The Digital Devil's In The Detail

One of the most disturbing rulings occurred this week in the court of US Judge Naomi Reice Buchwald and relates to a case of copyright infringement brought by HarperCollins in 2011 against Open Road in relation to the ebook publication of Jean Craighead George’s 1973 bestselling children’s book ‘Julie of the Wolves’.

The judge ruled that the original contract which was signed in 1971 differed to that of the 2001 ruling in Rosetta vs Random House and clearly granted HarperCollins exclusive right to licence electronic publications as then in 1973 and into the future. They still needed George’s permission to make any electronic rendition but they retained the exclusive licence right irrespective of whether George agreed or not. In this case George did not accept the terms and went to Open Road. George sadly passed away in 2012.

The actual wording difference between to Random House and HarperCollins contracts with respect to future technology and electronic rights appears to be clear to the judge and focuses on ‘in the future’. It has probably sent every trade house into a legal frenzy of activity on checking their digital clauses in their key and boilerplate contracts. As to whether this was the standard boilerplate contract term in the day, or a specific one honed for this contract, only the parties know. However, it would appear a very generous open ended clause for the agent to accept in those days and at a time when digital was clearly not even much more than a distant dream.

A contract is a contract and a ruling such as this brings both clarity for some and ambiguity to others. It however raises once again the question of the fairness and equity of contracts and whether they should be in perpetuity, tie both physical and digital to sales and inventory and can be so open as to cover anything and everything into the future. Some would suggest that you acquire as much rights as you can and use as little as is necessary. Today some would claim that excessive rights are demanded and that some subsidiary rights are not being fully exploited as a result. We have long argued that digital rights should be term based, not in perpetually and should apply on a back to back basis to both the agent and publisher contracts.  Also a pbook may not be the same as an ebook in the future, digital ‘sales’ are potentially going to become subscriptions and licences and therefore have different parameters of success and longevity. Digital may be published first with the physical having to justify print. On demand makes a mockery of inventory. It may be wise to contractually cleanly separate digital and physical and not muddy them under ‘published in any format’ catch all’s.

Whatever happens the backlist and orphan works position is probably going to get murkier before it gets clearer. Contracts that were once signed under the understanding of the day may now find themselves being dusted down to face a whole new brave world they were never really designed to cover. Governments may bring in regulated orphan ‘land grabs’ based on some due diligence, but again this doesn’t address the fundamental void of there being no rights authentication database. Books are not alone in this issue and our whole internet infrastructure would appear to be based not on validation and authentication, but on ‘catch me if you can’ and ‘safe harbour’ and take down notices.

Digital Warming

Global warming is effecting our weather and being blamed for the extreme weather we are witnessing around the world. This year alone we have had exception gales and flooding across the UK, a heat wave down under and polar freezing weather in the US and Canada. We understand some of the causes, but we still appear powerless to predict the future weather past the short term.

Publishing has been effected by its own digital warming which has seen the extreme performance of some, demise of others and a general unpredictability of most.

Is there a critical digital point which tips the scales of all other channels, or are there a series of tremors and spikes that we now have to live with? Technology is fairly predictable but the combined impact of this and changing consumer and social behaviour is making what was once fairly predictable market into one which now appears to be stormy and highly volatile.

Polarisation and consolidation is a given and if anything will increase as the big seek to retain market share and control and the small carve out viable niches. This is not just impacting a few but is now prevalent across the value chain. However, the traditional industry is no longer defined by the book but increasingly by technology, markets and media. Amazon is barely twenty and Google, Facebook Twitter are all relatively newcomers. The recent combination of Random House and Penguin pales into insignificance against the size of the new technology, social and online players. Size as once defined is no longer as relevant as community, touch, engagement and the Wow factor.

Interestingly we see a relatively flat overall market. Some sectors may be experiencing greater decline as their market accelerates online, whilst others are more resilient and subject to a more unpredictable path. Prices have fallen and are under constant pressure, merely raising the RRP to compensate for the discount given becomes a vicious circle where the market will increasingly dictate the price in a price comparison world. We have seen publisher declare increased revenues but is this a trend or merely another spike? We have seen other publisher flat line, or decline and is this reflective or the corporate adjustments being made, their publishing mix and offer, or digital warming? Retailers have experienced the same volatility and only recently we have seen John Smiths go one way whilst other flat line or go the other way. Many retailers no longer have the property asset to fall back on and are now a one trick pony. The ebook market is also changing. No longer are we obsessed with ‘lookie likie’ eink readers that offer little but now are focused on mobile platforms and towards a permanently connected online cloud world.

