Paul Krugman has an op-ed piece entitled “Bits, Bands, and Books” in The New York Times today about the influence of digital content on existing business models. His focus is on “books.”

The basic argument is that, as it becomes easier to duplicate and distribute digital content, the ability to make money from that content will fall. Eventually, income will have to be generated indirectly. In his words (in which he also quotes Esther Dyson):

Whatever the product — software, books, music, movies — the cost of creation would have to be recouped indirectly: businesses would have to “distribute intellectual property free in order to sell services and relationships.”

He then turns to examine books more specifically, considering the potential impact of e-books. He comes to this conclusion:

Indeed, if e-books become the norm, the publishing industry as we know it may wither away. Books may end up serving mainly as promotional material for authors’ other activities, such as live readings with paid admission.

I think this idea works just fine for writers of nonfiction (excluding memoirs). I can’t see this working, in any financially successful way, for fiction writers. Except for a few highly successful authors like Stephen King, who’s going to go see a live reading with paid admission? And what “other activities” could apply here, besides “the day job”? As for the ancillary market Krugman references, how would that apply to fiction? I mean, I love Faulkner, but I won’t be buying any Faulkner t-shirts!

Krugman admits as much:

Now, the strategy of giving intellectual property away so that people will buy your paraphernalia won’t work equally well for everything.

The other problem with this is that it’s an implicit admission that an entire segment of the market will simply disappear. Here’s why: the ancillary market has always been part of the business strategy, and it’s called ancillary because it isn’t the primary source of revenue. If “the ancillary market is the market,” in Dyson’s words, then that’s a crushing blow to the market.

He ends with a statement that is unhelpful, but also hard to argue with:

Bit by bit, everything that can be digitized will be digitized, making intellectual property ever easier to copy and ever harder to sell for more than a nominal price. And we’ll have to find business and economic models that take this reality into account.

I don’t have an answer, either, but I do worry. Even moderately successful authors are paid a pittance of the current market revenue. What’s a pittance of the ancillary market … ?