Saturday, December 31, 2011
This week we have written a series of short articles titled, ‘2012 Digital Perspectives?’ These have looked at what we believe are the short term issues, challenges, potential game changers and outcomes across the digital publishing value chain. Today we look at the many complex opportunities facing the Publisher.
As we have seen this last week with the HaperCollins versus Open Road legal charge, different parties can view even a contract from a perspective, which is not always shared. We often find ourselves through different windows into the same house and seeing completely different rooms.
Publishing is a rights business without a Rights registry, where much of the information about rights remains locked away behind closed doors. Digital publishing now demands greater clarity and transparency on rights and the current ambiguity and lack of information remains digital publishing’s biggest threat and opportunity.
The book world is global and as the ebook market explodes, publishers have to rethink territory rights. Orphans remain the prize sought by many and an issue still unresolved. Permission rights will increasingly become an opportunity as content gets fragmented, enhanced and as snippets become more accessible in a digital world.
Licensing models that exist in other media don’t exist in the book market today. Rental and loans can’t be ignored any longer and if not addressed proactively they may be addressed by others.
Digital Rights Management will continue to be demanded by publishers who will be wary of piracy. The shift to online and cloud based on-demand platforms will also start to negate the need for DRM and downloads as we know them today and it is inevitable that DRM as we know it will have a limited life.
Copyright contracts should move to fixed term contracts and commercial terms where a licence may automatically revert if not renewed. This could itself offer a different reward structure and one which is based more on performance by all parties. However publishers must seize the initiative and not wait for others to dictate it.
Many still print first then convert to digital and Editorial remains for many the last bastion of the analogue world. Although many in professional and STM have already learnt the lesson and gained the benefits of XML workflow and development it is still to be adopted more widely across all sectors..
Ester Dyson once said that being able to find a needle in a digital haystack was key and we thought that Google’s big opportunity was to start to change search and discovery. However this did not happen in 2011 and perhaps their problem is that they still see books as mere information to index and fail to grasp the context.
Content will increasingly be used to provide context and support search and discovery. These opportunities demand changes in how content is developed, managed and distributed.
Progress has been made with services such as Net Galley and Yudu, but these were still locked into solving bits of and not the total problem. The industry is failing to grasp the difference between content based services and transactional ones. It’s standards bodies and focus is still focuses on servicing business to business information and fails to grasp the more important and greater business to consumer opportunity.
Social networking is starting to make a difference, and the challenge is to harness the social facilities in a positive way to advise, stimulate and lead consumers to discover titles, whilst avoiding blatant product placement and ;happy money'. Success is not guaranteed by the size of the spend, but by the skill of the approach and the only one that really matters and decides the winners is the consumer.
We still have to see trade publishers grasp direct marketing skills and mail list management. It is after all easy to collect names, but a lot harder to know how to exploit them when you are not the natural consumer facing agent. Trade publishers now find themselves dealing with traditional mass marketing, marketing to channels, brand building of both authors and their own brand and direct marketing. Is it therefore understandable that they all often fail as they try to cover all bases.
Digital Sales, Tax, Pricing and Royalties
Today’s digital ‘honesty box’ sales model is not sustainable without sales and royalty transparency. Asking publishers to reconcile sales that they can’t often audit, could be seen by some as an untenable position. No longer can publishers count the stock out, sold and returned. In a digital world, the unit only needs to be stored once and only moves when it is sold and there should be no returns. In theory this should make sales and royalty reporting and reconciliation very simple. We expected the industry to address this before it became indoctrinated within the market, but have seen little co-ordinated effort, standards or even approach.
Taxation is a digital mess with different rules and rates everywhere and a lack of harmonisation even across the EU. Should prices be inclusive or exclusive? Should tax be at point of distribution or consumption? Why is the same product taxed differently because it is digital? Publishers may not make the rules but can lobby and influence them.
We know now that the agency pricing model will face many legal tests this next year and will probably fail some if not all. Pricing is a threat and an opportunity. Managing prices across thousands of titles, from thousands of publishers, through many many channels and outlets, can only be managed at the consumer interface. In a digital world where all books look the same, the lack of consumer price points only adds to confusion. This was partially addressed in music when iTunes invented the track price but remains a challenge in publishing where value still has to be effectively communicated.
The Publishing Organisation
Publishers now need to seriously consider the impact of digital on the organisation. There is no right or wrong answer.Do they have a single organisational focus that sees physical and digital as mere renditions of the same work and if so, which part is the dog and which is the tail?
The digital business will have to be far more holistic in its approach and consideration of all aspects of publishing and yet must remain agile enough to respond to rapid changes.
The large publishers will continue to control the vast majority of sales and in sectors such as education, professional and academic and it is hard to see a change to this 80/20 rule set. However, in trade publishing we see a different dynamic and potentially, a more level digital playing field. In digital, publishers are only as good as their ability to exploit their content and rights and those that believe they have a divine right to market share will soon learn the digital reality.
Thursday, December 29, 2011
We have written a series of short articles titled, ‘2012 Digital Perspectives?’ which we shall publish this week. These will look at what we believe are the short term issues, challenges, potential game changers and outcomes across the digital publishing value chain.
We have looked previously at digital publishing from the author and consumer perspectives and today we look at the customer facing Booksellers and Librarians. It’s the same house but we shall see yet again different perspectives.
The decline of the physical High Street model has continued in 2011 with the chains suffering the greatest demise. The economies of scale and scope once enjoyed by the brick and motor chains has continued to migrate online and physical shelf space has been replaced by more accessible virtual shelf space.
As ‘Rome continued to burn’, the Media continued to talk up the change in consumer shopping.
Bookshops will survive and will continue to sell books, but there will be fewer of them and they will have to start to rethink what the sell, how they sell and to whom they sell. They will have to break out of the ‘low risk’, sale or return model and start to sell all books not just front list and new. There will be less safety and more risk as they increasingly have to learn to buy firm and sell through.
However, the greatest immediate threat to the High street comes not from online but from the retail shed; the supermarket, hypermarket and retailers, for whom books are just one of many product lines where they can discount and demonstrate value. Any bookchain that believes that it can compete with the likes of Walmart on price and top titles is at best naïve and at worst doomed. The Asda £1 book sale will no doubt be repeated again this year and the range of titles on offer will have broad appeal. With books cheaper than greeting cards, its about time someone stepped in and said, 'Enough!'
The retail discount wars we lived through in a different retail sector, taught us that the only winner in a discount war, is the one with the deepest pockets and the greatest resolve. Bookchains thought this was them, but now have to realise it isn’t any more. The value pricing trick is to move from deep discounting to ‘everyday low pricing’ which is not simple.
Help for UK independents could come from the government and their determination to preserve the High Street. Two steps that would make a significant difference would be the removal, or levelling, of the charity shop status and a reduction, or freezing, of small shop business rates. Irrespective, 2012 will be yet another year where many independents disappear, but it will also be one where many find their retail flair and survive.
