In this Episode
David Vandagriff is known by people in the publishing industry as Passive Guy, his persona on his popular publishing industry blog, The Passive Voice.
In this interview, Leanpub co-founder Len Epp talks with David about his background, how he got into the law after studying speech and literature, his early innovations with desktop publishing in the preparation of legal documents, his work in advertising and how he got into the tech world, as well as recent issues in the book publishing industry generally.
This interview was recorded on November 6, 2018.
Len: Hi this is Len Epp from Leanpub. And in this episode of the Backmatter Podcast, I'll be talking with David Vandagriff.
Based in Utah, David is an attorney with a wide range of experience, both in technology and in contract and intellectual property law, including the various types of contracts authors sign with their agents and publishers.
In addition to his contract counsel work for authors, David has also engaged throughout his diverse career in high-level litigation, and has worked on contracts with some of the world's biggest corporations, including Apple and Disney and Goldman Sachs, amongst many others
Listeners to this podcast may be familiar with David through his popular blog The Passive Voice, where he writes under the name Passive Guy or PG.
On the blog, David writes about issues of interest to people in the publishing and self-publishing industries, as well as other important and just interesting topics and industry news. If you're not already reading it, I highly recommend you check out the blog at thepassivevoice.com, and that you follow the related Twitter account @passivevoiceblg.
In this interview, we're going to talk about David's career, technology and intellectual property issues, author contracts, and at the end we'll talk a little bit about some of the latest issues of note in the book publishing industry.
So, thank you David for being on the Backmatter Podcast.
David: My great pleasure.
Len: I always like to start these interviews by asking people for what I call their origin story, and I was wondering if you could talk a little bit about where you grew up, and how you ended up in the law?
David: Given my age, it's a long story. So if I need to speed it up a little bit, just go ahead and give me a sign.
I grew up in Colorado and Minnesota on ranches in Colorado and farms in Minnesota. I went to very tiny schools in Colorado. We were way up in the mountains for a while, and I was never the only student in my grade. But several times there were two students in my grade.
Anyway, I went to high school in Minnesota. If you've ever listened to Garrison Keillor, you know exactly what my life was like in high school. After that - I'd been to a summer program at Northwestern University between my junior and senior years in high school, and they offered an opportunity to speak with the admissions guy. I took that opportunity, and he asked me a bunch of questions - and then told me in essence, that I was a slam dunk if I wanted to come there. And so I thought to myself, "Well, that's easier than waiting around for acceptance letters."
So I applied, and they were kind enough to give me a very nice scholarship. I spent four years there in the School Of Speech. As a matter of fact, a couple of times I actually substituted on the campus radio station while I was there.
And anyway, I graduated, and went to work in Chicago after my graduation. First, with a large financial services company, then with a big advertising agency. I was selling hot dogs and dog food. Not to the same people, but I did that for a while.
Then I met the woman who would later become my wife, and every male member of her family was and is a lawyer. Her father sat down and gave me the big pitch on why law school was a great idea. And so I went to law school at Pepperdine University in Malibu. Much better in January than Chicago is, in terms of creature comforts.
I graduated there, and went to work for my wife's father's law firm for a little while. Let's just say our personalities did not fit together as wonderfully as they might have. I could handle her father on Sundays for dinner, and that sort of thing - but working with him was a different story.
So, I went to work for one of the firm's clients as general counsel. This client basically was - I don't hesitate to call him a genius inventor. He developed a whole lot of things that provided foundations for mainframe computers. I told you this is going back a ways. But basically [his inventions] were found in every mainframe computer. He had a whole bunch of patents and so forth.
He had a series of new patents, and wanted me to help him with the legal aspects of it. I sort of ended up being the chief operating officer.
We got great publicity - front page of The Washington Post, front page of the Los Angeles Times. We went back and had hearings in Washington DC. My boss testified there and all that. This was in the middle of the energy crisis during the Carter years.
So we had giant publicity, lots of people talking to us and so forth. But this boss - he wanted the perfect deal, and wanted all the money in the world, and complete control over everything that went on. We had some very good negotiations, and we licensed it to a few people. But in terms of the big payoff, it never came.
At this point in time, I was kind of tired of Los Angeles. So I sought a place as unlike Los Angeles as possible, and that turned out to be a little town in southwest Missouri called Monette. I went back there, hung out a shingle, and crossed my fingers while waiting to see if people would show up and hire me. It took them a while, but eventually they started doing it.
My specialty there was hillbilly law. Which is hogs, dogs, deeds, and wills. But it was very retail, and I ended up really enjoying it. I enjoyed being connected with real people. I enjoyed some of the stories that I picked up out of it.
I'd still be there now if it weren't for the fact that I discovered personal computing. When I started out, I had learned a dedicated word processing program, while I was in Los Angeles. I got pretty good at it, and used it to print out my resume to go to work for one of the firm's clients, like I mentioned.
Anyway, so I got a word processor, got that all going and everything. And lo and behold, a friend of mine ran the local Radio Shack store, and he was talking to me about Radio Shack personal computers and so forth. So I got one, and had a great time with it, and started using it in my law practice.
