Spotify For Trade eBooks?

Many talk about creating a ‘Spotify for eBooks’, but all too often they fail to grasp the differences between the media, marketplace and cultures and once again see all as the same. There is no reason to doubt that a subscription service will work for some book sectors, but there is plenty to question whether it could prevail across all sectors.

Academic, professional and educational sectors have a captive audience and market and often also have ‘must have’ content. This makes subscription services potentially viable in these sectors. There are questions about who can aggregate the offer and whether the subscriber is the user or a secondary intermediary service, but the content is often mandatory either way. The challenge is establishing that one stop shop and recognising that multiple ‘must have’ offers don’t always work in the eyes of the buyer.

Music, newsprint, magazines, film, TV along with services such as broadband and mobile service provision are ideal for subscription. The nature of these services also can lead to collaborative offers which can exploit additional memberships and add additional value. Importantly with regards to the content it is less about individual files and more about access to databases and collections.

Trade ebooks however have several challenges. The market and consumer reading is still very mixed between ebooks and pbooks, The readers are likely to only read a mere handful of books a year and often in an inconsistent and unpredictable time manner. Heavy readers tend to be eclectic in their habit and therefore do not want to be restricted to one genre and whereas ‘Twigging’ works best in a ‘must have’ market it is often far less important in a trade market where depth and range can be easily provided and search and discovery become more important.

The emergence of MOOCs such as edX and Coursera have started to radically change the content and business model in academic and education sectors. Jimmy Wales, founder of Wikipedia reflects on his own experience, ‘I was taking an advanced calculus class and my instructor was reputed to be a fabulous researcher, but he barely spoke English. He was a very boring and bad teacher and I was absolutely lost and in despair.’

‘So I went to the campus tutoring centre and they had Betamax tapes of a professor who had won teaching awards. Basically I sat with those tapes and took classes there. But I still had to go to the other one and sat there and wanted to kill myself.’

We now have TED Ed, MOOCs, Khan etc all built around offering the best teachers, content to all irrespective of location. The emergence of the virtual and universal course is forcing institutions to rethink their models and here access to quality can be best achieved by a subscription model.

Even the software industry is ditching its perpetual licence model and starting to move to a subscription based one. This drive is being led by the likes of Microsoft with their Office 365 which is now offering subscribers full office mobile on the smartphone.

Streaming services and faster mobile bandwidth are changing media markets such as music, film, TV sports. We are now seeing a clear shift from download and buy, to own to subscribe to access on demand as much as you want. Large subscription based services such as Sky, Vodaphone, EE, BT are all now also having to offer complimentary and added value services to maintain their member bases and avoid churn. Vodaphone are offering new 4G contracts with either Sky mobile sports or Spotify bundled in the UK. In other words you can now subscribe to one umbrella service and get the others at discount or even free. It’s about community and lock-in based on a single subscription.  

So what about books?

Today we have a number of attempted subscription based services; Nuvem de Livros in Brazil and Argentina, 24Symbols in Spain, Oyster in US. We have the potential return of the subscribing library and offers such as Amazon’s lending library. However these have to compete with a market which is still in a heavy discount war and undergoing fundamental relationship and value chain changes. The subscription offers that have emerged are not doing anything new and it could be argued are appealing to students and so tapping into the ‘must have’ segment not the trade.

We also have the potential of our Read Petite venture and subscription model and we would argue that this is different content to trade ebooks and a different new marketplace.

Subscription models are appropriate where there is a high reliance on the access and ’must have’ content, the captive audience and the alignment with mobile and online streamed services. We would suggest trade ebooks are not there today and are unlikely to make that transition anytime soon. 

Digital Platforms Are Strategically Changing

This last week we have seen three pieces of news which were all worthy of note but when taken together offer us an interesting insight into the strategies players need to adopt moving forward. Today is no longer a case of simply having one compelling offer or thinking that you own a slice of the market. Tomorrow will be won by those with broad appeal and that add real value.

First there is the launch of BT’s digital sports television service. We already have a saturated market in the UK with players such as Sky dominating. Taking on Sky with a straight head to head offer would have been yesterday’s approach, would have probably resulted in a bloody price war and could have been an expensive failure. So BT bid a won some significant rights to live sports including some 30 Premier soccer matches but how would they use these to build their consumer base?

The answer is now out, they will effectively give it away on the back of their broadband service. Those that subscribe to their broadband now get free access to live soccer over the internet. This not only captures the heart and minds of soccer fans who up to now have to buy it as a secondary added service but introduces that magic consumer word ‘free’. Consumers can pay an extra subscription to BT and get it delivered onto their TV through a set top box in HD but many will happily watch on their tablets, laptops and even smartphones.

BT has not only slapped Sky across the face but it has put pressure on those broadband providers that have been eating away at their business. The move reinforces BT broadband services and is a smart move.

Second we have the news / rumours that Microsoft (MS) are about to splash out $1billion to fully acquire Barnes and Noble’s Nook digital world. The hardware is already being phased out and discounted and the partnership / joint venture that offered so much is now being taken over by the Seattle giant.