We do not see a viable independent digital model today. Rather than build a viable digital co-operative distribution repository and service, the associations have chosen a 'quick fix' and one that merely gives away store brand and community to white label aggregators for a small commission. Other than in a superficial manner, this is not going to engage independents with the digital market and its consumers and is not sustainable for the future.
Barnes and Noble may have created a successful digital business, but their physical one is creaking. They achieved what they have online and digitally by tacking control and owning their own repository, distribution and platform and turning their back on their previous white label arrangements.
Another group that failed to grab their own destiny were the public libraries who in the main rolled over and gave the business to the likes of Overdrive. The libraries still retained their members but the service was effectively becoming outsourced.
Who needs library buildings in a digital world?
We have finally seen the conflict that we envisaged between ‘free to loan’ versus ‘pay to own’ digital models. It was obvious that public library digital lending was going to upturn the commercial tables and relationships that had been neatly separated by the constraints of the physical world.
Google may have been tied up in their audacious land grab of the GBS and library service, but others have stepped in.
Amazon’s partnership arrangements with Overdrive blew the doors off the library hinges and all of a sudden the digital issues became visible. Amazon and B&N’s digital lending programmes came out of the shadows and now threaten to even blow away the library and certainly force it to be redefined.
The reality is that digital book lending and rental is the future and a great opportunity for all. The challenge is to acknowledge this and respond quickly and positively to make it economically viable and rewarding for all. Spotify’s and Netflix’s relentless progress should have taught us all that digital on demand is both viable and potentially game changing. Also anyone who believes that a digital music and film files are inherently different from a digital book files, needs to now think again.
The digital Libraryworld has the potential to be a big winner and vehicle to promote both community and reading, but will publishers allow that, or will they attempt to force the digital genie back into the lamp and only accept change tied to their old commercial terms.
We must look close at the history of the public library and recognise that it is still relatively young and that both library and retail change is inevitable.
Wednesday, December 28, 2011
We have written a series of short articles titled, ‘2012 Digital Perspectives’ which we shall publish this week. These will look at what we believe are the short term issues, challenges, potential game changers and outcomes across the digital publishing value chain.
Yesterday we looked at digital publishing from the author perspective and today we look at the Consumer. It’s the same house but we shall see a different perspective.
Today’s media noise about ebooks and digital is now driving a greater consumer awareness about the opportunities and importantly what they want from digital content. What issues matter may vary by the different consumer demographics and they will change with time.
Who do the public recognise as the drivers of their ebook needs – Amazon, HarperCollins, Randon House, Penguin, Apple, Kobo, Barnes and Noble, Waterstones, Google?
We now live in a global world where consumers are connected 24x7 and can compare prices at a click of a mouse. They no longer are influenced by newspapers, magazines, TV, radio but now have a virtual world of information available in a click on the move. Importantly, the largest power block is not the youth, but the silver surfers, who now have the greater disposable income and time, are increasingly technically savvy and are the heavier book readers.
What Amazon has taught us is that no single device is going to satisfy demand and that ebooks have to be available across all platforms. They learnt this trick early on in the physical book world with ABE, marketplace and other ventures and now have transferred the logic to digital.They also recognise that the first page consumers turn to in a book in not the copyright page to see it it’s a new book.
Amazon understand consumer demand and behaviour better than most and it is this that aligns them with consumers. We should remember that it was consumers made Apple, Amazon, Google, Facebook and it was consumers that walked away from MySpace, Napser, Sony.
What are the key issues consumers look for in digital books? Do we understand these, or do we presume to understand them? Price is probably a major if not the major driver, but does this apply to all content and demographics? Availability is probably a major driver, but is it of the latest, or the right content and how do they find it in the digital haystack, let alone validate it is the right one for them?
Digital rights management has to work for not just publishers and authors, but also consumers. Napster demonstrated the folly of tight control and MP3 music is the norm and DRM free. Even Apple have had to yield to consumer demand for DRM free music. We must always consider the consumer usability needs, as well as our own and if we make it too hard to enjoy, share, borrow and read then, they will find an alternative.
The industry must find a way forward on the library ‘free to lend’ versus ‘buy to own’ issue. Consumers will increasingly question the commercials and ownership benefits and the more some refuse to do business with libraries on digital, or demand unreasonable terms, the greater the divide becomes with the group that matters – the consumer. Libraries charging for loans should not be off the agenda and we must also recognise that loans, rentals and on demand commercials should not be restricted to libraries and their members. As consumers become more aware that they have ‘lost’ the right of the first sale doctrine on ebooks then an ‘on demand’ 'Spotify' model could be the obvious answer.
The folly of agency pricing was not in a return to retail price maintenance by a back door to just stifle Amazon and support Apple, but the fact that it was not in, or would not be perceived to be in the consumer interest.
The salient lesson that the music producers failed to grasp was that the ‘customer is always right’ and it is all about perception and making that a ‘win win’ not a ‘win loose’ situation.
Perhaps someone at HarperCollins had just read 'A Christmas Carol' and wanted to be Scrouge and to be visited in the night by the ghosts of Authors Past, Present and Future.
As reported in Publishers Weekly, HarperCollins decided to dump a Christmas infringement present on Open Road in the form of a lawsuit on 23rd December. The suit is over Open Road’s publication of the e-book edition of Jean Craighead George’s bestselling and award-winning children’s book Julie of the Wolves which has sold some 3.8 million copies. The charge is that in 1971, George entered into a contract that gives HarperCollins exclusive publishing rights of the work “in book form,” and that this extends to ebooks by the inclusive clause “computer, computer-stored, mechanical or other electronic means now known or hereafter invented.”
HarperCollins also refer to “stated limitation of paragraph 20” of its contract, which refers to them having to seek George's consent to license rights in the work by stating that that does not permit the right for the work to be taken elsewhere. It is reported that Harpercollins is seeking an injunction against Open Road distributing any more copies and the destruction of copies.
Sometimes one has to take a firm stand to protect one’s rights and ensure that your investment is also protected. Other times one has to recognise that time has moved on and the intent you entered into in an old contract has long changed. The exercise can become more about flexing muscles and posturing to influencing others than about the individual case.
It is interesting to note that Jane Friedman, who set up Open Road, previously worked as CEO of HarperCollins.
The challenge could be that in 1971, some 40 years ago, the spirit of the contract that was entered into does not reflect the reality today’s today’s networked world. It was even before the PC, let alone the internet. However proving unworkable or unreasonable clauses, costs money and is not guaranteed an outcome.
The action could well win the battle for HarperCollins to retain their rights. There may be a out of court licence settlement, which effectively also may gag all parties, as like the earlier Random House versus Rosetta and also may act to stifle others looking to break free of the physical handcuffs. The declaration of war is however a far greater challenge for HarperCollins as it declares its stance not only on this one title by all those thinking about digitally moving on. It also sets an alarming precedent at a time when digital rights are being negotiated and warns all to avoid open 'catch all' clauses that may come back to haunt them in the future.
