Simply Producing More Books Isn't The Answer

What happens when the amount of books available to read exceeds the market’s ability to read them! We have always struggled with more books than buyers. The economics of market forces has always prevailed, choking back on production, shrinking shelf space and reducing the rewards to those who aspire to make fame and fortune from their writing.

It was simple when we only had the physical book. The market was controlled by the shelf space available, the cost of the inventory and the rate of purchases. We still produced more titles and units than could be purchased, but for those who back the right works the rewards were significant and for those with excess inventory there was always the ability to trade this through. Importantly the sales were steady and although unpredictable at title level, they were more predictable at market level. The supply chain was inefficient, but worked and publishers wallpapered stores with their sale or return approach to merchandising. Some aspects still remain, but those heydays are long gone. Many blame the demise of the Net Book Agreement in the UK and the resultant discount wars. The truth is far more complex and one element alone drove the result.

The arrival of the Internet resulted in the virtual shelf and inventory. No longer was shelf space an issue, as warehouse space, distance shopping and customer service prevailed. The back list vied on equal terms with front list and the mid list often found itself squeezed. Those mail order players who were in the market should have won this battle, but were wedded to yesterday, did not understand the new parameters and importantly did not understand virtual inventory and changing consumer demands. The retailers struggled to get the right people and often treated the internet as an adjunct and not an integral part of their business. Amazon won and became a category killer and although some shoots of new business have appeared, the ecommerce game is firmly controlled from Seattle.

The digital book should have been the opportunity to address the ground given away to Amazon, but the market lacked the commitment and ability to work together. It stumbled from one white knight to another, as if it was punch drunk and desperate to hold on to anything that offered anything. We had Sony who promised much but understood little, Google who came to ingest all and were courted, fought and allowed to offer not one but two poor settlements and finally by Apple, who only wanted business on their terms. Some such as Nook and Kobo were spawned from existing players, but these and others lacked the technology clout, investment and global presence to succeed.

However, the biggest change that digital introduced was to lower the barriers to publishing, not only allowing anybody to publish anything, but also giving them channels and virtual shells on which to display their works next to more traditional published works. Suddenly we were awash with books, physical and digital. Self publishing was no longer to be dismissed and looked down on. We were no longer just over producing new books, but effectively bringing back every book ever published, but the consumers were still only buying the same number of books. They may buy more to fill their physical shelves, but why should they buy more to fill a virtual shelf?

The purchase model then came under a new threat – subscription and on demand reading. It was working in music and film so why not in books?

We have to look at music more closely to understand the other changes that had taken place over the same period; the switch from album to single, the migration from physical form to full digital, the high bandwidth and availability of the internet, streaming technology, and the desire to listen on the move. Film is no different and has had many different pressures which make subscription viable.

We now even have the new EU regulations which have resulted in Apple introducing, a no quibble, 14 day return policy. Some will suggest a ‘read for free’ policy. The new EU and Japanese consumption tax changes may result in ebooks costing more, but the extra money goes not to the creators, but to the governments. Both these initiatives will hurt creators’ pockets and may drive more to publish themselves.

So the facts are that we have a glut of content and in the physical world even greater disparity between the successful and the others. In the digital world we have a dominant channel which has understood the overall business, its value chain and targeted elements overlooked by others and integrated them into their offer. The market is no longer controlled by a handful of publishers but by Seattle and yet we continue to stumble forward with more of the same. If we have too many books we can no longer rely on natural selection. The market isn’t suddenly going to grow and will continue to flatline.

There will be increasing pressure to try something new such as subscription.

However, what we are failing to address is the difference between physical and digital. We are failing to create digital content for consumers on the move. We are failing to look inside and see what’s in the locker already and instead we continue to publish the same and expect that a miracle will happen all by itself.

Time is the clue to the market opportunity.

Hear, See and Speak - No Used eBooks?

How do industry bodies and major players respond to new entrants who offer something different? Do they go out to squash them in order to maintain the status quo? Do they attempt to reign them in and restrict their influence and impact? Do they invest in them and work with them to create new channels, new markets and new revenues? Some believe that many stick their head in the dark and wish them to go away?

This last week we have all read the Amazon Press Release over their ongoing battles with Hachette and one of the most relevant statements came right at the beginning in their reflections of the current consumer offer.  

A key objective is lower e-book prices. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market -- e-books cannot be resold as used books. E-books can be and should be less expensive.