This would bring MS into the media battles again. Remember Zune that music competitor to the iPod, or their latest damp squib Surface, the tablet that choose the wrong operating system – again. Microsoft has a track record of getting things wrong and playing catch-up. However when they do acquire a readymade solution such as SKYPE they can screw up over engineering something that didn’t need the attention. Try accessing Skype today on Windows 8, through a browser or on an Android smartphone and you would think you were connecting with three different applications.

So what will Microsoft do with Nook? Maybe they will focus on education, but exactly what will it give them? Perhaps they believe that they can take on Amazon but do they really understand media or just bits and bytes? It’s a great financial exit for Barnes and Noble but what’s in it for the consumer?

Thirdly we have the rumours that Amazon is planning to launch its own smartphone.

We often ask what is amazon. Is it a media retailer, a publisher, a one stop shop, a marketplace, a technology company? The answer is probably all the above but primarily it’s a community hub that attracts many through not one but many offers and its quality service.

So why a smartphone? Well it’s an obvious extension of its hardware offer and remember when Apple went into the phone business we asked the same of that move. Unlike Apple it doesn’t need to plough its own furrow and can piggy back on a wealth of technology already out there. Maybe like BT it sees a way of being able to offer primary services with added value additional service that effectively lock in consumers.

Tomorrow is not about the best device, the best product offer, the cheapest price, the widest range, the fastest connection. It is about the best holistic offer that adds real value and is built around a primary driver.

Shrinking Discretionary Spending

We are increasingly moving toward a subscription lifestyle which bodes well for some and could give others a few sleepless nights as consumers’ discretionary spending effectively shrinks.

Only last week we were discussing subscription models with a financial industry expert, who informed us that it is being predicted that some 10% of spending could be subscription based in the near future. That may sound a small percentage but when we remove the must buys on rent, utilities, food, clothing etc. it leaves little discretionary spending and that 10% suddenly becomes a much larger threat and leaves far less in the pocket.

So what does this mean to a media sector and who could be the winners and losers?

Film has increasingly embraced the subscription model with cinema clubs and mega download stores such as Netflix and Lovefilm.com. Television has also moved from its previous dependence on ad revenues to build significant subscription layered services which are aimed at reducing churn and locking members into a bigger package which invariably now includes broadband, phone and much more.

Software was once traded on a one off fee and a perpetual licence, but this makes little sense for the developers who have to maintain a growing and changing environment. We now have Microsoft Office 365 on an annual subscription and Adobe products such as their Creative Suite, Dreamweaver Illustrator and Photoshop going onto a monthly on demand fee model. Interestingly Adobe will still sell standalone versions but these will not be upgraded and today may date very quickly. Abobe are to offer the whole creative suite for a 12 month contract based on fees of £47 a month (£564 pa as opposed to today’s £1800). Software providers see this move as freeing them from the traditional 18 to 24-month upgrade cycle and enable them to release updates as they became available.

Music is still in flux but the likes of Spotify and Pandora have both established significant user bases based on a simple on demand subscription model.

Newspapers have all fallen in and out of love with paywalls for accessing their digital versions. The challenge is often the wealth of material outside of the service and often news is news and unless a specific source adds real value paywalls will continue to have mixed success.

STM, professional and academic publishing has generally been a subscription based environment.

So what about the book trade?

Some have introduced digital subscription models but unless there is a base of heavy readers and wealth of materials it often fails to hit the consumer button. The old book clubs had the opportunity to migrate their offer to digital but often failed to visualise the potential and execute the change. There are obvious potential opportunities for the likes of Amazon. They already have subscription based offers such as Audible, Lovefilm, Free time and that Trojan horse Prime. Being able to mix and match these with on demand offers would give them a substantial offer that very few would be able to match.

If you are able to get all you want, at the right price do you want to shop around? Does the subscription model enhance the consumer / provider relationship and effectively lock out others? We all would like to market and sell direct but for many this will not be practical and being inside the subscription tent may prove more rewarding than being outside it. 

Digital Evolution: Part 2 Images

Yesterday we explored the evolution and impact of digital music and today we look at Images. This can be ‘still images’ such as photography, or ‘moving images’ such as film, animation and television.

We now all take television, photography and film for granted, but it was less than 200 years ago that the only way to capture images was literally with a pen, ink and paint. It wasn’t until the 19^th century that photography, followed later by film was invented. Many of the technologies first adopted were time consuming, proprietary and gave low quality results but the seeds of mass adoption and audience were sown.

Although Kodak proudly boasted of their camera in 1889, ‘you press the button we do the rest,’ the rest was what made companies such as Kodak very rich.  The first movie camera didn’t appear until 1880 but it wasn’t until ‘The Jazz Singer’ in 1927 that sound on film became reality. Ironically, at the same time in the ‘20s, Logie Baird was creating the very first television signals.

The digital evolution which began 1957 with Kirch’s first digital picture (176 x 176 pixels) and later with Kodak’s first megapixel sensor in 1969. The next decades have somewhat mirrored the experimentation phases of the 19^th century and at the same time have had the same profound impact on how we now, create, develop, share, distribute and consume images.