As we have seen News Corp is not adverse to bad publicity and this move is certainly not going to enamour them to many.
It is easy to predict that 2012 will see us celebrating the Queen’s Diamond Jubilee, see the US presidential elections and enjoy the London Olympics, but it is not so easy to predict the winners and the losers of each and every Olympic event. When it comes to complex issues such as; the stability of the Euro, Syria, Russia, North Korean we often recognise that they are influenced by many forces that are even more difficult to predict.
In digital publishing we can obviously see trends and understand the direction in which issues are heading, but identifying individual milestones, their relevance and timelines is often impossible. The other issue is that we all may look at the same issue, but see it from a different perspective. That doesn’t mean that we are right or wrong, we just see it differently. It’s like looking into the same house through what are often different windows – it’s the same house but we all see different rooms and perspectives.
We have written a series of short articles titled, ‘2012 Digital Perspectives?’ which we shall publish this week. These will look at what we believe are the short term issues, challenges, potential game changers and outcomes across the digital publishing value chain. Today we look at the creators – The Author.
2011 often demonstrated that Authors were starting to ‘do digital for themselves’.
Many authors continue to be tied to relatively new digitally inclusive contracts, but many of those who had retained their digital rights or reverted their back list rights, started to realise that it is easy to do it themselves and potentially earn more as a result. Some choose Amazon, Pubit or Smashwords whilst others took a more conventional route with the likes of Open Road. Some separated their back and front list and realised that they do not need the ‘digital serfdom’ of perpetual licences with fixed royalties and where the vast majority of earnings go elsewhere. The challenge authors and their agents now face, is how to avoid those digital handcuffs. It like taking on a business lease, you want break clauses, rent reviews and a fixed term deal and not life plus 70 years in a marketplace that is still in its infancy and unpredictable.
We envisage that more published authors will ensure old physical rights are reverted and that their digital rights are treated separately to the physical ones. Many may still choose to be tied to their print publisher and many will treat their digital rights separately, but all will be doing so with increasing digital market awareness.
We believe that at least one trade publisher will wake up and see the benefit of offering a significantly better digital royalty deal on back list and potential digital orphans in line with the likes of Open Road. We envisage that this will be tied to a fresh approach to proactively promote back lists and not just place them on virtual shelves. As publishers become more aware of the need to be seen as a trusted business partner, we seen ‘Author care’ becoming the ‘flavour of the month’ and offering greater transparency of information to authors and maybe even speedier digital royalty payments.
Promotion and marketing authors within a growing social direct marketing network will remain a significant challenge. This isn’t just about engaging with current fans but finding new ones and growing the base. It is also about publishing collaborations to create genre groupings which cross publishing houses and channels.
The key driver for change is digital awareness and we see increased media coverage on digital author options being a major catalyst.
We are not only in a digital age but also and importantly we are now entering a golden age for writing. Accommodating this creative explosion of new as well as old material is the real challenge. Managing authors expectations and ensuring that they are fairly rewarded and recognised is now the goal for all.
Thursday, December 22, 2011
The rules on VAT on ebooks is about to become very interesting. In 2015 EU consumers will pay the VAT rate based on the country they live in, but until then and under the current EU rules, European consumers pay VAT based on the country the vendor is based. The spanner in the works comes not from the UK, France , Germany but from the European home of Amazon, Luxembourg.
Some will question what difference this makes to retailers and whether Amazon pricing just got very competitive and attractive. The difference between the UK and Luxemberg will be a massive 17% and 2015 is a lond way off in ebook years!
However there are opportunities in this for publishers as well as consumers.
Today many price their book as VAT inclusive, but if they were to price them VAT exclusive then the VAT difference of 17% could be up for grabs with some creative juggling. One major European publisher recently changed its pricing terms with Amazon to take advantage of this opportunity.
Interesting times and an early Christmas present for some and maybe the act that will force the some countries to think twice about their high tax rates on ebooks and the great gulf between reading the same material on two different platforms.
Techradar source document
Wednesday, December 21, 2011
Jessie J’s ‘Price Tag’ has been a huge hit, but how many of us have enjoyed the catchy tune and been oblivious to the lyrics? The message of the song will resonate with many musicians, but equally, there will be many musicians who disagree and want the ‘cha-ching, cha-ching’ and who are focused on the ‘Price Tag’.
Today we read of another author, the Pulitzer Price winning Michael Chabon and his decision to split the digital rights to all his works. First there are those works were there were no digital clauses in the contract and he is free to trade and then there are those later works, which are tied to contracts with digital clauses and that remain licensed to the original publishers.
Chabon has made what many would see as a 'no brainer' of a decision to licence many of the untied works he where he owns the digital rights to, to Jane Friedman’s Open Road. Here he can enjoy a 50% royalty, whereas with the works where he is effectively tied to the print publisher and gets the standard 25% net sales deal.
Some would suggest that the publisher has not only made a significant investment to develop, edit, promote, sell, as well as all the physical inventory cost, but that the 25% royalty offered authors is fair. Others would say that the investment into the original physical publication is a sunk cost, irrespective of the exploitation of the digital rights and therefore, a far higher author royalty rate is not unreasonable.
In the Washington Post article Chabon referred to the Open Road terms as ‘extremely fair and generous.’ He said of the original publisher terms “I agreed to the traditional e-book royalty, which I think is criminally low, because I didn’t really have any legs to stand on. I didn’t want to get left behind in the e-book revolution.”
But is it all about the ‘cha-ching, cha-ching’, or is that just another symptom of a far larger divide that is now starting to open up publishing and question its value chain?
We have long advocated that digital rights should be separately licensed, or that the terms should be cleanly separated re reversal and that the license should be term based not perpetual. However, some would suggest that many authors appear to be slipping blindly into digital serfdom, for periods of life plus 70 years. Is this wise in what is a rapidly changing world and where digital books are only just in their infancy?
One agent claimed recently to us that the author 25% perpetual royalty deal was good because the publisher could 'cross sell the back list titles with the physical copies'. We stepped back somewhat amazed.One only has to look at the Amazon page to understand who actually does the cross selling and especially on back list. We raised a list of other contractual considerations that we thought should be taken up with the publisher which had been not considered in the offer. It is often easy for many to think about their own ‘cha-ching, cha-ching’ and ‘price tag’.
Authors are the bedrock of the publishing business and are often very different in their personal motivation to create and be published. However, many seek a fair reward and digital now offers a level playing field between; old and new works, famous and unknown authors and one where social technology can make the difference between being read and being left on the virtual shelf.
The one thing that is certain is that the commercial models for both royalty and reward and also revenue generation are changing. Agency pricing should and could well be thrown out, or at least seriously questioned and not just by the authorities, but by the consumers. ‘Honesty box’ trading has still to be tackled and as the percentage of digital market share rises, this will soon become a further issue to authors who want to question their sales. Finally, if as would seem inevitable, the cost of digital drops, we must also remember that even a 100% of nothing is nothing.