The somewhat throwaway line that caught our attention was that, ‘there is no secondary market ebooks cannot be resold as used books.’ With the revelations earlier this year about Amazon’s used ebook patent, we know that it has had its eye on this opportunity, but that the first sale doctrine is maybe a battle too far today. But used ebooks are almost certainly to happen and the change will be either driven by consumer demand or other start-ups who are prepared to push the envelope. It took the likes of Waterstones, Dillons and others some three years from starting to discount in 1991, to the collapse of the Net Book Agreement in 1994. It took years of patient lobbying for the B&Q and other large UK retailers to open up Sunday trading. It took years to change UK licencing laws. Things change in time and they change in favour of public demand.

Last month a judge for the District Court of Amsterdam ruled that Dutch used ebook reseller, Tom Kabinet can continue to operate while it is being sued in court by the Dutch Trade Publishers Association. Tom Kabinet enables users to resell DRM free and digital watermarked ebooks.

The Tom Kabinet site takes a 10% commission on all ebooks sold and have offered to pay a 5% royalty on all sales to authors for each ebook sold on their marketplace.

However, Tom Kabinet like the used l digital music service ReDigi are also up against EU legislators and a strong lobby. Although ReDigi is still in operation today, and have been awarded a patent earlier this year for their marketplace platform they have had to adapt their service in light of losing legal battles.

When Napster first threatened the music production business, the industry fought back through the courts and set out to shut down the new file sharers. The propaganda PR and lobby machines were wound up and the sound bites and messages broadcast. The political lobbing started as the industry  set out to shut down the new file sharers before they could establish themselves. The problem was Napster was free and consumers made it go viral.

The music industry won its battle with Napster, but then had others to deal with who had watched the Napster battle and learned new tactics. Although the music business kept winning they also kept losing and by the time they tried to get the Napster brand under their umbrella it was too late and the stable door was wide open.

The music streamers came next. First there was Spiral Frog who failed to deliver, but they were followed by Spotify and Pandora who did. The big music producers had learned some lessons and bought into the service but also tried to tame it and minimise the risk to their model. However they failed to understand that the threat wasn’t free, nor was it sharing, but it was about the whole ownership ethos that they had profited from for decades. The streaming services asked why you needed to buy when you could access on demand, from anywhere at anytime. Spotify with its 24 million users, of which 6 million are subscribers and the other services started to redefined ownership and how we paid for and listened to music.

It’s amazing how long the music industry took to include downloads into its charts and that they have only just opened the door to include streamed music. Today 228 million downloads happen across the various services every week in the UK and that is up from 142 million in 2013 and 67 million in 2012 (Official Charts Company). The maths of how many tracks on average people download a week, is not hard to calculate and is significant. Some 41.5% of singles are streamed and 12% of the current top ten are streamed. The UK alone has delivered a staggering 18.5 billion streams and in 2013 overall market revenues from streaming pasted the $1 billion mark for the first time. Interestingly, while streaming has experienced explosive growth the overall revenues of the global music market have only increased by a mere 4.3% (IFPY and Spotify).

We wonder how long it will be before they fully recognise the impact YouTube has made and that some suggest that more kids now watch their music today than listen to it. Interestingly, the success of streaming is negating the demand for used digital sales and in a market where growth is clearly in a new ownership model enabling secondary sales makes sense and will generate further income for artists.

Change will happen and denying used digital media a second life and sale will increasingly be seen as wrong and an untenable position by the people that matter the consumers. Denying a second income opportunity also impact creators at a time when their own first sale income is increasingly not meeting their expectations and the pool is being shared with even more fish.

Unlike music, ebook consumption is relatively low and prices relatively high and this will reduce some of the appeal of on demand ebook subscription services. The book market will remain a mixed economy for the foreseeable future with physical, digital, see through and subscription offers.  Perhaps it time that publishers work with new stat-ups to create and support a thought through and complimentary used ebook market and not wait for the collapse of the restrictions they have today and the chance that the result may not be favourable. 

YouTube: Dire Straights Or Huge Opportunity?

We know that YouTube has become the channel of choice for many kids to listen and watch their music. After all why have a one dimensional experience when you and get two for free. The video archive continues to grow and some would suggest that it’s easier to find some obscure footage and music via YouTube than via the pure music routes.

To think it all started with MTV or to quote Dire Straights' 'Money For Nothing.'.

Now that ain't workin' that's the way you do it
You play the guitar on the MTV
That ain't workin' that's the way you do it
Money for nothin' and your chicks for free

Billboard now report that they believe that YouTube is planning to introduce a subscription music service in weeks, which if correct could blow many traditional players off the scene. The assumption is that they will be offering a free service plus a premium one and Billboard believe that the premium service will also be tied to unlimited access to the full catalogue and the ability to cache for offline listening and removal of ads.

Video will clearly set YouTube apart from not only Google’s own Play service but also Spotify, Pandora, Apple’s iTunes Radio and others.

