History, Trends and Digital Changes in Media

Digital Music News have taken RIAA data and produced an interesting animated graphic of the changes in music purchases over the last 30 years. We strongly recommend that you view this as it shows how transient some technologies are and how it’s not just the technology that changes but how people buy and relate to media.

It would be great to be able to step forward and predict what will happen in the next twenty years but many of us would be struggling to see further than the next five years.

What is interesting is that the base content hasn’t radically changed, a song is a song and a recording is a recording and music made decades ago now lives comfortable alongside that made yesterday. In some cases the technology actually impeded the quality of the recording and forced the extremes to be toned down to fit.

The other interesting thing is that emerging music format technologies cannibalised their predecessors. 

Cassettes replaced vinyl, CD replaced cassettes, downloads replaced CDs and now streaming is replacing even downloads. We are moving to music on demand which is either paid for through other means, or is on subscription. This changes the question of ownership, collections, sharing and of course the reward earned by musicians, writers and producers. It also can change how we protect or identify usage rights and copyright ownership and some would suggest that the new technologies are more secure than all the belts and whistles of the early music DRM days.

If we produced a similar graphic for books, newsprint, film, tv they all would be different and we need to understand why and what similarities there are. Film and TV are probably the closest to music in the technology step changes, but differ in many other upstream ways. Interestingly the original formats of books and to a degree newsprint aren’t going away and it is easy to see books as the most resistant to technology.

However, all bar newsprint, show very similar patterns to the consumer trend from ‘buying to own’ to ‘subscribing to access’. Yes, the sectors are often moving at different speeds and even different directions but the trend is clear. DRM as we know it today is transient and past its sell by date and will become increasingly irrelevant in a streamed world where it happens albeit less obtrusively.

Therefore some would suggest that the challenge for book publishing is not the latest tablet, ereader, smartphone, app, enhanced ebook, but how we accommodate subscribing to access alongside the traditional buy to own, enabling both to flourish and appeal and importantly reward creators.

   

Amazon Deliver A PR Bomb To Hachette?

The problem with any open confrontation is that often things that were really said in public have a habit of rising to the surface and becoming public. Public Relations people then try to put them back into the box, or rationalise the issues, but often the damage is done, or the public’s perception has changed. Propaganda is a powerful tool when communicated effectively.

Today’s standoff between Amazon and Hachette is becoming increasingly visible to the public. Some would say that the majority of book buyers are more concerned about getting the right price and service for themselves than they are about the trading terms between publishers and retailers. This makes sense and for many it is as if this battle is taking place on another planet. But then we introduce the emotive strings and issues that attempt to sway opinion. Not many care about the plight of the main protagonists, but introduce the authors and that changes things a bit. One side infers that authors are being exploited, and the other also says that they are being exploited or harmed by the action. Some would suggest that the author is are mere pawns in this battle.

We now have Amazon making a public statement ‘Update re:Amazon/Hachette Business Interruption’.

The statement is logical from Amazon’s perspective and makes arguments for lower ebook prices, which reflect the reduced usage rights, plant and distribution costs. They suggest a price point of 9.99, but also recognise some books will cost more. They put forward their revenue model split between themselves, publishers and authors and then say we’ll give you 70% and you guys can sort it out the division between yourselves. They argue that lower prices increase volume sales which in turn create greater revenues for all.

What Amazon have subtly done is drop a PR bomb into the publisher lap. They have questioned the royalty paid to authors, knowing that their suggestion is higher than what publishers gives. They have started to make the public more aware of the differences between the usage rights costs and pricing of ebooks, and in doing so promote themselves as consumer champions. This interestingly moves the debate into the public arena and starts to set the public argument and seize the public initiative.

Can the publisher respond effectively and seize back the propaganda war, or will they aim to muddy the waters and strike back with a fresh angle of attack?

What we are seeing can only benefit two people in the end, the author who will demand more and whose case is being strengthened by the day, and the public who will get cheaper books as the ebook RRP comes under pressure. Will it benefit Amazon over others, or will others benefit from the stance taken by Amazon? Will others step in and try to broker a deal or will Amazon simply and suddenly capitulate knowing that they have already scored their points and leave the fight for another day?

  

Blame it All On Amazon

The papers are full of anti-Amazon rhetoric which some may suggest is being whipped up into a feeding frenzy within the publishing marketplace. Amazon is being portrayed as the biggest bully ever to have stepped into the publishing arena. But is this the case or is it another attempt by the publishing majors to wrestle back some of the control they happily gave the Seattle company, or a genuine grievance? How do consumers feel about the latest public spat, do they really care and how do they actually perceive Amazon? Do authors side with the retailer who has more than any single entity extended their market, or do they side with the publishing majors and those A list authors  who may be suffering in this conflict? 

The issues facing the ebook publishing marketplace are wide ranging and often interrelated, but often these only get raised and discuss as individual issues. Some would suggest that the book supply chain is adversarial by nature and can often be seen not as a supply chain, but as a ‘blame chain’. Yesterday it was the book chains and their greed to secure additional discounts, today it is Amazon’s same battle at a time when some major publishing houses are declaring profit rises due to digital sales and growth. It’s somewhat ironic to wind to the clock back just a few years to when publishers were claiming the true costs of digital were far greater than many envisaged and they were losing out and couldn't pay authors more.

The digital market has shifted significantly and mainly thanks to Amazon and its continual exploration of the marketplace. They have given us and invested in Marketplace, Creative Space, KDP, Audible, ABE, Goodreads, Singles, Kidsspace and much more. They have raised the bar re author royalties and whilst many publishers have started to raise the digital royalties, they all too often pale into insignificance compared to those offered by Amazon and followed by their competitors. Publishers claim that they can make the difference and ‘make a book happen’, but although this may be true in the physical market the digital one is effectively owned by Amazon. Interestingly Amazon have also opened up the digital honesty box through KDP and in doing so have given authors transparency on daily sales by title and region and paid them monthly, again with total transparency.

