The Author’s Guild, made up of many brilliant fiction writers, made up some fiction of its own and have pressured Amazon to remove a key feature of its eBook reader upgrade.  The Kindle 2 included a text-to-speech feature like many computer programs do.  The Author’s Guild president, Roy Blount, claimed turning text-to-speech in this fashion was copyright infringement, undermining the billion dollar audio book industry.

Um, no. Reading text out loud is not copyright infringement.  Blount has been pushing this issue, most recently in an op-ed in the New York Times, offering no legitimate argument for why text-to-speech is bad or illegal.  He says Amazon is not paying for audio rights, but there’s no need.  Michael Masnick points out the text-to-speech feature is not a fixed work, which is a requirement for copyrightable material. It’s the same as someone reading the book out loud, as much as Blount wants to pretend it isn’t.  Masnick says the only way this violates copyrights is if someone records the computerized voice, and then tries to sell it. Blount says he doesn’t want this to prevent parents reading to their children or the blind, but for no other reason than doing so would sound bad.

As for Amazon, shame on you. You come out with this innovative and successful product that makes people want to read more books, helping these very authors. But instead, without any legal basis, you cave.  It makes the product less valuable to consumers and even ebooks lose some value.  This is a lose-lose-lose situation (the third being consumers) where authors are decreasing the value of their books, Amazon is decreasing the value of Kindle, and consumers have less valuable products to buy – for the same price.  It’s sad Amazon was scared away from this legal fight. Instead it sets a scary precedent that groups can raise a little hell and make this retail giant fall.

The Guardian posts an interesting theory that for Amazon’s Kindle to be more successful, it needs more widespread piracy.  Unlike Apple’s iPod, Kindle users can’t transfer their book collections onto the hardware like CD-to-MP3s.  Every book must be purchased or downloaded. And while book piracy does exist, it relies on devoted fans copying every page – not as easy as an automated CD ripper.

The Kindle is selling quite well for Amazon, but hardly on the road to travel dominance like the iPod. This might show the market is not as ready for the iPod of books as it is for the iPod of music.  As I’ve (and others) have written, piracy shows what the market wants and at this point, digital books are not in high demand.

Book and content producers need to understand why this is the case. Right now, books are more valuable to consumers for any variety of reasons, like convenience, habit, and collecting.  We know reading online/on the computer is a preference for many for short features, like news articles, but books are still preferred in tangible form.  The Kindle isn’t going to change the habits of consumers, but it’s a forward looking option that knows paper’s days are numbered.

Unfortunately, the book industry is leaving clues they are more likely to follow the close-minded music industry approach.  Paul Aiken, the executive director of the Author’s Guild claimed the Kindle’s new text-to-speech feature was an act of copyright infringement by allowing any book to be read aloud saying literally: “They don’t have the right to read a book out loud…That’s an audio right, which is derivative under copyright law”. According to his logic, reading any book out loud, even a bedtime story for your kids, is a derivative work and thus copyright infringement.  Or, maybe, this feature is just a way to make the Kindle, and thus digital downloads, more valuable to consumers. It’s unlikely a computerized voice is going to replace emotional actors on audio tapes.

For book publishers, they need to plan for a future where books are digital and readily pirated. It’s already happening on a very small scale.  Instead of fighting the inevitable future, book publishers can embrace the change and profit from it. First, embrace the cheap distribution of digital goods and include digital downloads of books with the purchase of a hard copy. Even spread full, free downloads online – several examples of free eBooks show huge increases in tangible book sales.  These sales come because the hard copy is more valuable than the digital copy.  Book publishers need to increase the quality of the published books, recognizing why people buy them.  Small, soft cover travel copies are perfect for convenience customers (and should be cheap, impulse buys). For collectors, like everyone I know with huge bookshelves to fill, increase the value of hard covers with gorgeous art, author’s notes (the paper form of commentary tracks), and high-end binding.

These features give customers a reason to buy the hard copy.  This way, when book piracy explodes, book publishers are already offering compelling alternatives that give customers a reason to spend their money.

eBay’s early years capitalized on the unique strengths of the internet, building a multi-billion dollar enterprise off of auctioning everything from broken laser pointers to movie scripts. Business Week’s Catherine Holahan sees a change in eBay’s business, moving from auctions to now earning half its revenue from the Buy it Now option where the seller sets the price.

eBay’s growing reliance on fixed price sales leads to question why auctions are dying off. It seemed the internet was built for auctions, allowing a large number of people to sell and buy as they wished. Holahan writes auctions initially had novelty and excitement that has since died down due to power users gaming the system and leaving average Joe’s without empty-handed. Buy it Now is stress-free. Michael Masnick points out eBay now has more competition, where low auction prices are now competing with every discount retailer online. Nick Carr claims eBay was just a fad, but if that’s true, it was a huge $40-billion market cap fad.

I agree with Mathew Ingram’s point that auctions work for some things, not others, and eBay needs to balance the auctions with new business models. The challenge will be convincing people it’s more than an auction company.

I think eBay has more problems than that, specifically Amazon’s claimed a great deal of the retail space eBay could have dominated. eBay introduced store fronts to give small retailers online spaces without the vast expenditure, but Amazon’s service is much more developed. eBay can try competing head on with Amazon, but playing catch-up is never fun and rarely effective (good luck Microsoft). eBay’s stumbled with its expansions, acquiring Skype and StumbleUpon without effective synergies (and now rumored to be trying to sell Skype). Evolving from pure auctions to some kind of e-commerce giant will be challenging, but hopefully invigorating to the industry. Plus, it’ll be good to give Amazon some more competition.

Myspace controls 80 percent of the social networking sites. Google has 50 percent of web searches. eBay, PayPal, Flickr, etc. The web, for all its range and unlimited information, enjoys anointing single sites as the rulers of that particular genre. For all the discussion of media consolidation and big business in the physical world, online seems to have an eerie effect. Even when options appear, web users prefer to join/stick with the leaders in each field.

The reason for this appears obvious. The most popular web sites thrive on user-generated content, from eBay’s auctions to Myspaces my-spaces. Why join Faceparty.com when all my friends are already on Myspace. With Google, YouTube, Wikipedia, and other sources of information, users want all their information in one place. But this presents a difficult business and advertising challenge.

First, how do companies expand and/or start-up in this monopoly based climate? New social networks and search engines keep popping up against the Myspace and Google juggernauts (even Microsoft is having trouble here). Does this mean every new business is going to have to be an original, home grown idea. And if so, how many standard sites can I fit into my daily schedule.

Second, how, if at all, can web monopolies hurt/help business and users? Already, Google is the lord of web advertising. High placement on popular search terms can guarantee a website’s success, with similar results for paid Google ads. But YouTube and Myspace have yet to find real business models, still in the experimental stages, so their place as a controlled market force, like Google, remains to be seen.

And lastly, how does this happen? For any web start up, the question can no longer be, how do I make a new search engine. It has to be about how do I make something completely new. Then ask, how do I get everybody to use it. How, if at all, can this viral marketing be manipulated. Myspace, YouTube, Flickr all work without any advertising and are monsters in their genres.

A few exceptions, to note. Job sites are quite plenty. Craig’s List appears a decisive leader in all things classified, but HotJobs and Monster compete on pretty fair ground (and HotJobs has the backing of Yahoo!). Yellow pages and dating sites also do not seem to suffer from monopolies. At first glance, there seems to be a link in the need for local or specialized information, but many of these sites offer very redundant information (with similar features as Google Maps compared to MapQuest, both with yellow pages, and even Myspace for dating sites).