Amazon Creates New 'X Factor' or Crowdsourcing Offer

This week Amazon added another layer to their offer, a new ‘crowdsourcing’ book submission one, which as with all things Amazon today, immediately polarised many. The lure is to attract would be authors into what some would call a digital slush pile 'X factor’ competition, where readers vote and those works that get the votes, win and potentially get selected for stardom and the recognition their authors want. Under the new service Authors will be asked to submit never before published works. Amazon will then make available a preview of the work and enable readers to review and nominate their favourite and the books with the most nominations will then be reviewed by the Amazon team for potential publication. It is unclear when and if an author can flip a non-selected submission into KDP, but we suspect that will be on offer and provide an added author bonus.

So does the following have an impact on readers, an author, an agent, a publisher and Publishing?

• Guaranteed advance & competitive royalties: You will receive a guaranteed $1,500 advance and 50% royalties on net eBook revenue.
• Focused formats: We acquire worldwide publication rights for eBook and audio formats in all languages. You retain all other rights, including print.
• 5-year renewable terms, $5,000 in royalties: If your book doesn’t earn $5,000 in royalties during your initial 5-year contract term, and any 5-year renewal term after that, you can choose to stop publishing with us.
• Easy reversions: After two years, your rights in any format or language that remains unpublished, or all rights for any book that earns less than $500 in total royalties in the preceding 12-month period, can be reverted upon request – no questions asked.
• Early downloads & reviews: One week prior to release date, everyone who nominated your book will receive a free, early copy to help build momentum and customer reviews.
• Featured Amazon marketing: Your book will be enrolled into the Kindle Owners’ Lending Library, Kindle Unlimited as well as be eligible for targeted email campaigns and promotions.

What is different about this new offer to those offered in the past by some publishers and 3^rd parties? Is it any different to say Author Solutions? What does Amazon offer that others don’t?

We may need to step back and stop seeing these offers from Amazon as individual offers and start to see them as part of an overall offer which may even go further than just books.

They already have the market share of physical and digital books and in doing also have the largest known customer base and information on their buying, browsing and taste.  They have the largest digital self-publishing share with not only KDP but also Create Space and Audible. They make money on KDP and have probably done more for self-publishing than all the exploiting services that went before and can even boast some significant successes. Authors love it because it is transparent, rewards are high and they have a huge potential audience they can reach.

What this new move potentially does is move Amazon into a strong position to exclusively capture new talent and win their publishing rights, provides a feed to KDP as well as Publishing and adjusts the reward and rights benchmark both in terms of reward and importantly term time rights. The later can’t be overlooked as it is a major move away from the exclusive and some would suggest ‘in perpetuity’ aspects of the traditional model. Couple this with Amazon’s ability to make all activity transparent and remove those old Chinese royalty walls and there is a certain appeal for all.

Can others follow? We doubt that anyone today has the market vision and offer, reach, breadth and ability to leverage money on top of existing money in this way.

Five Digital Changes To Respond To

Battle lines are being drawn in the digital book arena and these are changing both in terms of goals and measures of success. The changes taking place may appear relatively small and tactical today, but their impact could be significant over time. How long they will take to deliver change is questionable, but that they will, is inevitable.

Although there is much noise in the market and many are merely shouting about what they are doing and it’s often hard to determine noise from substance and authority. It is also has to be recognised that different sectors have different issues and drivers and nowhere are there any silver bullets.

We would suggest that are five shifts taking place with the Trade environment. These are all at different stages of evolution and moving at different speeds, but will spawn more change.

Interestingly, as the overall digital market will be shaped by all of them, it may not be wise to simply cherry pick the ones you think apply to you and ignore the others.

Subscription

We are now starting to see the emergence of serious players and offers. Interesting, they have all pitched the consumer reading demand at the high end and made ‘one price fits all’ offer. 

