Tuesday, August 03, 2010
eBook Races: Thoughts on the Winners and Losers
If ebooks are to be as significant as predicted, who will be the biggest supplier? Will it be publishers supplying direct, social networks, traditional aggregators, the book-chains, device manufacturers, Celebrities, libraries? We have long regarded Amazon, Google as favourites and we can’t ignore the likes of Apple, but will these global brands conquer all, or will the business splinter? What will are some of the factors that will determine the winners and the losers?
Global Brand Recognition
Today Amazon claim that they have between 70% to 80% of the eBook market and that 80% of their sales are to Kindle owners. We have to remember that global brands and consumer awareness shifts more units of anything. No matter how big Barnes and Noble are in the US, or Waterstones are in the UK, the average buyer will only know, or have even heard of one of them. The acid test is to ask 10 people, on any High Street in any country, if they have heard of Amazon, Barnes and Noble, Kobo, whatever. We can predict the one to score consistently across all respondents in many countries will be Amazon. When consumers are uncertain they will go for safe bets on the known and trusted players.
Everyone is a Potential Retailer
Today, the business model adopted by many is similar to that of the traditional internet market, where someone aggregates all the content and sells it through what we refer to as ‘white label’ stores. The stores act as a shopping window, holding no stock, but branding the store and its stock as theirs. They merely ‘pull down’ stock from a digital aggregator only at the time of sale. This is achieved by separating the customer and transaction from the actual file access and download. Anyone can sell any file, as long as they have a commercial web site and an agreement with and ability to link to the aggregator. The ability to sell ebooks is not restricted to stores, it can be clubs, non traditional retailers, even celebrities such as Oprah Winfrey can sell ebooks alongside physical books and have them all supplied transparently by the likes of Amazon. Even libraries don’t have digital files they simply connect to the likes of Overdrive.
Repository Size doesn’t Matter
How many aggregators are needed to supply the market? As wholesalers and distributors from the physical world move into being digital wholesalers and compete with true digital aggregators, will they all survive, or have the lost the battle even before it has started? It is easy to believe that the biggest aggregator will win – after all those were the rules in the physical world. However in the true digital world, it’s all about networks and transparency of links, not accumulation of files. If you can identify where the file is and can connect to the custodian, all you have to do is send a ‘pick pack and dispatch’ message in real time and collect the money. The more repositories you can connect to, the greater the offer. Why do publishers want to send digital files to tens of aggregators when they could effectively store them within their own digital warehouse and only release then on a sale? There will always be a Amazon who demand the files, but there are only a handful who can justify the risk.
Price Can’t be Fixed Upstream
As predicted, the agency model is now coming under scrutiny with a second US state attorney now questioning it. Price fixing contracts that are 'never undersold' are counter productive in the short term and futile in the long term. Some would argue that the price is too low, others that it is too high, but entering into a model simply to try and control Amazon and discounting is not the answer. It was obvious that the ‘famous five’ agency pioneers would find themselves;open to a US legal challenge, taxation issues and be accused of reintroducing the NBA (price maintenance) in the UK through the back door. The best price control is the free market and the best people to set prices are those closest to the market and not sat behind desks in a distant office.
Is a ‘Book’ an ‘eBook’
We now have at one end, the book morphing into a multi media format and at the other, fragmenting into sub sections. What is clear is that there will be a vatiety of offers which may be genre defined. The book will no longer be straight jacketed and constrained in size or by two pieces of cardboard? This more than anything starts to change the relationship between author and publisher and also has an impact on rights. It starts to change the way we look at bibliographic information and other metadata. If the package becomes far richer it has implications on its promotion and marketing and also who owns what? If the book is fragmented then we also have to be able to tie the associate parts to together. These changes start to redefine and preserve the publisher’s role and remit in a digital world.
So we return to the winners and losers.
Amazon has clearly played a very strategic game and has placed itself between author and reader, accumulated a sizeable repository and the right to demand files. It has also positioned itself across all digital platforms, channels, in the consciousness of the consumer and as a destination store. It will succeed because it has spread its bets.
Google and Apple are forces, but interestingly have failed to spread their bets to date. Others will come and go, but will be always playing catch up and although there may be an outsider its hard to see one among today’s runners.