Technology has done wonders to raise the profile of the book but appears to have done little yet to increase reading. We have continued somewhat naively to pour the physical content into the digital container without questioning the logic and consumer need. Some would say it is like giving the early mass literacy readers of the Victorian age ‘War and Peace’ to read as their first book. Books must now compete even more in a time poor, channel hopping, and choice rich market.

The Pantone Reference Library

Imagine buying some books in the store…

‘We’ll have two blue ones, a crimson and a nice soft yellow, please’

‘We only sell the crimson under the counter sir.’

‘Well can you wrap that separately.’

‘Certainly sir and could I interest you in this risque deep purple, or some iffy shades of grey’

Book spines have long offered designers an opportunity to add colour and even art to a wall. Hotels and interior designers have often bought books by the yard, not to read, but to ‘furnish’ a room, lobby and make a statement.

Whether it was the iconic Penguin paperback ‘pantone’ jackets of the Lane era, the leather bound law and medical books that gave a false rare book feel, or the uniform classics of Wordsworth, OUP, Everyman, the spines can offer more than just information, they offer decoration. We often all look at a private library shelf and find our eyes drawn to those neatly lined up collections that are not alphabetically stacked, but offer a ‘uniform’ look of colour.

Random House Canada now want to shout about the ‘beauty of books’ and are experimenting with readers classics with solid Pantone covers. Thirty titles have been selected for an exclusive Indigo offer and include Canadian stalwarts such as Margaret Atwood in purple, Michael Ondaatje in blue and Wayson Choy in orange. Random have attempted to align colours with the themes with darker shades for deep books and lighter shades for less serious tomes. They even price the pantone editions at a slight ‘collector’ premium.

Will the book attract designers, young aspiration professionals wishing to make a statement on their shelves and maybe the odd reader will be an interesting question. Unfortunately, even if the they sell well there remains the questions as to why they were bought and if they are to be read, or merely decorate yet another wall, or even to provide a literary collection?

The price variance can be some $5 with the pantone edition being some $17. But they do offer two for $24, but hardly prices to go out and buy the collection! Perhaps buyers are drawn to the potential rarity of such editions or maybe it is down to the block of colour.

So do you arrange your bookshelves by colour and would you expect to find books in a store based on the colour of the spine?

How Do You Price eBooks?

Some would suggest that current ebook pricing resembles the kitchen floor after the baby has had its dinner, with bits of food left all around waiting to be tidied up.

One of the greatest challenges we all face when introducing new offers is on how to price them and the current ebook evolution is no different. The challenge is somewhat easier when the offer is new and there is no real old offer to compare it with, or when the change is a disruptive one and the old offer is withdrawn. However, when the old offer still remains alongside the new, then we have the added comparison and potential confusion in the minds of the buyer.

• Am I buying the same thing or something different?
• Is the value of the new offer greater or less than that of the old one and can we attribute a value to it?
• Am I buying, leasing, renting or a subscribing?
• Do my ‘ownership rights’ change?
• What should the new form cost in comparison to the old?

When the CD first replaced Vinyl the price went up. Consumer’s cries of foul play were met with claims about the investment and transition costs and the price remained high despite several consumer body reviews. Now those prices have plummeted. Was the drop was due to the greater economies of scale from a more mature market offer, or was the original prices were just too high?

Is there a price ratio between the old and the new when the new offer is first introduced that changes and does this reduce as the market matures? Some suggest that when the mass market paperback first appeared, the price ratio to the hardback may have been as high as 1:10. Today the paperback to hardback ration is down to around 1:4. The figures are obviously open to challenge but the principle is there for all to see.

