Monday, April 30, 2012

Microsoft Return to eBooks Via Nook

The breaking news that Microsoft have bought heavily into Barnes and Noble to create a new venture which encompasses their Nook, digital and college business is shall we say a surprise and a significant move for both parties. Microsoft will invest some $300 million for a 17.6% stake in the new venture which will be valued at some $1.7 billion.

Obviously, the dust has to settle and much has to be revealed, but it has obvious to many that B&N needed a partner with clout and deep pockets and Microsoft certainly can bring that to the table, but they also needed a global partner and Microsoft ticks that box too. Microsoft also needed to get back into the mobile marketplace but had previously walked away from ebooks at  that famous BEA in 2008 when they literally dropped Windows BookSearch.

So B&N divides, its business gets some cash, raises its valuation and gets a big brother with only a minority stake today and potential for more investment in the future. That is certainly good business for B&N and one which must seem like Christmas to their investors.

The questions are now about speed, focus and how Microsoft’s interests are projected onto an Android platform. We still have to see how the international offer develops and the sixty four dollar question remains over Microsoft’s sticking power and whether if the going got tough they would simply walk away again.

Wednesday, April 25, 2012

Is Publishing Experiencing Its Own Arab Spring?

The Arab spring swept across many Arab states and was driven by the confidence that others had succeeded and maybe they weren’t alone.

It has always been true that much of publishing tends to be ultra cautious, but when it turns, it does so quickly and often on mass. Things we thought were never going to happen, suddenly start to be talked about, the evangelists spread the digital word and one player moves, watched closely by many others. If the noise is positive and the resistance small, the change can happen and we all become born again believers. It’s as if everyone is constantly waiting for someone to dip their toe in the pool of opportunity and watch if they sink or swim.  

The latest cry of ‘me too’ would appear to be surfacing around DRM. Is it born out of the final acceptance that DRM is an inhibitor and not an enabler, or that it is often seen by the consumer as a pain to deal with and a straightjacket to work within, or the fact that music went DRM free and the market didn’t die, or by authors demanding it? For everyone you speak to, their will be many and often different answers and the arguments that supported its adoption are like yesterday’s regime support – forgotten.

Has anything fundamentally change to promote this new enlightenment and movement?

Yesterday, Tom Doherty Associates, sci-fi publishers of Tor, Forge, Orb, Starscape, and Tor Teen and part of the Macmillan trade empire announced that by July, their entire list of e-books will be available DRM-free. Their logic was that there authors and consumers were a technical savvy group and had demanded it for some time. DRM was cited as an inhibitor. We will not know if this was a shrewd move by Macmillan to test the market in a controlled vertical, or they just woke up one morning to a cathartic moment and realised what they stakeholders wanted.

Now every digital evangelist, industry thinker and consultant is jumping on the bandwagon and the state of DRM could be in for a bumpy ride and possible a people’s Spring, or maybe Summer, uprising. 

It is interesting that once again many are talking about the removal of the strict DRM regime as an opportunity to clip Amazon’s wings. The truth could be very different and the move to DRM free MP3 helped Amazon in its music business against Apple’s iTunes, but even iTunes, when they finally changed, were not significant impacted. DRM itself has nothing to do with stimulating or suppressing market competition. It is naïve to link them as closely as some have, or perhaps they are jumping on that other Spring uprising of anti Amazon feeling.

So lets think about a DRM free world? Are we dismissing ‘soft’ or ‘social’watermark DRM too, or is it just the hard encrypted and hardware specific DRM?

It’s often hard to gauge the feeling of the crowd, but what is clear is that hard DRM is fast loosing support even quicker than some Arab regimes did in their uprisings. Will this lead to an explosion of piracy? We think piracy will increase but will not be driven by the lack of DRM so much as the issue of pricing and other variances to the physical rendition. Let’s finally face it, a serious pirate will rip it irrespective of DRM and increasingly individuals will rip it if they feel it justified. The markets with most to fear due to their high ticket price; education, academic, professional, also could have the greater opportunity to minimise the risk. These sectors are moving away from the 'tome in a straight-jacket' to an environment rich with interactive media and links. They are now, or should be, raising the added value of a media and rich platform and leaving behind the commodity featureless tome.