Subscription offers need to be geared to individual needs and yet encourage members to read more. Just having the biggest library to choose from and expecting readers to consume 3 books a month is not the answer and niche genre offers are essential as well as recognising variable reading demand patterns which will keep members hooked. Today the churn rate is unknown and we suspect it will be quite high in the initial period and therefore these services need to develop secondary community draws to compliment and add subscription value and not merely appear as one trick pony’s. We would expect them to follow other media subscription services and align themselves to larger and complimentary subscription lists and this is essential as long term as subscription offers continue to consolidate their customer facing propositions.  

Ownership

The old and somewhat irrelevant buy to own model that prevailed in the physical market is fast becoming exposed. Although we have yet to see the ebook used market happen, with only the Dutch service Tom Kabinet is challenging the courts, it is inevitable in a highly restricted market.

However as used books, DRM, watermarking and on demand streaming services all overlap, maybe the emergence of on demand means that we no longer have to test the first sale doctrine and the used ebook market never happens. But unless on demand occurs, the used sale market potential for ebook is bound to be tested and found wanting and it is inevitable that the courts will eventually fall on the side of the consumer.

One of the challenges is about proving ownership, which with DRM should be easy, but with the current DRM walled gardens is almost impossible. Again with watermarking it should be also possible, but without a registry and standards conformity, is again almost impossible. With no DRM, no watermarking and no registry some would suggest that this is like closing the stable doors after the horse has bolted.

Self Publishing

We are firm believers in the democratisation of writing which is currently exploding in the digital market and will continue to grow for the foreseeable future.

Self publishing is no longer about the slushpile of aspiring writers all wanting to be the next EL James, but about the ability of anyone to bypass the intermediaries and express themselves and publish their works. It facilitates small publishing ventures as well as new and established writers. They may select to use outsourced services to polish and refine their work, or simply publish themselves.  

It challenges the ability of the intermediary to control what is being bought and read and can level the marketing playing field. The bestseller will still be a bestseller, but increasingly the backlist and midlist authors will now have to do more themselves to promote their works and in doing so find themselves head to head with others who have self published and earn a greater percentage of the revenue they have generated.

Can traditional publishers use the self publishing services to feed their lists, or have they now lost that opportunity? Maybe it’s down to the value they will offer the writers and that may have to be more than just a ‘safe home’ and a brand.

Author Care

As author earnings continue to be squeezed by net receipts, reduced advances and more competition, the publisher profits from digital have been seen to grow. Maybe the widening gap is down to bad PR and communication, but the writers are increasingly aware and continue to be the ones who create the initial value.

One area that is very visible to authors under the KDP and other self publishing services is their sales reporting and revenue payments. As the authors will demand greater transparency on earnings, speedier payments and an increased revenue share, there becomes less hiding place for publishers.

Publishers do add significant value, but now have to increasingly demonstrate this and one potential knock on effect will be a revision of digital rights to term based and separation of these from print. 

Content, Context and Community

In the main, the market continues, to merely pour the physical content into a digital container. 

Some would suggest that this is short slighted and ignores that it is just a transient step and some would even argue is the equivalent to performing self-harm. We don’t say that all ebooks must go down the multi media experience route, far from it, but that we should be thinking about the user experience and making the digital rendition complimentary and not just substitutional.

Digital also offers significant opportunities to grow author, genre, reading and writing communities. These may be devolved to others better suited or motivated to organise and curate. Digital also expands the ways in which works can be discovered, validated and valued which applies to both digital and physical renditions. It is no longer about describing books to place them on dry one dimensional shelves, but about enabling them to be found in many ways within a virtual environment. Standard bodies think library and bookshop shelving, but today’s buyers don’t.

Too many what we have said, is not relevant to their business today. They may wish to sit on the fence and wait for it to happen and expect that they can respond quickly. To others they see these changes happening, new opportunities and the ability to position themselves for tomorrow and not run the risk of being too late to the party. 

How Do We Compete With Amazon?