I graduated to - every time there was a more powerful computer that came out, new chip or something like that - I switched to that. I learned about WordPerfect, which still in my mind is the finest word processing program that ever has existed on the planet.
I started to do a variety of different things in my in my practice - automating it, basically. These things were items that just made sense to me - this is the way you do it. You don't retype the whole petition for dissolution of marriage, you just go ahead and set it up so all you have to do is just replace all the variables, and there you go.
I'm not sure exactly how, but I got a call from a guy who was looking for a speaker for the Missouri bar's annual meeting on technology. To this day, I still don't know how he got a hold of me. But I was asked to speak, and to come and talk about how I use my computer. And so I put together my first presentation for a bunch of lawyers, and it was - how much can you do in an hour? It was an hour long presentation. How much can you do in an hour in a law office, showing how to use your computers right? And so I did a demo of divorces and wills and everything like that in an hour - oh and on bankruptcy too.
I ended up having a bill for like $2,000 for an hour's worth of work. Which, by hillbilly law standards, is extremely rich. And then a guy came up afterwards and said, in so many words, "Hey, I'm a big shot with the American Bar Association, and I'm very interested in the computers. I've seen all the things that the speakers at the American Bar Association are doing, and nobody's doing what you're doing."
So that led to speaking at the American Bar Association annual meeting for 10 years in a row - speaking all over the country, getting invitations for presentations all over the country - from New York to Los Angeles, and doing what are called CLE's - continuing legal education programs. I'd do a whole day showing how to use computers.
The American Bar Association Journal - it's a monthly journal, it goes out to all members - said, "We'd like you to write a column for us." And so I showed up, and my byline specifically called out that I practiced hillbilly law. I was having a good time, lot of fun.
The ABA journal had me fly out to interview Alan Ashton of WordPerfect. I got to know him pretty well, and became sort of a WordPerfect - ambassador, is what they'd be called now. But I just liked it. And in those days, Microsoft Word was nowhere near - for the things that I did, and doing things fast - nowhere near.
At this time, my wife became very ill, and we were not able to find good medical care for her in rural Missouri. I got an invitation from somebody I knew at LexisNexis - a legal research organization, one of the two big ones - and he said, "Hey, heard you might be looking. Can you come to work for us and basically take over our small practice business?" Small was 10 and below for them. And I said, "Yes." So I went to work for a technology company.
It was one of those things that was fun at first, but then I learned another lesson.
And that is - be careful of who owns the company that you're working for. It turned out that they were owned by one of the largest - probably the first or second largest media company in the world, headquartered in England and Holland. And those guys, they were great at doing some things, but they didn't understand technology at all.
But I was able to push through the first program of computerized legal research for small firms. I did a lot more talking and so forth at that point in time. But I started letting people know that I wouldn't mind going someplace else.
I was contacted by somebody who said, "Hey, I know the guy who is the head of ancestry.com." Long story short, I came to work for Ancestry as VP of strategic partnerships, and then worked my way into VP of sales and marketing.
This was when I was having interactions with Microsoft, all the big banks in New York, Apple - let's see, who else? Sun Microsystems, when they were still a big deal in software. So a lot of technology relationships were going on there, in terms of technology we needed. And then a whole lot of publicity for selling genealogical services, which is what Ancestry was and is all about. That was really cool. Is this going on too long?
Len: No, no,. Please keep going. You're weaving a great story here.
David: The founders of Ancestry did not read the contract that they signed with what was then the largest venture capital group in California, CMGI. And CMGI decided that Ancestry didn't quite fit very well with the dot com boom. People were actually paying to use the service, which just didn't fit into the standard mold. And so they fired the President of the company, CEO of the company. They brought in a guy from California who wanted to spend more time in San Francisco than he did in Provo, Utah, which is where Ancestry was and is headquartered.
We opened up a New York office. I started flying back and forth to New York, I got a bazillion airline miles. But it wasn't going anywhere. And so the CEO sat down with me one day and said, "You know we've just acquired this other company and they're located in San Francisco. Basically I'd like a guy in San Francisco to take over your job." I said, "Sure fine." He ended up getting fired about six weeks after he let me go. It just all changed all at once.
I got called by a headhunter. Like a week after I left Ancestry, I was working for a company that is currently domo.com. I don't know if you're familiar with them, but they do business analytics, very high-end charting, graphing and so forth, over the internet. That worked out well, and then it's a series of other small company items - small tech companies and so forth.
And then finally, it'd be fair to say "burned out." I had some stock in a variety of different organizations and managed to sell it. It was not "never have to work again" money, but it was enough that I could just decide what I wanted to do.
My wife's an author, and she's been an author for - well she wouldn't like me to tell you how many years, but for a long time. I can't remember where I got the e-book thing - when I was first exposed to e-books.
I started talking with her about that. And she was traditionally-published with a couple of different publishers. I basically said, "I think you can make more money on this Amazon place selling ebooks." And so she told her publisher what she wanted to do, and her publisher said, "Well, we've got a contract with you."
And so I said, "Let's see the contract." It was one of those things where she asked me to look at it when she'd signed it years earlier - and I'd looked at it, but I had not really looked at it. Because these publishers were very reputable in the industry and so forth.
So anyway, I looked at the contract, and discovered that that lo and behold, there were a few problems with it. They were doing a few things that they were not authorized to do in the contract.
