EU VAT changes shift the digital landscape

From The VATman Cometh, Destroying Businesses by Cheryl Morgan:

Except that the new rules coming in next year have a turnover threshold of zero for digital products. Yes, that’s right. If all you do is sell one ebook, or a few knitting patterns on Etsy, or a little app you made for fun, you are required to register for VAT and file VAT returns once a quarter. Even if the tax involved is only pennies.

And from New EU VAT regulations could threaten micro-businesses:

The HMRC spokesperson says that most micro-businesses, such as developers of apps or digital downloads, trade through a third party platform or marketplace, like an app store.

“Where this happens it will be the responsibility of the marketplace operator to account for the VAT. As a result the vast majority of micro-businesses are unlikely to be affected by the changes,” adds the spokesperson.

It’s kind of amazing how hostile an environment for small digital service providers the EU is becoming.

None of these changes have too much of an effect on large corporations. Most of them already have the software to deal with this and the accountants to sort it out. But it has a devastating effect on small businesses and sole traders—exactly the kind of business that the web is otherwise enabling and giving massive leverage.

On the one hand this is a classic example of how our society favours larger corporations over small even when the small is more appropriate.

But on the other hand this also gives small publishers an incentive to change their strategy in ways that could make the rest of publishing very uncomfortable.

When you have two versions of the same product…

  1. A physical version that is zero-rated (no VAT paid), commands a higher price, and lets you trade up to 80 000 or so pounds a year without too much regulatory hassle.
  2. A digital version that has a next to zero marginal cost, substantial competitive price pressure, a high VAT in most countries, and imposes on you a lot of incredibly onerous taxation requirements.

… it makes sense for you to give the digital version away to increase sales of the physical version. Use outfits like Kickstarter and Blurb to increase the variety of your print offerings (i.e. adding more high end versions, collectors editions, etc.) and give away the digital version to promote them.

The other alternative is to stop selling ebooks directly, become entirely reliant on Amazon, Kobo, and iBooks for ebook sales, and give up on the opportunity to build a direct business relationship with your readers.

Of course, small EU-based software providers are screwed either way. Especially those offering web-based services. This will push a lot of desktop app developers who were fine with selling directly over to being exclusive to the app store. At least they have that option. Web services don’t have an app store.


Nominally, these changes are a part of a larger plan that’s supposed to even out the competitive landscape for large ecommerce providers. Amazon and Apple aren’t winning because they happen to be able to charge Luxembourg VAT while their UK competitors have to charge 20%. It gives them a slight leeway that others don’t have, sure, but they are winning because they both have huge platforms with a lot of users. Changing the VAT landscape won’t change that one jot.

On conferences

Publishing conferences are deadly serious

Publishing conferences are ritual performances. They are to the varied segments of publishing what morality plays are to the various forms of Christianity. They are narratives that are organised to demonstrate, emphasise, and reinforce the orthodoxy.

When heterodox speakers—like myself—are invited, we are there to perform a liturgical role. By providing a clear demonstration of threatening ideas from the outside, we end up giving the orthodoxy’s ideological centre a clearer delineation—reinforcing it. We are Vice, Folly, Death, Prodigality, and Temptation in the morality tale. We have to sound plausible, reasonable, and enticing for the drama to work, but are then parodied and mocked by the context. We exist solely to create an uncertainty that can be assuaged by the characters Mercy, Justice, Temperance, Truth, Virtue, and Tenacity, who bring the viewer back into the fold with convictions even stronger than before. Everybody who sets foot on the stage is a stock character serving a stock role that, one way or another, reinforces what the audience considers normal.

‘Digital’ publishing conferences are deadly serious

Alternative conferences, those that cater to the publishing heterodox ‘digital’, work in exactly the same way, often using exactly the same speakers, except the roles are reversed.

In traditional publishing conferences the temptation is the seducing allure of the new and exciting (i.e. unproven and risky) that pulls the audience away from their faithful field (traditional publishing). In a digital conference the temptation is the pull of the familiar, where instead of continuing the exploration of the unknown—which is where future inevitably lies—the true believer abandons the righteous path and goes down the known route that leads to stagnation and decline. Both groups are exposed to the same facts and the same reality, but end up seeing it in two completely different ways.

In both contexts the play is the same. The performers alternate between orthodoxy and heterodoxy, always making sure that the orthodoxy of that specific community controls the context and wins out both in numbers and presentation. The more hyperbolic the heterodoxy sounds, the better because the orthodoxy has to sound reasonable. The simpler the heterodoxy sounds, the better because the orthodoxy has to claim ownership of nuance and real-world complexity. Even when the heterodoxy does sound reasonable and nuanced, the orthodoxy has the high ground of owning the surrounding message and so can recast whatever the heterodoxy said in a grimmer light.