The questions over what the industry can do, or not do about Amazon’s dominance, were raised yet again last week. It was first sparked first by Barnes and Noble's declining interest and funding of its Nook venture, then we had Sony shutting up it US store and handing the keys to Kobo as it battles with many greater corporate issues, then came Kobo itself filing objections to a Competition Bureau agreement impelling four of the biggest publishers operating in Canada to renegotiate their contracts with ebook retailers and finally by an article by Jane Friedman in which she raises the new Amazon policy to drop its escalating royalty rate of 50%-90% on ACX titles sold exclusively to a non-escalating 40% and audiobooks distributed non-exclusively to a non-escalating rate of 25%.

The Kobo filing claims that prior to the Canadian adoption of the agency model it had been ‘losing millions of dollars per year” under wholesale terms and also that when, ‘In the U.S., when Agency Lite was brought into existence, Kobo saw its net revenues steadily decline. Kobo has since stopped investing in marketing in the U.S., closed its office in Chicago and is focusing on other markets. Its market share and revenues are now negligible there.’

The result of these announcements was to further fuel the debate on Amazon and its dominance of the marketplace in both ebooks, audio and the huge US market. It would be wrong to believe that they can be beaten on discounts, as the only winner in a discount war is the consumer and the one with the strongest nerve and deepest pockets. Wishing for a white knight may have been feasible ten years ago, but today it isn’t going to happen and no start-up is going to suddenly change that. Apple is tied to its own Appleworld and will never venture out into Android land, Google, well they may have scanned everything that has been printed, but please be careful what you wish for. Amazon has effectively woven itself into the publishing DNA and is not just at the consumer end but right across the value chain.

We have harped on about books being different till the cows have come home, been milked and gone back to pasture. Yes, books are different, but interestingly ebooks aren’t that different and maybe that’s where we often loose the thread. We have now to accept that we don’t live in a book centric world and that the larger media and home entertainment umbrella has several component strands. Books is the baby among several stronger digital sectors and the networks today are the gorillas. 

We are fast becoming the one sector that still is DRM obsessed, sell through orientated and like King Cunute think we can stop the digital tide sweeping over us. Only last week it was widely reported that the majority of books on our shelves are unread and a recent US poll suggests that some 25% of US citizens didn't read a book in 2013. We continue to think ebooks are just books in a digital container and in doing so we kid ourselves, confuse many and potentially miss the opportunities.

Amazon watches, learns, then acts and changes consumer behaviour in ways that many in the book industry have failed to grasp. At a basic level they offer, used books, marketplace, KDP, Goodreads, Book Depository, publishing, audiobooks, self publishing, on-demand and that is without its other media and technology arms. Just think it was just a little old internet shop in 1995, which right up to the turn of the century many predicted it would not survive. This last week they started to roll out their fresh food delivery service in the US and it is widely predicted it will soon come to Europe and some are already trying to protect the giant supermarkets, who ironically, have been often demonised for their destruction of the High Street. 

The Amazon is a huge river that is fed by many large tributaries and supports many ecosystems and is very important to the ecology of the world. Amazon the business is now no different.  

We have to analyse and think differently just punching the biggest kid in the schoolyard is futile and you just get hurt. Amazon’s weakness and its strength maybe is that it acts as a lone wolf. Some would suggest that It often buys to take out the competitive threat, or like with its audio market purchases, sets out to quietly corner the market.

Yes publishers need to develop their own direct business,but apart from the few this isn’t going to be a major channel to market, is only aimed at the consumer end  and some would suggest is too little too late.  Niche players may carve out a healthy living but the minute they get on the radar they are themselves vulnerable.

So where is the answer? It is almost certainly not within the book market by itself. Amazon crosses other media sectors and is competing for a strong position in many but it is a lone wolf. It rarely hunts in packs. It may have a federal approach to those it owns, but it retains a tight strategy grip over them. Perhaps its strength is its weakness? Perhaps a joint ventures that cut across current boundaries and create something that is not easily replicated is the answer. Last week we wrote about Nubico and although that is not necessarily the answer it starts to point in the right direction. People belong to very large subscription bases who all face threats and an everchanging power struggle. Lining up the ducks may appear hard today but if they create something of real value then maybe, just maybe there is an alternative.