It is down to the added and perceived value between the two people that matter, the author, who puts their words in and the consumer, who puts their cash in and for some it is about the words of Jessie J ‘We just want to make the world dance, Forget about the Price Tag’.
To read The Washington Post article
To Read the lyrics to 'Price Tag'
Tuesday, December 20, 2011
Christmas is the time to think about others less fortunate than oneself.
Well one has to think that the spirit of Christmas doesn’t extend to the corporate world of telecoms as the battles between the giants continue unabated and patent disputes are more common that fights in the school yard and everyone tries to outsmart each other.
Today British Telecom filed a lawsuit in the state of Delaware claiming that six of its core patents have been infringed by the Google Maps, Google Music, location-based advertising and Android Market products on Android. The patents relate to location-based technology that underpins navigation and guidance information and personalised access to services and content. The suit could have serious financial implications on Google with even penalties being due on every Android set sold! HTC and Samsung have already yielded to patent claims by Microsoft against Android and are paying a per-handset fee for every one they make. If held up in the US the BT suit could then move to Europe.
With the number of lawsuits being fought by Google one wonders if they have any friends to sit around their Christmas table let alone send greetings to!
Meanwhile Apple have just scored won a narrow victory over HTC as a court ruled that the HTC copied Apple’s touch screen software for clicking on phone numbers in documents from the iPhone. But the world of patents is not simple and the U.S. international trade commission ruled in favour of HTC on another three claims by Apple that its software had been copied. These are mere skirmishes in the raging patent wars. It should be noted that originally Apple accused HTC of infringing 10 patents so they won more than they lost but with the US being their single biggest market any loss could prove damaging.
So is it all about smartphones?
Well in the 6 months we shall see Amazon Fire grow into a furnace and Apple yet again contradict itself and produce a smaller screen iPad. But the interesting one could be the introduction of a Google Nexus tablet. This would be interesting not just because it’s Google, but also given their Chairman Eric Schmidt’s employment history. We wonder if he took any ‘secrets with him’.
Google has already ‘contributed’ in the development of the Motorola Xoom, but like other Android tablets, it has not delivered the sales but Schmidt in the Christmas spirit is reported saying that ,’competition between Android smartphones and the iPhone will be “brutal”.’
Saturday, December 17, 2011
The number of browser we have to support may be small but the versions within these can be a pain as new versions of some browsers appear to be arriving on a constant conveyer belt. Most users are cautious about upgrading until the release is bedded down and stable, but buyers of new PCs don’t have much choice.
Microsoft claim that their research shows that many cyber criminals target old or outdated software when they tried to trick people into installing fake updates. Therefore, in order to help beat scammers catching people out with fake updates, Microsoft will start next year to ‘silently’ update Internet Explorer (IE) users automatically without their users knowledge to the latest version of the browser. Microsoft said that those who did not want their browser updated could opt out or uninstall the software.
The programme will initially affect IE users with automatic updates turned on and running Windows XP, Vista and 7, and will first be rolled out in Australia and Brazil. Those using Windows XP will be upgraded to IE8, while those on Vista and 7 will be upgraded up to IE9.
Globally, Internet Explorer is still the most popular browser, with more than 52% of the market followed by Mozilla's Firefox and Google's Chrome. Interestingly though some 8.3% of IE users are still wedded to the 10 year old IE6 which, to the relief of many developers, is expected to die with this new initiative.
We have long recognised the issue of the lack of effective and consistent digital sales reporting. Its as if the standards bodies and consultants that work for the industry are too focused on building and selling the car but forgot about the after sales servicing. As an industry we spend a great deal of effort deal with the issues at the front end of the sale process, but like the infamous publishing physical returns issue, we often fail to follow through and deal with the back end. It is a golden rule of any supply chain that the chain is only as strong as its weakest link and that any all cost or inefficiency within the chain, is a cost and inefficiency to all and not just those impacted.
We have previously advocated that the standards bodies make strides to at least standardise digital sales reporting. However, in doing so we believe that they should also look not just to fix today’s problem, but build a mechanism that will enable us all to do things smarter and cost efficient tomorrow.
Reconciling digital sales is not straight forward and this was well put across by Helen Kogan, MD of Kogan Page in her reported comments in the Bookseller from the UK PA conference’s "Changing Face of Export Sales" panel. Kogan was reported stating that, ‘One of my biggest bugbears is about the nightmare of digital reporting, it should be a simplistic supply chain but instead we are dealing with multiple reports, multiple spreadsheets. Reporting is a real issue and distributors have a part to play in this. They could support us.’
Some would suggest that the market is consolidating around a few aggregators and therefore it’s a manageable issue. Others would suggest that the lack of reporting standards today and the inconsistency of reporting schedules effects not just sales reporting but also royalty transparency of reporting and payments. Whether we have a few super digital distributors in the future, or as more likely, hundreds of smaller ones as well, the problem remains transparency, timing and standards. Dealing with it today will be easier that trying to deal with it tomorrow.
In today’s ‘switched on’ world where there is literally only one digital file, which is then digitally ‘pick packed and dispatched’ in real time for each order, it would surely make sense to have real time sales reporting to its rights owner and maybe even its author. If addressed from a strategic and architectural perspective we may also address some of the ‘honesty box’ and audit issues which are not going to go away.
Well done Helen for stating the case.
Sunday, December 11, 2011
Last week we had two viewpoints expressed in Digital Book World which raised much debate and further amplified the gulf of dialogue and thinking within the industry today over the issue of self publishing especially in the digital world.
First we had the original article ‘Leaked: Hachette Document Explains Why Publishers Are Relevant’ , which again raises the question as to the role of the publisher in tomorrow’s changing value chain. The premise of the proposition was based on, ‘Self-publishing is a misnomer’ and it went on to lay out the value added services that publishers can offer authors. When we look at these in pure digital terms there are a number of questions:
‘Curator’ we are not sure that this is the right term but irrespective is the curator for the author or the consumer?
‘Venture capitalist’ some would suggest that this actually describes the publisher role. As many who have dealt with VCs know, the VC onus is often purely on the money and return, more than the venture and interestingly most VCs have an exit strategy from the outset.
‘Sales and Distribution Specialist ‘ we agree this is very important in the physical world where grabbing shelf space and promotion has to be ‘in the face’ . However, does it carry the same weight in a digital world? The digital world does not just compete with the other new titles and some back list, but has to compete with everybook ever published. There is an opportunity, but it is more about marketing and brand awareness than sales and distribution. It could be questioned what digital sales expertise one needs when the sales are to a small number of aggregators who actually drive the sales and who by their virtual shelves carry everything anyway.
’Brand Builder and Copyright Watchdog’ this is real value and one that becomes of even greater importance the more digital we become. Brand building is critical in today’s viral world, but as often proved, this can be unpredictable in today’s Facebook and YouTube world. Copyright protection is however difficult and the publisher should have the mechanism to monitor, raise take down notices and litigate where needed. However, we must remember that a watchdog is not just about copyright and we live in a digital ‘honesty box’ trade, where it is rumoured that ‘no audit’ clauses exist today, so assuming a huge amount of trust.