One of the things was, they were publishing ebook versions of my wife's books, and they didn't have any authorization to do so under the publishing agreements.
It had one of those standard provisions that you see in almost every publishing agreement that says something like, "All rights not granted by the author to the publisher are retained by the author." Most of the time publishers do an extensive job of taking all rights that make sense. But this publisher had never thought of anything like ebooks, and so they'd neglected to ask for them.
I had a few, let's say, "heartfelt discussions" with the publisher's lawyers. and she got rights to her books. The publisher was able to also publish the books, but I had an idea that we could do a better job and sell way more books than the publisher would. So that got me started in self-publishing for my wife.
She has a lot of author friends, and they kept on calling me. And then I started The Passive Voice. Basically, because I couldn't find another blog that really talked about these things in the way that was interesting for me.
And lo and behold - my wife wasn't the only one that signed a bad publishing agreement, and I started getting contacts. Right now I represent authors from all over the world. I've lost track of the number of non-US countries, but quite a few.
Initially all of them had contracts with US publishers. Now it's moved into a different area of, "Okay, how do I do a deal with my cover artist?" It's a handshake kind of thing. "Do I need something else?" "What am I going to do with a co-author? I'm worried because I heard there was this big fuss between two co-authors, and I don't want to have one of those." That sort of thing.
It's been very interesting to see technology come into the publishing industry, compared to some other industries. They were pretty late to that. The New York publishers are still pretty pretty late to that.
Len: Thanks for setting the stage that way. One really interesting part of your story that intrigued me when I was doing research for the interview was, when I saw that you studied speech at Northwestern. I wondering, going all the way back to that - what does it mean to study speech?
David: You mean in terms of, rather than having a real major there? Northwestern has - I'm sure they call it "Communications" now. But then it was "Speech." They have an extremely good program in speech. A lot of people I went to school with became Broadway producers and so forth, a couple became actors.
One of my favorite ones was a friend, whose name was Clyde Kusatsu. He was not like the leading-man kind of guy, but he was a really good guy, and he was a good actor. After graduation I sort of forgot about him. And then one night I was watching Star Trek: The Next Generation, and Admiral Nakamura came on, and that was Clyde.
David: Clyde had a whole lot of parts like that. I went to the movies one time, and there was this movie about the attack on Pearl Harbor - and that was Clyde, he was attacking Pearl Harbor. I thought it was really cool.
So anyway, speech, performing arts - that kind of thing, that's what I was involved with there.
Len: Being a good lawyer obviously involves being a good communicator, and being very good with language. I wanted to ask you if you felt that your work studying speech helped you in that regard throughout your career?
David: Absolutely. Because otherwise it would not have done anything for me.
I mentioned I did a lot of speaking about computers and so forth. Also, in my day job, I did a lot of litigation - talking to to juries and judges and such. It ended up being a very good thing for me.
Len: You invoke an interesting question of the way people perceive the utility of various majors. I was an English major in my time. I've actually thought a lot about it. Because from one perspective, you'd think - you use language in everything you do all the time, including your own thoughts. What could be more practical than understanding that, and being good at that? But a lot of people don't agree.
My pub-table theory is that there's two things that contribute to that. One is that, because we use language all the time, we all think we're good at it. We live unexamined lives that way.
But the other thing that's tricky, and which is what makes misperceptions about the practicality of studying these things so widespread, is that - my little phrase is, it's the kind of power that you must first possess, in order to then perceive.
David: Oh, I like that.
Len: It took me a while to work that one out. You can't see the power it gives you, until you possess that power. And it's that invisibility that perpetuates the idea that you don't actually learn anything useful, when you learn about these things.
David: It's had a really great benefit down to this day for me. Because the particular area that I was in was, I believe the full name of it was, "The oral interpretation of literature." That involved a very rigorous analysis, as you probably had with your English major - very rigorous analysis of a literary work or a poem or short story - something that you were going to perform.
The idea of the particular area that I was in, is that, you couldn't perform it well, unless you really understood everything that the author was putting into it. I spent a lot of time digging through a sonnet, looking for all the words and all the meanings and all of the so forth. And so I draw a direct line from rigorously analyzing a scene in a Shakespearean play, to rigorously analyzing contracts and agreements.
I think it - well, I don't think, I know, that that experience helped me develop a critical thinking skill and a critical analysis skill when it comes to words and combinations of words.
Len: And then, combining that type of analysis and expertise with communicating well, is just incredibly powerful.
You mentioned actually - I didn't know this from your profile online, that you worked in advertising in Chicago.
David: I did.
Len: I might be off on the timing a little bit, but was that around the Mad Men days of advertising?
David: Technically, it was after the Mad Men days. But you know what? Not much had changed then. Big advertising budgets, not many women. Losing accounts, getting accounts, and so forth.
One of my memories is, "Dogs love cheese." I got assigned to the dog food account, and our client decided to put cheese bits into their dog food. So it was our job to sell this dog food. And so we came up with, "Dogs love cheese," we had a series of very beautiful commercials with all these talented dogs doing all kinds of things - running off the end of a dog, catching a Frisbee in the air and then falling into the lake and so forth. So anyway, dogs love cheese.