Digital Warming and Self-Publishing

Today there is much debate over the value and size of the self-publishing channel. Yesterday this channel was restricted by the physical supply chain, which effectively remains owned by the traditional publishing channel. This is no longer the case with the digital channel and works are only restricted by all the other works that they compete with on their virtual shelf and the money spent in promoting and marketing a title.

Self-publishing was once seen by the market as vanity publishing and being the books that publishers didn’t want and therefore unworthy of the attention of consumers. The digital market has changed that and now self-publishing is growing in respectability. There are still poorly written and edited books, but some would suggest that also applies albeit to a lot lower extent to the traditional channel. Both now sit side by side on the same virtual shelf.

Platforms such as Kindle Digital Publishing (KDP) have made it possible for anyone to publish at relatively little cost and receive a large proportion of any revenues generated. Some will argue that there still are costs which are largely forgotten by the author. Others will claim that these tasks can be outsourced at a very low rate to professionals who don’t carry the corporate baggage. Some would suggest that publishers have the ability to generate more sales which even at a lower royalty will generate more money for the author. Others that self-publishing is more transparent, pays quicker and puts the author in charge of the price.

The self-publishing channel is now not restricted to new works, but is increasingly available to those published authors who have been able to revert their works when the publisher didn’t want them anymore, or digitally publish works that never had the digital rights licenced in the first place. The author are now able to republish these themselves digitally via the likes of KDP and others.

We now have a virtual shelf brimming over with old and new, self and published works and the challenge for all is now coined as ‘discoverability’. Marketing spend can still by the bestseller, but those without that backing now have to increasingly compete head to head with the self-published.

In his Report on self-publishing Hugh Howey draws his conclusion that the self-publishing channel is far greater than many think and he makes some claims which others dispute. The reality is that no one really knows the answer and the data today is incomplete and the analysis often more subjective than factual. Amazon, do not disclose and make the detail public and as a result there are many who make assumptions based on their opinion and bad data.

Counting the volume of total works published becomes a futile exercise as many self-publishing ones don’t have ISBNs, let alone bother to register them. So how many ‘new’ titles were published last year becomes an guessing exercise for some and largely irrelevant to many. The slice of market share achieved by some is as only as good as the data collated and what is often outside of that is ignored. Even the definition of a work and the number of renditions starts to be questionable.

Like global warming it would be somewhat naïve to not accept digital warming is happening and one aspect of this is that self-publishing is not only growing but that some authors are making a return off this route. Self-publishing will not cannibalise the traditional channel and as we have said, it can’t compete with others marketing and promotional spend, but it can be a viable first step to many, provide a longevity of a work for others and if dismissed by the traditional players may well come home to haunt some.

AuthorCare Begins With Transperancy

Today we read Hugh Howey’s blog post ‘Bread and Roses’ on what he believes the Authors Guild should be focused on and an author’s perspective on today’s marketplace. His views will not be shared by all, but they convey a frustration that is often felt by many, not necessarily on the activities of the Guild, but on their position within the market.

It is a given that we have to both encourage authors and reward them. Yesterday they often could secure healthy advances and had a clear measure of their sales and expectation of royalties. If there was an issue they could instigate an audit. Today they increasingly see a net receipt environment where they can often lose the distinction of sales and revenues and performance between the different channels. There is also is an increasing tendency by some to create a catch all bucket called ‘special sales’ and the author may be left with a feeling of ‘take it or leave it’ and potential frustration.

Does the reward match their expectation, exceed it, or disappoint? Some publishers will work hard to manage expectations, communicate openly and explain the results, but others may only supply consolidated entries on their statements.

Digital sales in particular should be transparent to all. Everyone should be able to track sales in real time and calculate revenues accordingly. However, that isn’t often the case and sales reconciliation across digital channels isn’t always easy for publishers, let alone agents and authors, and some publishers even outsource the process to specialist. Imagine, an ebook licence is sold today. There is no reason why with today’s technology that can’t be reported either in real time or near time to the copyright owner. There is no reason why every online retailer can’t supply a standard feed. Alas that isn’t the case.