A conference isn’t for learning

The experience is a religious catharsis, purging doubt, and reinforcing faith. By joining in the communion of verbal diarrhoea spewed by consultants and overpaid executives, the faithful build a bond that becomes invaluable for networking in the conference’s corridors and coffee breaks. Trying to change anybody’s mind is the worst thing you can do in a conference: it’d be like lecturing people on atheism as they gather outside church after a Sunday mass.

My advice on how to properly attend a conference:

  • Ignore the talks. At best they serve as a conversation starter. For that, only one of you needs to have listened to them. At worst they fill your head with out of date nonsense designed to sell you on somebody’s services. If the talk is any good, everybody will be talking about it during the breaks and online and you can catch it when the video or the slides are posted.
  • Find your crowd. If you’re in digital production, a conversation with a print-oriented executive with thirty years of experience in avoiding change is going to be torturous. It’d be about as much fun as waiting in the queue for the toilet after having drunk five pints at the pub while listening to ‘Splish Splash’ on a constant loop. The point of conferences is to find and connect with like-minded people you aren’t likely to find elsewhere.
  • Don’t try to change anybody’s mind. It’s like trying to teach a cat to type out Ulysses. It won’t work and they won’t appreciate it.
  • Every conference has a reality distortion field caused by the faith-affirming ritual nature of the beast. Maintain your skepticism and assume that all of the speakers are bullshit artists, even the ones you agree with.

Above all, try not to think about how much money the entire brouhaha costs.

Crushed by multinationals

From an interview on Salon with Cory Doctorow:

But I don’t think that’s true of the majority of artists. I think the majority of artists get the least that the investor class can get away with. They are, from the perspective of the investor class, largely interchangeable. That is to say, if you plan to publish 15 fantasy novels this month that are going to be primarily aimed at people who are buying them in airports to read on an airplane, then really what matters is that you just have 15 novels that are of readable quality. And there’s far more than 15 people willing to write you a novel this month for it.

What happens when the number of “channels” increases?

There’s more people competing to buy your stuff. And when there’s more people competing to buy your stuff, then they can be played against one another. You can shop around for a better deal. I think what’s happened, not just in the arts but everywhere around the world, is that we’ve had incredible waves of concentration in industry, where we have policies that favor extremely large entities at the expense of smaller and medium-size ones. (Italics mine.)

This is what I’ve been saying (and in the splintered author). The problems authors are facing are neither caused by Amazon’s dominance nor are they caused by traditional publishing. Presenting a dispute between the two as a battle for publishing’s soul is missing the fact that we already lost publishing’s soul years ago. It didn’t happen when Amazon launched KDP, if anything, that was a lifeboat for authors (more channels are always better). It happened when all power in the industry concentrated in the hands of a few large multinationals.

We don’t solve this problem by picking one multinational to win over the others and then hope they won’t step on us. We solve it by introducing new channels—new ways of connecting authors to readers—and the only way to do that sustainably is to build communities or become a part of one. To do that in a way that properly leverages the resources you have, you need to understand the strategic role of software.

If you expect whichever multinational that wins the current dispute to be a fluffy teddy bear who will be nice to you forevermore, you’re going to be disappointed. They already view most of you as interchangeable. Only the authors of bestsellers and blockbusters have any real leverage.

And if you’re a publisher who expects to win out in this market by doing exactly the same thing as a multinational who has—literally—several orders of magnitude more financial resources than you do, then you will be stepped on.

If you’re serious about ‘saving’ publishing, you need to stop playing their game.

Software as a strategy: prefabricated publishers

Redux:

Activities that make money aren’t strategic. Activities that affect a company’s ability to make money in the future are strategic. Where is the leverage? That’s what is “strategic.” Only software provides significant leverage in business today. (Alan Cooper – https://storify.com/fakebaldur/software-and-strategy)

Most publishers today don’t understand the role software has come to play in business strategy.

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Software as strategy in the ebook world

The other day I storified a bunch of tweets by Alan Cooper on the strategic role of software in business.

Here’s the first half of it. You should go and read the rest.

All business activities that used to be strategic are now hygienic. Today, all that is strategic is software. Activities that make money aren't strategic. Activities that affect a company’s ability to make money in the future are strategic. Where is the leverage? That's what is "strategic." Only software provides significant leverage in business today. If your office lacks electricity or wifi, nobody shows up and nothing gets done. But neither electricity nor wifi are strategic. (Alan Cooper – https://storify.com/fakebaldur/software-and-strategy)

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The five types of unpublished books

TL;DR version: go big or self-publish.

(The following was written to help me think through the possibilities for a couple of project I’m involved with. It may or may not be useful to others. Also, none of the following takes the need to diversify into consideration which could completely change the picture. As always, YMMV. And ‘book’ for the purposes of this blog post is any project, digital or print, that is primarily intended to be read.)