YouTube has committed to trailing offline video, giving creators the option of offering offline viewing to their videos. Google Play Music All Access licences also appears to give them the ability to launch the service obviating the need to go back to the table. Now the Premium service will generate both ad and subscription revenues and of course may feature high on many search requests.

We all think that we understand the landscape and that things don’t change. However, this is a classic sea change opportunity that if introduced as described and price attractively could change the music market. It starts from a place others aren’t at and can’t quickly catch up with and feeds on a growing two dimensional consumer trend. Finally, it also is fed by consumers own videos and bootlegs which up to now have been seen as interesting but…

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. 

Do You Hoard Media You Can't Play?

Hands up if you have a collection of vinyl, or even cassettes and don’t have the decks and equipment to play them on. Maybe you have VHS tapes, but no VHS player, or even eight track tapes and no eight track player.

A survey by UK electronics retailer Maplin has found that UK men still have their collections of older media in their homes, even though they don’t have the equipment to play these disappearing media formats. Some 45% still have cassettes, but no cassette deck, 47% vinyl singles and LPs but no turntable. Again some 20% have photographic slides but no viewer or projector.

However, more interesting is that some 75% admitted to having collections of music they never play and photographs and files they never look at. Are we a nation of hoarders, or do we just see equipment as a disposable and content as something we must keep just in case? Is it just that we all spent huge sums and time building up these libraries that reflected our taste at the time and do not want to let go of those memories.

Maplin also found that over 66% of those surveyed would like to be able to transfer old stuff to an up-todate format but lacked the time or the know-how.

In a few years time will we be saying the same about those ebooks we bought and were tied to devices or heavily restricted by DRM? Colin Powell has openly admitted to buying more ebooks than he has read and again once read how many every reread the book?

Contrary to the survey, we are pleased we have a significant vinyl collection and the equipment to enjoy it on, we do have cassette decks but no longer have cassette tapes. We have ripped the vast majority of our CD music library to digital files, but now have a Laptop, which like many, came with no CD although we do have an external one. We own some VHS and DVD tapes but also have VHS and DVD players. We also have a significant library of physical books and some Kindle ebooks which can be played on many devices. However, the majority of our media library is rarely played. Only last night my wife spent time photographing old college photos so we could post them on facebook for a reunion.

This useful survey highlights a number of interesting points about all media and our usage and archive of it in a digital age.

The first point would seriously question why we continue buy digital media and why it’s not made available on-demand, on subscription or on a pay to play basis? This opportunity is why LoveFilm, Netflix, Spotify, Pandora and others have huge potential to change our culture.

Secondly, any file or media that is tied to a specific technology is destined to have a limited life. This is fact and the early media files that were tied to a service, or device, are now potentially dead files. However, whilst they are still current we should be able to resell the files through an authentication broker which not only creates further value but could also generate new revenues for artists.

Thirdly, although upgrade services and devices exist these need to be better promoted by retailers and the industry itself, who could benefit from the improved customer contact and after-sales service.

We live in a market which is geared to forcing us to re-invest in technology on a cyclical basis. To buy the latest, smartest and hippest technology and throw out the old. Many reinvested in their music when the CD replaced vinyl and their VHS videos when DVD arrived but that retail trick can only be done so many times and once media is capture digitally it’s often easier to transfer it to new formats. Perhaps the biggest threat to digital files being upward compatible today is not devices but DRM?

A Netfix For Children's Books?

Netflix for Children’s books sounds interesting but hasn’t Amazon already put a stake in the ground with their ‘FreeTime’ start-up service?

US start-up Sproutkin, is a new US subscription service for books for children aged between 0 and 3 and 3 and 6. Like a book club it is based regular shipments of up to ten new books to its older members and some two to four books for its younger members. All members pay a monthly subscription of $24.99. It also works with a small educational advisory board to select its books to ensure their selections are relevant and quality. It aims to create many ‘happy sprouts’ or children who it happily posts on their web-site.

It sounds a good option for busy parents with claims of 45% discount on the younger material and 60% for the older material, but is the selection going to appeal to all and although the volume appears logical do the parents that would commit to this service not be the same parents who want to find their own material?

The terms sheet is an exercise itself but one of the opening lines is somewhat confusing, ‘The Company provides a place for purchasing and borrowing children’s educational and entertainment materials delivered physically and electronically.’ Also we loved the catch all, ‘The Company may, in its sole discretion, modify or update this Agreement from time to time, and so you should review this page periodically.’

So what doe sit what to be when it grows up? If the answer is another ‘FreeTime’ it is likely to loose on clarity, width of offer and price.