If we step back and look at some of the digital issues some would suggest that we often have little appetite to change and more easily accept the status quo, often letting others take the risk and waiting to see if they fail or succeed. We have lurched from knee jerk to knee jerk with the likes of the ill-conceived Google book Settlement and Agency moves. Some would suggest that these were primarily aimed at bringing in Google and Apple to compete with Amazon but on their terms.

Today we have a marketplace that is still fixated with front list in a digital world of virtual shelves that provide equal space to all content, irrespective of its age. We have no, or few price points that are recognised by consumers and this just promotes discounting across titles that should not be discounted. We have continue to pour the physical into the digital container and believe the job is done and in doing so undermine the physical product and marketplace. We have generally failed to create new digital content that encourages reading and compliments the physical book as Charles Dickens and others did in the early age of mass reading and have choosen instead to stick with the 256 page model fits all?

There are only two entities that truly matter in the value chain; the author who puts in the creative content and the consumer who puts in the cash. All the others have to add value and not just cost but also have to often co-exist to maximise the efficiency across the chain.

HELLO! Books Are Digitally Different

So what will be the next technology must have and what will drive its adoption? Will media come second and merely follow new technology?

In the last decade we have seen the transition from fixed location desktop PCs, through luggable laptops, the life and death of the notepad, the ‘air’ laptops and the explosion of the tablet. We have seen single functional devices such as the eink ereaders come and almost go, the transition from games only consoles to games anywhere, the death of the music only iPod and Zune and those video movie players. Home entertainment devices and interoperability has been redefined. The app, the cloud and streamed media services have arrived. Today the smartphone, or computer in your pocket, has taken over all our lives.

It has been a decade of significant technological and culture change and is unlikely to stop or even slow down as the technology shrinks, gets more powerful and anytime, anywhere and at high speed continue to drive our thirst to be connected. Our interface with technology is becoming more intuitive and although we may still be some distance from Pranev Mistry’s sixth sense world, it’s coming.

So how are the media and creative industries responding? What can we expect to see soon and what is still stuck some way off?

If we just look at film, music and books we see that although technology has increasingly impacted the development of the stuff, the output is the same. Films are still 90 to 120 mins long and apart from some 3D and computer aided technology the majority remain as they were. Music still retains the same length of tracks and although the technology has dumbed down the quality of content, a song is still a song. Books remain books with the vast majority of ebooks being straight digital renditions of the physical book.

However, there is a significant difference between books and the other two media. Film does not exist in a native technology free form, Unless you count the theatre and live music performances, both Film and music are very different cultural experiences and consumer purchases and not something you can put on the shelf and replay at will. Music has evolved through a series of disruptive technology changes, from vinyl, cassettes, 8track, CDrom, to today’s streamed MP3 on demand. Vinyl may be enjoying a small and limited renaissance and success in clubs, but for the average consumer it’s only like discovering a pile of old 78s and then looking for the device to play them on. The gramophone players, Walkman, ghetto blasters have gone and today we have the personalised earpiece connected to the smartphone and the cloud.

Books are different. Books remain and ebooks are a competing new rendition like the paperback was to the hardback. This difference challenges the ebooks ability to be a disruptive rendition and to kill off its previous forms. Book technology and the reader goes back hundreds of years and isn’t broken, nor is it made obsolete by the new form or its evolving technology. Therefore eBooks over pBooks is not a straight binary decision choice.

When we first grappled with the ebook in the 90s we often tried to enhance and exploit the content with the technology. Many fingers got burnt and so when it returned under the eink revolution, many kept it simple and also found that the eink technology didn’t exactly encourage content enhancement. However as tablets, mobile and smartphone technology become ubiquitous some may now return to enhance the content. Others may choose a different route and abridge it, or even play to the strengths of the technology and embrace the obvious – the short form.

Whatever the route taken the stupid thing would be to continue to merely pour the same content into a digital container. This logic is flawed as it not only creates competition where competition is not needed and can be counter-productive, but it fails to understand the technology, the cultural changes that are happening and the opportunities that are available for the two that matter - the author and the reader.

Making Reading Fit Today's Lifestyle

Is it a surprise that men read less in today’s channel hopping, multimedia, time poor environment? Are we really shocked to find that some 63% of men polled in a recent UK survey said that they prefer to spend time on the internet or watch the big screen version of a book? Many claim to blame a lack of time, whilst 20% stated that they find it difficult or don’t enjoy reading.

So what is the industry response and reaction to the news from the study commissioned by the Reading Agency conducted by OnePoll which polled some 2,000 UK men and women?

Some believe that the answer lies in more of the same assisted by that great give-away event, World Book Night. It’s as if they believe that all can be converted to reading by a freebie and that they can somehow like King Canute, control the tide from coming in. The reality is that social culture is changing and is being driven by many competing demands. The internet and mobile technology is having a significant impact on what we all do, how we do it and where we spend or effort, time and money and although books have significantly benefited from the exposure they have been given, they remain wedded to the physical world and yesterday’s culture. Many still believe that it’s just a case of pouring the finished physical book content into the digital container. They have failed to grasp the opportunity or understand the difference between physical and digital consumption. Some also believe that it is a case of adding more to what already exists and by doing so enrich the physical book with multi media. They have often failed, or ignored the lessons of others and from the often disastrous CDRom days of the late 90s.

