Mitch Ratcliffe is a veteran entrepreneur, journalist and business model hacker. He operates this site, which is a collection of the blogs he's published over the years, as well as an archive of his professional publishing record. As always, this is a work in progress. Such is life.

Premature evolution: E-book standards alone won’t solve the publishing problem

Peter Osnos, writing at The Atlantic, reiterates PC World‘s Tony Bradley in calling for a standard e-book format, writing that “it is a good place to start.” His article, however, suggests that the reproduction of reading is also the end of the road:

“As readers become increasingly familiar and comfortable with reading and listening devices and the machinery for producing books on what are essentially a new generation of copiers, books can be instantly available. If readers come to believe they can get Good Books. Any Way You Want Them. Now, and publishers can provide them without the waste, inefficiency, and consumer frustration that comes from scrambling to put out the right number of printed copies, I believe that books will hold their own–and maybe more so.”

Osnos has been working with the Caravan project, whence his Good Books slogan comes, with The Century Foundation for some time, commenting occasionally on the progress. A key idea in his posting today is that e-book reader devices (hardware and/or software) are a “new generation of copiers” and that distribution is the challenge “for books.” As I wrote last week, responding to Bradley’s article, getting words on the digital page is only a small fraction of the challenge ahead, and that any standards should not prevent the development of enhanced reading experiences that transcend the printed book, which is solely a delivery platform, not a networked environment comparable to the Web. It’s my opinion, but it bears repeating as often as we hear the argument that words on a page make a book.

Distribution is the challenge for publishers, not the form we know as the book. Books are packages, which have been applied successfully to moving thousands of words from printing facility to the public for centuries, distribution is the key to making money as a publisher. Books are changing, just as the products produced by every other industry has been transformed in whole or part by digitization. Yet, Continue reading

Have e-book sales gone exponential?

Trade Stats_09_03The trend line for e-book sales has hit an inflection point, a glance at the IDPF graphic (right) and other data at the IDPF site suggests. The graph represents wholesale e-book revenue by quarter and, as you can see, Q1 sales leaped substantially beyond earlier quarters. Bookselling has always been extremely seasonal, with most revenue falling in the last half of the year, so the rest of the year may, if the increase continues, represent the beginning of a steep rise in revenue for e-books.

A certain perspective is needed with these numbers, however. They represent “wholesale” sales, rather than retail sales. For example, if you add up the 2008 sales by quarter provided here ($53.5 million) and compare them against the annual sales reported by the Association of American Publishers, which were $113 million in 2008, these figures only represent 47 percent of the total revenue from e-books reported. Moreover, they are slightly counter-cyclical, with later quarters in the year growing less than Q1 and Q2. In fact, these numbers are only U.S. e-book revenues for a small sample of “wholesale channels.”

I think, because of the absence of inventories with e-books, that a different word than “wholesale” is needed. It’s a small but useful sample that can be helpful in understanding sales.

In any case, the question still remains, does Q1 2009 represent an inflection point at which sales will increase on an exponential curve, the Continue reading

Calling writers

I’ve been an editor for almost as long as I have been a writer, and believe I can help writers do what they do better by giving useful feedback and actively editing. That’s where BooksAhead is headed, and the next step toward the site’s more august purposes begins today.

Would you like to write for BooksAhead, getting the input of an experienced editor as part of your preparation for publication? If you’d like to join BooksAhead, send me email at godsdog (@) books[no-space]ahead.com and let’s get started. Tell me a little about yourself, what you are interested in. If you are looking for ideas, I can help with that, too.

I know I’ve missed having an editor whenever I’ve written without one. Writers should form an editing collective, though that gets dangerously close to becoming a writing workshop. I promise to be a ruthless editor, though with that gentle interpersonal touch that justifies absolutely no payment whatsoever for your articles. Glory. It’s all about the glory of a well-written article and the inevitable notoriety that flows from publication under your own byline.

A “standard” assumes the features are already set

“Ultimately, the success or failure of the eBook and eBook reader market is going to depend on establishing a standard format,” writes Tony Bradley at PCWorld. He’s right to the degree that, once a format is ready to make reading on a digital device better, it must become a standard to ensure that readers can access the file on any device and that publishing involves managing as few formats as possible. But there is an assumption in the article that there is a viable format exists on which everyone should agree. We are very far from agreeing what an e-book is, except that, as a subset of that definition, it will display words on a page.

