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. 

Why is eBook Metadata So Hard?

Today many continue to pour the physical book content into the digital container and believe that they have addressed the digital opportunity. However many have also adopted the same approach to contextural data, metadata, bibliographic, burbs etc. It’s as if we think that what works in the physical world is equally applicable in the digital one.

Is this blind faith approach down to a conscious decision to do as little as necessary and incur as little cost as possible, or is it a fundamental misunderstanding of the digital environment? Some would suggest that it’s like continuing to distribute AI sheets like confetti via a fax machine in the email and internet age.

Way back in the eBook dark ages (the late ninties) we were part of the highly acclaimed publishing research series edited by Mark Bide and Mike Shatzkin, ‘Publishing in the 21^st Century’ and one of the reports we produced was simply titled ‘From N to X’ and was about the growing importance of Context (metadata) over Content. What was clear then was that discoverability was as important, if not more important than the content and finding that digital needle in the Internet haystack was going to be a challenge to all.

Interestingly, the industry choose to retain their physical taxonomy of classification and apply restrictions often that only applied to the physical world. It as if all we could see was physical shelves and we had to place the titles thus. ONIX which did much to provide structure for the physical B2B supply chain started to become increasingly irrelevant in the B2C ebook supply chain. The major ebook retailers all adopted their own classification taxonomies some permitting many genre classifications others a few. Keywords became important but the response was varied. The important blurb was often just the physical one again merely poured into the digital description. Some indexed the first chapter, others the whole book, but searching index words often then became highly subjective and often irrelevant to the intended search. As seen with some generic search engines today even your individual profile may present different search results to others.

Some battled with the semantic tagging of the likes of illustrations. Some sectors recognised the importance of citations, references and continued to support those established to manage these in the physical world.

The point is that we have a very rich bank of potential information that can aid discoverability and qualification. The richest source of content metadata being in the book itself. Some 95% of all contextual data is available via the book with the remaining being often available via hyperlinks.

The other source of information comes from our own profiles on our tastes, preferences and habits. Some will say that one of the reasons why social book sites work well is that they aid discoverability, recommendations and thereby add context. Its little surprise therefore that Amazon bought Goodreads and have just launched their Twitter relationship. Book recommending social services have mushroomed but  have they actually increased sales to the same proportion or are they just an extension of today’s ‘me too’ social dating society?

We therefore need to rethink what we give away to promote, aid discoverability and add value to drive sales. Merely to continue to pour the same physical information into the digital boxes is not going to work. Equally waiting for the white knight to provide the solution may well now carry a health warning.

2012 Digital Perspectives: The Publisher

This week we have written a series of short articles titled, ‘2012 Digital Perspectives?’ These have looked at what we believe are the short term issues, challenges, potential game changers and outcomes across the digital publishing value chain. Today we look at the many complex opportunities facing the Publisher.

As we have seen this last week with the HaperCollins versus Open Road legal charge, different parties can view even a contract from a perspective, which is not always shared. We often find ourselves through different windows into the same house and seeing completely different rooms.

Rights
Publishing is a rights business without a Rights registry, where much of the information about rights remains locked away behind closed doors. Digital publishing now demands greater clarity and transparency on rights and the current ambiguity and lack of information remains digital publishing’s biggest threat and opportunity.

The book world is global and as the ebook market explodes, publishers have to rethink territory rights. Orphans remain the prize sought by many and an issue still unresolved. Permission rights will increasingly become an opportunity as content gets fragmented, enhanced and as snippets become more accessible in a digital world.

Licensing models that exist in other media don’t exist in the book market today. Rental and loans can’t be ignored any longer and if not addressed proactively they may be addressed by others.

Digital Rights Management will continue to be demanded by publishers who will be wary of piracy. The shift to online and cloud based on-demand platforms will also start to negate the need for DRM and downloads as we know them today and it is inevitable that DRM as we know it will have a limited life.

Copyright contracts should move to fixed term contracts and commercial terms where a licence may automatically revert if not renewed. This could itself offer a different reward structure and one which is based more on performance by all parties. However publishers must seize the initiative and not wait for others to dictate it.

Content
Many still print first then convert to digital and Editorial remains for many the last bastion of the analogue world. Although many in professional and STM have already learnt the lesson and gained the benefits of XML workflow and development it is still to be adopted more widely across all sectors..

Context
Ester Dyson once said that being able to find a needle in a digital haystack was key and we thought that Google’s big opportunity was to start to change search and discovery. However this did not happen in 2011 and perhaps their problem is that they still see books as mere information to index and fail to grasp the context.

Content will increasingly be used to provide context and support search and discovery. These opportunities demand changes in how content is developed, managed and distributed.

