Tax Can Be Taxing

Tax and laws created before there was an Internet often can create conflict often between bricks and motor stores and online eretailers however changing the law can often be as hard as collecting the tax.

In the US, sales tax has been a thorny issue between online and physical stores. On one side stands Amazon, eBay and the new breed of online only etailors, who do not have a physical presence in a state and do not have to collect sales tax and on the other, there are those who have physical stores and operations and have to collect taxes. Brick-and-mortar retailers, are claiming that because of their sales tax burden they suffer a competitive disadvantage compared to their online counterparts
States are prohibited from taxing a person with whom it lacks a relationship between the taxing authority and the taxpayer. Some 19 years ago, the Supreme Court held that, at least for purposes of collecting sales tax, ‘ a state lacks substantial nexus over a taxpayer that has no physical presence in the state.’ It was the courts view, uncertainty about what jurisdiction has power to tax, as well as compliance with numerous and difficult tax policies, would place an undue burden on interstate commerce.

The current hearing was set up to explore whether Congress should reform the sales tax legislation and to understand how this could be done so that it does not increase administrative and compliance burdens on America’s small businesses.

Currently 45 US states and the District of Columbia have a sales tax and also a “use” tax, equal to the sales tax rate, which residents must pay for the usage, consumption or storage of goods purchased in a non-resident state and brought into the state. A consumer in Florida who buys goods online from a retailer that does not have any physical presence in the state is responsible to pay use tax and pays no sales tax on his transaction. This is achieved by taxpayers declaring their purchases in other states. Obviously this is a significant tax loophole and as a result online purchases invariably escape taxation altogether.

Three separate bills have been tabled to address the situation and Amazon testified before the hearing to put forward their case.

Paul Misener, vice president, Amazon global public policy, today made a testimony in which they fully backed the need for change. Misner stated that, ‘Far from an e-commerce "loophole,” the constitutional limitation on states’ authority to collect sales tax is at the core of our Nation's founding principles. For this reason, Amazon has steadfastly opposed state attempts to require out-of-state sellers to collect absent congressional authorization…’

He continued, ‘ Fairness among sellers should be created and maintained. Sellers should compete on a level playing field. Congress should not exempt too many sellers from collection, for these sellers will obtain a lasting un-level playing field versus Main Street and other retailers. Congress should rectify the current imbalance and avoid a future imbalance…’

Amazon recognised the need for a small sellers threshold, ‘Such a threshold, which would exempt some sellers from a collection requirement, must be kept very low to attain the objectives of protecting states’ rights, addressing the states’ needs, and creating fairness among sellers…The consequences of the threshold level to states’ rights, the states’ needs, and fairness are very significant, because a surprisingly large fraction of e-commerce is conducted by smaller volume sellers. For example, nearly 30% of uncollected sales tax revenue today is attributable to sellers with annual online sales below $150,000, and only one percent of online sellers sell more than this amount. In other words, a $150,000 exception would deny the states nearly 30% of the newly-available (yet already owed) revenue, but would exempt from collection 99% of online sellers. Any higher threshold would deny the states even more revenue and keep the playing field even more un-level.’

But they ten took a swipe at eBay saying that , ‘while Amazon is prepared to make its technology available as a service to help sellers by collecting sales tax for them, eBay seeks to avoid any role in collection, claiming that small volume sellers will be burdened and, implicitly, that eBay’s technology is not capable of helping its largest sellers to collect. And these claims are made despite the fact that eBay manages to collect the transaction fees it charges its sellers, and despite the fact that eBay already calculates state sales tax for eBay sellers, all the way down to the local jurisdiction level. Amazon and many other service providers will help smaller online sellers collect; surely eBay can as well.’

So change looks imminent which would take the pressure off Amazon having to fight many state battles and give them consistency across states.

Amazon Press Release
Link to watch 2 hours 30 mins of the hearing

Australia Lifts Samsung Ban

An Australia court has overturned an earlier ban on the sale of Samsung’s Galaxy tab in the country. Apple had previously won an injunction against Samsung in Austrailia and Germany preventing sales of the Galaxy 10.1 tab, accusing of it copying its touch-screen technology and infringing its patents. Samsung has sought a ban on sales of Apple's iPhone 4S in Australia, Japan, France and Italy.

Today’s news means Samsung will no longer be restricted in Australia. However, they will not be able to start selling the tablet immediately as Justice Lindsay Foster granted a stay on the order until Friday, 2 December, which allows Apple time to appeal in the High Court.

The case is part of a long legal battle which we have previously reported and one which is focused on the two market leaders slugging it out bout in the courts and the shops for a bigger slice of the smartphones and tablet market.

recent article: Apple and Samsung Lock Horns

Can eBooks Meet Changing Social Demand?

Three stories catch our eye that all point to a significant trend in the demand to loaning and renting ebooks. Some can be seen to be responding to these changes, whilst others dither, stall and demand it to be on their terms only. Are ebooks just for Christmas and today, or are they really going to be around for life? Do we have to replace those treasured printed titles with a digital library?

Social Reading
A fascinating blog from Danny Sullivan titled http://daggle.com/amazon-apple-hate-families-2867 raises many interesting questions about lending within the family unit. It explains the challenges families face in having to use adult only accounts and in reading on multiple devices. It relates the digital restrictions to those of the physical world and asks for tolerance. Perhaps it makes the case for single versus and multiple use licences, but some would suggest a book is a book is a book.