To get more people reading and enjoying the experience you have to encourage them by giving them something that fits their lifestyle, habits, time windows and technology today. Some will not take up the offer, others may migrate to the physical book and time commitment and some may remain at the entry point. But trying to force feed them with something that they already have rejected and doesn’t fit their culture is very questionable.

So it’s no surprise to many who have read our previous articles that we believe that the digital offer now requires serious and radical overhaul. Merely pouring that physical content into the digital container is naïve, as it undermines the physical product and makes it a substitution sale, assumes that the experience and appeal is the same and importantly reduces opportunities for authors to reach new audiences.

If we want to grow reading we have to adapt what we expect people to read. We have to give them something that is digestible. Some would suggest that what we are doing to today is like expecting, in the early age of mass literacy, the Victorian masses, to rush out and read War and Peace as their first book. We may learn from other media sectors but we can also learn a great deal from history too.

Making reading relevant to today's lifestyle is different from making today's lifestyle adjust to reading. Giving away books is relatively easy, getting people to change their habits is a lot harder and without change some would suggest that it is relatively easy to predict the results of next year’s Reading Agency survey.

eBook Subscriptions Part 3: The Future Should Be Significant

In the last two articles we looked at today’s subscription market and some of the players, but what of the future? Do we really believe that the consumer will continue to want to ‘buy’ eBooks that they effectively don’t own, that they can’t easily share with others and that they are prohibited from reselling. Adobe may have backed down from their heavy handed approach to their initial ACS5 upgrade plans, but DRM remains a millstone around consumer’s necks and wedded to yesterday’s 'download to a device' ownership model. Today the media world is moving towards on demand, streamed and cloud based services whilst ebooks often appear to be still stuck in an eink device type offer.

Some would suggest that the eBook market is already a mature and well established, others would suggest that it is merely at first base and has some major changes and challenges on the horizon that will redefine it, in terms of its content, context and commerce.

Some will look at the other media consumer markets; music, film, TV, games, newsprint, magazines, etc and see clear and growing trends towards on-demand subscription services. Some of these sectors are further ahead of others and all may be moving at different speeds, but they do appear to be moving in the same direction. So should eBooks remain stuck in some pseudo digital world?

Imagine making one monthly payment and getting your network connection, together with media options on films, music, TV, games, news, and eBooks. You may get some services free, or others cross subsidised by others, but you potentially get your Home Entertainment under a ‘one shop’ federalised deal. Today the likes of Spotify are being rolled into network and Home Entertainment deals, so why not extend it to encompass all media? Today we see the likes of Nokia and others now realising that providing digital content services is maybe as important as selling the device. Enter the likes of Apple, Google, Samsung with their growing media content offers.

Home Entertainment propositions have huge appeal to advertisers who could also have both separate and collective deals. It will potentially attract new investment which in turn can either lower consumer subscriptions, or feed greater rewards to the creator. Many sports today benefit from Home Entertainment tie-ins and this route could raise the appeal of ebooks, reading as well as increase the revenue in the market.

Imagine a world in which consumers are encouraged to read, not by serving up free copies of the same stuff they don’t buy today, but by offering them digestible chunks of content that by themselves fit into their often time poor, multi-demand lifestyles. We don’t expect young children to be immersed in long textural works, so why do we expect adults who don’t read today and have shortening attention spans and time windows, to suddenly create 16 hours to read an eBook. We have written much on this subject, but the relevance to the potential subscription market is significant, as readers will consume short works faster and potentially more regularly than large ones. Also pricing short works today to sell through against the heavily discounted longer ones, is very difficult. Has anybody stood back and asked whether its wise to converted the physical book and merely just pour it into an ebook container?

If we look at how films and TV shows are now financed, produced, branded and even merchandised, we increasingly see cooperative ventures. These set out to maximise the investment and rights sold, not minimise them in a hope that they prove to be winners that may be exploited later. Amazon’s influence in making the BBC change its decision to cease production of the ‘Ripper Street’ series was a significant step and it is not alone in the shift of power that is happening in the Home Entertainment world. Harry Potter may be seen as an exception today, but can others now take a more holistic approach to rights and services and beg the questions as to whether subscription based models a more natural way to harness and maintain these new communities?

It is easy to envisage subscription services being a major driver of change to what is created, how it is developed, marketed, promoted, sold, paid for and consumed. However it is often harder to see an industry which is often slow to change and diverse in its structure making those changes. So are we to remain wedded to the digital base 1 or can we now move towards second or even envisage third base, or will we wake up one morning and find someone has done it to us?  

Digital Warming and Self-Publishing

Today there is much debate over the value and size of the self-publishing channel. Yesterday this channel was restricted by the physical supply chain, which effectively remains owned by the traditional publishing channel. This is no longer the case with the digital channel and works are only restricted by all the other works that they compete with on their virtual shelf and the money spent in promoting and marketing a title.

Self-publishing was once seen by the market as vanity publishing and being the books that publishers didn’t want and therefore unworthy of the attention of consumers. The digital market has changed that and now self-publishing is growing in respectability. There are still poorly written and edited books, but some would suggest that also applies albeit to a lot lower extent to the traditional channel. Both now sit side by side on the same virtual shelf.

Platforms such as Kindle Digital Publishing (KDP) have made it possible for anyone to publish at relatively little cost and receive a large proportion of any revenues generated. Some will argue that there still are costs which are largely forgotten by the author. Others will claim that these tasks can be outsourced at a very low rate to professionals who don’t carry the corporate baggage. Some would suggest that publishers have the ability to generate more sales which even at a lower royalty will generate more money for the author. Others that self-publishing is more transparent, pays quicker and puts the author in charge of the price.

