Are Consumers Now in the Digital Driving Seat?

Yesterday’s Apple announcements on the iPhone 5 were greeted with the usually hoops and wows but also with a few more yawns and so what’s. Its not so much that Steve Jobs is missing as much as the marketplace is shifting and moving on and more of the same isn’t that stimulating. Wired described it as being ‘mostly it is the Toyota Prius of phone updates’.

Sometime you just sense a change in the air. It’s like when winter changes to spring, the days start to lengthen, blossom and colour burst forth, and the sun’s rays become warmer and we start to think about summer. Business and technology is not different, just less marked and has many individual but intertwined seasons. The cycle can be seen as moving from innovation, to adaption to the market, to wide adoption within the market, to commodity and commodity upgrades and then, back to innovation. Because technology alone is not enough the subsequent innovation may be more commercially and market driven.

We are clearly seeing the emergence of the market demand for the technology to be device agnostic. This is because the technology itself is now becoming commoditised. Consumers are looking beyond the ‘wow’ factors and more at their own needs. Android has been the driver of much change and has clipped the wings of Apple. It may ‘borrowed’ some things on its journey and Samsung may have lost one battle on Apple’s home soil, but the change has happened and Apple now has to respond, is no longer in a market of one and that is good for everyone, including Apple. The Nexus 7 and Samsung Note are becoming serious tablet contenders and who would have thought the Kindle Fire, a basic tablet with a lower cut of Android, no camera and few Apps would secure a reported 22% of the US tablet market?

However, we are now also seeing some real convergence between mobile devices as smartphones get smarter, faster and with bigger screens, whilst tablets shrink to meet them. Just as eInk was always going to be and was clearly a significant catalyst of change, it now looks a casualty of the process it succeeded in kick starting. Amazon retain their loyalty with it some may say more as an insurance policy than a strategic bet. It is easy to see the same fate for the early smartphones and tablets. As many early ereader producers will testify, technology without the platform is now a waste of time.

It’s no longer about formats, DRM, standards and more about online, anytime, anywhere, any device. This itself changes both the package and its delivery in ways we are only just starting to see today.

The market is now focused on ‘platforms’ and less on devices, on online on-demand services and less on offline, accepting the consumer merely licences and doesn’t own files, and changing business models that continually engage with the consumer. These changes are fundamental and start to open up new business models which in turn fuel new technology. Remember Blockbuster and how we used to rent videos from the store, then came Netflix and Lovefilm with their postal offers and now everything is going on-demand and streamed importantly to aany device anywhere, anytime. Remember record stores and megastores, then came iTunes with DRM, then came MP3 now we have Spotify. The basic content didn’t change radically, what changed was how we found it, acquired it and consumed it.  

So where does this leave book publishing and its alliances to the new technology and the changing consumer market? Unlike music and video, books have to compete head to head with the physical product and existing model. Merely driving down the digital price to a silly point like 20p will itself force change but are we ready or even thought through the implications or are we like many today spreading our bets and hoping one will come in?

Somewhat related:

A funny cartoon that brought a smile to our faces over upgrade announcements.

Are Sony's Days in eBooks Numbered?

Sony once aimed its sights at being a big player in digital publishing. It created its own ebook format, was one of the major drivers behind Adobe updating the neglected ACS3 with the ACS4 DRM service, were the early backers of the ePub format and of course introduced several eink ereaders. It even entered into one of those ‘exclusive trade deals’ with UK retailer Waterstones. However it failed to deliver the list, didn't not develop a plausible platform and lost the eink world to Kindle. Some five years on and how times have changed. Sony were around at the begining of the digital reading chapter, but this may be one ebook that will remain unfinished and is in danger of slipping from the front list and going out of digital print.

Sony’s problems would be small if they were just about their ill fated venture into ebooks. However, today Sony have just announced a 159 billion yen ($2bn) net loss for the last quarter of 2011 and have slashed their full-year forecast to a loss of 220 billion yen ($2.8bn). Hard times, require hard action and Sony have reacted and announced that in April ex-PlayStation exec, Kazuo Hirai will take over from Howard Stringer as Sony president and CEO.

The reasons for the challenges facing Sony are as many as the different markets they deal in. They include the implications of the losses it made on selling its S-LCD display shares to Samsung. Also there is the cost of the migration of Sony Ericsson back to Sony with the associated creative accounting on deferred tax assets and a fickle electronics market,where Samsung have eaten into Sony’s once strong market share and it has dropped some 15.7% in the last quarter. Then we have the floods in Thailand a strong Yen and a sales drop of some 24.4% in its consumer products and services sector. Even Sony Music and Sony Pictures didn’t lift the gloom with Picture only registering a modest profit and Music seeing a sale year on year decrease of some 11.7%.

Its hard to see Sony making a comeback into digital publishing and its offer would require some serious investment and change of fortunes at a time when the business obviously reqires to focus on its core operations.So as Waterstones look set to announce another partner is Sony's ebook venture at the end of the road?