We live in a rapidly changing world where this year’s latest technology is next year’s junk and where purchasing loyalty is often defined by convenience. Locking in family units to one channel may not be desirable, but may be practical. However, overly restricting what they do between themselves could be an open invitation to unenforceable infringement.

If we step back and look forward, how will the current model and its restrictions pan out say in 5 years, when the devices have moved on several times, the under 13’s have become ‘adults’ and what we see today as future proof standards and DRM, may be not be so solid?

Library Lending
Libraries feed the needs of communities. They were originally restricted by the local budget and facilities but now we have interlibrary lending and collections are more open and sharable but does this support the one digital library concept and result in just one global library. Google, Overdrive, Amazon, and the others.

This week we have all read the often confusing story about Penguin ‘it’s my ball and iam not playing’ spat over ebooks. First it was a call on security and then it was new titles and now some would suggest like a spoilt child they have left it hanging in the air saying maybe they will and maybe they will not allow libraries to play digital lending. This year we have also had the HarperCollins demand that ebooks are not for life and wear out after the same number of library lendings as physical books and therefore like the physical book, they have to be obviously repurchased. We also have two other majors in Simon and Schuster and Macmillan apparently sitting on their hands unable to accept or reject digital library lending.

We have written much about the potential conflict between retail and libraries within the digital world. The history of the public library appears to have past many by and been ignored yet it clearly indicates that what we have today is almost certainly a transient model and will change with digital and trying to protect it for the sake of the status quo will surely fail. We may not have covered everything but our historic review article of last November is worth a second read.

The library lending battles are as predicted now starting to hot up. Some may suggest it is a shame that all parties could not see the writing on the wall and work together to reach a compromise.

Some would suggest that the digital opportunities should create a renaissance opportunity for libraries and reading but appears that it must obviously be on commercial terms acceptable to the big publishers.

Interestingly, the conflict has come at a time when public libraries are under their greatest threat of closure and are subject to spending cuts. Many, for all over the industry, are manning the barricades to fight the closure, but it would appear that some would only do so for physical books and their overall revenues remaining the same. Is this commercial reality or digital hypocrisy?

Canadian Success?
We now read an uplifting story about Montreal's largest library which claims to be busier than ever. According to a recent report by Lumos Research for the Canadian Urban Libraries Council, library usage across the country is up 45% over the past decade, from 16.6 to 24.1 transactions on average per capita and the growth is down to digital. The Grande Bibliotheque’s membership has grown 17% and the $142-million library, now claims some 286,000 active members and 3 million visits annually.

These increases are not just about ebooks but access to electronic databases, Internet visits to library websites and catalogues, digital audiobooks, as well as music and movies. The Montreal library now has 200,000 ebook titles available which all can be downloaded from home with the click of a mouse. It claims to be the busiest library in the French-speaking world and other Canadian cities, have apparently committed to building similarly large, central libraries.

If libraries can be allowed to adapt to new technology they will continue to play an important role in communities. It may be appropriate to redefine the size and reach of the community in this virtual world. If libraries are seen merely in terms of stacks of print books, then the future looks to be far more menacing.

Does the Kyobo Reader Pass the 'So What' Test?

If we had a colour ‘eink’ ereader device some 18 months ago we world may have been different today. If we had a colour ‘eink’ ereader device even 12 months ago it would have had a significant impact on the market. But today we have to ask whether it even passes the ‘so what’ test?



Kyobo Book Centre in South Korean has launched a Kyobo eReader, with a full-color display using Qualcomm mirasol technology which is even fast enough for video.The Kyobo eReader uses a 5.7-inch XGA mirasol display from Qualcomm with resolution of 1,024 by 768 pixels and runs on Android 2.3 Gingerbread. The device also features a 1 GHz Qualcomm SnapDragon processor, multitouch touchscreen, Wi-Fi connectivity also has English-language text-to-speech capabilities.


The display combines the long battery possibilities of E Ink displays with a full colour output. The Mirasol display controls the distance between a membrane and a reflective glass surface, and this either blocks light or amplifies particular frequencies. The result is that the membrane can appear transparent, black, or a particular colour. Qualcomm’s mirasol display layers three of these together to create a full colour red, green, and blue display. The displays then only consume power then they’re moving the membranes around, and only have to move a few hundred nanometers to change colour, The display gets brighter in direct light, and uses a front-light LED system to simulate sunlight in the dark.


The Kyobo eReader is available in South Korea for a relatively high ticket of around US$300.
So does it pass the ‘so what’ test?


It would appear to be halfway between a smartphone and a tablet. It reads ebooks but is that its main draw and in our opinion it fails on some basic counts. It is not a smartphone. Size wise it falls uncomfortably between the new smartphones and today's tablets. The screen technology may now offer colour but anyone who has a Amoled screen will know this game has already been decided and the winner is here today. Finally the price is sitting on the high side of unattractive.


Interestingly we wonder whether those UK booksellers that have a somewhat daunting ebook challenge may go for it just to be different? As the market moves progressively away from devices to platforms these devices will still create interest but will not become mainstream just expensive gadgets with a limited life expectancy and novelty usage.

Spotify Delivers Pay Subscribers

Some 4 years ago we awaited the launch of Spiral Frog’s music streaming service but . Unfortunately when it finally it came to market it was littered with many industry issues and was still too early for the market. Spotify and Pandora have followed and those who have followed our writing will know we have long supported these services and the logical user model adopted by Spotify.