If you’ve written a book, there are basically five things you can do with it.

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Four hundred words from Anita Elberse’s book “Blockbusters”

Rather than spreading resources evenly across product lines (which might seem to be the most effective approach when no one knows for sure which products will catch on) and vigorously trying to save costs in an effort to increase profits, betting heavily on likely blockbusters and spending considerably less on the “also rans” is the surest way to lasting success in show business.

[…]

With such high stakes and money tied up in a few big projects in the pipeline, the need to score big with a next project becomes more pressing, and the process repeats itself. The result is what I call a “blockbuster trap”: a spiral of ever-increasing bets on the most promising concepts.

[…]

Third, by extension, not bidding for sought-after projects makes it harder to get best efforts from sales and marketing representatives and other employees. After winning the hotly contested rights to a book like Dewey, Grand Central executives can forcefully make the case that this book will beat its competitors. (“It’s a sure bet to do as well as Marley & Me—why else would everyone be after it?”)

[…]

Fourth, critically, if entertainment businesses forgo making big bets on likely blockbusters, they will find their channel power waning over time. Retailer support is decisive in most media markets, In the film industry, the number of screens a movie receives from exhibitors in its first few weeks remains the best predictor of its revenues. Exhibitors want to see evidence that a movie is worthy of their scarce resources; they like nothing better than to know that a studio is making a significant push for a film and planning an extensive marketing campaign.

[…]

As this example again makes clear, the idea of smaller bets being “safer” is a myth. Blockbuster strategies reliably beat the alternative of more risk-averse strategies: the highest-performing companies in the entertainment and media sector thrive by investing a relatively large proportion of their resources in just a few titles and then turning those choices into successes by giving them a higher level of development and marketing support. It may be partly a self-fulfilling prophecy, but it works. And because the marginal cost of reproducing and distributing entertainment products is relatively low—especially compared to their up-front production expenses—and because of the economies of scale involved in advertising campaigns, the advantage of a bestseller, a box-office champion, or a ratings monster is huge.

More here…

The case the book makes is compelling and terrifying. It explains quite well the behaviour of most large media companies over the past few years. The implications for those of us who care about variety and diversity in our art and media are … disconcerting. Highly recommended for anybody who wants to be depressed about the state of art, media, and culture.

The splintered author

One of the major problems with yesterday’s blog post was my use of a derivative of the word ‘professional’ (or, ‘de-professionalised’ if you want my garbled, distorted, and modified to hell derivative).

That word, helpful and specific as it might seem at first glance, has a long history of being stretched, manipulated, and abused to suit people’s agendas. It has served very well those who have sought to be exclusionary and divisive.

It was quite possibly the worst term I could have used, except there aren’t that many alternatives with the meaning and history that fits.

So, instead, I’m going to describe very quickly the process that I’ve labeled as a ‘de-professionalisation’. That way, if you still disagree, you’ll at least know whether you disagree with my use of the term, my version of history, or my view of the present.

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There is no war between Amazon and Traditional Publishing

There will never be peace in the war between Amazon and traditional publishing because there is no war.

One of the defining qualities of the current dispute between Amazon and Hachette is just how softly softly it is. These kind of disputes between a mega-retailer and a major supplier happen every day in other industries and are notably brutal. The retailers promote the supplier's competitors heavily and with eye-bleeding discounts; they remove the supplier's goods from sale completely; they pressure other companies to stop dealing with the misbehaving supplier. Most large retailers have clout and wield it. Amazon just lost ten times more on the Fire phone alone than they were ever likely to lose from properly blacklisting Hachette. In turn, Hachette isn't playing hardball either. They aren't making sweetheart deals with Amazon's competitors. They aren't organising eye-watering sales or promotions with B&N. They don’t have a competent direct sales platform they can use to leverage the publicity the dispute has generated. Both parties are just continuing with business as usual, just with a little bit less effort. The predominant characteristic of the argument is its sheer lack of inspiration. It’s pedestrian and mundane.

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Ebooks suck for learning

On Twitter earlier I said this here thing:

There’s an implicit assumption in publishing commentary that the trajectory of media evolution (books, ebooks, websites, apps) is a known. That the long-term effects, drawbacks, & benefits of each medium will follow a predetermined path towards its manifest destiny. That ebook apps are as good as they'll ever be and will never integrate what research is discovering about learning and memory. That apps will always play the roles they play today. That websites will never reach beyond their current niche, except maybe into apps.

These assumptions are all unsafe. Ebook apps are a young and unformed species. The future of web and app dev is dynamic and changing.

What's more, the publishing industry isn't in charge of this evolution except insofar as it can sabotage ebooks with its misconceptions.

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