Kobo Unplugged

The one thing that you can say about Kobo is that they remain focused and determined to forge an international offer and pit themselves in the face of some formidable competitors. Their international strategy was eloquently conveyed by their evangelist and Vice president of content, sales and merchandising , Michael Tamblyn, speaking at the Digital Book World conference in New York. Michael said that when you start from Canada you have no option but to go International.

Michael’s presentation is good and well worth a listen and brings home some of the realities of managing a tight roll-out to many countries and the need to segment operations and stick to a template approach. They aim to establish themselves in 12 more countries this year, which may not sound that ‘gun ho’, but is a country a month and will get harder as they break out of the English speaking and ‘western’ markets.

However, international growth, which is heavily reliant on ‘partners’, can have its challenges. Last weekend we visited a large WHS store and saw first hand how a partner can let you down badly. Getting some retailers to treat it better than just an instore franchise is itself a challenge, but this was in what was a ‘hotch potch’ of a ‘pick and mix’ store that frankly made the old Woolworths look good and was hardly aligned to the messages Kobo needs to get across. Yesterday, Asda announced that they would be selling the Kobo touch reader for £87 which is just under the Amazon Kindle price of £89, which enjoys the Amazon brand and is backed by significant mainstream advertising campaign. Simply relying on spot buys, bin end POS and a comparable price isn’t exactly pushing the boat out. We have already seen how the old Waterstones was unable to retail ebook readers in store. Its one thing to have retail partners, its often another thing altogether to control their representation of your offer.

Michael presents some very interesting figures for Kobo sales of self published titles in various countries. Self publishing represents some 7% of US unit sales, this rises to 8% in Asia, 9% in South America, 10% in Australia, New Zealand and Europe and 14% in Africa. He explains some of the reasons behind the local variances but the percentages are somewhat higher that we expected and demonstrate that the opportunity that is potentially starting to blossom under the ebook umbrella.

Michael also shares some interesting insights on local and global pricing which demonstrate how many publishers still see physical and digital pricing locked together.

Kobo are now within the Japanese giant Ratuken, which will give them better backing and they know that they will need it as they race to get themselves established in many countries and across all the continents. This is about raising brand awareness and credibility just as much as it is about service. Whilst Barnes and Noble still today remain largely unknown outside of publishing and the US market, Kobo now has a better street profile in a growing number of countries. It will be interesting to see how the Kobo brand stands up to the potential Waterstones’ adpotion of B&N’s Nook and how they both compete with Amazon in the UK later this year.

To hear Michael's 15 minute presentation

Related posts
Kobo Steps up to go Global (Nov 2011)
Can Kobo Win at the Races? (oct 2011)
Kobo Has to Follow (June 2011)

Apple To Take Back AppleWorld ?

Yesterday Apple, as it often does, threw what some though was a ticking bomb into the ebook world. The company has told applications developers, including Sony, that they can no longer sell content, like e-books, within their apps, or let customers have access to purchases they have made outside the App Store.

The problem with Apple is that it controls its app world with an iron fist and as already documented is capable of changing the rules as it sees fit and with no recall and then changing them back just as quickly as it did last years on its stance on developer tools.

But before we look at some of the responses we are always reminded of that now infamous Steve Jobs quote he made in 2008, on commenting on the Kindle where he said, "It doesn't matter how good or bad the product is, the fact is that people don't read anymore... The whole concept is flawed at the top because people don't read anymore.”

We are all realising that the power is in the access and interoperability, not in closed worlds. Kindle is making its device successful despite the iPad, because consumers recognise that Amazon is a platform and that its device is independent and the Kindle device is a bonus but not a nessessity. Couple this with a ‘cloud’ approach and we start to see a significant game change where the likes of Amazon, Google and Kobo benefit and the likes of Sony and Apple don’t. The money is in the eyeballs and content not in the tin.

Ars Technica in their report quotes Apple spokesperson Trudy Muller,'We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase.'

They continue to point out that ‘If an app lets users access content that they purchased via Amazon's website, for example, then that same app must also let users buy the same book via Apple's own in-app purchase system. If the app developer doesn't want to use Apple's in-app purchases to sell content, then the app can't access content purchased elsewhere either.’

‘This is notable because it will require Amazon and Barnes & Noble (as well as Sony, whose iOS app is not yet available) to change how their offerings work. Apple wants its 30 percent share of content sales whenever possible.’

How would the move effect Amazon.com? They offer free mobile apps specifically to give customers the ability to read their e-book purchases on all devices allowing an iPad owner to still to buy and read Kindle books bought from Amazon on their iPad. How would effect any exclusive Kindle Editions or where a publisher doesn’t have a contract with Apple for a title?