Many questioned whether users would just use the basic service and avoid the payment subscription service and whether the music industry would allow it into the US. Today Spotify has announced that it has now over 2.5 million paying subscribers and since its summer US launch it has grown from 1.6 million subscribers in June to day’s 2.5 million with revenue increasing over the last year from £11.3 million to £63 million with subscription alone delivering £45 million.

Spotify is still not into clear waters with losses growing from £16m to £26.5m. Even with the increased royalty and licence payments that cause the losses it is now possible to see growth and with it the potential to change the music model.

It is important that the media sectors recognise that models will have to change and that it is better to support legitimate players such as Spotify than cripple them and hand over the business to others who will not pay a penny. This shift to rent, subscription real-time and cloud based services on demand are perfect for today’s mobile world. The question is whether we will all see this or remain wedded to models that they have little future.

Buffy the Facebook Mobile Slayer?

Will Facebook’s ‘Buffy’ be the vampire mobile slayer or a step too far?

Facebook are widely reported to be working with HTC to create its own Android smartphone, which is due out in 12 to 18 months. According to The Wall Street Journal the Facebook phone project has been codenamed, ‘Buffy’.

However why does it need to have its own hardware? Facebook is already tightly integrated into many Android smartphones and it is very questionable exactly what Facebook would gain over the wide adoption it already has. If Facebook believe that ‘Buffy’ could tightly integrate other Facebook services such as their email it could turn many off if all their all email and messaging from the phone have to be done through Facebook?

Facebook isn't a hardware company and perhaps they should stick to what they are good at. Even the likes of Google have struggled with the hardware and ended up buying Motorola and launching a Nexus with Samsung and Microsoft has many hardware nightmares most notably with their Zune player.

Ironically HTC, the world's fourth-biggest smartphone brand shares have fallen by 7%, which is the maximum allowed in one day. The fall has been driven by a cut its growth forecast. HTC had earlier forecast growth of 20% to 30% but despite a booming market now expected revenues for the final three months of 2011 to be little changed from a year earlier. This demonstrates the growth of Android adoption by many players.

Equally interesting is the news that Google and Samsung have confirmed that there are volume issues with their flagship mobile phone the Galaxy Nexus and Apple and that the battery problem that has dogged the new iOS 5 Apple operating system remains unfixed.

However, the one thing that is clear is that smartphones remain at the core of mobile technology, Android is now leading the wave and the more platforms tightly integrate applications and services the more the smartphone will become the device of choice. This has a significant bearing on how media providers, channels and cloud based services must adapt.

Cybercrime, SOPA and Copyright

Cybercrime takes many different forms and always happens to someone else. We can take precautions against it but when it happens its impact can be significant.

Some recent news items demonstrate the size and impact of cybercrime activity.

• The UK’s Metropolitan Police’s Central e-Crime Unit (PCeU) have closed down over 2,000 fraudulent e-commerce websites ahead of this year’s Christmas shopping season. These were websites that were marketing products from well-known brands such as Nike, GHD, Tiffany and Ugg. Consumers received shoddy bogus items, nothing or could have their identities stolen or bank details used. It is estimated the banking fraud alone was in the region of £2.9 million.
• The US FBI have charged six Estonia individuals with conducting a sophisticated click-fraud scheme that infected about four million computers in 100 countries with malware and stole over $14 million Six people were arrested in on 8 November. The seventh member of the gang, a Russian, remains at large.
• US and Romania authorities have arrested over 100 people in connection with Internet fraud schemes that are claimed to have netted over $100 million.
• Four British men have been charged with conspiracy hacking to carry out an unauthorised act in relation to a computer as part of the infamous LulzSec and Anonymous group activities.
• Hackers are even alleged to have destroyed a pump used to pipe water to thousands of homes in a US city in Illinois.

These are some of the cybercrimess that have made the news in the last few days and we have to accept that there are many that don’t and that go undetected, or are merely kept quiet. Cybercrime is not going away nor is any consumer, organisation or even state totally safe. Cybercrime also is global but is often policed locally. It's not only about financial gain, but affects all property, intellectual property, utilities, commerce, and even personal identities. What makes cybercrime so difficult is that the motives behind it vary widely. We may hear about the large financial fraud and theft cases and those relating to large scale privacy issues, as above, but everyday what we all regard as criminal activity is taking place and intellectual property theft and infringement is happening at an alarming and increasing rate.

As states attempt to clamp down on cybercrime they do so often with a lack of inter state consistency and some would suggest that they go too far in encroaching on the rights to privacy. The laws have to deal with many complex issues and it makes us wonder whether police forces will be judged in the future, not by the number of ‘bobbies on the beat’ (police on the street but on the number of ‘bobbies on the net’.

It is often difficult to separate copyright infringement from financial cyber fraud and many hold different opinions about these. Protection and management of owned rights is critical in today's intellectual property sectors. It is often one thing to own rights and a completely different thing to be able to police and manage them.

SOPA

The US legislators are currently grappling with how far to clamp down on copyright infringement. The House of Representatives has tabled a Stop Online Piracy Act, (SOPA) copyright bill which is designed to make it much harder for rogue offshore sites to sell counterfeit U.S. goods, including fake prescription drugs and copyrighted movies and music. Such sites are believed to be causing tens of billions of dollars in losses annually to U.S. companies.

