Of iPads, embargoes and the confrontation with reality

I’ve been settling into my new job, designing the next generation of Microsoft’s TechNet service, but have not turned away from the e-book market or its hijinks. Oh, what a week. Where to start and where will it end?

First off, the Apple iPad. My thoughts: It was one of Steve Jobs’ worst presentations in many years. It was dull. He lacked energy and attitude, which reflected on the device he was introducing more than the device itself was a let-down. Because, really folks, can any one device save publishing? And movie-making? No. However, the iPad is another example of a fascinating blend of pragmatism and accomplished design that is going to be attractive to the average person who has been thinking of a lighter, more convenient PC, an e-reader or a new television.

At the entry price, $499, it’s a steal compared to the comparably priced Kindle DX and sexier than all the netbooks on the market wrapped in a big ball of sexy, with sex on top. The iPad is going to eat the low-end of the market that Apple has so famously “missed” during the past couple years—as though not selling MacBooks for $500 was doing the company damage—for its proverbial lunch while barely cannibalizing Apple’s MacBook sales. The higher cost iPads will be subsidized by carriers wanting to compete with AT&T.

Moreover, with the next generation of e-readers clearly stuck somewhere in the same price range, iPad is poised to destroy the glutted market of E-Ink devices by presenting a singular color-capable choice as an alternative to one of the 50+ e-readers on the market now. Amazon will counter by licensing Kindle features far and wide, getting its PC client onto new netbooks in exchange for a small fee or a small share of ongoing revenue from the PC OEMs.

But Amazon’s real challenge will be staying hip when it’s business strategy is looking so very square. In a little remarked posting by Kara Swisher at AllThingsD, she shared a video clip of Steve Jobs talking with her colleague, Walt Mossberg, after the iPad announcement. In that clip, Jobs says that the $9.99 e-book price point will soon be a thing of the past, because publishers will “pull their books” from Kindle to sell them for a higher price—on iPad. Many took this to mean that Apple will sell books for $9.99. Others missed this completely because they focused on what Jobs has said in the past about reading. But listen carefully. Jobs clearly says, in response to Walt’s question about why someone would pay $14.99 for an iBook title when they could get it for $9.99, that it will not be a problem as soon as publishers decide to draw the line with Amazon. Jobs says “the prices will be the same,” meaning that prices will rise as people shift to a reading experience they value more.

And MacMillan did draw that line this weekend, pulling down its Kindle books. As I have been saying for a while, $9.99 isn’t set in stone and cannot last. Amazon has never been in the business of selling e-readers, only the process of building libraries it can serve to digital readers. This is why Kindle on the iPhone and iPad are more representative of Amazon’s future than the Kindle hardware it sells today. Jobs hasn’t crushed Amazon, he enabled it to get out of the hardware business. Look for Kindle books for the iPad to be priced higher and have more features—you don’t think Amazon has had Mac and PC coders around for 18 months without making some real improvements on the Kindle software, do you?

What of MacMillan, which initiated an embargo on Amazon’s $9.99 price point? It is just the first publisher to launch a salvo over e-book prices, it won’t be the last. Amazon has been losing money on best-sellers for almost two years. The business is unsustainable at $9.99 for Amazon and publishers. In one real way, Apple is saving publishing, because it is pulling the biggest book distributor’s fat from the fire, as PaidContent explains here.

Final thoughts on the iPad. The name is awkward, but the trash talk will settle down. It’s unfortunate that Apple managed to alienate women, one of its target audiences for the iPad. At the same time, in many dialects, “iPad” will sound exactly like “iPod.” The biggest change in the hardware between the announcement and shipping will be the appearance of subsidized hardware deals, most likely from T-Mobile.

We haven’t seen the future as much as version 0.92 of the future. Pads ahead, as well as books. But look for many tablets from other manufacturers, too.

How to create new reading experiences profitably

Concluding my summary of my recent presentation to a publishing industry group, begun here and continued here, we turn to the question of what to do to revitalize the publishing opportunity.

I wrote a lot about the idea of exploding the limitations of the book in the last installment. Getting beyond the covers. Turning from a distribution model to a reader-centric model. It’s simple to argue that change is needed and to say what needs changing. Here, I offer a few specific ideas about lines of research and development that I would like to see begun by publishers, who, if they wish to remain viable—let alone profitable—must undertake immediately. The change in book publishing will happen at a faster pace than the collapse of newspaper and music publishing did, making a collective effort at research and publication of the results for all to discuss and use, critical during the next 18 months. Think open sourcing the strategy, so that a thousand innovations can bloom.