In his blog Terry Jones (no not friendly Python) wrote how Apple's actions reminded him of Microsoft with the browser and the OS. He posses the thought, ‘Imagine Apple claiming that such a separation is technically impossible and that the App Store is fundamental to the iPhone experience.'

To us we see Apple as having a habit of firing shots and thinking later and tend to do this most in the App Store and with developers. Apple is never going to be the ebookstore leader but they can’t afford just to be demoted to tin provider

So the big line up:
Google growing multi platform with Android and opportunity to bury stuff in firmware (information content hungry and advertising driven)
Amazon the ‘online WalMart’ who have a books vertical, brand and loyalty that is proven by current Kindle sales (despite the iPad) but must counter their Amazon only world by offering all platforms
Apple has great tin, innovation and music business, but no book understanding.
Abobe still trying to control the content and design of content with CS6 and ACS4
Sony – lost souls who stumble along
And the pretenders who are very reliant on the big boys to allow them to play or simply follow

Our 2009 Predictions

2009 beckons and as we celebrate the end of what for many was truly an unpredictable year we look forward to what we may expect in the next 12 months. We will all be heavily influenced by the economy and its impact on consumer confidence and spending no more so than new initiatives within digital publishing. The unthinkable question is not what will happen, but who will survive 2009? The physical market is still the dominate one for all and is unlikely to be a smooth ride for anyone, with authors being placed on hold, agents having to battle to get to the front of what will be a big queue, publisher reining in the bets and looking for the safest route and retailers watching the credit and cash flow.

At times of austerity some will spend their way out, hoping that by being brave they will be rewarded, others will batten down the hatches and hibernate, waiting and hoping for Spring. What is obvious, to all but the die hard, is that there likely to be fewer ‘passengers’ at the Book Fairs this year and conferences will become a luxury?

We still find ourselves trying to create an ebook market in a vacuum and although the device is less of an issue, consumers want a ‘safe buy’ that has legs, or a price that makes the purchase a ‘no brainer’. Today the price is not right, the format not clear, the model is lost trying to live off the printed one and the content itself is just a carbon copy of the printed book and not special or a must buy.

So against this bleak winter what do we predict for 2009?


1. Content
The volume of digital titles will continue to grow but in tens of thousands not hundreds of thousands and the dominant format will remain PDF and Adobe eBook. The industry ePub format will grow in popularity for those who choose the detailed XML route but for many it will remain a cost too much.

2. Context
In a tight market, marketing is going to have to be on top form. That little extra effort could make the difference between an also ran and a hit. We must remember digital context sells both digital and more importantly physical books.
We envisage widgets will become smarter and offer a lot more that just the plain look inside the book. Digital renditions will be increasingly given away to promote physical sales. Authors should come to the front with podcasts, videos, blogs and web sites to promote them and their titles and the interesting question is whether they will do it themselves, be aided by their agents, leave it to the publisher, or look to others?

Finally the academic market will see the emergence of the digital inspection copy being used to sell adoptions and maybe create an academic social network environment. The trade on the other hand will miss the opportunity to digitise their review copies, or at best do it as an afterthought and believe that physical review copies are still a cheap run on option.

3. Rights
The introduction of the ‘Google’ Rights registry in the US is certainly going to focus the thinking. We believe that it will raise many of the challenges that have long been bubbling under the surface and many question are likely to be raised on the specification and scope of the work. Why the bibliographic agencies or the authors bodies stand up and do this is another question.
The whole spectrum of rights will continue to be questioned as POD is used to grab more orphans and retain rights in perpetuity. Permission rights will start to become more visible and an issue as ‘chunking’ will become more common together with the sale of digital fragments.


4. Digital Platforms
We stand by our vision of the mobile and the notebook still being the real platforms. There will be more ereader devices based on eink and expect a price battle but we still can’t see them becoming a must have device. We also see a shift towards online and rentals and away from download purchases. We believe that if Flash 10 makes it successfully put onto the mobile chip then mobiles devices will move forward and start to dominate the market.

5. Market Sectors
The educational, professional and academic sectors will continue to lead the way in digital both in publisher commitment and sales. One to watch in 2009 – religion. Trade will be more hype than substance but with a clear emphasis on digital marketing. The other sector we expect to raise its digital head is the public library market where the interesting question of its conflicting business model with trade (free to rent versus pay to buy) will remain unsolved.

6. Omnivores and New Entrants
The three main players will continue to steal the show, Amazon with its comprehensive covering of all bases, Google with the help it got buying the trade for ‘chump change’ and Adobe quietly plugging away on many fronts in the background.

7. Editorial / Production Content Development
We envisage that more and more publishers will review their antiquated development process and realise the opportunity benefits to be taken from digitising this. The key to success will be down to the implementation approach and managing the change programme. The old adage, ‘if a customer service clerk doesn’t like the system, you sack the clerk, but if and editor doesn’t like the system you sack the system,’ will still apply. Another important opportunity will be to pull the publishing business (content, context and rights) under one single digital process.