We then read the response from self publishing author JA Konrath, ‘Advice to Publishers’ .
In his response Konrath lists six points:
‘Offer much better royalties to authors.’ This should be a given but there is often much debate about the digital norm and the fact that royalties are based on net sales which can be very loose. If agents do not tie contracts to term times, authors may find they are digitally tied to perpetual contracts, with little incentive and where both agents and publishers live off a sizable proportion of earnings for life plus 70 years. In this digital real time age, why digital royalties aren’t paid out monthly or even at the end of each day and totally transparently? The recent Simon and Schuster move on transparency is a step in the right direction but to some is only a one step.
‘Release titles faster. It can take 18 months after a book is turned in to be published. I can do it myself in a week.’ This is a legacy issue and often tied to physical lead times that are required by many large bricks and motor chains. In a digital world this doesn’t apply but the implications on the development process within publishers are significant and with reducing advances the pressure to reduce lead times and be smarter is clear for all to see.
‘Use up-to-date accounting methods that are trackable by the author, and pay royalties monthly.’ We have covered this above and must remember, when someone decides to do this and promote it heavily, it may become a game changer for all.
‘ Lower e-book prices.’ We see Konrath’s point and how some have moved volume by low price pointing. It is a case that when there is only one mouth to feed then a larger amount of a lower price is acceptable, but when there is a corporate to feed, there is often a cost point that must be first cleared to have any chance of break even.
‘ Stop futilely fighting piracy.’ This is not so much about self publishing as about publishing risk. We will soon reach a point when DRM (Digital Rights Management) becomes less of a risk and more of an inhibitor. It happened in music with MP3 and it will happen with books, it is just a case of timing.
‘Start marketing effectively. Ads and catalogue copy aren’t enough. Neither is your imprint’s Twitter feed.’ We understand Konrath’s point, but we all face the same problem and there are no digital marketing silver bullets. If there were, we would all be adopting them and … Publishers do offer scope and skills, but many have not developed these and rely heavily on external resources to show them the way. This is a core skill set for tomorrow’s publisher and one where they can offer in house value add.
Last week a good friend was offered a digital deal on some six titles that are still in print, but where the digital right is not encompassed within the contract. The agent had taken some months to negotiate an offer 25% net and suggested it was a good deal. Our advice was to define a fix term time, understand the reversal clauses on digital, agree the loan and rental deals up front, and the control and pricing policy on agency. The agent gulped and understandably is yet to respond.
The news last week was again littered with the impact on how the publishing industry deals with new entrants and in particular the Gorillas that are now in the back yard. Two stories in particular raised our eyebrows.
Google Book Settlement
Or as we called it from the very beginning ‘The Great Book Bank Robbery’.
It now looks like the saga is entering yet another interesting phase as Google moves to get the case dismissed by the court. According to which side of the barricades you stand behind, the legal technicalities and case is clear. However, once again we enter into somewhat uncharted waters and a level of unpredictability on the outcome and keenly await the court ruling. What is apparent, is that the world has moved on since the original submission and has twisted and turned ever since, to a point today where one could argue the original submission is in danger of being lost in translation.
Does this mean that all parties will now loose the appetite to resolve the dispute? Some now believe that Google has manoeuvred themselves into a position where the shackles can come off and free them to resume their quest to scan and monitories all in Googleworld, on Goolgleworld terms. Orphan works remain the key, but will everyone now ignore these to open the door to allow everyone to adopt them and be dammed? Will the legislature finally arrive and redfine copyright for the 21st century and protect orphans, or will the opportunity again corrupt our thinking once more? Will anyone protect the orphans or will they just become casualties from increasing ‘friendly fire’ and land grabs? Who will step up to citify the obvious need for a rights registry and will this be global or restricted by somewhat meaningless geographic boundaries?
Some would suggest that the current rights information void is akin the those patents that some big corporate entities buy up and sit on out of their own vested interest.
The second predictable development was the growing concerns over the agency model, or what some see as a return to retail price maintenance for just ebooks by the back door. The agency pricing debates rage on, with often ‘holier than thou’ arguments according to the side you sit on. Our view has always been that the only entity that can effectively price for the consumer is that which deals directly with them and they should be allowed to make their own commercial judgement call on price, profit and offer. However, many publishers will disagree and some will believe that they in fact ‘own the consumer interface’ and are the only middleman between the author and the reader. Others see agency as the Amazon ‘brake’ and vehicle to start to get control of pricing. Many now recognise that ebooks will have a significant place in tomorrow’s revenue streams and understandably want to protect the status quo through price control. Some would suggest this happens today with the pbooks and the somewhat fictional RRP which is there in some cases to accommodate deep discounting.
We would suggest that publishing is now entering a phase where cost reduction across the whole value chain is needed and today’s ‘passengers, prisoners and wounded’ may not be affordable moving forward.
The referral by the UK OFT (Office of Fair Trading) to the EU on the agency issue, the news that the DOJ is finally looking into the issue and the establishment of a federal Judicial Panel on Multidistrict Litigation accusing Apple, Barnes & Noble and a group of major publishers of conspiring to fix e-book prices should be welcomed by all as a wake up call. No one can call the result but the investigations themselves should signal that agency is at worst against the consumer interest and at best skirting very close to being against their interest.
The rumours of some of the contractual clauses that may or may not be included in the agency agreements are alarming if true and still disturbing if not.
So what do we learn from these two separate but related threads?
The industry should not act out of fear of Amazon to form new business models and alliances but should do these on their own merit. Inviting another Gorilla into the back yard may look attractive but what ever happens the only certainty is that there will be a Gorilla in the back yard and whoever the Gorilla is they are still a Gorilla. Agency was a kneejerk reaction and a unilateral declaration by a few, for the few and without thinking of the many. The Google Book settlement unsurprisingly has the same fingerprints on the gun.
Friday, December 09, 2011
At the time I had left B&Q and just completed a massive EPOS roll out programme at UK supermarket Somerfield. My EDI track record was forged at the leading edge B&Q to be the first major retailer with 100% supplier participation. I was also the Chairman of the Tradenet User group, which then was the largest EDI User community in Europe and part of GEIS’s EDI Empire and also was on the council and management committee of the then ANA (Article Numbering Association), the body responsible for all cross industry EDI standards (Edifact, EAN, Tradacoms etc.). So it was natural that First Edition approached me to help get their service established.
For a variety of reasons I declined to join First Edition and was quickly snapped up by Denis Bennett (Vista) who along with Francis Bennett (Book Data) then jointly owned First Edition. My association with First Edition continued when I became a non executive director on behalf of Vista.
I have just reread the business plan that Mark and I worked on and it amazing to read the opportunities that were identified. The business plan itself helped me later invent and architect BookEasy which turned into PubEasy and the BA association’s Batch service. It was interesting that the business plan also gave me the insight to input into much of the acclaimed Publishing in the 21st Century series and engage with those industry thinkers Mark Bide and Mike Shatzkin. In particular it gave great input to the Supply Chain paper, my BA conference Dublin speech in the late 90s and discussions with highly influential Findlay Cauldwell who the drove the Dillons supply chain agenda which led to the KPMG review.