Making books into e-books is not the challenge facing publishers and authors today. In fact, thinking in terms of merely translating text to a different display interface completely misses the problem of creating a new reading experience. Books have served well as, and will continue to be, containers for moving textual and visual information between places and across generations. They work. They won’t stop working. But when moving to a digital environment, books need to be conceived with an eye firmly set on the interactions that the text/content will inspire. Those interactions happen between the author and work, the reader and the work, the author and reader, among readers and between the work and various services, none of which exist today in e-books, that connect works to one another and readers in the community of one book with those in other book-worlds.

Just as with the Web, where value has emerged out of the connection of documents by publishers and readers—the Web is egalitarian in its connectivity, but still has some hierarchical features in its publishing technologies—books must be conceived of not just as a single work, but a collection of work (chapters, notes, illustrations, even video, if you’re thinking of a “vook“) that must be able to interact internally and with other works with which it can communicate over an IP network. This is not simply the use of social media within the book, though that’s a definite benefit, but making the book accessible for use as a medium of communication. Most communities emerge long after the initial idea that catalyzes them is first published.

These communications “hooks” revolve around traditional bibliographic practices, such as indexing and pagination for making references to a particular location in a book useful, as well as new functionality, such as building meta-books that combine the original text with readers’ notes and annotations, providing verification of texts’ authenticity and completeness, curation (in the sense that, if I buy a book today and invest of myself in it the resulting “version” of the book will be available to others as a public or private publication so that, for instance, I can leave a library to my kids and they can pass it along to their children) and preservation.

Think about how many versions of previously published books, going all the way back to Greek times, when books were sold on scrolls in stalls at Athens, have been lost. We treasure new discoveries of an author’s work. In a time of information abundance, however, we still dismiss all the other contributions that make a book a vital cultural artifact. Instead, we need to recognize that capturing the discussions around a book, providing access (with privacy intact) to the trails that readers have followed on their own or in discussions with others to new interpretations and uses for a text, and the myriad commentaries and marginalia that have made a book important to its readers is the new source of infinite value that can be provided as the experience we call “reading.” Tomorrow’s great literary discovery may not be an original work by a famous author, but a commentary or satire Continue reading

Challenging publishers to change isn’t the safe path

Continuing my tale of the publishing industry presentation I made last month, begun here, let’s turn to the changes in the book and book supply chain that are necessary to resurrect publishing as a pivotal source of creative value in a time when gatekeepers are despised and largely redundant.

The electronic publishing supply chain is dominated by distributors, particularly those that wield a popular format as leverage to gain a larger share of revenue from publishers, who are still trying to determine how to change their product to address opportunities when books are not trapped in paper. Just as the music industry in the late 90s was led by the nose by encoding companies that charged a million or more dollars to “rip” a new version of a record label’s catalog to address a new format, today’s e-book industry is being hauled along by distributors who trade “free” encoding and distribution of e-books to publishers in exchange for rights to do so. The only major difference between the e-book industry today and music industry of 1999 is that more rights are being exchanged for encoding, where music remained a cash business that sapped the labels of massive amounts of money to keep up with new formats and channels for music. There are, however, plenty of e-book services companies trying to reproduce the music encoding phenomenon with publishers who, thinking that they can pay for a format will then be able to distribute the resulting files directly.

Unfortunately for publishers, the channel is controlled by application and hardware developers who have the actual customer relationships. Amazon, which has been toying with the question of whether to compete directly with publishers for more than a year, finally did so last week by signing Seven Habits author Stephen Covey to an e-book deal that completely circumvents the publisher of the books, Simon & Schuster. When I made my presentation in November, this suggestion was greeted with horror and a reflexive dismissiveness that has been beaten into sensibility by the hard reality that publishers have never mastered the customer relationship.

Publishers have excelled at the paper distribution process, actually managing to earn profits despite the vast return rates that paper books produce by the nature of mismatched supply and demand. With electronic publishing and the Web, publishers can certainly reduce returns—indeed, that is what most publishers I talk to are banking on in order to survive the transition to mixed paper and digital publishing—but no one establishes a branded relationship with a publisher, simply because books are aimed at readers’ attention, which is completely fungible, shifting from one publishers’ products to another’s from day to day and read to read.

Competing for attention and building brand reputation for reliable, enjoyable or authoritative writing (though books will be much more than writing in the near future, as Fast Company‘s Adam Penenberg pointed out on Wednesday), requires that publishers reject Continue reading

When customers love the product, but hate your mission, it’s time to change publishing

I recently had the pleasure of presenting a vision for the future of publishing to a group of publishing professionals in New York. Can’t say where it was, yet, but suffice to say it was worth saying and that the message was well received by the thoughtful, albeit skeptical, audience.