The bill however is attracting as much negative as positive attention. Objectors are raising issues regarding the bill potential to require Internet providers to monitor customers' traffic and block the addresses of Web sites suspected of copyright infringement. A network provider can be ordered to "prevent access by its subscribers located within the United States" to specific Web sites defined by their unique DNS number. ‘Deep packet inspection’ to block data from specific Web pages, or URLs and potentially intercepting a customers' browsing for analysis is at the core of many objections. As well as free speech and rights advocates groups, some of the largest web companies, including Google, Yahoo, Facebook, have spoken out against the bill.

What is also interesting, is how SOPA and the Digital Millennium Copyright Act (DMCA), which grant immunity to website owners for content posted by users will interact could be in conflict. The DMCA offers website owners a Safe Harbour for content posted on their site by users. So a sites such as Wattpad or YouTube cannot be held responsible if a user posts copyright infringing material on its site. DMCA allows content owners to ask the YouTubes of the world to take down infringing material but the site can claim safe habour and is immune to being sued unless it refuses.

The Recording Industry Association of America, along with the Motion Picture Association of America and the U.S. Chamber of Commerce, strongly supports the SOPA legislation. However, the question remains as to in whose interest should the bill be crafted.

European Union Digital Agenda Commissioner Neelie Kroes is widely reported saying that the millions of dollars being spent copyright infringement it is not addressing the issue. She also believes that consumers can see copyright as a restrictive tool and that artists are still not being adequately rewarded.

Kroes said, "We need to go back to basics and put the artist at the centre, not only of copyright law, but of our whole policy on culture and growth. In times of change, we need creativity, out-of-the-box thinking: creative art to overcome this difficult period and creative business models to monetise the art."

We support the sentiment given by Kroes but also accept that legislative action is required to deter, and police the internet. When we see the legal patent battles that are going on today between the technology giants we have to ask what realistic chance has the small owner of intellectual property got in the depths of the internet and in dealing with international infringement and crime?

Digital Content Is Different

Yesterday we sat down with someone who is starting a new digital venture. As we discussed the potential, the market, the options and much more, it became apparent to us that there are a lot of things that applied to the physical book market, that simply do not apply, or should be questioned in the digital market. Walking blindly into the digital world assuming that all remains the same is in danger of establishing a set of urban myths that we have written about in the past but that continue to dog all our thinking and real digital opportunities.

We would like to take the opportunity to offer a dozen points as to why we believe digital content is different.

1. Size - 256 pages and x thousand words were mere economic parameters that prevailed and mattered in the physical world. They become meaningless and irrelevant in the digital world. The author is free to write as little, or as much as they feel appropriate and that convey his story and that the consumer can digest. One would argue that small starts to become beautiful and large may be present a page turn too many. Short stories present a great digital opportunity, but may only happen if they are thought through economically and cost is taken out. After all many successful authors started their writing with short stories and articles. We still have still to adopt and adapt the Keitai model in the West, but if Dickens could write and sell by instalments why are we waiting for the finished tome?

2. Price – Some would suggest that prices must relate to the physical book and that any major price reduction on digital could cannibalise physical sales and the market. Some also suggest that digital is a huge investment and that the costs of the physical product are still incurred in the pre production and marketing activities. The problem is all too often this thinking is based on ebooks being just ‘another rendition’ and that each must stand economically on its own two feet. Why aren’t ebooks ‘given away ‘as aperitifs, lost leaders and to stimulate and drive physical sales? Why doesn’t digital content adopt simple price points like other media? Finally, digital content must be different as demonstrated by the differentiation given to it by the vast majority of governments.

3. Age - The consumer may want the ‘latest book’ but this is often driven by media and promotion. How many consumers do you see opening a book at the copyright page to check when it was published before they buy it? Amazon’s advanced search has a publication date field which is missing on The Book Depository, Waterstones and Blackwell’s who has a ‘published between two dates’ option. We may be thick, but we couldn’t even find an advanced search at Barnes and Noble or Kobo. The eWorld now has to compete with, not just the remaining books on the shelf, or in the store, but all books ever published.

4. Rights - When you buy an ebook, it may be literally just for Christmas! eBooks do not have a second life, no first sale doctrine and being able to lend them to friends. Therefore, to say they are merely just another rendition is like saying there is no difference between a taxi and a car, both get you from A to Z, both are driven by an engine but both are very different .

5. Media - Today we see books, music, film, games, being offered separately on some sites and collectively, as a one stop media shop on others. Dedicated media offers will work as long as they offer the consumer value, but when the vast majority of digital media is now supplied through white labelled channels this makes the one stop shop attractive. As some start to ‘enhance ebooks’ the synergy between media sectors could further erode and the one stop shop appear even more compelling. As we have seen it isn’t difficult for supermarkets, associations or in fact anyone to sell white label stock off their brand with no inventory cost.

6. Taste – It used to be said that you could judge a person but the books on their bookshelf. However, when their collection is no longer visible, no judgement is possible. Some would advocate that this merely flips into a social network opportunity, where readers share their book experience, favourite reads and what they have bought. However, we would suggest that this is a different and ignoring the hype has still to be proven between strangers.

7. Device – The ebook evolution was born out of a combination of digital content and reading devices both being widely available. Today we have now passed that stage and replaced the device with a device agnostic platform. Importantly mobile devices have not stood still and we now have smart phones with sufficient power, Amoled screens, apps and broadband connectivity to challenge ereaders, games machines, laptops, and even the emerging tablet itself. Multi media devices have arrived to your hand and technology is going only one way – smaller, cheaper and smarter. We would suggest that the ereader device is fast becoming irrelevant.