If we look at today’s offers we have in simple terms; hardback, paperback and ebook. Tomorrow we may well have enhanced ebooks with lots of added value but today it’s the same content. We may well loose or see a drastic reduction in physical units produced and sold in either form and if so how does that play out across the economics of the work itself? What should the price ratio between the offers today and tomorrow? What is the cross subsidy that takes place as the ebook share increases to that of the pbook? Also as the ebook share increases what is the economic impact on the pbook model, margin, net receipts and author reward structure?

Other factors such as the market sector, channel, geography etc are also worth noting as the perceived buyers value may well change with digital making which could effect the price charged.

Then we have the anti Amazon agency model and the obvious question of whether this is in the best interests of consumers? The US Justice Department and EU are separately investigating the issue. Some agency publishers may appear desperate to hold the pricing line, but what is clear, is that irrespective of the outcome, the mere visibility of the current investigations will impact and potentially further damage consumer perceptions on ebook pricing.

Another area of pricing challenge is the public library market. Unlike the pbook the ebooks doesn’t wear out the more it is loaned out. As a result the library doesn’t need to replace the ebook. HarperCollins approach to this was to create a ‘26 loans and renew’ policy, which basically replicates the pbook and says that the more successful the title the more HarperCollins wants to be paid. Today we read that Random House have adopted a different library pricing model based on a reported upfront 300% price hike on ebooks. Others have proactively walked away from the market and decided to sit on the fence on several ebook issues and play wait and see.

The interesting thing about the library pricing issue is that the issue could have far wider ramifications as we see new ebook on demand rental and lending services.

Other media sectors don’t have the same replacement revenues to protect and it is hard to see how publishers can sustain the current position especially when they are advocating the benefits of the digital book over the physical one but at the same time denying them when faced with a perpetual sale that is a resultant benefit! It is even harder to see the logic of creating potentially bad PR in making the public purse spend and not share technology benefits.

We did a 'ebook pricing' search on our blog posts and were amazed on both the number of articles posted on the issue and the history. Pricing is not easy but getting it wrong can be hard to undue.

eBook Opportunities Are Unlocked At The Sharpe End

‘Anything you can do I can do better!’ This was an old schoolyard jibe we have all witnessed.

We now have the publisher riposte to the actions of agents and literary estate taking the digital publishing route and becoming publishers. The Bookseller's FutureeBook blog report that Random House, who earlier had ‘lost’ Catherine Cookson to the digital initiative of her agent Sonia Land, have done a direct deal with author Tom Sharpe for his backlist e-book rights without recourse to his agent, who happens to be Sonia Land. Some may say a small skirmish, others ‘tit for tat’, and others refer to that old schoolyard jibe.

Forget the games, we now have been presented with a great opportunity to move the digital agenda forward. By responding this way some would suggest that Random House have effectively now admitted that digital is different and that volume rights etc don’t count and that the wording within the contract would appear to say ‘if digital is not specified its up for grabs’. It would tend to blow the ‘non compete’ clause out of the water or at least restrict it to the rights specified within the contract. If this is the case, then Random House may well regret the action, as it could leave them exposed to many digital exoduses.

This unlocking of the filing cabinet can only be good for authors and their estates and of course readers. We now have on one hand the publisher who has to act to digitise and potentially promote back list and on the other the agent is also freer to act themselves. A competitive market position which should be good for digital, authors and readers.

The Author Is Victim?

In the article which was published in the New York Times today, ‘There’s More to Publishing Than Meets the Screen’,Jonathan Galassi, the President of Farrar, Straus & Giroux, expressed his views on the current Random House digital claim to rights of William Styron’s works. He argues that digital is just another edition and suggests that because Random House; copyedited the manuscript, choose the binding, picked the typeface, created the jacket image, wrote the blurb, developed marketing programme, publicised the book and managed the rights that they acquired to William Styron’s works, that this entitles them to assume the digital rights that they didn’t acquire.

He recognises that the author’s heirs hold the copyright to his work but he questions whether another company can issue e-book versions of Random House’s editions without its involvement. The premise is based on the view that the ebook is a mere digital edition of the physical one and a replication of it.