Despite the increasingly rapid changes in reading due to technological evolution, the folks with whom I was talking rightly believe that they should not revolutionize their business simply for the sake of revolution, and I was perceived, unfortunately, as a revolutionary. They represented publishers, distributors, supply-chain enablers and book retailers, all of whom need to embrace changing roles as they constantly refine those roles in response to greater information about what is in a book, how books are used and what readers think about the books they purchase, borrow or steal. Having worked in publishing—in many forms and markets—for 25 years, and for several huge publishing companies destroyed by the failure to change, I think my perspective is one of pragmatic realism. Certainly, the publishing industry I arrived in as a newspaper/magazine reporter is largely gone, victim of its failure to evolve with the times, with the reader’s habits.

Darnton 2So, it was ironic, I thought, that my opening remark, that the future has never been brighter for publishing (in this, I completely agree with Seth Godin’s remarks about the future of publishing here—I only wish I was a good a presenter at Seth), was greeted with a sense that I was trying to paint my revolution the color of the audience’s fears about the future of their individual business models. Sure, they were thinking, it’s bright if you don’t have to fire people, change the workflows at publishing houses, in composition and printing shops, and so forth.

Books are healthier than ever, really. According to Bowker, publisher of Books In Print, more than 900,000 books will be published worldwide this year. The United States produces more than five times as many titles as only a decade ago. Moreover, the breadth of the titles has never been greater, with genres and subjects exploding in their complexity. Just as the desktop publishing revolution produced an explosion of magazines and newsletters that transformed the periodical business in the late 1980s, print-on-demand and Web technology, including e-books, have multiplied the number of books, about every conceivable topic. Worldwide, the growth of titles published is growing faster than in the U.S., as it becomes infinitely more efficient to address language and geographically specific marketplaces with printed or electronic books.

Moreover, with more than $100 billion in local U.S. media spending in play because of the fall of the local newspaper, the opportunity to connect revenue with books that engage and sustain hyper-local communities, has never been greater. Succeeding in this market, however, means changing the entire book value chain, eliminating the value chain’s focus on distributors and retailers, turning it instead to models predicated on what the reader wants and values. Reader-centrism is the only viable basis for revivifying existing publishing companies, because every new player in the publishing market is starting their business based on close identification with their customer, the reader.

Now, I want to keep this short, and go on in future postings with more detail. But let’s look at the most recent description of what a publisher does that I was able to find, in Robert Darnton’s new book, The Case for Books. Darnton, the chief librarian at Harvard and an accomplished author captures what the publisher does as completely as possible:

“Publishers are gatekeepers, who control the flow of knowledge. From the boundless variety of matter susceptible to being made public, they select what they think will sell or should be sold, according to their professional expertise and their personal convictions. Publishers’ judgments, informed by long experience in the marketplace of ideas, determines what reaches readers, and readers need to rely on it more than ever in an age of information overload.”

“Publishers are gatekeepers, who control the flow of knowledge. From the boundless variety of matter susceptible to being made public, they select what they think will sell or should be sold, according to their professional expertise and their personal convictions. Publishers’ judgments, informed by long experience in the marketplace of ideas, determines what reaches readers, and readers need to rely on it more than ever in an age of information overload.”

This is the mission of publishing from the time of the scriptoria until the turn of the 21st century, a risk-defined mission based on the high cost of making information available. It is not what readers want today, even though they do still count on many filters to help them choose what to read. The financial risk of publishing today is perceived as minimal, even though it is still quite risky because publishers are clinging to the hit-driven model that requires a book to sell tens of thousands of copies to be a “success.” Let’s consider Darnton’s definition of publishing through the eyes of a reader who can browse the Web, Google Books and myriad other sources of textual, audio and visual information. These people still love books, but they no longer honor the mission that produces many books, as evidenced by widespread dislike of the ideas highlighted in the following version of the quote:
“Publishers are gatekeepers, who control the flow of knowledge. From the boundless variety of matter susceptible to being made public, they select what they think will sell or should be sold, according to their professional expertise and their personal convictions. Publishers’ judgments, informed by long experience in the marketplace of ideas, determines what reaches readers, and readers need to rely on it more than ever in an age of information overload.”
Let’s break that down in terms of the networked marketplace.