The self-publishing channel is now not restricted to new works, but is increasingly available to those published authors who have been able to revert their works when the publisher didn’t want them anymore, or digitally publish works that never had the digital rights licenced in the first place. The author are now able to republish these themselves digitally via the likes of KDP and others.

We now have a virtual shelf brimming over with old and new, self and published works and the challenge for all is now coined as ‘discoverability’. Marketing spend can still by the bestseller, but those without that backing now have to increasingly compete head to head with the self-published.

In his Report on self-publishing Hugh Howey draws his conclusion that the self-publishing channel is far greater than many think and he makes some claims which others dispute. The reality is that no one really knows the answer and the data today is incomplete and the analysis often more subjective than factual. Amazon, do not disclose and make the detail public and as a result there are many who make assumptions based on their opinion and bad data.

Counting the volume of total works published becomes a futile exercise as many self-publishing ones don’t have ISBNs, let alone bother to register them. So how many ‘new’ titles were published last year becomes an guessing exercise for some and largely irrelevant to many. The slice of market share achieved by some is as only as good as the data collated and what is often outside of that is ignored. Even the definition of a work and the number of renditions starts to be questionable.

Like global warming it would be somewhat naïve to not accept digital warming is happening and one aspect of this is that self-publishing is not only growing but that some authors are making a return off this route. Self-publishing will not cannibalise the traditional channel and as we have said, it can’t compete with others marketing and promotional spend, but it can be a viable first step to many, provide a longevity of a work for others and if dismissed by the traditional players may well come home to haunt some.

Digital Warming

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

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

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

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

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

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

Drones, Cheap Tablets, The Cloud, Robots and Publishing!

This month we have read of the $38 tablet, Amazon’s statements on the potential use of Drone technology to delivery local parcels and the growth of stuff that is now and predicted to be connected to the Internet. Some would suggest that these are interesting but don’t apply to their world, others would suggest that they are part of the relentless march of technology which is now promising so much, whilst threatening so much at the same time.

Drones

Drones have started to revolutionise warfare in the same way that communications did before them. The move from open warfare, to insurgent terrorism, may now start to be redressed once again. Armies who once were exposed by the hidden insurgent and suicide bomber, now have their own crewless spy and attack tool. Like space exploration before it, drone technology will provide us all with new opportunities to do things smarter.

I remember seeing the film ‘Enemy of the State’ when it was released I the late 90s and marvelling at the spy and satellite technology it predicted. Over a year ago a friend in Bath showed us his $100 drone he acquired when he was working in Silicon Valley. It came complete with GPS, camera, video and internet connection to his smartphone. The control, speed, pictures and range where frightening to observe and the privacy issues it raised, frightening to consider. Now that same technology has the potential to go to not only observe, but collate what it sees.

The embedded YOU TUBE video is only a simulation, but makes you think. For more in-depth insights on Drones click here

When Amazon throws down a statement saying that in the future drones could deliver goods, it may be foolish to mock. We always considered individuals having their own personal flying machines to transport them, maybe it’s not people, but goods that get flown around in the near future?

Matternet, A Silicon Valley start-up, Matternet reports that is building a UAV (unmanned aerial vehicles or drones) system that will transport crucial goods in areas where roads aren’t always accessible. They offer a fast, energy efficient opportunity to deliver medicines and emergency relief and remove heavy infrastructural costs. It is claimed that some billion people around the world live in such areas or would greatly benefit.

What we view today as a gimmick, a toy, something for the geek in us, may after all soon be offering us something lifesaving that was developed in a life taking world.

The $38 tablet

It’s not the potential price that matters, but the opportunities that such low price, ubiquitous technology can deliver.

The UbiSlate 7Ci will be priced for the US market at just $37.99. It will not have the sophistication of the more expensive tablets, nor the brand ticket price of others, but it could start to significantly change our storage, processing and network processes in ways the others only talk about. It will have sufficient internally to, send emails, browse the internet, check Facebook, and play simple games. Others will follow which may be a tad more sophisticated, have a higher spec, but all will now compete on a low ticket, commodity price point.

These tablets can enable one tablet per child, one tablet per worker, one tablet for all. This not only offers so much to developing countries, but also to the developed ones too. It could change culture from a local file ownership and manipulation to explode cloud computing to all. The potential benefits to education, community services and the workplace are obvious and huge and it is not hard to see the knock on impact on all mobile technology.

The growth of connected stuff

I am grateful to my good friend a futurist, Ray Hammond, for pointing out that research group, Gartner claim that the Internet of Things (IoT), which excludes PCs, tablets and smartphones and is the network of physical objects that contain embedded technology to communicate and sense or interact with their internal states or the external environment, will grow to 26 billion units installed in 2020 . This will represent nearly a 30-fold increase from 0.9 billion in 2009.

Gartner also claim that this will generate revenues exceeding $300 billion in 2020 and $1.9 trillion in global economic value-add through sales into diverse end markets.

Robotics

We were all shocked by the BBC documentary on the working performance target driven picking within Amazon warehouses in the UK. For those with a logistics background it was less ‘pick by light’ and more ‘pick in the dark’.

   

But thanks again to Ray Hammond, we learn that Amazon has quietly deployed 1,400 robots in its US warehouse distribution system. The technology comes from a Kiva Systems Inc., a company it bought last year. They claim that the technology could reduce fulfilment costs by some 20% to 40%,  which not only raises the bar for others, but also demonstrates that it may not just be down to offering the range and service, but also operating to exploit the economics of scale.

Google has just aquired Boston Dynamics a military robotics company.

So what does all this mean to publishing?

First, we must recognise that the age of the cloud is here and its impact on all things digital is only going to grow. With cheap tablets that are basically cloud based you have to have cloud based services that are streaming and on demand and maybe subscription based, and less of the old download and licenced model.