What remains interesting is that this potential uprising is taking place against the backdrop of the sales ‘honesty box’ and lack of rights registry. We must recognise that making fundamental changes in one aspect will have a knock on impact in others and without considering these and taking some action, the sprit of the uprising, could sour as authors find reconciling sales unacceptable and potential infringement under ever stone. Publishers will have to step up their legal diligence and actions, which mean increased cost and resource and small publishers may have to act co-operatively, or face some often scary digital reality.

Monday, April 23, 2012

Agency Mud Sticks?

Searching for clarity on the DOJ Agency debate is often like searching for the Holy Grail and wherever one turns one finds opinion based often on vested interest more than independent judgement. So it was great to read Jane Little’s ‘Antitrust Primer for the Publishing Price Fixing Lawsuit’ article on the case. Jane has taken the legal points made by the DOJ, reviewed the anti trust legal position in the US and has crafted a piece we would recommend all to read.

Some 15 U.S. states plus Puerto Rico are apparently in settlement talks with the three publishers who have opted to settle. This action itself could impact on the separate class actions that have been lodged in the US. There is speculation as to the motive behind these settlement talks and some such as Alison Frankel suggest that they made be designed to undermine the class action cases.

Interestingly two Canadian law firms have now named Apple, Hachette, HarperCollins, Macmillan, Penguin, Simon & Schuster, and their Canadian subsidiaries, in class action claims that they colluded to “fix, maintain, increase or control the price of ebooks”. The filing claims that the action contravenes the Canadian Competition Act which makes it a criminal offense to enter into a conspiracy with competitors that increases prices. The Canada’s Competition Bureau has not declared if it is probing Apple or the publishers.

The European Commission stated last week that it had received settlement proposals from Apple and four publishers; Simon & Schuster, Harper Collins, Hachette Livre and Macmillan. Interestingly this further settlement could include Apple and Macmillan who have not settled in the US and have opts to have there day in court.

So we have different perspectives in different geographies which are obviously driven by different laws. However, the news has raised the profile of ebooks within the general public for all the wrong reasons and whether we like it or not has it has again raised question of pricing in the mind of the consumer. Anyone who remembers the initial CD pricing debacle in the UK will know that mud unfortunately sticks.

Thursday, April 19, 2012

Internet and Mail Order Costs Are Rising Too!

We often hear about the constant cost pressures on the High Street and the claims that brick and mortar retail is at a cost disadvantage. Perhaps realty is not as clear cut as many think.

Mail order has been under constant cost rises which are forcing the traditional catalogue online. It is not the consumer switching to digital that is driving this as much of the constant rising cost of paper and postage. We may moan about the number of printed catalogues we receive, but each one is costing at least 10% more to produce than it did last year and in the UK, thanks to some exceptional steep increases from Royal Mail it is costing some 25% more to deliver. As mail order operators look to find new ways to get their inventory in the homes more catalogues are now being inserted with other materials and catalogues in an attempt to share costs. However it’s the weight the determines the price paid so sharing is more about speculation for new customers than reducing costs on existing ones. A catalogue doesn’t guarantee an order and even regular customers can often become irregular but they all still need to be mailed. Without the catalogue the retailer is not reminding his customer that he is there and showing them new products and offers.

We live in an increasingly mixed marketing environment. Research from Marketing production form Charterhouse suggests that 70% of marketers use printed media to interest audiences in online content and to drive extra web traffic. Catalogues4Business claims that their recent research highlights that businesses still see catalogues and direct mail in general as an important part of their marketing mix. Their MD Ian Simpson says, ‘While many customers place their order online or by tablet or smartphone, the trigger is very often a catalogue or piece of direct mail.’ Clearly Google Ad words only goes so far and is great for search and discovery of specific products but doesn’t create spot buys or cover the items the customer didn’t know the retailer had on offer.

However, once the customer has bought online or offline, the goods have to be picked, packed and shipped to them. Here we find another urban myth, that shipment is ‘free’. Sadly it isn’t and increasingly this cost is rising far greater than any inflation benchmark.

Yodel, which distributes 25% of the market in the UK, handles some 1.2 million parcels a day at peak times and its contracts include the likes of; ASDA, Amazon, TESCO and Littlewoods. Yodel has some 55 depots and employees 14,000 staff. Two years after buying up the competitive DHL Domestic parcel business is now seeking a “double digit per cent” hike in its fees. Their pressures are many but they claim the sheer volumes alone are making their current model unprofitable. They state that the UK infrastructure is not developed sufficient to handle the current explosion in online shopping. They also see the need for thousands more local collection points, the introduction of six days a week delivery and the choice of morning or afternoon deliveries and customer text updates.