Len: I've got some questions about technology and your adoption of it.
You worked for LexisNexis, as you mentioned. It's really interesting, because you also mentioned at one point that the trade publishing industry has been slow to adapt to technology in lots of ways.
I remember, for one of my first interviews for this podcast, I interviewed Thad McIlroy, who I'm sure you've heard of. He may have been involved in the very first project in America where a book was produced entirely using desktop publishing technology. This is in the mid 80s.
Len: And then Apple found out, and someone contacted him - and they basically flew him out, to talk to him about what he'd done, and work with him.
And so, you were there at the beginning of a very important moment for legal publishing, when you were working for LexisNexis.
I was wondering if you could talk a little bit about what that time was like, and what it was like working on one of the first - there was another technology, not just the paper publishing technology and electronic publishing, but the web was becoming a real thing, and I was wondering if you could talk a little bit about what that was like, and the impact you saw this technology have in a very short period of time, on the legal publishing world?
David: It had a big impact. I was actually responsible for the first web-based product that Lexis offered. Prior to that time, you had to install software on your computer, and do dial-up and so forth.
We had the first one that you accessed with a web browser. It had a tremendous impact, because lawyers, at that point in time, were so focused on books. If you went into a big law office, as you walked through there, you'd see a library that was just stuffed with books. And if you were doing research and you didn't have the right books in your own library, you might have to go over to a university. You might have to go to another law firm's library in order to access books that they had in theirs. It was very much a situation of being bound with books.
And with Lexis, the cool thing was that you could find all kinds of stuff that none of the aids that were developed to help lawyers find cases and statutes that were relevant in the in the printed world - those aids did not have nearly the scope as your ability to electronically search.
That's where I learned search technology and search tactics and so forth, that, again, I still use to this day.
While I was still practicing - again, I got offered a lot of free stuff from legally-oriented tech companies, and this was another online research firm - during this time, I did a lot of work for Legal Aid, which was a service that provides legal help for low-income individuals.
I got a client that had defaulted on his student loans, just simple as that. And he was a Legal Aid client - he didn't have much money, and owed a zillion dollars.
I sent a letter to the the local attorney and a Justice Department attorney saying, "Hey, let's see if we can work something out." I got about a two inch thick stack of paper arriving in my office about three days later, and it was their standard pleading that they had used a zillion times before, to get a summary judgment against my client. And that summary judgment is basically - this is a slam dunk deal, there's no issues and so forth. And so, Judge, just go ahead and drop the hammer on this guy.
I pulled out the electronic legal research, the online the legal research, and I hunted around. And lo and behold, I found something that - this was a Veterans Administration loan, and I found something that they were supposed to do in a statute, that nobody had ever looked at, evidently.
And so I prepared my - I didn't make it two inches thick, I made it about 20 pages thick - my own motion for summary judgment against the United States Government, saying, "This statute says they're supposed to do this. They haven't done it. Judge, we win." And darn if the Judge didn't agree with me. It was just the slickest thing. I don't think anybody at the US Attorney's office had the slightest idea that this statute existed.
Len: That's a really great story. It reminds me, I watched Anatomy of a Murder recently. It has a scene that's typical of portrayals of the law and criminal court and things like that, where somebody goes hunting through a book to find some kind of unexpected precedent that they can use. And that story - of using a new technology to search text - is not only just great in itself, but also goes perhaps some way towards explaining why some areas in the production of texts adopted technology faster than other sort of variations of the same industry did.
Len: Actually that that leads me - this might be a little bit left field, but talking about technology and the law in particular - one thing that people are talking about a lot these days is the impact that things like deep learning or machine learning and AI will have on employment. And one thing you do hear about sometimes is that this is going to have an impact on the legal profession, and maybe take away jobs for millions of lawyers. Insert lawyer joke here. Do you think that that's actually going to happen?
David: It certainly is going to change the way lawyers practice. It'll accelerate and help them do more things.
One of the great things about being a lawyer is that human nature plays a role in all of this. This is not just cold logic and applying rules mechanically. If it weren't for human nature, there wouldn't be any lawyers around. And so people will continue to do dumb things, and artificially intelligent legal systems won't prevent them from doing that.
It's an adversarial system. It's designed to be that. You get somebody on either side, and trying to come up with a way of representing their client well. And you get what passes for innovation in the legal world that way, just by that clash.
So in terms of its impact on lawyers, the technology is going to have more impact. It's already had a lot of impact. But I don't think it's going to put lawyers out of business just because, the rules.
First of all, you've got to think of who actually creates the laws. For the United States, it's the United States Senate and the United States House of Representatives. And those doofuses don't know what they're doing half of the time.
So you've got lobbyists that put this provision and that provision and so forth. The law, if you're talking about the statutes that are passed by legislatures - it's got a lot of holes in it, it's got a lot of unintended consequences and things that that people never thought about while they were making it - but are right there in Section 15.
Len: Speaking of adversarial systems and politics - that gives me an opportunity to segue into the next part of the interview, where I'd like to talk to you about intellectual property.
For those listening, David has kindly taken the time to talk to me on election day in the States - the consequences of which are going to be potentially very big. And one of the very high level issues that occasionally gets to the front of the stage in American politics now, is actually intellectual property theft of American information or intellectual property, IP - we'll say, by China.