Second, closed communities with cloud access for all, such as education, will need online solutions and platforms. The device doesn’t matter anymore, it’s what is at the end of the connection that does.

Third, the content has to be re-thought and merely pouring physical content into digital containers is not a wise way forward.

Four, the economics of scale and scope will radically change if Amazon successfully deploys robotics for physical goods and few will be able to match those new economics. They also may not be happy to subsidise the rest of the market.

Tomorrow’s winners might just be those with the right investment in technology, robots and of course the delivery drones. 

Authors Need eReward

We read that the EU is now considering harmonising VAT on ebooks across the community and that the likely solution is that they will become zero rated. This would also negate the need for tax to be levied at point of consumption in 2015 and remove one aspect of the Luxembourg magnet for digital distributors and retailers. We also are all aware that a further ratchet twist of UK ebook pricing is taking place between Sainsbury’s and Amazon, with front list ebook titles dropping to 99p. We also read about the emergence of ebook subscription models and services which would generate new revenue streams and services.

Some view the moves as being good for publishing, publishers and readers. However, does this mean that they are good for those key players, the authors?

Let’s look at the 99p best seller. Today any title distributed in the UK incurs a 20% VAT charge. If distributed from Luxemberg it incurs a 3% charge and the distributor effectively buys VAT inclusive at 20% and sells VAT inclusive at 3% and the 17% goes to…. The retailer takes say a 30% levy for the transaction and the rest goes to the publisher. The publisher then pays the agent say between 15 and 25% of their receipts. The agent takes off their say 15 to 20% fee and the author gets what is left. Not bad you may say when the starting figure was around £6 but not a lot when it plummets to 99p.

However, the price war is just temporary you may say, prices will revert upwards and not all ebooks are at 99p. Well we have seen the rapid reduction in prices over a relatively short period and it is fair to assume that when retailers start to create price points- they stick.

Recent figures demonstrated that consumers liked free, 0.99 and 2.99 but were unsure about 1.99 and their interest tailed off as prices rose. We are now seeing price point consumer perception and this will be hard to change. These are licence more than outright ownership sales and the price has to reflect this.

The move towards zero harmonisation is welcome by all, but will the money flow back to the; consumer in lower prices, the retailer through tighter margin negotiation, the publisher in retaining the RRP at zero rate, or flow back to the agent and author? We can’t assume anything other than many of the above will lay claim to it.

Finally, we have the emergence of the ebook subscription model.

Why would consumers commit to a subscription model when the pricing of ebooks is dropping and pricing is unstable? If prices were high and stable then a subscription model based on low consumption may have an appeal, but in the current climate and with relatively inconstant and low consumption rates, it makes little sense for ebooks unless the offer is coupled to other media or service subscriptions. It would make sense for someone like Sainsbury’s to tie subscriptions to other services and cross subsidise and offer a value added consumer proposition. But ebook subscriptions to remain by themselves.

Again the author will only get a slice of revenues generated for the material read. As we have pointed out earlier this week reading habits will could also hinder reads being recorded and paid out on.  

We can only speculate on the outcome of these three options, but we must remember that there are two critical people in the value chain, the reader and the author and that any pricing and model for must work at not just one, but both ends of the spectrum. 

Why We Need To Challenge Today's eBooks

Offered below are just three arguments that force us to question what we publish today and what we should publish tomorrow. Individually, the arguments may not pass the ‘so what?’ test, but taken together they should ring alarm bells in every publishing building.

Firstly, we often assume we will see and understand change and importantly be prepared for it. The reality is very different and change today is not linear, nor is it predictable and in many cases it is disruptive. The industrial giants of yesterday have been overtaken by technology and networking companies who connect stuff. Things that were once impossible to imagine can now be achieved from anywhere, at any time, in a click. Technology is enabling us to reevaluate how we develop, manage and market content and its associated context. As change happens society adopts and adapts and expectations and values we took for granted also change. Technology is now enabling everyone to be a creator of content and to connect to an audience and this democratisation of creativity is further impacting content formats such as books, film, TV, music, games, photography, art.

Secondly, we are a society, which in the main, has an ownership culture. We buy bricks and mortar and called it home, we  then set about filling it with possessions, some transient and throw away and others more assets and collectibles. Our possessions often reflect and describe who we are, or who we aspire to be. Unlike yesterday many rooms may not be filled with shelves of books, music, films, magazines etc. On demand instant access to very large ’libraries’ starts to question the basics need for ownership and opens the market to models such as rental and subscription, which were not attractive in the old analogue world. Netflix, Lovefilm, Prime, Spotify, Pandora are all creating the on demand market in film and music and now the likes of Oyster, Scribd, Amazon and others are following their lead in the ebook market.  

 

Thirdly, the way we read, what we read and when we read and how we spend our leisure time today is increasingly different from 100 years ago, fifty years ago and even 20 years ago, yet the content itself has altered very little. The vast majority of ebooks today take the content developed for the physical container and merely pour it into a digital one. Is that logical? Are we presuming that’s what consumers want? Imagine we could take the text and create a perfect audiobook at a click, would we really expect that to be good enough or just a lazy quick fix. Today audiobooks are adapted from books and professionally read to fit the medium and consumers’ expectations. It’s true that they no longer are restricted by the digital media but just how long would it take to listen to ‘War and Peace’ with a synthesised voice? Screenplays of books adapt the content to fit the format, consumers’ expectations and budget. We do not have many 5 hour films and most fit within 180 to 240 minutes and may only cover a fraction of the book content. We don’t have many 15 minute music tracks and again these are no longer restricted by the media. 

So why are ebooks so wedded to the 75,000 word or 256 page economic physical book model?

How we should respond to these arguments today and what will we have to consider tomorrow?