It’s a sobering thought that each order is today exposed to potential service cost increases of some 30%. The lower the value of the order the higher the margin impact and books are in the main not expensive items. So as we listen to increased cries of unfair from the High Street remember the direct mail and internet channel is also experiencing cost increases and not everyone is 100% virtual.

Cartoon with kind permission of

Would You Buy A Nokia Smartphone Today?

In the wider technology and corporate world there are significant changes taking place which should act as a warning to all that no one’s future is guaranteed and that everyone is judged by not what they delivered yesterday but what they deliver today and tomorrow.

Yesterday, we saw a brash Nokia stand boasting much but delivering little at the London Book Fair. It is somewhat delusional of them to believe that they are ready, or even offer a viable proposition in the dynamic digital market. They may have technology, but it’s the technology that is not in demand today and its consumers they need to convince.

It was only a short time ago that Nolkia were the mobile of choice, they dominated the global market and appeared not to put a foot wrong. Then came the iPhone, apps, Andriod and the market changed. Nokia made some wrong moves, bet on their leading position and technology and with a series of operating system gaffs bet on losers. It is very questionable whether their switch to Microsoft will save them and we see two former world champions not capable of getting into the ring with the new contenders.

This week Nokia’s credit rating was cut by Moody’s to Baa3, which is one step away from non-investment level. Compounding this bleak position a profits warning last week knocked 20% off Nokia share prices and as iPhone and Andriod sales continue to rise Nokia’s smartphone sales have now halved in a year.

Nokia remains liquid and maintains a strong capital structure, but desperately needs to reposition itself in the market which may be difficult. It has the capability to bounce back but can it be a force against an Apple and Google dominated market? The two things that are certain about tomorrow are that we will be older and change will happen and what is increasingly uncertain is who will succeed, fail or even survive the journey.

Friday, April 13, 2012

The Organisational Impact of Digital

The changes in the technology market are somewhat frightening and swift and organisations we once expected to last for ever, or were seen as the new role models can soon wane. We remember, the first ‘Publishing in the 21st Century’ research paper , The organisational Impact of New Media’. We helped those stalwarts, Mark Bide and Mike Shatzkin galvanise their thinking. Then we looked at a digital world that was going to happen, some 15 years later, we now face an exploding digital market.

Only this year we have seen Kodak hit the digital wall this year.

We have also seen Nokia struggle to find the right mix as others swallow up their once dominant market share.

It is sobering that this week Facebook, in acquiring Instagram, valued the 15 month old company of 13 staff at a staggering $1 billion.

We have seen the innovative Sony in the doldrums with four years of losses. At the end of March 2011 Sony had some 168,200 employees. Now Sony has announced it is to cut some 10,000 jobs, which equates to some 6% of its workforce. Only last month Sony said that it was selling a chemical products division, shedding some 3,000 people and earlier it merged its Sony Mobile Display business with Toshiba and Hitachi to form Japan Display and in doing so effectively shed a further 2,000 jobs. Job cuts and reorganisations are not new at Sony. In the Global Fincial Crisis at the end of 2008 they shed some 16,000 employees.

We often think of businesses in simple terms of turnover, employees, profit, but today these can be inhibitors, which make the ship heavy and difficult to tack quickly whilst others prove far more nimble and react to changes far quicker.
This week many are debating the perceived justice or injustice of the DOJ decision on the ‘Agency’ pricing model. What may be more interesting is to debate the organisational changes that will have to happen within ‘publishing’. Big is not always best and not all of today’s players will make it to tomorrow. What is the ideal publishing organisation of tomorrow? How will it be structured different from today? What will the difference between the various sectors? Who will be best positioned to seize the new opportunities?

What is clear is that change is not just about content and seize is not about people but how you deploy them.