I just wanted to ask you, given your experience in litigation and with technology and with intellectual property issues, is there anything that can genuinely be done to stop China from stealing intellectual property from American owners of that IP?
David: No. In a word, no. Intellectual property relies upon the law for its existence and its value. In the United States, in Europe, intellectual property is protected very nicely by a series of laws that are enforced with regularity that says, "No, you can't take this. This is intellectual property, it's protected under the under our law."
Until China moves into that kind of an attitude towards intellectual property, and the Chinese government says, "Okay well, company A - you stole this from somebody else, that is protected intellectual property. And so we're going to drop the hammer on you for doing this." Until China gets to that point - and I'm not a I'm not an expert on China, but it's pretty clear to me that in the IP area - they're not at that point at all. Then it's going to be really tough to protect US intellectual property from being utilized in China.
Now if they, let's say "borrow" it for their own use in China, and ship products back the US - then then that falls under US jurisdiction and you can drop the hammer. But if they're created in China and are exported to a third world country, you're not going to be able to protect it.
One of the problems is that IP can be embedded in devices, embedded in systems. And absent the ability to really dig in and understand how those systems work and what's going on inside, you may not even know that your intellectual property is utilized in there.
Len: Speaking of what one knows or not, I actually had a question to ask you about intellectual property infringements and litigation generally. My understanding is that at a certain point you had a business where you purchased a bunch of IP -
David: Oh yes, I forgot to mention that.
Len: - and then you licensed it out. I think a lot of people actually might not be aware that that actually is a way you can run a business.
Intellectual property is real property that you can own, and then you can license it out to people. You can also litigate against people who infringe against your ownership of the patent, or what have you.
One question I had is just - generally speaking, if one discovers a patent infringement - is it usually something that the infringer knew they were doing?
David: It will vary a lot depending on what sort of technology or industry you're in. But generally speaking, most of the time, in my experience, in the situations that I'm familiar with - it's unintentional, it's just basically ignorance. Because there are so many patents that, in the process of developing a new product, it's almost impossible to say, "Alright, well we've checked every single patent that might apply and we're clean." Just in part, because the patents may be written in such a way that they are designed to cover product A, but without anybody really intending it - according to the words of the patents, they also cover an element in product B as well, that nobody thought of when they got the patent to protect the technology in product A.
It's not a simple thing to do for sure, due diligence, "This does not violate any patent anywhere." It's really hard to say that. You can you can avoid some of the big mountains, but there are going to be some potholes that you just cannot foresee.
Len: And given that it's often the infringer is unaware, what's the first step that you would take as an owner or an attorney representing an owner, in approaching someone who's been infringing? Is your goal to get them to pay you a license fee, or is it to sue them?
David: It depends on what you're doing. If you're an independent inventor, like one of the people I worked with a long time ago, you want a license. You want people to buy licenses. Most, or a lot, of inventors are engineers of one sort or are another, and engineers seem to be, generally as a group, in my experience, very practical, and they don't want to have a lawsuit. They'd rather just go ahead and get paid for the technology. From that standpoint, what you do and how you approach it - generally you want to license first, before you sue. But the range of people on the other side -
Let's take a hypothetical. If you tell Apple that they can't sell the iPad without licensing a technology from you, that you developed in your garage a couple of years ago, they're unlikely to say, "Oh my gosh, we never realized that. How much do you want so we don't have to redesign every iPad that goes out now?"
It's a pretty good rule that the larger the tech company, the less likely they are to say, "Oh my gosh, we always want to obey the law. We never want to violate anybody's patents. And so let us do the right thing right away." Usually there's a fight.
Len: Speaking of fights actually. That leads me to my next question, which is about copyright reform in the EU. And this is related to what we've been talking about - about enforcement and of infringement.
There's something that listeners may have heard of, called Article 13, which gets represented kind of cartoonishly as an internet filter. One of the things that people are concerned about is that this EU legislation could actually mean that you're not allowed to do anything online without what you're doing being scrutinized by some kind of software to make sure you're not infringing on any copyright. Do you think that's an accurate representation of what's happening?
David: That is certainly one of the aspirations they have. I will say that from a technology standpoint, I think you can do some level of copyright checking or whatever. But there are so many copyrights on so many different things, that the job of putting all those claims into some sort of a computer screening program, is just never going to work.
That said, one of the one of the things about the internet is that - of course you've got the search engines there. And if you think somebody may be violating a copyright, it's very simple to go ahead and drop in - do a big search and see what comes up.
You can take a chapter, or as much of it as will fit into a Google query, and see if it appears anywhere that you don't expect it to. So there's some ability to do that.
But it's impossible for an individual author to know everything that has been written about any topic, other than the most minute and tightly constrained subject. And so, again - like with technology, sometimes the copyright violations are unintentional.
Generally speaking, somebody picked up something on the internet and used it as a basis for part of what they wrote, or whatever. It's unintentional, and I think Article 13 certainly can cause a lot of harm. But is it going to guarantee that creators are properly compensated for their work? No, I don't think so.