8. Leadership – The largest players always dictated the game and the book market has been no different. Amazon has established itself as the largest driver and influencer in the market today and will be for some years and the largest retailers are no longer defined by square footage or constrained physically. Will tomorrows leading retailer be that with the best mailing list and management? As the retail internet offers become somewhat indistinguishable does this open the door for smaller specialists and innovators to survive and thrive? We also assumed the largest publishers will drive the market but is this a given? Will again the innovative and agile score over those who will find it hard to tack and change course in what will be choppy seas?

9. Re reading the novel - People often say that they re read their favourite books and its true, but they often do this after a long period of time. Guess what, the ebook format, device, technology may have changed by the time you get round to re reading it! It may be like going back to cassette, vinyl and eight track.

10. Metadata – We used to cringe when the dreaded ‘m’word was raised and often found ourselves in the uncomfortable position of having to use a word which itself was an instant turn off. Great strides have been made to rationalise the communication between trading partners and improve the physical supply chain and standards and metadata where pivotal to this. However, when you have all the content digitalised and the associated material and information is fully indexed the game starts to change. Some 80% of what you need to know about the book is retrievable from the digital content itself and some other information exists in real time. This must change how we communicate and what we communicate as we move from a transactional and physical supply chain to one that is driven by media content and social interaction. The library world has finally accepted that the old MARC record is past its sell by date and maybe it will be followed by others we regard as essential today. We now have to radically rethink information, access and retrieval and equally who is best to lead us through this revolution.

11. Rental and the public Library - We strongly believe that ebook sales are going to move from downloads as we know them today to online and cloud based rentals. Netflix, Last FM, Pandora and our favourite Spotify are among those leading the way. Many may see this as a huge threat but is this real or more based on the challenge it poses to the existing business model . We have written much on this radical change and on the redefinition of the library tomorrow. Some may resist the move to online and rental, but it will happen and it may well not be a top down driven but a bottom up revolution.

12. External agents –5 years ago, when we wrote the Brave New World report, we recognised that the digital world was going to be heavily shaped, not from inside but from the outside. Today we have all seen the impact that the likes of Amazon, Apple, Google and others continue to have on the market and the evolution of digital publishing. These new entrants have bothered to invest in the physical channel and when some suggest that they should acquire Borders, B&N etc the answer is obvious and negative.

There are many thoughts we all have as to how the market will evolve. It is important that we start to see digital content as different and free it from the physical book spine that will continue to choke it.

Samsung and Apple Lock Horns

We handed in our old and trusty HTC Hero Android last week which now some two years on is showing its age. We looked hard at what was on offer from operating systems, hardware and networks and choose not to wait for Ice cream sandwich and choose the Samsung Galaxy S 2 running gingerbread. It isn’t until you actually get your hands on the latest Samsung technology that you appreciate the real threat they pose to Apple today.

In just a handful of days, iPhone users who have seen my smartphone have been taken aback and old iPhone users are clearly jealous. The thing that won it over the other Android for us was the quality and size of the AMOLED screen and its lightness and thin profile. The thing that won it over the iPhone was the growing position and offer of Android. We didn’t consider the others as serious contenders. Samsung also offers the tight integration of many apps and superb communications. It even came preloaded with the majority of apps and social services we use including BBC iPlayer which is as good as watching TV and of course for us free Sykpe, GTM app and much more.

Samsung is now locked in patent wars in some 10 countries with Apple and its isn’t the one way traffic some would have you believe. Samsung is trying to even ban sales of Apple's latest iPhone on alleged patent infringements in Australia, Japan, France and Italy. Apple has preliminary injunctions against some Samsung products in Australia, Germany and the Netherlands, and is trying block US sales of some Samsung models. Samsung has also appealed against an Australian court's decision to block the sale of Samsung's Galaxy Tab 10.1 tablet and a full court hearing is scheduled for later this month.

The battle is not just about phone patents but also tablet ones too as these two giants tussle for what is a huge global market. To top it all and little know to many, is the fact that even Apple buys chips and displays from the South Korean giant!

We now have the smartphone market growing by some 42% year-on-year in the third quarter and shipping some 115.2m units. Smartphones continue to not only outsell PCs, but the gap is growing. In just three years since its launch Android now powers 52.5% of handsets shipped, which is staggering, given this was just 25.3% only a year ago. Samsung claims to have shipped more smartphones in the third quarter of 2011 than any other company. The Android genie is definitely not going away and Samsung still has others such as Motorola, LG, HTC all pushing the Android envelope.

Is Apple concerned – well yes, according to the recent Steve Jobs biography. Apple’s market share has dropped from 16.6% in the third quarter of 2010 to 15% in 2011 and even though its sales rose from 13.4m to 17.3m, this fell short of Samsung’s 24m.
It’s no wonder Apple wanted to put the Australian case hearing put back till next August, but the judge has set a date on March and feels August is simply too far away.

So we come back to our decision and what we have in our hands today. When I demoed it to someone yesterday they summed it up perfectly by saying I had a true mobile that offered everything and can make calls as well! Why bother with a tablet you can’t slip into your pocket and are tablets really the answer or just a fad?