We have been fixated on the end form, the finished book and not the creative process itself which for many has changed very little. We have remained locked to the physical book economics and presumed that the chicken will always lay the ebook egg. We have continued to be obsessed with units sold and largely ignored other models which may cause contract friction. We have continued to pour the same content into a similar digital container without thinking. We continue to view the book as the start and not the book as a potential subsidiary. We have many very well subscribed short story competitions which go nowhere. We have failed to grasp or translate the Japanese Keitai opportunity.

There is no silver bullet. No one solution way forward. Expecting that worked yesterday will continue to work tomorrow, is not good enough.

Retaining Author Relationships In A Transparent World

Technology and communications are changing not only our culture but also our relationships with others. It is not just about how and what we communicate but also about the transparency and openness of the communication. Where once we could not see, we now can and this can start to question and even undermine the trust and inter-dependency in relationships we once took for granted.  

We can all now see our financial transactions and business is now viewable in real time 24x7. Even our location, what we are doing, what we like and dislike can be tracked and visible to many. There is often no hiding place unless you are switched off. As recently witnesses in the news, even governments are exposed and they need to maintain their trusted relationships within an increasingly hostile environment.

When we look at the book business and it value and supply chains, this increased openness and transparency is opening up both new opportunities and also starting to question relationships and process we once took as given.  Increasingly, we are all questioning the value that others add and are now looking to technology and information to support these. These changes are changing relationships and what we expect from them and potentially exposing that thorny issue of trust.

We can no longer deny the rise in self-publishing. What was once seen as the slush pie and vanity publishing is fast becoming respectable and a vibrant publishing market in its own right. As this door widens it could impact on the traditional publishing chain and question what rights are traded, the terms and even the commercial relationships themselves. The process between rights and royalties may have been to many authors something that just happened, but as the likes of Amazon’s KDP and Kobo’s publishing and other services start to show live sales being accrued along with earnings, what once was a mystery to many authors is starting to become transparent. This shift is significant as it starts to force new rules on all and merely sticking to the old ways may in fact end up driving more to the new ones.

We have long argued that physical and digital rights should be separated. We accept that the two go hand in hand and that they are different to other rights such as Film and subsidiary rights. However, the terms under which they are licenced should be separated. Right reversals have a defined physical trigger in most contracts and this works today. However in a digital content world this can easily become perpetual licence as the inventory never goes out of print. If the two are joined under the same revert clause then the physical work can be locked in perpetuity irrespective of its performance. Term time licencing of digital would make sense, but these leads us to consider the information needed by the author on which to base their relationship and trust. We now have to accept a greater transparency, openness, availability of detailed information and timeliness of payments.

Of course some may say the wheel isn’t broken so it doesn’t need fixing, others may say they have a contract and that is that, but it is not about today but tomorrow and maybe it’s time for a change and one that reinforces the relationships and trust and negates the need to go for a more transparent and open deal.

What we can’t deny is that the world around us is changing and with it our approach to what we expect out of those we do business with and there is no reason to believe that should be any different for authors. 

Penguin, Puffin and The Snowman Get Closer

As publishers have always been in the content and rights business but have long been restricted by the book format. Now the digital world offers new forms and licensing opportunities and enables publishers to redefine their role in the development and exploitation of content and rights and also build brands.

An example is the recent move by Penguin to take full ownership of Snowman Enterprises Limited (SEL). This logical acquisition means that Penguin now control not just the traditional book rights but the film, TV, digital and merchandising rights to Raymond Briggs' classic, The Snowman. The Snowman has accumulated over 8.5 million sales worldwide and has become synonymous with Christmas today. 

“... One winter's night, a snowman comes to life and a magical adventure begins...”

As part of the brand development, Penguin imprint Puffin now plans to release audio ebooks of The Snowman and The Snowdog read by actor Benedict Cumberbatch, as well as new publishing in print and digital formats. 

The move starts to move Penguin into being a multi media content and brand owner who is built around solid and respected stories and now with a tighter control over all associated rights.

Are Consumers Now in the Digital Driving Seat?

Yesterday’s Apple announcements on the iPhone 5 were greeted with the usually hoops and wows but also with a few more yawns and so what’s. Its not so much that Steve Jobs is missing as much as the marketplace is shifting and moving on and more of the same isn’t that stimulating. Wired described it as being ‘mostly it is the Toyota Prius of phone updates’.

Sometime you just sense a change in the air. It’s like when winter changes to spring, the days start to lengthen, blossom and colour burst forth, and the sun’s rays become warmer and we start to think about summer. Business and technology is not different, just less marked and has many individual but intertwined seasons. The cycle can be seen as moving from innovation, to adaption to the market, to wide adoption within the market, to commodity and commodity upgrades and then, back to innovation. Because technology alone is not enough the subsequent innovation may be more commercially and market driven.

We are clearly seeing the emergence of the market demand for the technology to be device agnostic. This is because the technology itself is now becoming commoditised. Consumers are looking beyond the ‘wow’ factors and more at their own needs. Android has been the driver of much change and has clipped the wings of Apple. It may ‘borrowed’ some things on its journey and Samsung may have lost one battle on Apple’s home soil, but the change has happened and Apple now has to respond, is no longer in a market of one and that is good for everyone, including Apple. The Nexus 7 and Samsung Note are becoming serious tablet contenders and who would have thought the Kindle Fire, a basic tablet with a lower cut of Android, no camera and few Apps would secure a reported 22% of the US tablet market?

