Making a digital copy of an ebook costs nothing. After the first ebook is created and paid for, there is potentially an infinite number of cost-free copies. Does this abundance of ebooks change how much a person should pay for an ebook? Has it changed how much we pay for software or music, also cost-free to copy?

WOWIO has based its business model on two concepts I have since encountered in Chris Anderson’s book, The Long Tail and Mike Masnick’s work on the economics of free.

Long tail: On WOWIO, there are generally popular books and books that are important to niche groups. With enough books and enough niche groups we see all our books downloaded by someone. As digital storage is much more compact than physical bookstore storage, the only limit to WOWIO’s book collection becomes the ability for a person to find the book they are looking for, and our ability to bring new publishers on.

Scarce for non-scarce: A concept that Mike Masnick proposes is that people can exchange non-scarce goods for scare goods as a way to develop new business models. WOWIO does this by enabling people to download non-scarce ebooks in exchange for sharing their scarce attention with sponsoring brands.

Also Old world: The third aspect of WOWIO’s business model is the that we do not live in a post-scarcity society overall. In other words, while ebooks can be duplicated without cost to the publisher or author, these people still live in a world that is generally not abundance-based. To survive in this old-style economy based on resource scarcity, the publisher and the author must be compensated for their work to cover how much it costs to initially produce the ebook and to also capitalize on the success of the particular work, should it become popular. Thus enabling them to make additional works.

Here, then is a question that I am seeking the answers to:

Is the publisher and the author best compensated by payment from sponsors based on ebook downloads, or do these parties best benefit from the growth of audience through free downloads that are then converted in to something else, like print sales or speaking engagements? Publishers currently get both, but I’m planning on reading the below references and see how these theories align with our practices. Any insights, most welcome.

Mike Masnick
President and CEO of Techdirt. Wrote a beautiful series of posts on the economics of abundance that concluded with The Grand Unified Theory On The Economics Of Free.

What Jefferson noted is the wonderful feature of a non-scarce, or infinite, good that it is effectively a free resource. Once created, it costs nothing to give to someone else, and you still retain the original. In fact, economists have finally realized that this is the very key to economic growth and progress. The infinite resource known as an “idea” that improves what was already there is what increases the size of a market. Or, putting it another way, that infinite resource of a new idea makes an existing scarce resource more valuable. It’s easy to understand that when it’s an idea applied to, say, a machine making it more productive — but it also applies to any infinite resource appropriately bundled with any scarce resource.

Cory Doctorow
Author and co-editor of Boing Boing. He has published 3 science fiction books and released these books for free under a creative commons license simultaneously.

I believe that we live in an era where anything that can be expressed as bits will be. I believe that bits exist to be copied. Therefore, I believe that any business-model that depends on your bits not being copied is just dumb, and that lawmakers who try to prop these up are like governments that sink fortunes into protecting people who insist on living on the sides of active volcanoes. Me, I’m looking to find ways to use copying to make more money and it’s working: enlisting my readers as evangelists for my work and giving them free ebooks to distribute sells more books. As Tim O’Reilly says, my problem isn’t piracy, it’s obscurity. Best of all, giving away ebooks gives me lots of key insights into how to make money without restricting the copying of bits. It’s a win-win situation.

ALSO:

Ebooks: Neither E, Nor Books
Paper for the O’Reilly Emerging Technologies Conference, 2004

A side question to this is the notion that ebooks can drive print sales. I have seen anecdotal evidence for this claim, but I wonder if it is a temporary condition. Should a truly appropriate digital reading device emerge, would the book form factor actually take on the emptied hull of the 8-track-tape, tape, cd, and floppy disk. Or the form of the record, still loved and used by eccentric aficionados and niche professionals, but generally replaced by a digital format.

Chris Anderson
Author of the Long Tail and editor of Wired Magazine. He is currently working on a new book called “Free”. At a recent talk at BEA he mentioned that he would like to give his books away for free as he earns much more from speaking engagements than book royalties.

From 2006 post on the economics of abundance:
Abundance thinking–understanding the implications of “practically free”–is a core competence of our age. It brought us everything from the iPod (”what if storage were so cheap you could put your entire music collection in your pocket?”) to Gmail (”why should you ever have to delete an email?”). Most truly disruptive technologies disrupt because they take a scarcity assumption and, thanks to some technology that generates abundances, simply turn it on its head. Just think VOIP (why should phone calls, which use hardly any bandwidth, cost anything?) or how anyone under 25 uses a digital camera (why settle for stills when you’d rather have the video?)
Also: Post on Chris’ Pop!Tech talk on the Economics of Abundance

Gift economy
From Wikipedia, the free encyclopedia

A gift economy is an economic system in which goods and services are given without any explicit agreement for immediate or future quid pro quo. Typically, a gift economy occurs in a culture or subculture that emphasizes social or intangible rewards for generosity: karma, honor, loyalty or other forms of gratitude. In some cases, simultaneous or recurring giving serves to circulate and redistribute valuables within a community. This can be considered a form of reciprocal altruism. Sometimes there is an implicit expectation of the return of comparable goods or services, political support, or the gift being later passed on to a third party. However, in what is considered to be in the true spirit of gift economics, many times giving is done without any expectation of reciprocation.

Post scarcity
From Wikipedia, the free encyclopedia

Post scarcity or post-scarcity describes a hypothetical form of economy or society, often explored in science fiction, in which things such as goods, services and information are free, or practically free. This would be due to an abundance of fundamental resources (matter, energy and intelligence), in conjunction with sophisticated automated systems capable of converting raw materials into finished goods, allowing manufacturing to be as easy as duplicating software.

The Post-Scarcity Economics/Culture of Abundance Reading List v2.2