The Times Are a Changin'

Today we have two different stories which by themselves are newsworthy. Together these demonstrate that the booktrade is not in full control of its own destiny and that changes can happen from outside that will change what is developed, sold and how it is sold.

Firstly, we have long believed that ebook sales are going to move from downloads as we know them today to online cloud based rentals. They are many who see this as a huge threat, whilst there others like ourselves, who see it as a huge opportunity. However, can such a change be controlled by the existing big players, or will we see a shift in market power driven by consumer demand, in the same way that Nasper, iTunes, Pandora and Spotify have changed music and YouTibe and Netflix video?

Verdict Research claims that consumers are spending 21% less on films, video games and music than they were in 2008, down from £7.7 billion to £6.1 billion. It would appear that they prefer free services such as YouTube, Spotify , BBC’s iPlayer and the mass of free app downloads for mobiles, over traditional home entertainment. The current economic downturn is also obviously fuelling the trend. So is the move towards an increased demand for ‘free’ in other media sectors a blip, or a real trend and will books be different?

Secondly, the current economic turmoil in Europe is significant and is now in danger of engulfing major countries such as Italy, Spain and according to the ex UK PM Gordon Brown, even France. Austerity has a funny way of driving both consumer habits on spending and government measures on taxation. What we assume is safe can become unsafe overnight and only a fool would believe that books are and will always be viewed as different.

The French government has announced that VAT rate on books will rise from the current 5.5% to 7% from 1st January. This is still a reduced rate compared to the standard rate of VAT in France of 19.6% but is a clear sign that in times of austerity the gloves come off when governments have to reduce public debt.

We all are acutely aware of the disparity on VAT between EU states and also of the tax disparity between physical and digital renditions. We should not assume that this will remain as is in difficult times and that any harmonisation has to be to the lowest common denominator.

So we see consumer consumption changing in other media sectors and taxation changes being taken to reign in state debt. We can’t assume tomorrow will be the same as today and that we have full control over our destiny.

KOBO Steps Up To Go Global

In a move clearly aimed at the international market KOBO has been acquired by Japanese e-commerce company Rakuten for a reported $315 million in cash. The ebook world todate has been very US driven, but this could change as all the major players now vie for the other markets where they all wish to be number one. This change is both inevitable and significant and will squeeze those who do not have the reach or the commitment.

Founded in 2009, Kobo has grown from its roots in Indigo into a formidable eReaders platform and broken out of its Canadian roots to move internationally with partnership arrangements first with the ill fated Borders in the US and more recently with Fnac in France and WHSmiths in the UK. It is widely regarded as the strong outsider in the market behind Amazon, Google and Apple and in the uS Barnes and Noble. Kobo claim 5.6 million reader worldwide.

Kobo claim that the company will maintain its headquarters, management team and employees and will continue to be run from Toronto and see the acquisition as an enabler which will allow with them to grow faster and complete internationally.

Rajuten has been buying up ecommerce companies and spending heavily. In 2010 they bought French e-commerce company PriceMinister and German online shopping mall, Tradoria. In 2011 they bought e-commerce companies Ikeda (Brazil), Buy.com and Play.com. Rajuten is now one of the top global e-commerce companies by revenue and is clearly building an end to end platform which not only services the consumer but also manages important media content, giving it both higher margins and tighter control over media.

This move should open up significant global opportunities for Kobo in markets that they would have struggled to penetrate alone. It does however raise questions on how Barnes and Noble will break out of the US and what options are left for chains such as Waterstones in the UK.

Rethinking the Digital Future

Technology is not only changing how we do business and is introducing a significant challenge in reducing the time to do business. As technology speeds up processes it also highlights those age old time blockages and inefficiencies that didn’t matter, or could not be addressed yesterday. Technology now enables us need to look afresh at the end to end business and consider how we can do things quicker and smarter.

Today when we look at publishing, we often see a market littered with ‘gatekeeper’ checkpoints. These barriers were not only aimed at introducing quality control, reducing the flow of traffic and they also often to slowed down the process itself.

Manuscript submissions, acquisitions, development and production can take months if not years. There may appear to be perfectly good reasons why it should be as slow as it is, but it is now clearly restrained by people rather than technology. The way works are also marketed, promoted and sold, could be said by some to belong to a bygone age that was more obsessed with feeding the shelf, events and calendars and those 13 week windows, than satisfying today’s real time world of instant gratification.

However, like many markets, we are obsessed with the consumer end. After all, the consumer is the only one that puts money is and despite what some marketers think, is the only one who decides the true winners. When we look at the end to end process we often view it as not one marketplace but a series of linked marketplaces each with their own gatekeepers, fiefdoms and find that they are often overly protected from each other. Despite the huge advances and improvements to Supply Chain communications, some what suggest that we still do business by ‘slipping notes to each other under the door’.

What if we could tear up today’s processes and redefine the role of the gatekeepers?

What if we could view the business as one end to end marketplace?

What if Michael Porter’s linear Value Chain model was a virtuous circle with no start and end?

What if we viewed the business as one integrated marketplace with content and associated rights at its core and the players and activities being just that and periphery to that core. More importantly, what if we recognised that all players could effectively participate at any time?

Imagine consumers being able to access and comment on manuscripts alongside agents, publishers and retailers, some will say its already happening. Imagine living bibliographic records being managed as ’wiki’ records where they are developed not so much in a vacuum but as crowdsourced documents that never stop being updated, appended to and refined. Imagine the elusive rights registry being open to all.