Len: Thank you for that. That was actually going to be my next question - I've asked a number of people on this podcast that question. Regardless of what one's opinion might be about what should and shouldn't happen, is it actually going to benefit content creators? Thank you for the clear answer on that.
Moving on to talking perhaps more specifically about books and the publishing world. You've negotiated publishing contracts with big New York firms, as well as with Amazon. And without asking you about any particulars at all, I was wondering if you could talk about - people might be curious about if, say, the negotiators from Amazon might have a different style than the negotiators from the New York firms?
David: The answer is yes in some ways, no in others. The approach of Amazon, at least for me, with a lot of experience in a variety of technology areas - is a tech company's approach, which tends to be more pragmatic. "Hey, we need to accomplish this. Let's do something fair. We're talking about the Internet, where people give away information and whatever for free all the time." And so here's kind of that, "Let's work with these folks, rather than trying to beat them over the head."
That's a different attitude than you get from a traditional New York publisher. Because their attitude towards authors is almost treating them like children, emotional children, sometimes. For a lot of New York publishers, authors are a necessary evil, other than the biggest sellers, and they're happy to grant the huge sellers credit for being intelligent and all of that sort of thing. But they get bombarded with so much crap from authors who want to be published, and the attitude is kind of built in, that, "Most of the authors we're dealing with are idiots who don't know how to do anything."
And it sort of builds up over time, and has become institutionalized - Well, in every major publisher that I've dealt with in New York. That attitude carries over to the general counsel as well.
Len: Speaking of big authors and emotional children, you actually just reminded me. When I was preparing for this interview, I listened to an interview you did - I think about four years ago now, for a podcast shortly after you were flown out to a debate in New York. Which I believe pitted you against a whole suite of other people representing publishing companies, on a stage in New York. And one of the other participants was James Patterson, I believe?
Len: There was a sort of cliffhanger at the end, at least for me, listening to this four year old interview - where they were proposing that they might do another debate at a certain point later on. I guess I wanted to ask you first, did another debate happen? This was around the Amazon and Hachette controversy. Was there ever another debate, and did you participate?
David: No, to the best of my knowledge, there was not another debate. I did not participate in any other debates. I would've been happy to do so.
It's a weird mentality in the publishing business. It's denial, denial, denial, up one side and down the other. They just don't want the world to change.
I would think that an economically rational publisher would love ebooks, because all they are is bits. You upload your bits once to Amazon, and then you just watch the money roll in from that ebook from here on forward.
It's much less hassle than dealing with Barnes & Noble and bookstores and Ingram's and predators and all of that kind of stuff. It's almost an ideal money-making situation, if you if you look at it that way.
But obviously they're worried about being disintermediated, and Amazon is happy to do that. It would be interesting, in an alternate history, to have the publishers all welcome Amazon with open arms, and say, "We want to work with you, we'll work with you. And yeah, you want to sell cheap, and we'll work with you on that. We want to be your partners. We want to help you out as much as we can to be the best possible bookstore you can be." As opposed to trying to fix prices and all of that kind of stuff.
I think Amazon, viewed properly, should have been seen as the best thing that could ever happen to publishing in terms of profits. Because ebooks are just lovely for profits.
Len: That reminds me of a couple of things, one just a very brief anecdote. I don't have too many personal publishing industry anecdotes. But on the subject of denial - I was at the Book Expo, formerly called Book Expo America, in New York in 2013. I saw a panel with a lot of potentates on it, including the CEO of Simon & Schuster, and I believe it was the CEO of Overdrive, if I remember correctly.
And the CEO of, I think it was Overdrive, a company of that kind - excitedly waving an iPad in the face of this very dignified and calm CEO of Simon & Schuster. He was shouting, "This thing is real, it already exists. It's not coming in the future, it's here now." It is just such an interesting thing to me about how, around the subject of technology and the issue of technology, there's just so much frustration on all sides in the trade book publishing world.
We can ask the question: why don't they embrace this technology? Is it really that straightforward as, their profit is made around the physical constraints that come from having something be incarnated in paper form?
David: They know how to make money in the - quote - "current marketplace," or maybe it's the recent past marketplace. They've got all their systems in place to do well there. And they know what kind of competition they're going to run into, and who can get it in the bookstores and who can't, and that sort of thing. At some level, this is just not conscious, but they don't want the world to change.
I'll tell you a specific story in the legal publishing world. Legal publishing is extraordinarily profitable. Very high profit margin. And one of the publications that Lexis owned was something called Martindale-Hubbell.
Martindale-Hubbell, since time immemorial, has published a directory of the attorneys in the United States. It's an old idea that you see online, but you can get a standard mention in there for no charge. They want to be the phone book that everybody uses. But if you want a more prominent position - if you want to be able to write some things about how wonderful your law firm is, and how accomplished your lawyers are, you've got to pay them essentially for advertising, to sit there.
When I first got there - LexisNexis is, maybe after Thompson, the most profitable publisher in the world. It makes New York publishing look like a bunch of small timers. I mean, we're talking about net margins of 50% or more.
Martindale-Hubbell, when I got there, was the most profitable in terms of percentage profit of any company in LexisNexis. This is a company that has worldwide publishing. And I go in and say, "This online stuff is going to change your world," and blah blah, blah. And, "Yeah, yeah, yeah," is the response.