However, we are now also seeing some real convergence between mobile devices as smartphones get smarter, faster and with bigger screens, whilst tablets shrink to meet them. Just as eInk was always going to be and was clearly a significant catalyst of change, it now looks a casualty of the process it succeeded in kick starting. Amazon retain their loyalty with it some may say more as an insurance policy than a strategic bet. It is easy to see the same fate for the early smartphones and tablets. As many early ereader producers will testify, technology without the platform is now a waste of time.

It’s no longer about formats, DRM, standards and more about online, anytime, anywhere, any device. This itself changes both the package and its delivery in ways we are only just starting to see today.

The market is now focused on ‘platforms’ and less on devices, on online on-demand services and less on offline, accepting the consumer merely licences and doesn’t own files, and changing business models that continually engage with the consumer. These changes are fundamental and start to open up new business models which in turn fuel new technology. Remember Blockbuster and how we used to rent videos from the store, then came Netflix and Lovefilm with their postal offers and now everything is going on-demand and streamed importantly to aany device anywhere, anytime. Remember record stores and megastores, then came iTunes with DRM, then came MP3 now we have Spotify. The basic content didn’t change radically, what changed was how we found it, acquired it and consumed it.  

So where does this leave book publishing and its alliances to the new technology and the changing consumer market? Unlike music and video, books have to compete head to head with the physical product and existing model. Merely driving down the digital price to a silly point like 20p will itself force change but are we ready or even thought through the implications or are we like many today spreading our bets and hoping one will come in?

Somewhat related:

A funny cartoon that brought a smile to our faces over upgrade announcements.

Frommer Has Just Been Googled

Some would suggest that when the BBC Worldwide acquired the Lonely Planet publishing unit they were looking to build a travel brand that could add value to their content, create a community and create a holistic source of travel information. Merely acquiring a travel publisher didn’t make business sense. However, sometime that and makes a marriage hard work. Some would suggest that this is probably where the BBC / Lonely Plant relationship is today.

Now Google has shown it too has eyes on the global travel business, but for different reasons. Today Google has added to its 2010 acquisition of flight booking service company ITA Software and its more recent  £150 million acquisition of Zagat’s, with a raid on Wiley book publishing trade business and acquired Frommers. Earlier this year, Wiley had put its trade business on the block and were looking to disinvest and they must be both surprised and happy with the off loading of the Frommer brand. Wiley still have to find buyers for the other non core units, but given their tight vertical nature they didn’t sit easily with Frommer, or as Wiley have deduced, with themselves.

Google have now got two significant pieces to the travel lifestyle model and one that will sit easily with both their business and consumer local and international, search and advertising revenues. Will it continue to publish Frommer, or flip the brand online and into the greater Google mix? According to eMarketer the online advertising within the US travel industry is estimated to be worth over $2.5 million, with online travel booking clocking up over $100 million last year. Both markets are growing at a significant rate and price Google is paying Wiley is likely to be chump change in the exchange for the advertising revenue potential and added value the information it could offer and its obvious synergy with products such as Google maps, YouTube and their other products .

The question this raises is whether some publishers will find it hard to resist the potential cheques that could be offered by outside interests who may see the content as a means to a bigger end? The other question is whether those left behind on the shelf will be further marinalised? Its hard to see book publishers buying up outside businesses but is now easy to see outside interests buying up certain publishers.

The Polarisation of Publishing

Publishing whatever sector, geography and format has always adhered to Pareto’s 80/20 law and in many cases less than 20% have generated even greater than 80% of revenue and unit sales. This obviously leads to a polarisation of the market, with in many cases, no more than a handful of publishers and channel operators dominating each sector. Many don’t like it, cry monopoly, but its not going away and the dilution of one operator will just be replaced by another.

We recently raised the question of the impact of the migration from print to digital revenues and asked what it would mean to organisations, supply chains and the remaining print based operations. We all know digital is happening and continues to accelerate and although we may not be able to predict where the line will be drawn, the impact will be significant and not preparing for it may be like a publishing ‘Pearl Harbour’. Perhaps today’s biggest conference circuit agenda should be on , ‘How to survive in a downsized print world.’

When Chris Anderson first coined ‘long tail economics’ in 2006, many were cynical and merely asked where the money was. It challenged the fundamental principles of the economies of scale and scope on which the 20^th century was successful. However, today no one can deny that the long tail is here and not only has it arrived, revitalised the forgotten back list, inspired many authors to do it themselves, but it has challenged the industry’s obsession with front list. Penguin’s recent acquisition of self publishing operation Author Solutions, is not just about feeding the machine, it also about trying to accommodate the new long tail world and get involved in a mass movement. Amazon have once again shown great strategic vision and application with their Kindle DP programme, which could now become a significant jewel in their crown and although other players are trying to emulate it, they are playing catch up and are clearly behind the curve. Open research and access is also going to have a significant impact on some markets and change the balance of power across the value chain. However, we still to see some more moves and there are some real opportunities today that are just begging to be taken.

Only this week we read in Publishers Weekly about the demise of print back list sales which is in part down to reduced shelf space and also part down to digital offering what we believe is a more logical and better home for these works. This again impacts the balance of the market both in terms of front versus back list and also physical versus digital. the interesting question is, if the physical back list market becomes less predictable and attractive does this give publishers the confidence to digitise their back list or raise the risk that digital migration may not be rewarding? Will they merely sit on their assets, revert them, digitise them with no marketing effort, or let them slide into an orphanage? Digital may only be seen to be worth the effort if it generates sales and if the digital shelves are full how do readers find and differentiate the back list from the rest?

We are no longer talking about ‘long tail’ economics but ‘long market’ economics.

So what will be the organisational and economic impact of the seismic changes that are taking place today?  It is not just a case of responding and generating new revenues, but one of managing and protecting old ones too. We and many others believe that the 80/20 law will still prevail but that the market will become even more polarised and middle ground will change radically. One of the leading thinkers and a Director at Bloomsbury, Richard Charkin, recently is quoted as saying that, ‘publishers should now start to act and think as start-ups.’ A very scary thought for some, but a stark reality for many.