Mark had a great desire to change the way publishers and booksellers did business and together with Denis and Francis made a formidable trio of evangelists for doing things smarter. The battles with Teleordering were not to be underestimated but Mark saw the logic of adopting cross industry standards and extending the communication past the basic ordering. That this vision and conviction drove me to Pubeasy and Batch can’t be underestimated and the industry owes much more to Mark than it probably will ever realise.
Thursday, December 01, 2011
"We want music to be like water -- available everywhere, available seamlessly," Spotify CEO and founder Daniel Ek.
There has been much interest of late at reviewing the difference between the digital journey’s of books and music. We wrote about this some 5 years ago in the Brave New World report and although the media have evolved the roots of the divide were clear laid many years ago and the divide very clear. However, there is much to learn from other media and today those smart guys at Spotify delivered another lesson in digital evolution in a press event in New York.
Spotify announced the birth of a redefined social media platform based around full member participation, added value supplementary content and what can be best described as a music platform which would make iTunes look sterile and clunky and Amazon a music shop -full stop. Along with Spotify’s on demand model the platform could not only change music but the commercial model of digital music for all. Sounds grand and overstated and the only thing potentially standing in their way is the music business itself, which would be an irony given the opportunity potentially on offer and the dire position of the current model. The other potential issue is whether developers will build apps for the platform
Spotify are releasing a new API (application programming interface) that will let developers create apps coded in HTML5, and powered from within the Spotify app. Spotify will add a section called the "App Finder" on the left side of its landing page. Spotify is also building its own new features which include ‘favorite friends’.
It’s like the democratisation of music and the creation of new ways to share music, reviews, information, lyrics, concerts tickets etc. It would enhance the subscription service adding a significant number of optional features that will be invisible to users who just want the vanilla version. Publications such as The Rolling Stone are on board and its co-founder Jann Wenner states that the service is “really just the perfect companion to read about the stuff you want to hear as you hear it.” Rolling Stone plans to ctreate playlists for release on Spotify. Last.fm are to provide an app that lets members share their songs with each other, see what other members are listening to and display album covers. Hovering over an album cover in both the Rolling Stone and Last.fm apps will trigger them to play one of the album's tracks. Another app, from Songkick, shows users what concerts are playing in town. It uses their playlists as the base to recommend concerts they might be interested in and displays the locations of those concerts. The location display includes a Google Map.
The list of partners at the launch was an impressive gathering of players; Last.fm, TuneWiki, The Guardian, Dagbladet, We Are Hunted, Soundrop, Top10, Billboard, Fuse, Gaffa, Pitchfork, ShareMyPlaylists, Tunigo, Songkick,and MoodAgent. Now imagine you are a musician and what you could do on a platform that today has 2.5 million subscribers and growing and is both established in Europe and the US.
The jury is still out as to what this will mean to the relationship with Facebook nwhich has helped Spotify’s growth but if they remain coupled then it is easy to envisage mutual benefit.
Despite the recent removal of some indie labels Spotify’s 15 million legally-licensed songs must offer a significant opportunity for app developers to create a music platform which would be difficult to emulate and could actually move music fully into a on demand world and change how we pay, listen and relate to all things musical.
Wednesday, November 30, 2011
Tax and laws created before there was an Internet often can create conflict often between bricks and motor stores and online eretailers however changing the law can often be as hard as collecting the tax.
In the US, sales tax has been a thorny issue between online and physical stores. On one side stands Amazon, eBay and the new breed of online only etailors, who do not have a physical presence in a state and do not have to collect sales tax and on the other, there are those who have physical stores and operations and have to collect taxes. Brick-and-mortar retailers, are claiming that because of their sales tax burden they suffer a competitive disadvantage compared to their online counterparts
States are prohibited from taxing a person with whom it lacks a relationship between the taxing authority and the taxpayer. Some 19 years ago, the Supreme Court held that, at least for purposes of collecting sales tax, ‘ a state lacks substantial nexus over a taxpayer that has no physical presence in the state.’ It was the courts view, uncertainty about what jurisdiction has power to tax, as well as compliance with numerous and difficult tax policies, would place an undue burden on interstate commerce.
The current hearing was set up to explore whether Congress should reform the sales tax legislation and to understand how this could be done so that it does not increase administrative and compliance burdens on America’s small businesses.
Currently 45 US states and the District of Columbia have a sales tax and also a “use” tax, equal to the sales tax rate, which residents must pay for the usage, consumption or storage of goods purchased in a non-resident state and brought into the state. A consumer in Florida who buys goods online from a retailer that does not have any physical presence in the state is responsible to pay use tax and pays no sales tax on his transaction. This is achieved by taxpayers declaring their purchases in other states. Obviously this is a significant tax loophole and as a result online purchases invariably escape taxation altogether.
Three separate bills have been tabled to address the situation and Amazon testified before the hearing to put forward their case.
Paul Misener, vice president, Amazon global public policy, today made a testimony in which they fully backed the need for change. Misner stated that, ‘Far from an e-commerce "loophole,” the constitutional limitation on states’ authority to collect sales tax is at the core of our Nation's founding principles. For this reason, Amazon has steadfastly opposed state attempts to require out-of-state sellers to collect absent congressional authorization…’
He continued, ‘ Fairness among sellers should be created and maintained. Sellers should compete on a level playing field. Congress should not exempt too many sellers from collection, for these sellers will obtain a lasting un-level playing field versus Main Street and other retailers. Congress should rectify the current imbalance and avoid a future imbalance…’
Amazon recognised the need for a small sellers threshold, ‘Such a threshold, which would exempt some sellers from a collection requirement, must be kept very low to attain the objectives of protecting states’ rights, addressing the states’ needs, and creating fairness among sellers…The consequences of the threshold level to states’ rights, the states’ needs, and fairness are very significant, because a surprisingly large fraction of e-commerce is conducted by smaller volume sellers. For example, nearly 30% of uncollected sales tax revenue today is attributable to sellers with annual online sales below $150,000, and only one percent of online sellers sell more than this amount. In other words, a $150,000 exception would deny the states nearly 30% of the newly-available (yet already owed) revenue, but would exempt from collection 99% of online sellers. Any higher threshold would deny the states even more revenue and keep the playing field even more un-level.’
But they ten took a swipe at eBay saying that , ‘while Amazon is prepared to make its technology available as a service to help sellers by collecting sales tax for them, eBay seeks to avoid any role in collection, claiming that small volume sellers will be burdened and, implicitly, that eBay’s technology is not capable of helping its largest sellers to collect. And these claims are made despite the fact that eBay manages to collect the transaction fees it charges its sellers, and despite the fact that eBay already calculates state sales tax for eBay sellers, all the way down to the local jurisdiction level. Amazon and many other service providers will help smaller online sellers collect; surely eBay can as well.’