Thursday, April 12, 2012

Agency Wake Up Call

Yesterday was a sad day and somewhat a watershed for publishing. The judgement of the US Department of Justice was inevitable and seen by many as the only conclusion they would have reached. Three publishers settled to an agreement which on the face of it looks to be a bit of a muddle of a compromise, which itself is probably going nowhere fast and has compliance officers and reporting strings attached. Two publishers Macmillan and Penguin decided to fight on and John Sargent, CEO of Macmillan , issued an open letter to staff and authors which spoke of his moral stance, but omitted any mention of the thorny issue of the ‘most favoured nation’ clause. Apple has the money to stand its ground and some would suggest can only operate on a simple pricing structure such as offered by agency commission.

Yesterday was not what is being declared be many as a victory for Amazon, but was a victory for consumers. Amazon will now have all the ‘good and mighty’ on their backs and will probably be openly pillared by many within for bringing down their ‘white knight’ agency model. The reality is that if Amazon had not played the discount card someone else would have.

What we all must be wary of is the price and offer to consumers and avoiding any knee jerk reaction which will further raise consumer challenges over price. Consumers will in the main always side with price and service over maintaining any legacy industry infrastructure. The library lending issue of ebooks hasn’t gone away and consumer groups can do the maths and may conclude that resistance to change is greater than finding solutions to enable it. We also still have an industry that is front list orientated and often in denial over used books, bargain books and often back list. The strength of the offer is in depth and range and not just the latest and celebrity tie ins.

We all often side where are interests best served but we must remember that the only two that ultimately matter are the author who creates in the initial value and the consumer who values the end result and pays for it.
The filing is now available here:

The filing is now available here:

Tuesday, April 10, 2012

Facebook Buys Instrgram For $1 Billion

One of the most popular apps Instagram has been bought by Facebook for a cool £1billion.

We have all become happy to share our thoughts via blogs, twitter and Facebook, our business contacts via LinkedIn, our social circles via Facebook, our videos via YouTube and our photos via Facebook and Instagram. Instagram has been downloaded and used by a staggering 27 million people, including many celebrities. In fact, the app has only just been released onto the Andriod platform and we only downloaded ourselves this weekend. So in theory the app has the potential to double its audience!

The app is like Adobe Photoshop plus much more and allows users to alter and post images on their smartphones and tablets. It offers stylistic filters, frames, and special effects to photos. Options can transform a straightforward snapshot into something very special.

Kevin Systrom, the the 26 year old CEO, who turned down an offer to join Facebook in 2004, founded Instagram only 15 months ago. With only 13 employees, Systrom now has hit the $1 billion jackpot. Systrom also retains 40% of the company and lands £400million from the deal, which values the business more than the likes of the New York Times!

Although Facebook has a reputation for buying up start-ups and then integrate the technology Systrom has reassured users that Instragram will continue to exist independently of Facebook and will continue to add new features to the product. Facebook CEO, Mark Zuckerberg commented , ‘This is an important milestone for Facebook because it's the first time we've ever acquired a product and company with so many users. We don't plan on doing many more of these, if any at all.’

As we develop our social skills it is going to be very interesting to see how ownership and privacy evolves. What is clear is that a handful of services will know a significant amount about us which can be used both positively and negatively and how much control the individual ultimately has will be very interesting to watch.

Friday, April 06, 2012

Indies You’ve Been Googled!

The marriage of Google Books and Indie Bookstores tied the knot between, the bride who brought her wealth of stores and customers and the groom who brought his technology and ebooks. Was it an even relationship founded on common understanding and shared belief in each other, or merely a hastily arranged mis-marriage born more of convenience than love and probably never consummated?

This week Google started divorce proceedings based on the indies not delivering sales.

Unrequited love, often drive the groom to seek pastures new and in this case Google has declared that it will start to sell e-books solely through its recently launched Google Play beginning January 31, 2013. Will it makes the envisaged sales it believes it can do better on its own or will it find the market will has moved on further and Google is not the ebook force it once envisaged?

The bride will no doubt be unindicted by new suitors hungry to convert the dowry on offer. However, will these wanabees fair any better, offer a true relationship or once again follow in the footsteps of Google when their expectations are not met. It is easy to see a line of ‘white label’ suitors who all will offer books and technology. How will any of these differ from what went before? It is often said that if one rushes on the rebound from one broken relationship to another, with the next one being to someone very similar to the first.