Aaron Miller of BookGlutton.com as kindly given us permission to quote his views,

'Perhaps I'm missing something here, but my impression of the editing process was that after it was over, the edited work still belongs to the author, and only the copyright belongs to the publisher. So when that copyright expires, it reverts to the author, who now has the copyright to the (edited) work, and can pass it along to his/her heirs (as was the intention of the original copyright laws). This means editing is transitory, and since marketing, by nature, is transitory (as markets are), what matters down the line is not who has done the work or sweated for sales, but the work itself, and the right to copy it as it stands.'

The point is that publishing is a rights business and as such it acquires, develops and sells the rights acquired. If it doesn’t own foreign rights or audio rights it can’t assume them. It doesn’t own those rights by default, so why should they assume that digital is any different? Why has Random House not negotiated the rights they didn’t acquire over the last couple of decades and waited for others to spot the obvious, whilst they sat on their hands? Some may call Galassi’s views arrogant and why many publishers are struggling to adjust to the digital age. Others will point to the music world and cry déjà vu.

We agree that a publisher does far more than print and sell a book but we disagree that this gives them rights they neither acquired nor paid for but have merely assumed.

The publisher will always make investments to added value to the work, that’s the job and how they profit from the contract. Everyone in the value chain adds value but none of them should ever assume rights they have not acquired.

Finally, Galassi was right about one thing ‘some things never change’.

Readers Only Need One Place?

ReadersPlace aims to be the social networking site for book clubs, offering global interaction, debate and thoughts about their favourite books. They can web chat with authors live, get reading guides to more than 200 titles including author details and interviews, plot summaries, starting points for discussions and suggested further reading. Of course their will be promotional and discount deal offered at www.rbooks.co.uk.

West Midlands Library Authorities have been part of the pilot helping to develop the site and comes on the back of many innovative new services from Random House.

We welcome this more social engagement with readers and linking authors to their readers in every way possible. Our only comment is that its Random House and what a difference it would be if it embraced more publishers both large and small and all books. At a time when Richard and Judy are being put to rest and a simple twitter from Jonathan Ross can generate a twitter storm and best seller, one questions why its so hard for publishers and retailers to collaborative and embrace an inclusive model and approach? Some would say that its every man for himself and publishers are all after the same sale, but some would suggest the bigger prize is being lost and there are now some big gorillas sitting in the back yard who also don’t understand collaboration.

We believe that if say the major six UK distributors, all of which are owned by the major publishers, actually collaborated to create a joint social network it would probably cover 75% of the UK market and more importantly provide a real incentive for everyone to participate from the authors to th readers and that sales would flow to the deserving but the buzz would be significant. There again we are only dreamers.

Dear Author

The news today from Richard Curtis’s eReads blog, ‘S&S Follows Random in Reduction of E-Book Royalties’, may have raised some eyebrows. We wondered how the news may be broken to agents and authors. The letter below is purely fictious and is not representative of any letter that may have, or may be sent.

Dear Author…

We are all excited about the potential opportunities that digitisation offers the book trade and although sales today are relatively small, we are convinced that through our astute business negotiation we are building digital business models and distribution channels, that will ensure that we get our due return on our huge investments.

As you know we are investing huge sums of money in our digital programs and when we finally get round to digitising the total publishing process this will make us more productive and lower our cost base. We will also be able to digitally promote your works so benefiting all.

We realise that you enjoy bookshop library visits and signings, so we are pleased that these will continue for the physical books. Obviously, many small independents will not be able to sell digital copies and ebooks can hardly be signed, so we are therefore focusing on all the big aggregators, Amazon and of course the new breed of booksellers, Google, Sony etc. These will obvious sell lots of stock, albeit at maximum discount.

You may be aware that some major publishers have just announced, (Simon & Schuster and Random House), that they are unilaterally switching to a 25% royalty on net receipts on digital and audio download sales. This obviously is a greater % for you and everyone benefits. Some would suggest, today's list price has to be inflated to accommodate the increase in discounts being demand by many resellers, but in our case it clearly is not so. We also believe that the digital recommended price should reflect the current edition. This would align the recommended price to that of the hardcover when that is out and the paperback when that comes out. We realise that the consumer may be a bit confused as to why the price of for the same title, in the same digital format, with the exactly the same content, is the same, but they will get to understand its down to marketing and selling it at premium and then discounting it later. We are convinced the big resellers will understand. You may wonder what happens in Europe with VAT and how the recently announced potential drop in tax due on digital copies will affect the price. Many of us today merely deduct the tax of the list and stand this, so any reduction will benefit both of us as we will keep the price the same.

