for the most part genuine, as people could now travel where they wished without tolls or fares.

Motorized transport, and motors in general, stimulated an entire productive sector - people could transport themselves, procure their own goods, mow their own lawns, till their own fields, lift things, move things, make things - and an entire productive economy developed around these innovations, one so large it dwarfed what existed before it.

Today we are witnessing the conversion of the intellectual properties from a predation to a production model. We are entering an era in which most of us can sing, act, write, draw and paint, compose, author, program and design. These skills, once the preserve of an elite, these products, once carefully hoarded (Disney still talks of the 'Disney Vault' as though it were a good thing) are becoming common and plentiful.

Flat World is and was based on the predation model, even when it was giving content away for free. It was based on this model because it sought to be the proprietor and locus of content production. That's what made it possible for it to so easily add a paywall. If it were based on the production model, the idea of a paywall would seem absurd.

To me, the NC clause means that my content is the output of the economic process, not the input. It is something produced by the productive economy, not something consumed by the predatory economy. It is something that is meant to be shared, not sold. It is something that is intended to be abundant, not scarce. It's value is calculated according to what it contributes, not by what it takes.

2 comments:

  1. Stephen, I know you mean well, but the assumptions you make about market realities in the educational publishing space are so far off rail that I hardly know where to begin - so, I won't.

    Instead, what I suggest you do is actually go talk to a real educational publisher to gain market insight, and then apply that information to your analysis. Your arguments will carry more weight that way.

    btw, FWK is not going to a paywall because it didn't succeed. Fwk is making a calculated market adaption, to remain sustainable (i.e. profitable - heaven forbid!) Did the New York Times going to a paywall indicate that it didn't succeed? The Chronicle of Higher Education? The Financial Times?

    How about the university you teach at? Does its insistence on a tuition paywall mean that it has somehow failed in the "free" dissemination of education?

    Little more than confusion results from all the needless chatter, mumbo-jumbo, and philosophizing about which open license is better; or, whether "free" is better; and so on. It's doesn't matter! What matters is offering high quality products that can be delivered at cheaper cost with more benefits. Is that a bad thing? That's what FWK is trying to do. That's all. Why make "open" a sacred thing? Why try to surround "open" with dogma? The academic community, foundations, and even the Federal Govt has a "true believer" stance re: open licening - requiring a specic kind of open (CC-BY), and eschewing all others. That's just dumb; it confines the world of open; it sets precedents that weaken the prospect of successful innovation in open - and even closed - enterprise.

    Bottom line: textbooks cost too much; education costs too much; certifications cost too much. There are going to be many efforts started to meet this gap in the market - between overpriced current options and new innovation that deliver the same or more benefit as the old, for a lesser price.

    All your (and others) theorizing on these non-issues results in little more than a weird demonizing of companies, revenue models, strategic market approaches, etc. that are trying to make a difference, but somehow fail in your eyes because they fail to meet the standards that you have created in that comfortable little theoretical room inside your head. It's really comfortable in there, I know, but please do strive for more accuracy instead of setting up straw men that are convenient to argue against; that's not the real world; it's the world of the ivory tower, where things are mostly thought of in the abstract.

    Having to make a profit or find something else to do is not a concept that most academics are very up on (including many business school academics). The recent several-year dialogue about open and how open should or should not play out in this-or-that way has been riddled with the basic of misunderstanding and outright error, with academics and foundations mostly responsible for those errors, and thus causing great harm to the search for cheaper, high-quality textbooks.

    Well funded fiefdoms have arisen as a result, with little to show for $100's of millions of dollars of investment. What a waste; what an injustice to the millions of students who could have already had high-quality, low-priced or free college textbooks - but don't. That's a tragic loss, and an opportunity wasted.

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  2. On the CC-NC piece, I'm been flailing on this post that you commented on a while back - http://educationaltechnology.ca/couros/1822 - but this brings me back to my initial position. Thanks.

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