When we wrote the Brave New World report in 2006 we saw the opportunity for booksellers to embrace and deliver the digital opportunity. Then it was possible to see strong partnerships that could have matured, but today the landscape is very different and although the pie has grown significantly the opportunity to cut a sizable slice of it has diminished for many. We did discuss the opportunity for bookstore to build their own platform and take control of their own destiny but it was felt that marriage was more rewarding than remaining single. In hindsight we wish we would have been more forceful and argued the case stronger as a booksellers digital repository tied to stores and consumers would have had strong market appeal and perhaps would have attracted a more equal suitor or offered a stronger relationship.

The opportunity is not lost, nor should anyone dismiss the wealth on offer, but it takes strong leadership and vision now to move the indies digitally forward. The UK and US do not have the security of the Centraal Boekhuis relationship but can learn much from it. The stores themselves need to recognise that white ‘label stores’ only offer a commission not a marriage or partnership. It’s somewhat ironic that the two parties, libraries and bookstores, that are now playing the dating game, are potentially still the strongest bodies if they can the pull all the pieces together.

Wednesday, April 04, 2012

US Survey Says… ebooks readers read more and much more

We know that readers are reading more ebooks in the US, but now new research gives us some interesting insights into their behaviour and their use of digital and physical content. Some 30% of those that read econtent claim that that they now read longer, with some 41% of tablet readers and 35% of ereaders readers claiming to be reading more. The research claims one-fifth of American adults (21%) have read an e-book in the past year, which is an increase of some 4% on those who, in December, claimed to have read an e-book in the previous year. This is probably understandable given the amount of devices that were received as presents over the Holiday and Christmas period.

Is it surprising that those who read ebooks, read more books than those who don’t have devices? One would assume that those who have bought the devices would have done so to read and therefore would be readers and gifts would be probably given to people who are know readers, so it’s not surprising that they have used the devices and even have read more as they go through their early adoption phase. The figures make one assume the survey demographic chosen are heavy readers, but the figures given are that the survey included readers who had read; only 1 book (8%), 2-3 books(17%), 4-5 books(16%), 6-10books (19%), 11-20 books(18%) and over 20 books (22%).

The first interesting point is that that those of who read an e-book in the past 12 months, some 42%, did so on a computer. This compared to those who used an ebook reader (43%), a smartphone (29%) and a tablet (23%). This issue is however is whether the high level of computer reading is down to transition and adoption of new devices and if it was consistent over the full year.

The next interesting point claimed by the research was that some 88% of those who read an e-book also read a printed book. Of those surveyed, 14% claim to have read both printed books and e-books. Overall, over the year, 72% of adults surveyed read a print book, 21% read an e-book, and 11% listened to an audiobook.

The research also looked at the reading behaviour and why readers read ebooks. Again we could suggest that 2011 was a transient year in the US and although the research claims book readers are more likely buy their most recent books (48%), rather than borrowed them (24%), or loan themt from a library (14%), we have yet to see the real loan, rental and alternatives such as ‘on demand models’ in the market. DRM still remains a borrowers and consumer nightmare and today will constrain borrowing. However, it was interesting that those how read both physical and digital books preferred e-books when they sought convenience to buy quickly, when travelling or commuting and when they wanted to review a wide range of titles. As for that favourite reading place the result was split with 45% prefer reading e-books in bed, while 43% prefer print.

Book recommendations clearly should be a wake-up call for all those that believe that we are still in a mass market community. The vast majority, some 81% of ereader and tablet owners, get recommendations from ‘friends and family’. This also applies to non ereaders surveyed (64%) too. On line bookstores and web sites were high influencers with 56% and 28% respectively but physical bookstores and libraries had far less influence (31% vs 23%) and 21% vs 19%) respectively. Social networking and usage of friends and family is an obvious pivotal key for all.

The main reasons given by those who do not own ereaders and tablet devices are; they don’t need or want one, they can’t afford one, they have enough digital devices already, or they prefer printed books. Not exactly rocket science but confirms what we probably already knew. The survey found that 19% owned a reader and same number owned a tablet but it didn’t identify how many owned both. Of the tablets 61% were iPad and 14% Kindle Fire 14% with the Nook only registering 1%. Of the reader devices Kindle were 62%, Nook 22% and Kobo and Sony only 1% and 2% respectively. Of the adults who did not own a tablet 10% plan to buy one in the next six months and a further 8% eventually, whilst 8% who don’t have an ereader plan to purchase in next 6 months and 5% eventually. This would indicate that there is still significant device growth and that Amazon is very well positioned in both segments to achieve further growth in the US. What it clearly says also is that the device battles are clearly down to Apple versus Amazon today. How that may shift over time will be interesting to watch and also what happens with the great unread will be even more interesting to monitor.