Tim Berners-Lee published the first photo on the web in 1992. Today we all post our pictures on the likes of Facebook and store our digital libraries on the likes of Instagram. The once mighty Kodak has fallen and technology has consolidated and shrunk into the smartphone we all carry. This means that we are all now capable of capturing that moment and instantly posting it, not just to friends, but to everyone connected to the net.

We witnessed the bloody video wars between VHS and Betamax which were won by the availability of the first consumer camera and some would suggest the take up of the technology by the porn industry.

Television is no longer restricted to the schedule. The likes of Tivo and later BBC iPlayer have redefined TV on demand. The increased capacity of today’s network means we don’t have to buy the DVD, or the lost Blue ray, we can click and watch almost anything on demand when we want, where we want and on what we want. This is now resulting in the merging of services. The likes of Netflix, iPlayer, Sky and others are commissioning their own unique material to supplement their existing content. Film channels that were once provided on the back of a connection service, such as Sky, now have to compete with services such as Netflix who don’t have the same infrastructure. TV schedules and ratings have become less important and the money is shifting to the value of the rights, content and brands.

We have seen the production experts and expert tools continually fall. To alter an image you once needed an expert, then you needed very expensive and complex software tools, now the likes of Adobe Photoshop, digital publishing and movie publishing software is freely available to all. Even the relatively new world of CGI, which commanded an expensive software price, has now plummeted down in price and is available for all at £5K and falling. Technology, or its cost is no longer a barrier to creative entry.

YouTube has not only started to redefine music consumption it has helped redefine moving image quality. What once would have been frowned upon as sub standard filming is now more acceptable. Even the movie industry has made ‘hand held’ films and recognised that everything doesn't have to be perfect. CCTV surrounds us and what appears to be our every move. The smartphone has also started to redefine news coverage, where news can be instantly capture and contrary to the words of Gil Scott Heron, the news will be televised.

However, finding a digital needle in a digital haystack still requires effort. Still images are all too often badly indexed and their rights unclear. Semantic tagging is still a holy grail with one person seeing ‘Hay’ and another a ‘straw hat’ and another seeing neither and just a painting by Van Gogh.

So what is the future of imagery? Sharing and distributing and being able to consume content has never been simpler and available to all. However, a good photograph still requires a photographer, a good film a director, script and actors.

It’s not so much about technology, it’s about human creativity.

Sky To Enter The Music Streaming Business

So Sky has announced that it is to launch an online music service that will offer customers access to more than four million music tracks for download and streaming. Instead of a single subscription they have chosen two, one at £6.49 a month, which allows the download of one album or 10 individual track and another at £7.99, which increases the track to 15. However the albums appear to be priced differently some at £6.49 and other at £7.99 and dependant to your subscription is what you can download. Without even trying to understand their logic it is madness! All Sky broadband customers who access the site will receive a free downloadable album worth £6.49.
Sky is obviously looking to build yet more subscriptions to their TV ones but there again where’s the bundle offer?

We think that iTunes has built its brand and loyal users and others such as Spotify are clearly giving everyone a run for their money and there is always Napster. Will the subscription model work? Will consumers wake up and realise ownership doesn’t make sense and flip to the streamed model? Will players such as Sky be able to cross brand and cash in on the new models?

What is clear is that streaming is happening and people are warming to it. What is also clear is that anybody can play.

UK TV

Two quick views of the UK broadcasting market.

First, on the subject the value and use of the licence fee versus advertising. According to a Guardian/ICM poll published today it appears viewers and listeners are rallying around the BBC and show rising levels of trust in the broadcaster and also support for the licence fee. The Murdoch Empire has taken many a swipe at the BBC and the latest was made last month by James Murdoch when he was highly critical of what he claimed was the "expansion of state-sponsored journalism". The Guardian report that an overwhelming majority, 77%, ‘think the BBC is an institution people should be proud of’ – up from 68% in an equivalent ICM poll carried out five years ago and that 63%, also think it ‘provides good value for money’ – up from 59% in 2004.

The licence fee as a means of funding is still backed by 43%, with 24% thinking advertising should foot the bill and 30% who think people should pay to subscribe to see BBC programmes. Interestingly only 31% backed the licence fee in a similar research in 2004.

To read more on this interesting survey ‘Public rejects Murdoch view of BBC, says ICM poll’

Second, the drop in advertising revenues and the state of ITV. The loss in advertising revenues is double edged as it can’t be compensated by increasing the charges for prime slots and drives down the available investment in new programmes which in turn drives down viewers and advertising. Unlike in the US, where advertising alongside the Super Bowl will cost a significant amount and is open to bidders, UK commercial companies like ITV charges are effectively capped. They are currently unable to fully exploit the earning potential of winners such as ‘X Factor’. ITV is effectively losing revenue because of commercial advertising agreements created before the digital explosion, recession and much more.

Channel 4 is at least bolstered with some licence fee, Sky has its subscriptions and others doesn’t have ITV’s overheads. In January the commercial advertising agreement is up for renegotiation and it will be interesting to see what happens and whether it changes the playing field. It will also be interesting to see if players like Sky in the meantime don’t go after ITV.