As happened in the music industry, the software industry, the television industry, and the movie industry, publishers will have to adapt to the new technology. Like every other business, it is natural for publishers to want to continue to operate as they have done in the past. But they may not be able to. Once a few publishers take advantage of the technology other publishers may be forced to comply. As has happened in the most staid of all industries--banking.
In 1977, Citibank's share of retail deposits was 4.7 percent. Citibank realized that it could increase market share by reducing its unit costs; revenues would increase if it could attract many more low-balance customers. Citibank invested at least $250 million to deploy roughly 500 automatic teller machines (ATMs). By 1982, it had more than doubled its market share, and its share continued to rise by about 1 percent a year since 1983. By 1990, its share of the retail market was 14.7 percent--triple its 1977 share .
In 1983, eight other banks banded together to meet the threat and formed NYCE (New York Cash Exchange). By 1988, NYCE was the second largest shared ATM network in the world, trailing only France's Carte Bleue. Today it alone provides instant 24-hour service to over 11 million cardholders, who can use over 6,000 ATMs owned by 360 banks in 22 states. Many new bank branches are merely a series of ATMs set into a wall, with no tellers at all. Today a bank's ATM network is not a competitive advantage, it is an economic necessity.
Information is not the same as tangible goods; it can be copied almost instantly over enormous distances, with no trace, no loss in fidelity, and, potentially, no loss in value. This is true for pictures, designs, music, movies, software, and books. In the information economy, the ability to read something is inextricably bound up with the ability to copy it. When a few million people have the means of duplication in their hands copyright may exist as an idea, but it will be unenforceable between publishers and the public. Today no one is arrested for making personal copies of audiotapes or videotapes, even though that principle has never been tested in court . We could control illegal drugs easily if they had to enter the country through a few large depots.
But avoiding copy protection does not mean giving up copyright, particularly since the new technology allows abuses of copyright between authors and publishers and between publishers and retailers. That was not possible when production and distribution were so expensive that they were solely in the hands of publishers, and publishers had to be large companies just to be publishers. In those days, authors could always sue their publishers, and authors could not cheaply distribute their own works. But now that production and distribution are affordable by individuals, and growing ever cheaper, cases will eventually arise of publishers hiding sales from their authors, of retailers hiding sales from their publishers, of publishers selling independent of their retailers, and of authors selling independent of their publishers.
However, the subscription scheme is immune from attack because it makes book buying cheaper and more convenient than book copying. To see why it can work, imagine that someone invents a programmable matter transformer that can produce food from sand. Now imagine that the technology is so cheap that everyone can own one. It would then be foolish to try to sell food. But you can still sell recipes. And the same would be true of pharmaceuticals, jet engines, or microprocessors, only the producers and consumers change.
What will make consumers come back for more? The promise of more delicious recipes. The next section discusses what will make those recipes delicious.