It was a pity that the question of DRM appears to have not been covered, along with the question of perceived ownership versus licence and the lack of ‘first sale doctrine’. These are perceived consumer issues and this would have been a great opportunity to gauge consumer perception.

Finally, the survey also claims that although econtent is relatively easy to find, 23% of those who read ebooks, digital newspapers, magazines, etc. can’t find what they are looking for or its not available in the format they require it. Although the detail is somewhat ambiguous the message should be noted.

The research may not be news to many but what is important is that we monitor these social changes in reading habits and understand the market trends.

The research was prepared by Princeton Survey Research Associates International for the PEW Research Centre’s Internet and American Life Project and the Gates Foundation. The project was underwritten by the Bill & Melinda Gates Foundation.

Monday, April 02, 2012

Will eBooks Loose Their Triple 'A' Status?

If the ongoing DOJ negotiations with the gang of five as expected take away Apple's "most favoured nation" status, which prevents the publishers from selling e-books through rival retailers such as Amazon, Barnes & Noble, Kobo etc for less.

It will almost certainly reduce the ability of publishers to control prices. This will almost certainly lead to a resumption of skirmishes between some parties and reduce market prices.You could say that the market will certainly loose its triple 'A' status (Apple Agency Appeal).

The question of whether we shall see a return to $9.99 ebook pricing is not so important as the one as to what any removal of the status will do to Apple’s commitment to ebooks. Apple are unlikely to dominate the ebook market and like to keep things simple. They are not retailers and playing in an open market is unlikely to be appealing, will be very demanding and not very profitable. The ebook market is very small in Apple’s revenues and is unlikely to grow exponentially with the removal of agency.

We all have to wait for the Justice Department and the EU Commission’s judgement but is looking increasingly like that an agency model will stand as constructed today but the most favoured nation may only consist of one.

Public Library News: April Fools?

April Fools Day always raises some dubious claims, which have to be carefully considered before they are accepted as genuine. It was therefore somewhat an unfortunate day for the Public Library News blog to post a report into a panel discussion on the future of public libraries held under the Arts Council England (ACE). Perhaps they just couldn’t wait another day and thought the news to hot to handle, or perhaps it was a spoof.

What we found interesting was that they seemed to have dropped the ‘book’ and moved onto ‘community centres’. The ‘core services’ were about ; civic engagement, transformation, getting people back to work, promoting health and repeatedly they have some weird obsession with 3D printing and fab-labs .

It certainly didn’t describe a library as we know it today, or yesterday and books were brushed off as being "the given". On one hand they wanted to ‘engage more with e-books and encourage "live" literature such as author visits’, but on the other saw acquisition, cataloguing and librarians as past their sell by date. They state that ‘other people offering these things (books). Why should a library offer them too?’

The more we read, the more convinced that it must be an April Fools Joke. The thinking was far from joined up and somewhat all over the floor. So on one hand we have real estate and inventory and folk who are trained to relate this to the community and on the other thinking that say we can role up the Citizen’s Advice Bureau, the civic crèche, the Community Day Care Centre, the Tourist Information Centre, the Job Centre, whatever into one building and call it a library. Forgetthe books its more about the service. Its as if thinking 10 years out they believe the community will still be physical and need a building or that ‘books are a given’ but don’t need curators and people interested in them to manage the service. We fondly remember when librarians became ‘Information Officers’ and wonder if the same hands are on this tiller.

The Public library service is what it says on the tin and changing that redefines its role, who it employees, its financing, and who its customers are. The panel discussion clearly lacked vision, mission and operation today and it’s a shame as it has potentially a huge role to play in the digital age and one far more engaging than 3D printing.

Their conclusion was that, ‘the argument in the country tells you what passionate feelings have about their libraries. Makes it important to discuss. We need to get thinking for "not tomorrow" but for 5 or 10 years time.’ Ours is that they should get today’s thinking joined up before they dream like little children on what they want to be when they grow up.