We were sorry that we upset you when we tried to take away the right reversal clause in your contract, but we have help shape and support the historic Google settlement that among other things sorts the problem out and also mops up all those poor lost orphan works. We realise that you may be also wondering about the Google settlement and how it will effect you and why Google is paying a different rate on sales and how they derive the price of your old books that are no longer in print. Don’t worry we will as ever, support your best interests and reflect this in your royalty statement.

Yours…..

Scribd: Noise or News?

The announcement that a group of major trade publishers were embracing Scribd as a means of promoting and distributing books was interesting. The players include Random House and Simon and Schuster and therefore carry weight. The Scribd service has collected much in its short time and could be described by some as a virtual filing cabinet of stuff ranging from powerpoint presentation, school reports, essays, memos etc.

It has ebooks which can be best described as somewhat long tail and which often expose limited views of stuff you would frankly aviod if you weren’t desperate to pass time.

So we have a repository that can be filled with widgets and ebooks and other book stuff but will that lead to sales and traction or is it merely scattering seeds and hoping for some to take?

Scribd does present a good opportunity to increase viral marketing into social networks and create recommendations but does it pass the ‘so what’ test? Today Scribd remains unprofitable and is still supported by its $14million initial Venture capital

Audiobooks Just Got a Look Clearer?

It heartening to read in PW, that the major US trade houses are very close to fully embracing DRM free audio books. The reality is that virtually every audio CD is DRM free today and ripping a CD to create a file of choice is a lot easier than scanning a book. However DRM free talk is not new and the same publishers have stated this intent several times but have made relatively little progress in their delivery.

We do take our hats off to Random House who saw the light some time ago and have stuck to their guns. Other such as Penguin pulled out of the original DRM free trails and is not quoted in the PW article.

We must also point out that the number one audio provider Audible still sticks rigidly to their DRM technology. After all its what gave them their market position, which in turn enticed Amazon to buy them. Many would say that Audible’s DRM is the only effective DRM for these files today, but alas it is proprietary. Some would say that audible didn't really know whether it wanted to be a technology company, a publisher, a book club, or all the above. Amazon on the other hand has championed DRM free music but has stayed quiet on audiobooks. Amazon also has now acquired a audio publisher. Perhaps this is called ‘Every which way but loose.’

Some 30 months ago when we wrote the ‘Brave New World’ report, we believed that audio books would be at the front of the digital publishing movement. The logic was that the user experience was the same, the MP3 players were ubiquitous and all that needed to change was the delivery, which would make it similar to music. What got in the way were rights contracts, DRM, inertia, lack of price points, general pricing and Audible’s market dominance. We have been increasingly disappointed that talk has not been followed up by action and a clear opportunity has languished untapped.

Just like with ebooks publishers need to take bold steps, 50 titles here and 100 there isn’t going to change a thing. We are again talking about a change in a vacuum of real content. All new titles DRM free and a clear program to address the back list will change that. So who is going to take the bold steps? Who is going to sort out the pricing issues? Will files be watermarked?

The other interesting question is again focused at the public library versus retail. How will audio books free to rent and download from a library compete with purchased download from a retailer?

Finally, how will these titles get to market? Audio books don’t need a single point of distribution be that Overdrive or Audible they need to be available for every retailer to sell, every library to lend, every consumer to enjoy. This means that not only doe the DRM have to go but the channel ahs to be effectively opened up to those who want the freedom to sell every title available and not be tethered to those who restricted the old world.

Hear Hear!

We read in today’s Bookseller ‘Mobile Deal for Random’ of the new audiobook download service from www.gospoken.com for Random House titles. What is different and refreshing is that they have bypassed any PC or intermediary device and gone straight to where it will win – the mobile phone.

We as expected had to try it out and there are a couple of titles to demonstrate the service and a sample chapter to download for free. Within no time we were listening to The Bone Garden by Tess Gerritsen. The sound was clear and the information was embedded within the file such that once stored it was instantly displayed.