Progress has been made with services such as Net Galley and Yudu, but these were still locked into solving bits of and not the total problem. The industry is failing to grasp the difference between content based services and transactional ones. It’s standards bodies and focus is still focuses on servicing business to business information and fails to grasp the more important and greater business to consumer opportunity.

Social networking is starting to make a difference, and the challenge is to harness the social facilities in a positive way to advise, stimulate and lead consumers to discover titles, whilst avoiding blatant product placement and ;happy money'. Success is not guaranteed by the size of the spend, but by the skill of the approach and the only one that really matters and decides the winners is the consumer.

We still have to see trade publishers grasp direct marketing skills and mail list management. It is after all easy to collect names, but a lot harder to know how to exploit them when you are not the natural consumer facing agent. Trade publishers now find themselves dealing with traditional mass marketing, marketing to channels, brand building of both authors and their own brand and direct marketing. Is it therefore understandable that they all often fail as they try to cover all bases.

Digital Sales, Tax, Pricing and Royalties
Today’s digital ‘honesty box’ sales model is not sustainable without sales and royalty transparency. Asking publishers to reconcile sales that they can’t often audit, could be seen by some as an untenable position. No longer can publishers count the stock out, sold and returned. In a digital world, the unit only needs to be stored once and only moves when it is sold and there should be no returns. In theory this should make sales and royalty reporting and reconciliation very simple. We expected the industry to address this before it became indoctrinated within the market, but have seen little co-ordinated effort, standards or even approach.

Taxation is a digital mess with different rules and rates everywhere and a lack of harmonisation even across the EU. Should prices be inclusive or exclusive? Should tax be at point of distribution or consumption? Why is the same product taxed differently because it is digital? Publishers may not make the rules but can lobby and influence them.

We know now that the agency pricing model will face many legal tests this next year and will probably fail some if not all. Pricing is a threat and an opportunity. Managing prices across thousands of titles, from thousands of publishers, through many many channels and outlets, can only be managed at the consumer interface. In a digital world where all books look the same, the lack of consumer price points only adds to confusion. This was partially addressed in music when iTunes invented the track price but remains a challenge in publishing where value still has to be effectively communicated.

The Publishing Organisation
Publishers now need to seriously consider the impact of digital on the organisation. There is no right or wrong answer.Do they have a single organisational focus that sees physical and digital as mere renditions of the same work and if so, which part is the dog and which is the tail?

The digital business will have to be far more holistic in its approach and consideration of all aspects of publishing and yet must remain agile enough to respond to rapid changes.

The large publishers will continue to control the vast majority of sales and in sectors such as education, professional and academic and it is hard to see a change to this 80/20 rule set. However, in trade publishing we see a different dynamic and potentially, a more level digital playing field. In digital, publishers are only as good as their ability to exploit their content and rights and those that believe they have a divine right to market share will soon learn the digital reality.

Music Just Got 'Sticky'

The digital music revolution is now entering its next phase. The first phase merely dumped the music onto your player, the content was the same, played the same but lacked that something that vinyl and CDs had – extra fun. Downloads didn’t have liner notes, photos, lyrics and all those extras that made the physical renditions more tactile, they were just digital content.

Now the mobile application boom has generated a potential answer – the total music experience. Before the December 16 release of Fall Out Boy's "Folie a Deux," the band will release an iPhone application. This is notthe first nor will it be the last and follows the lead taken by the likes of Pink, Snow Patrol and David Cook.

The iPhone application is basically an interactive website, accessing track listings, photos and lyrics from the band's entire discography as well as links to buy its songs from iTunes. As a mobile application it doesn’t need to be static and can be updated with more information and functionality and could include a mobile social network integrated with the community on falloutboyrock.com, Twitter tools, photo uploading and even the ability to find other nearby users with the iPhone's GPS location technology. The application can also contain games and streamed videos. The applications are only restricted by imagination, ability and effort.

By separating the music from the application they have avoided making the download complex, raising its price and best of all retained control. Importantly the applications could generate a new ‘must have’ around the iPhone and in order to compete the other mobile players would have to reproduce the application on their platform. However by tying the application to the device they have joined that current disconnect that occurs between the artist’s web site and the music whilst potentially replicating the web site content and experience on the iPhone. A very clever move and one that increases the overall marketing ‘stickyness’. Not an easy task as it evolves in many directions. Also with each band in effect creating their own application this makes the service even richer and compelling and also again harder to replicate.

Will the music labels follow and try to wrestle control? Some would say that this is inevitable, but again they have sat on their hands and the artists have taken the initiative and many will want to retain that element of brand and social group control. The music labels will also want it to be on every mobile device not just the iPhone. Can you imagine the likes of Sony rolling over and handing it to Apple? The other problem the labels have is that they are music producers and marketers and do not inherently have the skill base or set.