In some media sectors competitors are now working together to share investment and importantly risk and reward. Do we see a similar collaborative publishing environment, or a continuation of the ‘winner takes all’

Many still believe that digital is just about pouring the physical book content into a digital container. Whilst others believe that digital wizarderly and extras will prevail and digital content will become a full blown multi media experience. Reality will be somewhere in the middle but what is clear is that publishing will continue to polarise and in doing so create some exciting opportunities which will demand market and organisational change.

The democratisation of reading and writing is happening and the question is who will be prepared, fit, and responsive and succeed in the Brave New World of digital and physical content?

Some say the today’s weather is becoming more volatile, extreme and unpredictable. Welcome to publishing tomorrow.

So How Will Digital Growth Impact Physical Decline?

We all now accept that digital ebooks will continue to grow at speed, but that it is still highly speculative what the rate of growth and market size will be and that this is likely to vary between genre. We agree with Bloomsbury’s CEO Nigel Newton, when he states that physical books will remain and that we will have a mixed market for in the future. The question that we feel is missing in the digital debate is the impact that digital growth will have on the inevitable shrunken physical supply chain. Some may feel that the digital market is supplemental we would suggest that this will not be so and that the current practice of merely pouring physical content into digital containers will lead to a cannibalisation of physical sales.

The publishing supply chain remains finely balanced and somewhat complex. It remains a ‘many to many’ chain trading in many unique products from many sources. The reality is that any cost or inefficiency to one, is born by all within the chain and so the efficiencies that have been driven into the existing physical chain over the last decade could easily unravel as the economies of scale and scope change and numbers become even less predictable.

We ask the question of what the potential high level impact may be and what the supply chain may look like if the physical market were to shrink by say 20 to 30%?

Many predict the death of the physical bookstore and for many this is probably their fate if they remain wedded to their current model. The front list ‘sale or return’ model has worked well but is in danger of going past its ‘sell by date’ for many. Other retailers are now creaming off the volume on the big sellers and with their pricing clout are making the High Street a no go area for many. The independents have to wake up and sell old, used, bargain and respect that the cosy days of letting the publishers wallpaper their shelves are going and if a 20 to 30% reduction in physical sales were to occur they will have to find alternative revenues. A  reduction in revenue can be compensated by higher prices, which is highly unlikely, or by a reduction in cost, which in simple terms would mean a shrinkage in physical square footage – less stores. Waterstones are probably focused on reducing their estate by a significant percentage, getting these right and in doing so retaining their viability, but this option doesn’t exist for independents were the decision may be more binary.

A reduction of selling footage on the High Street is not going to be just down to digital but compounded by other retailers such as the supermarkets and the Internet creaming off the best sellers and higher volume sales.

Some will argue that the independents and High Street is doomed and so what. But as the percentage of the physical sales grows across a handful of channels and the overall volume of physical sales reduces, this has to impact and question the distribution and efficiency of the supporting supply chain. Today many will look to compensate any home sales reduction with exports but there is little to believe that this will not also be effected and the strategy may be more tactical than strategic. There is a clear case for greater physical supply chain consolidation and it is hard to envisage the same number of distribution and wholesale operations.  

There is the question of returns. As the physical High Street demand contracts there will be the inevitable increase in consignment errors. The stores will continue to support the low risk returns model which will lead to even more product being shipped around the country with no revenue being generated. The waste is a cost to everyone and will increase as declining sales make some publication’s sale less predictable.

It is fair to assume that you can’t have a significant disruptive impact on one area of the supply chain without the effects also impacting all other areas either in the form of the ripple, or domino effect.

Publishers have many challenges if the physical market were to shrink by 20 to 30%. It’s true that they will still have digital revenues to compensate and to do so at probably better margin and positive impact on their bottomline, but what will this mean to their organisation, processes, and cost structure? It is also true that different publishers will be impacted differently according to their sector coverage and mix of titles, but a 20 to 30% reduction in Physical sales will impact all.

Like any army one has to adapt your resources to fit the battle you are engaged in. The question now is what the organisational impact of not just digital but a contracting physical market will be on publishers?

Rights obviously become even more important but the onus changes with resources need to be deployed to discover and deal with digital infringement, a growing importance of permissions and the obvious greater need to capture, manage and access all rights detail more efficiently.

Marketing and Sales faces change. It is less about filling shelves and spread betting and more about engaging directly with the consumer marketplace. A migration from mass to direct marketing even though the product may be physical or digital. The challenge is whether the sale moves direct or remains through third parties? If the physical market shrinks and consolidates then the need for field sales must also reduce. Perhaps we shall see even more collaboration between competitors to share field sales resource, perhaps we shall publishing outsourcing to call centres to up-sell direct basis. Whatever the mix it will be a mix and it will be interesting to see how not only the large but also the small publisher organises this to balance their digital and physical sales.

Marketing material also stats to change as the physical market declines and consolidates and at the risk of being pillared by the every standards people, maybe the bibliographic and metadata also changes with the remaining clients still requiring more detailed metadata whilst the digital discovery forces more of content itself with secondary promotional materials to be used to engage with the audience.

We could also think about the obvious impact on editorial and production , the author relationship and their royalties, front list, mid list and back list mix and market differences. However,  what is clear is that any significant rebalance of the mix between digital and physical markets is going to have an impact on all and we need to think just as much of what this will mean in the physical world as we do in the digital world.

Unfortunately we somehow doubt that there will be an explosion of publishing conferences on the mixed economy and managing the physical offer in a digital world ….