An inclusive ‘book’ marketplace perspective could change not only how we do business, the speed in which we do business but the relationships within the business? It could remove some of the adversarial and holier than thou attitudes that continue to dog the industry. It could create a new level of interest and participation that is more organic and spontaneous than today’s often ‘manufactured’ approach.

This holistic marketplace may appear unfamiliar, dangerous, exciting and to some a bridge too far, but it is the direction that technology, social networking and networks are clearly taking us today. We don’t fully understand the implications on today’s roles, processes and business and the route is somewhat dynamic and unpredictable but it is happening and the genie is not going back in the bottle.

The key is to see one holistic marketplace.

When we look at the likes of Amazon, Kobo and others we see businesses uncluttered with yesterday’s thinking and ready to redefine how we do business tomorrow not just at the consumer end but within the new virtuous circle of value.

Can You Define Tomorrow's Digital Library?

Today we have two separate but interlinked news articles on libraries. Declining spend, visits, issues, stock, staff numbers would all send out alarm bells to most businesses let alone libraries today and the news that the biggest industry player has now launched its own ebook lending library would certainly heighten the alarm bells.

It’s just under a year since we wrote an article ‘Public Libraries: Back to the Future’. The article was about the history of the public library and changes that it now faces in the 21st century. This article was different to the many others we have written, in that it focused on the changes that libraries have gone through both in their funding and their membership and its concluding comments questioned why tomorrow should be the same as today and remain unanswered :

Many would go on blindly demanding on the universal right to 'free' and that the funding by public funds must be a given. However, some would now suggest that this needs to be seriously questioned if we are to avoid the questionable digital position adopted by the UK PA over electronic access, the handing over of public assets to Google and the potential challenges of digital subscription/circulation libraries outside of the public control. Could Amazon or Google Editions become the new digital subscription / circulation library?

First, despite the high profile activity to save UK public libraries, we have a report from the UK Chartered Institute of Public Finance and Accountancy (CIPFA) that states a 2.3% drop in spending across the service of from £1.19bn to £1.16bn. Book acquisition drops included; adult non-fiction, down 13.7% to 2.36m, Adult fiction down 7.4% to 4.58m, children's fiction down 7% to 2.92m and children's non-fiction down 5% to 659,000. The total book stock held by libraries also dropped from 99.2m to 98.3m and the number of libraries also dropped from 4,612 to 4,579. The decline also hit the number of overall visits to libraries which dropped 2.3% to 314.5m and book issued, down 2.9% to 300.2m and even the number of web visits to libraries, which had risen sharply over the previous four years, dropped from 120.4m to 114.8m.

The CIPFA report also stated that the total number of volunteers in UK libraries had risen by 22.3% to 21,462 people whilst the number of library staff had dropped by 4.3% to 23,681 over the same period.

As we face the digital challenge with declining spend, visits, issues, stock, staff numbers we have to ask whether public libraries as we know them today are sustainable.

Secondly, we have the launch of Amazon’s Kindle Owners' Lending Library, which allows ebooks to be borrowed by US Prime members and read on all Kindle E Ink and Fire devices. Prime began as a membership offer for package-shipping benefits and costs $79 per annum and has now added video-streaming with some 13,000 movies and TV shows to members as well as ebook lending. Prime members will only be able to borrow one book out at a time for up to a month and any Notes, highlights and bookmarks made will be saved even when they return the book. When they want to borrow a new book the old book is effectively removed.

In September Amazon entered in agreement with Overdrive to make Kindle titles available to libraries and already libraries claim that the impact of this has been significant in the US.

Amazon claims that Kindle Owners' Lending Library will offer "thousands of books to borrow", but today these will exclude titles from the major trade houses, who have refused to join. Amazon appears to have reached a fixed fee agreement with other publishers and is claimed in some cases to be purchasing a title each time it is borrowed by a reader. Some would suggest that to grow the service in the short term Amazon doesn’t need the major Trade Houses and if like everything else they have pioneered they get it right the major Trade House will need them or an alternative in the long term.

Libraries serve communities and promote reading, learning and have been at the heart of society over the years. However as public libraries come under increasing fiscal squeeze their current business model may also come under increasing pressure.

CIPFA Press Release and report
Amazon Owners' Lending Library
'Amazon Overdrive potentially lock up libraries', Brave New World April 2011
'Freeing eLibraries to Compete', Brave New World March 2011
'Public Libraries: Back to the Future'. Brave New World December 2010

Just When You Thought Standards Were Simple

The amazing metadata map above is simply called Seeing Standards: A Visualisation of the Metadata Universe and is truly mind-blowing and a tribute to the creator Jenn Riley. It demonstrates not only the vast range of standards, the communities they serve, their purpose,function and domain.

Metadata is the data that describes data. We often refer to it as bibliographic data and it is the information that enables us the search, find, retrieve the appropriate information and allows us to talk to each other through a common language.

The book world is widely adopting ONIX which originated from the music industry in the 90s, whilst the library world with its more complex requirements has retained its MARC records.

However, it would appear that time is being called on the MARC record.

The Library of Congress is now being asked to take action by two expert groups with the aim of funding the work to create a new bibliographic framework that will serve a wide range of associated library communities well into the future.