So change looks imminent which would take the pressure off Amazon having to fight many state battles and give them consistency across states.
Amazon Press Release
Link to watch 2 hours 30 mins of the hearing
An Australia court has overturned an earlier ban on the sale of Samsung’s Galaxy tab in the country. Apple had previously won an injunction against Samsung in Austrailia and Germany preventing sales of the Galaxy 10.1 tab, accusing of it copying its touch-screen technology and infringing its patents. Samsung has sought a ban on sales of Apple's iPhone 4S in Australia, Japan, France and Italy.
Today’s news means Samsung will no longer be restricted in Australia. However, they will not be able to start selling the tablet immediately as Justice Lindsay Foster granted a stay on the order until Friday, 2 December, which allows Apple time to appeal in the High Court.
The case is part of a long legal battle which we have previously reported and one which is focused on the two market leaders slugging it out bout in the courts and the shops for a bigger slice of the smartphones and tablet market.
recent article: Apple and Samsung Lock Horns
Monday, November 28, 2011
Three stories catch our eye that all point to a significant trend in the demand to loaning and renting ebooks. Some can be seen to be responding to these changes, whilst others dither, stall and demand it to be on their terms only. Are ebooks just for Christmas and today, or are they really going to be around for life? Do we have to replace those treasured printed titles with a digital library?
A fascinating blog from Danny Sullivan titled http://daggle.com/amazon-apple-hate-families-2867 raises many interesting questions about lending within the family unit. It explains the challenges families face in having to use adult only accounts and in reading on multiple devices. It relates the digital restrictions to those of the physical world and asks for tolerance. Perhaps it makes the case for single versus and multiple use licences, but some would suggest a book is a book is a book.
We live in a rapidly changing world where this year’s latest technology is next year’s junk and where purchasing loyalty is often defined by convenience. Locking in family units to one channel may not be desirable, but may be practical. However, overly restricting what they do between themselves could be an open invitation to unenforceable infringement.
If we step back and look forward, how will the current model and its restrictions pan out say in 5 years, when the devices have moved on several times, the under 13’s have become ‘adults’ and what we see today as future proof standards and DRM, may be not be so solid?
Libraries feed the needs of communities. They were originally restricted by the local budget and facilities but now we have interlibrary lending and collections are more open and sharable but does this support the one digital library concept and result in just one global library. Google, Overdrive, Amazon, and the others.
This week we have all read the often confusing story about Penguin ‘it’s my ball and iam not playing’ spat over ebooks. First it was a call on security and then it was new titles and now some would suggest like a spoilt child they have left it hanging in the air saying maybe they will and maybe they will not allow libraries to play digital lending. This year we have also had the HarperCollins demand that ebooks are not for life and wear out after the same number of library lendings as physical books and therefore like the physical book, they have to be obviously repurchased. We also have two other majors in Simon and Schuster and Macmillan apparently sitting on their hands unable to accept or reject digital library lending.
We have written much about the potential conflict between retail and libraries within the digital world. The history of the public library appears to have past many by and been ignored yet it clearly indicates that what we have today is almost certainly a transient model and will change with digital and trying to protect it for the sake of the status quo will surely fail. We may not have covered everything but our historic review article of last November is worth a second read.
The library lending battles are as predicted now starting to hot up. Some may suggest it is a shame that all parties could not see the writing on the wall and work together to reach a compromise.
Some would suggest that the digital opportunities should create a renaissance opportunity for libraries and reading but appears that it must obviously be on commercial terms acceptable to the big publishers.
Interestingly, the conflict has come at a time when public libraries are under their greatest threat of closure and are subject to spending cuts. Many, for all over the industry, are manning the barricades to fight the closure, but it would appear that some would only do so for physical books and their overall revenues remaining the same. Is this commercial reality or digital hypocrisy?
We now read an uplifting story about Montreal's largest library which claims to be busier than ever. According to a recent report by Lumos Research for the Canadian Urban Libraries Council, library usage across the country is up 45% over the past decade, from 16.6 to 24.1 transactions on average per capita and the growth is down to digital. The Grande Bibliotheque’s membership has grown 17% and the $142-million library, now claims some 286,000 active members and 3 million visits annually.
These increases are not just about ebooks but access to electronic databases, Internet visits to library websites and catalogues, digital audiobooks, as well as music and movies. The Montreal library now has 200,000 ebook titles available which all can be downloaded from home with the click of a mouse. It claims to be the busiest library in the French-speaking world and other Canadian cities, have apparently committed to building similarly large, central libraries.
If libraries can be allowed to adapt to new technology they will continue to play an important role in communities. It may be appropriate to redefine the size and reach of the community in this virtual world. If libraries are seen merely in terms of stacks of print books, then the future looks to be far more menacing.
Saturday, November 26, 2011
Kyobo Book Centre in South Korean has launched a Kyobo eReader, with a full-color display using Qualcomm mirasol technology which is even fast enough for video.The Kyobo eReader uses a 5.7-inch XGA mirasol display from Qualcomm with resolution of 1,024 by 768 pixels and runs on Android 2.3 Gingerbread. The device also features a 1 GHz Qualcomm SnapDragon processor, multitouch touchscreen, Wi-Fi connectivity also has English-language text-to-speech capabilities.
The display combines the long battery possibilities of E Ink displays with a full colour output. The Mirasol display controls the distance between a membrane and a reflective glass surface, and this either blocks light or amplifies particular frequencies. The result is that the membrane can appear transparent, black, or a particular colour. Qualcomm’s mirasol display layers three of these together to create a full colour red, green, and blue display. The displays then only consume power then they’re moving the membranes around, and only have to move a few hundred nanometers to change colour, The display gets brighter in direct light, and uses a front-light LED system to simulate sunlight in the dark.
The Kyobo eReader is available in South Korea for a relatively high ticket of around US$300.
So does it pass the ‘so what’ test?
It would appear to be halfway between a smartphone and a tablet. It reads ebooks but is that its main draw and in our opinion it fails on some basic counts. It is not a smartphone. Size wise it falls uncomfortably between the new smartphones and today's tablets. The screen technology may now offer colour but anyone who has a Amoled screen will know this game has already been decided and the winner is here today. Finally the price is sitting on the high side of unattractive.
Interestingly we wonder whether those UK booksellers that have a somewhat daunting ebook challenge may go for it just to be different? As the market moves progressively away from devices to platforms these devices will still create interest but will not become mainstream just expensive gadgets with a limited life expectancy and novelty usage.
Thursday, November 24, 2011
Some 4 years ago we awaited the launch of Spiral Frog’s music streaming service but . Unfortunately when it finally it came to market it was littered with many industry issues and was still too early for the market. Spotify and Pandora have followed and those who have followed our writing will know we have long supported these services and the logical user model adopted by Spotify.