A first-generation standard will scratch only the surface of the problem, addressing the problem of getting words on the digital page. The industry and, more importantly, readers, need more:

  • An open annotation system, but one that respects personal privacy by keeping notes meant only for the book’s reader (and, by extension, anyone with their password, their heirs) separate from public notes and conversation embedded in/around a book title.
  • A privacy regime enforced at the document level, preventing tracking of personal reading.
  • A page-independent reflowing capability, so that ridiculous ideas, such as “books for the Kindle DX,” become the fossils they deserves to be. A book should never be dedicated to a device, though there are some bizarre collectibility plays that might go that way.
  • A page-independent citation system so that kids can use an e-book citation in their homework as easily as a scholar.
  • And more…. Such as the whole question of how to integrate networking into documents.

The challenge of establishing that first standard, which lets e-books be read on any device, including PCs and smartphones, will be choosing technology that doesn’t shut the door to these additional standard requirements of a book while preserving forward-compatibility.

UPDATE: As I was arguing the other day and in the previous posting, the conform-to-compete trend in e-books is indicative of a wave of destruction. Mike Cane argues an e-book bubble is already well underway and I would not disagree with him, except to point out it is a very small bubble, though one that could unfortunately hobble the market for another half decade if it pops just now. Having published an e-book in 1993, when these things were going to be big, big, big! I have no illusions about how small a market can be. Cane, however, uses his argument to conclude that components of current technology, such as E-Ink, will inevitably fail. He argues this for all the right reasons that e-books don’t do anything spectacularly different than books and often represent less-than-a-book—he’s right that it is a race to the bottom based on price. The individual components could succeed or fail, perhaps not even within the e-book industry.

An iRex Kindle competitor?

iRex’s iLiad e-reader has been the top dog in the “business e-reader” market, selling somewhere in the 60,000 units range to date. Today, CNET’s Crave blog reports iRex will offer a 3G-enabled reader with an 8.1-inch screen this fall. Plastic Logic enters the “business e-reader” business next year, so iRex is mixing a down-market device into its offering to counter the impact expected when that new competition appears.

Will the company find any wiggle room with Amazon, Sony, Samsung and Plastic Logic vying for market share? Instead it looks to me like iRex needs to focus on winning buyers in at least one segment rather than diversifying to meet the rising tide of e-readers. iRex has collaborated to develop specialized devices, such as the aviation-targeted SolidFX e-reader air travel charts. This device looks like another conform-to-compete e-reader.

Crave writer David Carnoy heads deep into speculative territory, saying this sub-DX but supersized consumer device will sell for “less than $400 and possibly less than $350” and that there will be a major bookseller offering e-books through the device, but iRex’s 8.1-inch screen, if it is Wacom-enabled, allowing users to write on the screen, is likely to keep the price near or north of $400. Furthermore, what major bookseller is left to do a deal with iRex? Borders? Perhaps, but that struggling bookseller has already released an e-reader from Elonex in the U.K. Plastic Logic has an exclusive with Barnes & Noble while Amazon has the Kindle.

There is so little information, other than a “mock-up” drawing of the device, that this looks more like a test balloon than a product. Grains of salt taken.

If you need more sodium in your diet: Acer may launch an e-reader, too.

“Authors must blog” and other truisms displaced by an evening with Pynchon

I’m about halfway through Inherent Vice, which I’ve been waiting for like a sinner waits for confession, because a good novel cleans the soul. I am thinking about why great writers’ works are important, even when some of their books are treated as toss-offs compared to more momentous efforts. In this case, a mystery novel, a private dick story with a psychedelic twist may not seem as big an effort as Mason & Dixon or Against The Day to some, but for the aficionado of a particular author’s work these “second-tier” efforts are the zest and riff that make a jazzman not just cool for the college crowd but skull-ringingly great regardless of who is listening, square or not.

I got to thinking, between hits of Doc Sportello and The Golden Fang, about the meme of the moment, that “publishers are on the lookout for authors who blog” and how that is interpreted by many to mean that all it takes to win a publishing deal is a blog—the story or non-fiction pitch will just fall into place once the contract is signed. Shortened to the quick, the same logic makes all bloggers writers, which conflates the genre with accomplishment.

No, publishers don’t think that every writer needs a blog (even though some may think its easier to source book material from blogs), but it’s convenient to sell the idea to the masses that would like to have published a book and think that authorship is like being an executive on teevee, just one sexy tryst and then another cut-throat meeting before cashing the daily paycheck and leaving for a night on the town, the kids stowed with the nanny and plenty of time for sleep and a visit to the gym between 6 AM and Eight-in-the-morning when the dry cleaned suit appears and it’s back for another romp at the office. If we are all going to live that life, sooner or later the con is going to end. No, writing and instant success because of a new technology, as though Shakespeare would have fallen flat if the words had been scratched on stones, are antithetical realities.