In the late 1960s, early 1970s, the Library community created the MARC21 standard. At the time was a giant step forward and enabled libraries to share machine readable bibliographic data and also to reduce the cost and effort of cataloguing. The MARC standard has been a huge success and is responsible for the global creation of millions of bibliographic records. The structure was approved as a National Information Standards Organization (NISO) (Z39.2) and the International Organization for Standardization (ISO) (2709) standard, which helped establish it as the standard used by libraries. It also was used to describe other material, such as serials, sound recordings, still and moving images, maps, archival material, computer software, digital resources etc. Today there are over a billion MARC 21 compatible records.

Now some 40 years later the a working group from the community have found that MARC is ‘no longer fit for the purpose, work with the library and other interested communities to specify and implement a carrier for bibliographic information that is capable of representing the full range of data of interest to libraries, and of facilitating the exchange of such data both within the library community and with related communities.’

This call for change is echoed from tests of the Resource Description and Access (RDA) conducted by the National Agricultural Library, the National Library of Medicine, and the Library of Congress.

So when we read the statement from the Library of Congress we find ourselves drowning is a sea of acronyms and names. We are familiar with some we have no clue about others. So we are lucky to have been pointed to work that Jenn Riley has done which could be described as a ‘dummies guide’ to standards and their relationships, which we highly recommend and share links to below.

Read the Library of Congress Statement, October 31, 2011

Seeing Standards: A Visualisation of the Metadata Universe by Jenn Riley

Glossary of Metadata Standards by Jenn Riley

Glossary of Metadata Standards (poster form) by Jenn Riley

Collective Endeavour On Cybercrime?

What would bring representatives from over 60 nations to London to a special two day conference this week? The representatives include EU digital supremo, Neelie Kroes, Baroness Neville-Jones, Wikipedia founder Jimmy Wales, UK Foreign Secretary William Hague, Cisco vice-president Brad Boston, Senior Executive at Facebook Joanna Shields and until issues forced her to cancel even US Secretary of State Hillary Clinton had been due to attend.

In a world where literally everything is now online, cybercrime, which is now estimated to cost worldwide some £600bn a year, is increasingly becoming a big issue.
This year has seen some very high profile attacks; Nintendo, Sony Pictures, Sony Europe, 10,000 Iranian government e-mails stolen by Anonymous, Defence group L-3, Google Gmail, Honda Canada, Lockheed Martin, Sony Music Japan, Nasa etc.

It is not just large multi-national companies who get hacked, or their intellectual property stolen, but also individuals who can have had their personal information stolen and pasted all over the internet.

Today, we read that security company Symantec claim that from July until September some 29 companies in the chemicals industry, which included Fortune 100 companies, were the target of cyber-attacks and a further 19 companies, including defence specialists, had also been affected. The incidents are being linked to earlier attacks on carmakers and human rights organisations.

Iain Lobban, the head of GCHQ, claims that a "significant" attempted attack was made on the Foreign Office and other government departments over the summer.

Ross Anderson, professor of security engineering at Cambridge University, claims that as many as 5% of PCs are infected with malware and there was a one in 20 risk that any given computer was sending spam without the owner's knowledge.

Its hardly surprising that hacking is on the increase with Attack Tool Kits (ATKs), which programs designed to exploit website security, being widely available on the internet.

Rik Ferguson, senior security researcher at Trend Micro says of today’s hackers that they can be, "both black or white hat (or sometimes grey) depending on their motivation." In hackerworld, white hats are the good guys, black hats the criminals.
A popular practice is to simply deface websites with a message similar to the graffiti that adorns our cityscapes today. Zone-H, a website which monitors such activity, claim over 1.5 million defacements were logged in 2010.

Not only is the Internet a force for good and changing how and what we do, it is also reshaping and redefining crime against states, companies, property and individuals.
UK Foreign Secretary, Mr Hague, stated that, "The response does not lie in the hands of any one government or country but it is too important to be left to chance. This needs to be a collective endeavour, involving all those who have a stake in cyberspace.’ The UK government has also put aside some £650m of additional funding to help tackle computer-based threats over the next four years.

We hope that the ‘London Agenda’ can make progress and help define a new safer Internet road.

More info:
Symantic release on ATKs
Hacker attacks up 43% on Retailers SC Magazine Oct 2011
Thousands of WordPress sites sucked into BlackHole SC Magazine Nov 2011
'Nitro' Hackers Reportedly Attack Dozens of Companies in Chemical, Defense Industries
Fox News Oct 2011

Google To Take You Inside The Shop

We all thought that Google Street was taking mapping to a new level when you could actually ‘walk’ down the street and see the sights as if you were actually there, but Google has now taken the experience to a new level and has started a pilot project which will take you behind the shop door!

The new project is completely on a voluntary and Google’s Street View has already gone behind the doors of some 17 museums.

Initially the project is being limited to locations including London, Paris and some cities in Japan, Australia, New Zealand and the US. It is based on inviting the most searched types of businesses to be captured from the inside on camera. This group includes restaurants, hotels, shops, gyms and repair workshops, but interestingly today it excludes big-brand chains and community services such as Hospitals and solicitors.

In addition to the 360-degree fish eye and wide-angle lens shots the businesses that participate are also invited to upload their own pictures. All images will become Google’s property that may be used in other Google applications.

So if you own a bookshop would you participate or watch your competitors get that extra lift? Will Google make it a no brainer for those bookshops that sign up for Google? Will they exclude bookchains and enable the little independent to be exposed?

The interesting challenge is whether business see this as an intrusion, a marketing tool, or merely something they must now do in order to compete?