Three years after I came on board, basically Martindale-Hubbell collapsed financially. Everybody got fired. I think they still do some contract printing once, a little bit. But it became basically an online directory. And so it went from the most profitable to bust very quickly.
I don't have a better problem seeing that traditional trade publishers, could take the same route. It just that they've got to watch their prices, because if a $30 printed book - compared to the ebook prices - I mean, there are people that want to buy them, and there are people that still think that having a lot of books in their homes is a real cool thing.
But the market is not headed in that direction. When I was little, there were no ebooks. I enjoyed sitting down with a printed book and all that, but those days are past - I'm ebook only, essentially - and that's the direction the world's heading.
Len: Speaking of $30 books, that gives me an opportunity to move on to the last part of the interview, where we talk about recent things that have been happening in the publishing industry.
I saw one of your blog posts on The Passive Voice, where you talked about how conventional publishers have a term they use called "premium price loyalty," to refer to a certain type of approach to selling books and pricing books. I was wondering if you could talk a little bit about what they really mean, when they talk about premium price loyalty?
David: It's status-signaling, in a way. It goes back to - we would rather make $15 on the sale of 100 books, than take the risk of making a dollar on the sale each on the sale of 100,000 books. At some level they want to position some kinds of books as luxury items, semi-luxury items, whatever.
I'm sure you've seen the books that get printed with these baby chinchilla bindings [In the audio it's clear this is a joke - eds.] and so forth, that are just extraordinarily beautiful objects. But the information inside is no different than a bunch of bits that you can get down as an ebook.
The publishers like the position that they hold in some people's minds, of just being really intellectually cool, avant people that really count in the intellectual firmament of New York City or London or wherever. Part of this is, we have Corinthian leather collections of books that only the most discerning customers will be able to buy. It's one of the oldest things in marketing, and that's upselling - adding bells and whistles to your base product and calling it the super deluxe product.
Len: It's something that I personally can't help but be very cynical about - this connection publishers will often attempt to establish between price and quality.
I think it's a well-known fact that people, when they taste a bottle of wine, if they're told it's worth $50, they're more likely to rate it higher than they would if it was worth $5. There is a sort of crude analog that happens in the world of books, where if something is cheap, people associate it with lower-quality writing.
And, people often relate to things that come in electronic format, as though they're not quite as real as things that come in sort of physical format. So you get a kind of ontological argument, basically,tThat like the existence of the printed thing makes that content somehow better.
I often like to take the opportunity in those conversations to observe that, you can you can tell when someone hasn't experienced a true desire to read a certain set of words, and hasn't also experienced scarcity, when they have these alternative ways of valuing what books really are and mean.
From a certain perspective, anything you can do to reduce the price of a book for the reader is better for culture and better for knowledge - as long as long as creators are still being appropriately compensated.
And having a way of delivering those words to people that cuts down on the cost, without necessarily cutting into the profit - like you're saying - can work with ebooks. It seems like it would be something that people who really cared about culture and really cared about knowledge would embrace fully.
David: I absolutely agree. The traditional publishers love to be thought of as curators of the culture, and curators of the art of writing and so forth - and they like that image. No offense to English majors, but that's one of the things that attracts so many English majors to the publishing world - is that, "I want to be one of those people who, somebody says, 'Oh I love that book, can you tell me what the author is like?'" Or something like that. Sort of the in-crowd.
But you're right - if you're talking about proliferating knowledge out to the general population in the most efficient and effective way possible, you don't do it in a $30 hardcover. And you don't in a copy in the library where somebody has to wait two months on the waiting list, before they can they can get it.
You do it by shipping a bunch of bits out and proliferating, so that no matter where you are - you can be 100 miles from the library, you still have the ability to consume and learn and benefit from the knowledge that the author is communicating, and the wisdom that the author has developed by study and and whatever.
If you're talking about providing access, real access to important information to the widest possible audience for their benefit - the benefit of human kind, if you will - you don't charge an arm and a leg for it. You don't require that they buy it from a bookstore that doubles the wholesale price. You make it widely available and let everybody pick what they want, and sell it for something that is not going to take a day's wages for a poor person to buy.
Len: On the subject of paper books actually, there's an interesting scandal happening right now around AbeBooks. I actually happen to live in Victoria, British Columbia where AbeBooks is based. So that's just a fun coincidence.
Len: But right now, AbeBooks sent out some emails to some of its customers, I believe in South Korea, the Czech Republic, Russia, and maybe one or two other countries - saying that they're not going to be allowing those booksellers, who often tend to be antiquarian booksellers, to sell their books via AbeBooks. As a result of this news getting out, and the high-handed manner in which it was communicated - a lot of antiquarian booksellers around the world have banded together and pulled, I think, around 2.7 million books from sale temporarily on AbeBooks. [AbeBooks reversed its decision - eds.]
One of the interesting things to me about it is that AbeBooks said they were doing this because - quote, "Our third party payment service provider is closing at the end of the year," end quote. That just does not sound like an Amazon, to say, like, "Sorry, nothing we can do here folks, our third party provider's not -" that is not the reputation that Amazon’s culture has.
David: Definitely not.
