Tim O’Reilly On the Evolution of Online Distribution

Who is Tim O’Reilly?

Tim O’Reilly is the founder and CEO of O’Reilly & Associates, thought by many to be the best computer book publisher in the world. O’Reilly also publishes online through the O’Reilly Network (www.oreillynet.com) and hosts conferences on technology topics. Tim is an activist for open source and open standards, and an opponent of software patents and other incursions of new intellectual property laws into the public domain. Tim’s long term vision for his company is to help change the world by capturing and transmitting the knowledge of innovators.

His thoughts on online distribution:

Lesson 1: Obscurity is a far greater threat to authors and creative artists than piracy.

Let me start with book publishing. More than 100,000 books are published each year, with several million books in print, yet fewer than 10,000 of those new books have any significant sales, and only a hundred thousand or so of all the books in print are carried in even the largest stores. Most books have a few months on the shelves of the major chains, and then wait in the darkness of warehouses from which they will move only to the recycling bin. Authors think that getting a publisher will be the realization of their dreams, but for so many, it’s just the start of a long disappointment…..

Lesson 2: Piracy is progressive taxation

For all of these creative artists, most laboring in obscurity, being well-enough known to be pirated would be a crowning achievement. Piracy is a kind of progressive taxation, which may shave a few percentage points off the sales of well-known artists (and I say “may” because even that point is not proven), in exchange for massive benefits to the far greater number for whom exposure may lead to increased revenues…..

Lesson 3: Customers want to do the right thing, if they can.

Piracy is a loaded word, which we used to reserve for wholesale copying and resale of illegitimate product. The music and film industry usage, applying it to peer-to-peer file sharing, is a disservice to honest discussion…..

Lesson 4: Shoplifting is a bigger threat than piracy.

While few of the people putting books on public web servers seek to profit from the activity, those who are putting up CDs for sale on eBay containing PDF or HTML copies of dozens of books are in fact practicing piracy–organized copying of content for resale.

But even so, we see no need for stronger copyright laws, or strong Digital Rights Management software, because existing law allows us to prosecute the few deliberate pirates…..

Lesson 5: File sharing networks don’t threaten book, music, or film publishing. They threaten existing publishers.

The music and film industries like to suggest that file sharing networks will destroy their industries.

Those who make this argument completely fail to understand the nature of publishing. Publishing is not a role that will be undone by any new technology, since its existence is mandated by mathematics. Millions of buyers and millions of sellers cannot find one another without one or more middlemen who, like a kind of step-down transformer, segment the market into more manageable pieces. In fact, there is usually a rich ecology of middlemen. Publishers aggregate authors for retailers. Retailers aggregate customers for publishers. Wholesalers aggregate small publishers for retailers and small retailers for publishers. Specialty distributors find ways into non-standard channels…..

Lesson 6: “Free” is eventually replaced by a higher-quality paid service

A question for my readers: How many of you still get your email via peer-to-peer UUCP dialups or the old “free” Internet, and how many of you pay $19.95 a month or more to an ISP? How many of you watch “free” television over the airwaves, and how many of you pay $20-$60 a month for cable or satellite television? (Not to mention continue to rent movies on videotape and DVD, and purchasing physical copies of your favorites.)

Services like Kazaa flourish in the absence of competitive alternatives. I confidently predict that once the music industry provides a service that provides access to all the same songs, freedom from onerous copy-restriction, more accurate metadata and other added value, there will be hundreds of millions of paying subscribers…..

Lesson 7: There’s more than one way to do it.

A study of other media marketplaces shows, though, that there is no single silver-bullet solution. A smart company maximizes revenue through all its channels, realizing that its real opportunity comes when it serves the customer who ultimately pays its bills.

At O’Reilly, we’ve been experimenting with online distribution of our books for years. We know that we must offer a compelling online alternative before someone else does. As the Hawaiian proverb says, “No one promised us tomorrow.” Competition with free alternatives forces us to explore new distribution media and new forms of publishing…..