Thomas Pynchon never blogged a word in his life, that we know of. He may have written the Wanda Tinasky letters in an age before everyone could be a wit with a keyboard ,though not necessarily a wit, but so, too, Benjamin Franklin enjoyed pseudonymous letter writing, and Ol’ Ben certainly agreed with Dr. Johnson that only a blockhead writes for free. Authorship is a kind of work that is different than writing, it involves intent and rigid self-criticism, or a very good editor. If you have a blog, the route to publication is certainly shorter today, but that doesn’t mean the work is “writing,” except in the sense that we indulge ourselves in writing a journal or to a friend.

The point is, dear reader, that the story of e-publishing is all glitz and revolution designed to justify readers’ investment in hardware that, to date, does nothing to transform reading beyond addressing a certain breed of convenience. The story is embellished with how-to books that proclaim “you too can be a best-selling author, your buttocks massaged by nymphs and sensually inspired favors of the Muses pumped into your bloodstream in only two hours a week” and e-reader product horse races that, while they signify capital investments and marketing with a furious vengeance, do not represent the innovation that will transform the market for reading. In the end, it will take an author to transform reading using new tools that we haven’t encountered, yet.

This is a market increasingly fed with truisms that, when you read someone like Pynchon, whether you like his work or not, makes the e-reading promotional tactics sour in the mouth and anyone can taste the treacle they are. Then, we can see that how-to articles and product reviews of devices are marketing of feel-good drugs instead of the story of hard won accomplishment.

Sony conforms to compete: Low-priced reader and $9.99 e-books ahead

According to The Wall Street Journal, Sony will introduce new versions of its Reader and lower the price of e-books in its store to match the prices at Amazon.com and BarnesandNoble.com. The devices, the PRS-300 and PRS-600, as well as their respective prices, $199 and $299, were “leaked” last week, including the pricing (ZD Net’s Larry Dignan has a good summary about the new readers). Sony’s falling into line with pricing of e-book titles is the news here.

Now, what’s got me wondering here is how all the would-be major vendors of e-book readers are competing on price and only price, for both the hardware and content, what’s the opportunity to differentiate? At this point, only connectivity, which Amazon has nailed with the WhisperNet technology it currently offers. Plastic Logic will have a Sprint-enabled WAN service, too, but Sony’s still in the wilderness with its dock-to-sync e-readers—however, The Bookseller reports that Sony is planning a Wi-Fi-enabled Reader for European release this fall.

If connectivity is the only differentiator, the opportunity to extend competitive advantage lies in one of two directions:

  • The iTunes Model—Make a proprietary system so darned convenient that the customer hopefully forgets about the DRM and other downsides, or;
  • The Rich Format Model—Take an open format for e-books and begin adding to it, putting annotation and other “social” features into the titles to begin to add value.

No device succeeds without adding value to the experience its competitors provide. Amazon remains the standard setter in the e-reader business. No one wants to go into the uncharted waters of open and “social” formats where the real wealth lies.

Priceline orders Smashwords to cease and desist

Apparently, Mark Coker, founder of e-book distributor Smashwords.com set up a site that caught the attention of Priceline, a Shatner-enabled vendor of travel services with which you may be familiar and less inclined to like after hearing the following. Priceline wants Coker to shut down his new site, called “name-your-own-price-ebooks.com,” because it violates the company’s trademarked slogan. Mark blogs extensively about the letter, including printing the letter’s text, at the Smashwords blog.

The greatest irony, I think, is that the law firm’s url is “DRM.com.” It is an acronym of partner names, but represents what the company and its clients spend their time doing. Alas, Mark should drop the url rather than get himself into a suit. What he should ask, however, is that Priceline agree never to enter the e-book market in return for the concession on his part. After all, he got the URL first, and if Priceline wants him to respect their trademarked slogan, which is only a fragment of the name of his site, he should expect something in return. I had an investment in a company with a name that was spelled similarly to a publicly traded company, both of which had been registered in different states within weeks of one another, that received a payment from the company asking them to stop using the homonymic URL after several years.