Many questioned whether users would just use the basic service and avoid the payment subscription service and whether the music industry would allow it into the US. Today Spotify has announced that it has now over 2.5 million paying subscribers and since its summer US launch it has grown from 1.6 million subscribers in June to day’s 2.5 million with revenue increasing over the last year from £11.3 million to £63 million with subscription alone delivering £45 million.
Spotify is still not into clear waters with losses growing from £16m to £26.5m. Even with the increased royalty and licence payments that cause the losses it is now possible to see growth and with it the potential to change the music model.
It is important that the media sectors recognise that models will have to change and that it is better to support legitimate players such as Spotify than cripple them and hand over the business to others who will not pay a penny. This shift to rent, subscription real-time and cloud based services on demand are perfect for today’s mobile world. The question is whether we will all see this or remain wedded to models that they have little future.
Will Facebook’s ‘Buffy’ be the vampire mobile slayer or a step too far?
Facebook are widely reported to be working with HTC to create its own Android smartphone, which is due out in 12 to 18 months. According to The Wall Street Journal the Facebook phone project has been codenamed, ‘Buffy’.
However why does it need to have its own hardware? Facebook is already tightly integrated into many Android smartphones and it is very questionable exactly what Facebook would gain over the wide adoption it already has. If Facebook believe that ‘Buffy’ could tightly integrate other Facebook services such as their email it could turn many off if all their all email and messaging from the phone have to be done through Facebook?
Facebook isn't a hardware company and perhaps they should stick to what they are good at. Even the likes of Google have struggled with the hardware and ended up buying Motorola and launching a Nexus with Samsung and Microsoft has many hardware nightmares most notably with their Zune player.
Ironically HTC, the world's fourth-biggest smartphone brand shares have fallen by 7%, which is the maximum allowed in one day. The fall has been driven by a cut its growth forecast. HTC had earlier forecast growth of 20% to 30% but despite a booming market now expected revenues for the final three months of 2011 to be little changed from a year earlier. This demonstrates the growth of Android adoption by many players.
Equally interesting is the news that Google and Samsung have confirmed that there are volume issues with their flagship mobile phone the Galaxy Nexus and Apple and that the battery problem that has dogged the new iOS 5 Apple operating system remains unfixed.
However, the one thing that is clear is that smartphones remain at the core of mobile technology, Android is now leading the wave and the more platforms tightly integrate applications and services the more the smartphone will become the device of choice. This has a significant bearing on how media providers, channels and cloud based services must adapt.
Wednesday, November 23, 2011
Cybercrime takes many different forms and always happens to someone else. We can take precautions against it but when it happens its impact can be significant.
Some recent news items demonstrate the size and impact of cybercrime activity.
- The UK’s Metropolitan Police’s Central e-Crime Unit (PCeU) have closed down over 2,000 fraudulent e-commerce websites ahead of this year’s Christmas shopping season. These were websites that were marketing products from well-known brands such as Nike, GHD, Tiffany and Ugg. Consumers received shoddy bogus items, nothing or could have their identities stolen or bank details used. It is estimated the banking fraud alone was in the region of £2.9 million.
- The US FBI have charged six Estonia individuals with conducting a sophisticated click-fraud scheme that infected about four million computers in 100 countries with malware and stole over $14 million Six people were arrested in on 8 November. The seventh member of the gang, a Russian, remains at large.
- US and Romania authorities have arrested over 100 people in connection with Internet fraud schemes that are claimed to have netted over $100 million.
- Four British men have been charged with conspiracy hacking to carry out an unauthorised act in relation to a computer as part of the infamous LulzSec and Anonymous group activities.
- Hackers are even alleged to have destroyed a pump used to pipe water to thousands of homes in a US city in Illinois.
These are some of the cybercrimess that have made the news in the last few days and we have to accept that there are many that don’t and that go undetected, or are merely kept quiet. Cybercrime is not going away nor is any consumer, organisation or even state totally safe. Cybercrime also is global but is often policed locally. It's not only about financial gain, but affects all property, intellectual property, utilities, commerce, and even personal identities. What makes cybercrime so difficult is that the motives behind it vary widely. We may hear about the large financial fraud and theft cases and those relating to large scale privacy issues, as above, but everyday what we all regard as criminal activity is taking place and intellectual property theft and infringement is happening at an alarming and increasing rate.
As states attempt to clamp down on cybercrime they do so often with a lack of inter state consistency and some would suggest that they go too far in encroaching on the rights to privacy. The laws have to deal with many complex issues and it makes us wonder whether police forces will be judged in the future, not by the number of ‘bobbies on the beat’ (police on the street but on the number of ‘bobbies on the net’.
It is often difficult to separate copyright infringement from financial cyber fraud and many hold different opinions about these. Protection and management of owned rights is critical in today's intellectual property sectors. It is often one thing to own rights and a completely different thing to be able to police and manage them.
The US legislators are currently grappling with how far to clamp down on copyright infringement. The House of Representatives has tabled a Stop Online Piracy Act, (SOPA) copyright bill which is designed to make it much harder for rogue offshore sites to sell counterfeit U.S. goods, including fake prescription drugs and copyrighted movies and music. Such sites are believed to be causing tens of billions of dollars in losses annually to U.S. companies.
The bill however is attracting as much negative as positive attention. Objectors are raising issues regarding the bill potential to require Internet providers to monitor customers' traffic and block the addresses of Web sites suspected of copyright infringement. A network provider can be ordered to "prevent access by its subscribers located within the United States" to specific Web sites defined by their unique DNS number. ‘Deep packet inspection’ to block data from specific Web pages, or URLs and potentially intercepting a customers' browsing for analysis is at the core of many objections. As well as free speech and rights advocates groups, some of the largest web companies, including Google, Yahoo, Facebook, have spoken out against the bill.
What is also interesting, is how SOPA and the Digital Millennium Copyright Act (DMCA), which grant immunity to website owners for content posted by users will interact could be in conflict. The DMCA offers website owners a Safe Harbour for content posted on their site by users. So a sites such as Wattpad or YouTube cannot be held responsible if a user posts copyright infringing material on its site. DMCA allows content owners to ask the YouTubes of the world to take down infringing material but the site can claim safe habour and is immune to being sued unless it refuses.
The Recording Industry Association of America, along with the Motion Picture Association of America and the U.S. Chamber of Commerce, strongly supports the SOPA legislation. However, the question remains as to in whose interest should the bill be crafted.
European Union Digital Agenda Commissioner Neelie Kroes is widely reported saying that the millions of dollars being spent copyright infringement it is not addressing the issue. She also believes that consumers can see copyright as a restrictive tool and that artists are still not being adequately rewarded.
Kroes said, "We need to go back to basics and put the artist at the centre, not only of copyright law, but of our whole policy on culture and growth. In times of change, we need creativity, out-of-the-box thinking: creative art to overcome this difficult period and creative business models to monetise the art."
We support the sentiment given by Kroes but also accept that legislative action is required to deter, and police the internet. When we see the legal patent battles that are going on today between the technology giants we have to ask what realistic chance has the small owner of intellectual property got in the depths of the internet and in dealing with international infringement and crime?