The best was the fact that Random House true to its earlier statements have gone with a MP3 service and dumped the doomed DRM formats.

Will it take off? We have long held the view that audiobooks must go digital and download. Afterall it the same user experience and less hassle. It has the best chance to do so in our opinion and if others follow will set a trend that will cut the new Amazon Audible honeymoon short. Well done Random House in continuing to show the way forward to what could be a significant market.The sound on the tube and bus will be very different and we may hear an alternative to the thud and hiss of music on mobiles.

Many questions still remain. Will the existing channel be able to sell the service and files or is it a direct only channel? How will it plug into the library channel? Will the pricing change to reflect what people expect to pay or will it still remain linked to the CD and its high costs?

We can now see even more clearly the end of the CD dominance and death of DRM on these files. Lets hope the trade gets behind this bold step; authors, agents, publishers, wholesalers and retailers and others come to open up competition in the market.

Audiobook DRM RIP

The story of the month must go to the news that Random House are to allow audiobook downloads to be sold online as downloads free of DRM. We have written about their watermark experiment with eMusic and the mystery as to why Penguin pulled out.
This at last brings some sanity to the market and we hope will not only kick-start the long overdue audio push but importantly allow all online players and the channel to compete. It is great news for the industry and hopefully just as with music the gates will open and many will follow. It is certainly a great day for retailers and consumers.

It puts Audible in funny position as it effectively sounds a death knell for their unique selling point their proprietary DRM. The question of whether Amazon would have bought them today is now debatable, as is the price they would have to paid toady. The other interesting position to watch is Amazon DRM free versus Amazon Audible.

But the day must go to Random, hats off and sanity returns. The next issue is that of pricing, but that’s for another day.

Read by Digital Chapters

We read today of a move we long expected to make a return – digital chapters.
Remember ‘Riding the bullet’ by Stephen King which he released in chapters digitally in mode of the most famous chapters man Charles Dickens. Today few realise that that Dickens wrote and released his works this way and many have forgotten the famous Stephen King ‘experiment’. So today its good to see Random House taking on a chapterised experiment. They have long been at the forefront of the digital experiment and this certainly is one to watch.

Random will sell the six chapters and epilogue of "Made to Stick: Why Some Ideas Survive and Others Die" for $2.99 each. That makes the total price around $21 for a hardback listed at $24.95. However we can buy the ebook today for $16.47 , the audio CD for $19.77 and the downloadable audio Mp3 file for $15.73. The question this begs is why its is priced so for what is clearly a promotion to sell the book and also the concept. It is in danger of starting life with its hands tied behind its back!

We can only wait until someone is brave enough to write and publish a blockbuster in chapters. If the last Harry Potter had been published in chapters not only would the premium be paid on the digital copy but the publisher would not have given away the margin and the physical copy would have probably sold as many copies. The channel would have responded in a heartbeat and everyone would have experienced the ebook. Importantly we would not be sitting hear debating if and when the tipping point on digital will happen.

Come on someone ride the bullet.

Wigets Multiply Overnight

Predicting some things is easy. Only one day after HarperCollins announced their ‘Browse inside’ facility, Random House announced their ‘Insight’ one. Both service have adopted the same approach which enables others to add sample material from a title to their own website by use of that new word we will heart much of – the widget.

What becomes less predictable is who will be next? Also again how the bibliographic agencies will react and how those omnivore search engines will step on the digitisation accelerator re the smaller publishers.

What is clear is that we are now entering a new phase of bibliographic development far greater than that we saw ten years ago when suddenly jacket images became a must. This one is about using the content itself to promote the book in physical, digital, audio etc. Digital publishing is publishing and using digital content at the centre to provide a single authoritative source of context and rights metatdata is logical and one we have long spoken about. Building complex systems alongside this may be a duplication of effort and not the logical approach. Today the greatest driver for publisher’s to digitise their content, is not the ebook, but the support of their marketing, sales, publicity and promotion activities. I would be as bold as to suggest that those who follow this route will see a double digit return and this today is likely to be at the expense of others who have not responded to this exciting challenge.