Mark just set up the site, having seen only nine visitors at the time he received the cease-and-desist letter. Nevertheless, he did invest in the design and functionality on the site and should use the occasion to ensure that Priceline stays out of e-books and will enter into no future litigation over similar concepts, such as “your price on e-books” or whatever. In the meantime, he should switch his new site to a variation on the phrase that will not raise the hackles of lawyers with nothing better to do that send letters like this over the weekend. And he should retain the existing site but place a redirect to the new URL on it for a period of one month.

If Mark wants a really cool tool for a patronage model in e-books, he should take a look at Songslide.com’s “pick your price” slider tool, which lets artists set a minimum price but be paid more by fans. I’m an investor there. Happy to make an introduction.

Thinking about LibreDigital’s $15 million funding

LibreDigital this week brought down a $15 million B-round, adding Triangle Peak Partners to first-round investor Adams Capital Management, and signaling a potential flurry of investment in e-book distribution plays. The company facilitates file conversion and delivery for publishers of books, magazines and newspapers. Based in Austin, Texas, and founded in 1999, LibreDigital has evolved and suffered with the publishing industry, to which it sells content conversion, warehousing, browsing and distribution services. Now that it has $15 million in new capital and the burgeoning e-book industry on which to hang its marketing, LibreDigital is getting its day in the sun. The question is, is that sun rising or setting?

LibreDigital’s clients include major book publishers, such as Simon & Schuster, Hachette Book Group, HarperCollins, newspapers including The New York Times and USA Today, and many magazine titles. With e-book sales exploding, albeit from a very small base, LibreDigital seems poised for growth.

The company’s emphasis on helping its publisher customers experiment with marketing programs and pricing strikes me as on target, because only a wide range of options will help differentiate electronic titles from their paper counterparts. Price, of course, is only one dimension of value, though it is the one getting the most attention right now. Alas, another continuing problem is the rights management question, which LibreDigital appears to solve primarily through application-based restrictions, for example, these terms for the downloading of The New York Times. In other words, DRM is the main defensible feature of the distribution system. The solution offered by LibreDigital through Newstand.com does allow printing (no copying) of files rather than locking the data to electronic format.

There is no record of patents or patent applications by the company, a search of the U.S. Patent and Trademark Office database suggests. What, exactly, then is the company selling? Service, though they are described as products. The careers of the management team point to expertise in process development and management, exactly Continue reading

Pearson’s digital pay-off still awaited

Pearson, the British publishing group behind Penguin, The Financial Times and a growing educational assessment and testing business, reported first-half financial earnings yesterday. Share prices gained nine percent on the day, well ahead of the rest of the market. Some digging in the report and presentation raises some interesting questions.

First, the FT, which saw 18 percent growth year-over-year in online subscriptions, is losing more paper subscribers than it is gaining online subscribers (roughly 20,000 new online subscribers versus a loss of approximately 24,500 paper subscribers). However, the shift to digital is insulating the group from the steep losses due to advertising that has hit the newspaper industry generally. Total revenue for the FT declined only 13 percent year-over-year. That is good news in this newspaper market.

What’s missing from the report, though, is information about digital subscriptions to the FT on the Kindle. The newspaper currently ranks #2 in British newspapers and #6 in U.S. newspapers with an overall Kindle Store sales rank of 25,586. By contrast, And Then the Roof Caved In, an account of the financial crisis by CNBC’s David Faber has a Kindle sales rank of 820 (sales figures as of this writing). This tells us little in specific, but draws an intriguing picture. Pearsone-booksales

Likewise, Pearson’s e-book sales charts look great (see right) until the lack of a scale sinks in. Certainly, e-book sales have increased by at least an order of magnitude year-over-year. Any given month of 2009 would account for 70 to 100 times 2007 sales. The chart starts from a minute number of units sold in 2004 and ends with a towering but unspecified number of e-books sold in the first months of 2009.

Best guess, the company is still seeing total sales of e-books that account for less than 1.5 percent of total book sales. Penguin’s sales increased eight percent, though the first half of any year represents less than a quarter of the total sales in a year, as the second half, particularly the beginning of school and the holidays, generate the vast majority of sales. The gain bodes well for Pearson’s second-half.

The short story, though, because there is no highlighting of e-book successes, is that Penguin and Pearson have no break-out e-book and digital newspaper story to tell, yet.

Noted in the graphics of the presentation: While Pearson featured seven iPhone application views, two iPod views and the Sony Reader in its slide about its digital market presence, Kindle was absent. Think a bit about that. Seven iPhones. No Kindle. On one slide. It’s a message that Amazon execs will catch.