When we look at Amazon’s KDP self publishing facilities, the author sees sales as they accumulate and can see payments due, which are then paid monthly direct into their account. Even if we ignore the percentage of receipt paid as being significantly higher than that paid by publishers, the transactions are transparent and the money often flows quicker.

Today we see a growing self publishing movement and although many make little money, they often feel that they are at least able to seen what sales they make. In creating an open and relatively transparent service, the likes of Amazon are also nurturing trust and swaying authors to follow them. Getting them back into the traditional publishing process may be harder than some imagine.

Customer service and Authorcare begins with communications and transparency and the one thing that counts is the reward in units sold converted into royalty paid.

Amazon.com And You're Done

I remember in the late 90s siting in a strategy board meeting, where one director predicted that Bertlesmann would ‘crush ‘ Amazon and that the company would not last at the level of losses is was making. I tried to explain global branding, customer service, and how retail operations can work on positive cash flow, but I only got a glazed look in return. The outcome is now history.

It is hardly surprising to find that the media that Amazon started with, books, is one that they cover so well. It is the width and depth of Amazon’s book vision and commitment that makes it different. They proved themselves adept in understanding the market’s weaknesses and seizing on opportunities. As a result Amazon is truly vertical.

Who else has a significant if not major share of:

Physical books - Sales over the internet now includes The Book Depository and ABE acquisitions. Amazon remain one of a few who openly sell new books alongside, bargain, second hand and rare. They understand that to a consumer, a book is a book and that bookselling is about selling all books, not just front list.

Ebooks - Amazon not only rekick started the ebook market, but drove the consumer adoption of eink readers and later platforms. Although they still own Mobi, it is somewhat languishing in the background and we are not sure what happened to that other acquisition, Lexcycle’s Stanza reader. They have however created a market leading and global Kindle brand, which now transcends the device itself.

POD – Amazon acquired Booksurge. Although POD never fulfilled its potential to change the model from print and distribute, to distribute and print, Amazon still acquire content through this channel and it has also established their appeal to many authors.

Audiobooks – Amazon has this base covered with market leading and aptly named Audible.

Marketplace – Amazon’s service pulls in retailers, wholesalers and publishers and creates a place where Amazon may not be the cheapest but they still gets a healthy slice of the takings from each sale. A very clever move to create a service which everyone has to be in.

Singles - Amazon Singles may still be a bit lost but could easily find a home in their new Washington Post offer.

Digital Library – The Amazon owner lending library creates a new lending model which offers the consumer a new service and the author additional new income.

This is all without KDP and its successful self-publishing arm and also Amazon’s now serious and potentially disruptive moves into being a publisher. Did we forget that Kindle brand? Did we forget that umbrella subscription service, Prime?

To achieve the above in less than 20 years and do so across the globe is significant. Together it shows a clinical understanding of the value chain, book sectors and its supply chain that has to be admired. Amazon is truly a category killer.

Now add LoveFilm video streaming and DVD rentals, a very healthy CD Rom music retail offer and music downloads, the Washington Post, Amazon’s new Art offer and we see a media conglomerate that has subtly moved in and picked the industry’s ‘low hanging fruit’.

We must not forget all the other Amazon businesses. The range of goods it now sells is diverse and generates significant revenues. Here it services the same consumers through a single marketplace portal, offering a true one stop shop, or ‘Walmart on the internet’.

Then we have the technology that underpins all their services and like their cloud and web services are now being retailed in its own right. 

Amazon is here and is here to stay.

As long as they continue to provide that comprehensive cover, service and one stop shop, they will not be dislodged. Some may want to be number two or three, but it’s like chasing rabbits and their future will be determined more by Amazon’s actions and their ability to merely track them. We now need to learn to survive in an Amazon world. To do so we must innovate and do things differently and smarter and in doing so recognise that only the agile survive a category killer.