January 25th, 2006

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What is Ransomware?

Wednesday, January 25th, 2006

Some years ago, as I recall, Stephen King published an e-book through his Web site. At the time, the prevailing thought on how to make any money at selling e-books, or any digital content, was locking up the files in some sort of digital rights management. Each buyer of content would get a unique file that they alone could read.  Yet, nobody had figured out an unbreakable system, so no major writer was willing to publish e-books.

Mr. King decided to try an experimental new way of selling an e-book. He posted one chapter at a time to his Web site. He requested that each individual pay $1 for each chapter downloaded. As long as a certain percentage of downloaders paid for chapters he would continue to publish chapters. This was his attempt to insure he was paid based on the popularity of the book.  He even insited that each individual pay that $1.  He didn’t want his most interested and financially secure readers to make up the difference for the readers who didn’t pay, even though he had some readers willing to pay $10, $100, or even $1,000 per chapter to make up for 9, 99, or even 999 other readers.

Unfortunately his publishing attempt failed. Not enough downloaders paid for the chapters. Mr. King expressed frustration with the way the experiment worked out, and he ended up not finishing the book.

At the time I thought he was being silly, expecting most of the book’s readers to pay one dollar a chapter for the book. I thought this was especially silly since he didn’t get paid in the same manner for his other books.

The way Mr. King and most writers get paid for writing a book published the traditional way is through an advance negotiated with the publishers.  An advance is sort of a loan from the publisher that is paid back from the royalties (per book earnings) the author’s book makes.  The author gets the advance by the time the book is for sale in book stores.  The author doesn’t have to pay back the advance, if the book doesn’t sell enough copies. Yet he dosen’t get to keep any additional royalties until the advance is paid back.  If the book is popular enough, the author can make a great deal more than that initial advance. Of course this is a simplification, and there are all sorts of wrinkles on this system in the real world.

Mr. King’s advances were in the millions of dollars per book, so he probably rarely paid back his advances, and earned additional per book royalties.  His earnings per book were based on what he (or his agent) could convince his publisher the book was worth.  Using the popularity of major writers such as Mr. King, a publisher can earn additional money from the other books they publish. So a book by Mr. King may directly earn less than the advance paid to Mr. King, yet still result in a bottom line profit for the publisher.

So he was selling his books to the publisher based on an up front price that wasn’t necessarily based on the books’ true popularity. At the time of this experiment I thought that Mr. King should do the same for his e-book. He should sell the book based on an up front price, and not try to worry about having his earnings match his popularity.

The system would work like this: Once an author has written a book, he would decide what the book was worth for him to publish it. The book must be split into a certain number of chapters, and he would publish the first chapter. He’d divide the sale price of the book by the number of chapters (minus the one free chapter), and ask for that amount before he published his next chapter. He would suggest a price per person per chapter, but not require it. Those readers who found real value in the work could pay what they want, and those readers who couldn’t or wouldn’t pay for whatever reason could still read the work and hope enough other readers would pay for the release of the next chapter.

For example, imagine a famous author who thinks his latest book was worth $1,000,000, and is willing to publish using this system. Imagine the book is eleven chapters. Since the first chapter is free, he divides his desired earnings by ten chapters, and comes up with a price of $100,000 per chapter. He suggests $1 per chapter price, but accepts any amount. If he gets a million readers, and 10% of them pay for the chapters, he’s made the desired amount.

I call this system of publishing ransomware. The publisher of the material is holding the later chapters hostage and will release the material when the ransom is paid.

In other posts I’ll elaborate on aspects of this system, such as some of the realities of collecting small payments, and how this system would encourage readers to promote the work.