Len: Do you have any thoughts? I mean obviously, just hypothetically, but do you have any thoughts about what's really going on?
David: I can't imagine that if AbeBooks contacted somebody at Amazon, that Amazon does not have third party payment processors that AbeBooks could use. It's just one of those dumb things that you wonder why
Well, let's just say that Amazon has a lot of really smart people working for it - but that does not mean that everybody is smart that's working for Amazon.
That's clearly foreseeable as a disastrous PR thing, and hard on the brand. I would bet good money that that the CEO of AbeBooks got a nasty call or a nasty email from somebody at Amazon saying, "What did you do this for? Why didn't you just -? Let's just integrate what you're doing in with our own payment processing, and keep the lights on all over the world as far AbeBooks is concerned."
[It seemed like a] really, really a dumb thing, and demonstrates that smart people and smart companies sometimes do dumb things.
Len: It struck me that in addition to coming across as dumb, it came across as weak. And that was perhaps what surprised me the most. That someone like that would would be at a relatively high level in the Amazon ecosystem.
Just for those listening, Amazon owns AbeBooks, they bought them about 10 years ago, which is why we're talking about Amazon and AbeBooks as though they're connected, because they are.
The last thing I wanted to talk to you about is, I think, becoming a bit of a theme to be the last thing we talk about on this podcast - which is Barnes & Noble, which continues to be entertaining to watch as an outside observer. It's in it's own kind of mild corporate scandal, really quite an extraordinary situation. I was wondering if you could talk a little bit about the latest developments in Barnes & Noble news.
David: The latest that I have seen is that WHSmith was in negotiations with Barnes & Noble to acquire them. And for some reason, the acquisition blew up.
And Barnes & Noble, as some of your audience knows - is suing their former President, and the president is suing them for violating his employment contract. And this is what - the fourth president in five years, or something like that? I mean, it's definitely a revolving door for the presidency of Barnes & Noble. And their last president has filed suit for violating his employment agreement. Barnes & Noble's made a nasty response. And in this case, as in most cases - the court documents are public documents and available for anybody to see. And so they're kind of trading nastiness back and forth.
I don't know what is going on there. There have been reports that Leonard Riggio - who's the guy that founded Barnes & Noble and still is the chairman of the board - that he wants to buy it back. But Barnes Noble is not a healthy company financially, from everything that I know. And they're in prime position to do another Borders.
I mean we remember what happened when Borders ran out of gas, and just collapsed very quickly. I'm not predicting anything like that for Barnes & Noble - and I have no inside information about Barnes & Noble, but they just seem to be - there's more going on. They're not dumb people, but they're acting in a dumb manner, I think - by having a public spat with their former president.
Len: I totally agree. It's very strange to see things looking like they're being taken personally at the level of like the executives, the C suite of a public company. I mean to counter-sue an individual for disloyalty does not come across as the behavior of serious people who are taking care of their company properly, to be blunt about it.
In a former life, I was an investment banker, and I worked in mergers and acquisitions. It wasn't in the publishing world. But one of the details, and it didn't just leap out to me - one of the details that emerged around the time of the former president's lawsuit against the company, was that there had been a potential acquirer, now revealed to probably have been WHSmith from the UK, who got to the due diligence phase of the process, and that's when they pulled out.
Again, this is just me, my opinion from reading the news - is that someone really thinks that they can blow smoke around that due diligence issue, and whatever it is that was found in the books. I can say from experience - you cannot hide anything. If there is something stinky, it will be found. And even, and this is the thing - even if it's not found by a potential acquirer during the due diligence phase, when they get to see all the books. If they find it afterwards, that's bad for you too.
David: Exactly, exactly. And Barnes & Noble is a public company, and has a legal obligation to make appropriate disclosures of financially meaningful information in a timely manner, so that their stockholders, and the market in general, can make decisions in terms of buying, selling, pricing and so forth.
Again, this is pure speculation, but you sort of wonder if WHSmith's found something really nasty like you suggested, that has not been disclosed. But it would seem strange that they would come in and start doing due diligence, without knowing everything that was publicly known about Barnes & Noble prior to that. And sort of going through an acquisition checklist to say, "Alright, well - from what we know, before we even talked to Barnes & Noble - we need to make sure that all of these boxes are checked, and that that we're comfortable that we know exactly what the situation is - before we schedule a meeting.
Len: It seems like one thing they might be trying to do is - just say, oh it wasn't anything they found in due diligence, it was something that the former president said.
David: That has been one of the contentions in Barnes & Noble's responses to their former president, was that basically he blew up the whole deal. But the details that have been included in their filings almost make it seem like - I mean, nobody who's an experienced businessperson would say and do the kinds of things that their former president [allegedly] did. It's just weird behavior, that doesn't fit with somebody who's had high-level corporate jobs before.
Len: Well, thank you very much David for taking the time to do this great interview. We covered a lot of ground. I really enjoyed the way you laid the foundation for your own story so well at the beginning.
For anyone interested in following publishing industry news and specifically the Barnes & Noble story - I couldn't recommend a better place to follow it than thepassivevoice.com, and David's writing.
David: Thank you so much Len. You're very kind to say that, and I've really enjoyed our conversation as well.