Gatekeepers are no longer valued, they are despised by people who feel they have the ability to judge information and ideas for themselves. As Jacques Rancière puts it in his latest book, The Emancipated Spectator, “There are not two sorts of intelligence separated by a gulf” in a truly democratic marketplace of ideas, there are different perspectives that demand free rein and resent gatekeepers.

No one entity or person can/needs to control the flow of knowledge when everyone can do their little part by tagging, rating, reviewing and commenting on parts of the data flow; this is “crowdsourcing” in the fully positive sense, free from the stain of mob mentality, which can play an important role in an unbridled cataract of information.

Customers, not sellers, decide what will sell—they always have, but industrial production tended to limit the choices and create the appearance of successful planning, which in many cases is exactly what produced bestsellers, though at the cost of diversity, which people value, too.

Professional expertise is, unfortunately, despised because of knavery on the part of pundits, who claim expertise without the hard self-criticism that is applied by professionals. We do need people to help us select what to pay attention to, just as we have always relied on guidance from others when coming into a new environment. That advice can come from friends. However, it often comes from the loudest knaves in the mediasphere.

What reaches readers in a connected networked world is everything and anything that can be transmitted, but few would surrender their opportunity to think for themselves in exchange for a truncated view of reality—let us remain optimistic about people’s judgment and intentions here—but readers don’t want to admit they rely more on experts today than ever before, because they don’t see the world as information overload, rather they perceive they are seeing it all for the first time without restrictions, which is exhilarating, the very source of growth, egalitarian opportunity and the unexpected. That sudden sense of having options is why more books than ever are being produced and sold.

Given that readers today still love books, in more forms than ever, what is a publisher to do? That’s the subject of the next couple postings in this series.

Cross-posted to ZD Net.

Smashwords gets Kindle distribution deal

Smashwords, the e-book self-publisher services company, is for real. The company has won a series of distribution deals, including through Barnes & Noble, Sony and Shortcovers e-book stores. Today they added Kindle distribution, paying authors 42.5 percent of the sale list price of their Kindle books.

As an author services play, Smashwords has sped to the front of the pack for e-book authors. Congrats to Mark Coker and team.

Cheaper Kindles will seed more digital libraries

Amazon today lowered the price of its U.S. Kindle 2 to $259. It also announced an international version of the Kindle 2 for $279—globe-trotting customers are paying more for a more capable radio, but it’s still $20 less than Kindle 2 was yesterday. The price of e-reader hardware is definitely trending downward. If you imagine the profits from an ever-less expensive Kindle converging with the rising costs of selling Kindle bestsellers below cost, the model makes no sense, unless the purpose of the business is to create digital libraries.

With 45+ dedicated e-reader devices on the market, Amazon absolutely must lower its prices aggressively over the the next year to maintain its market share. But, here’s the question: To what end is Amazon driving e-reader pricing downward? Kindle still delivers a much better buying and reading experience than any of the currently shipping e-readers. Sony’s Daily Reader will be comparable, but it will not be out for another month or more. Next year, Plastic Logic, among others will have a Kindle challenger with built-in wireless purchasing features, too.

AmazonBestcostsRemember that Amazon is still losing money on every bestselling book sold through its store. The company pays publishers about $3.60 more than the list price for a bestseller when sales costs are factored into the expense. If each Kindle accounts for just two bestseller sales, the cost of supporting 3 million Kindles in the market rockets past $20 million (see chart, right, which looked better in Excel. The scale should be 50,000 to 3 million, though this logarithmic curve makes the point that every Kindle sold adds to Amazon’s bestseller costs at $3.60 per title sold).

The goal, at this point, is to get more people invested in a Kindle, or, more precisely, a digital library. It’s more than format lock-in, Continue reading

A book evolution, not revolution

We often hear arguments that the age of the book has passed or that, with the advent of e-books, the book is doomed. It makes good copy, just as populist-sounding charges that publishing is “corrupt” does, but none of these arguments recognizes the human cultural tradition that we build on rather than destroy. Is it true that no one listens to radio now that television has reached 50+ years of use? No, we remix our attention and what is valued. Books, both paper and digital, will live side by side.

I write this because of two Fast Company pieces of the last 24 hours, one of which I helped edit for my good friend, Marcia Conner, the other reporting on the possibility that Dan Brown’s The Lost Symbol could sell more copies in digital form than hardcover. I am sure The Lost Symbol will sell more e-copies than hardcovers over time, if readers don’t find they are disappointed by the book—it’s virtually assured, just as cheaper paperbacks outsell hardbacks. The important question is whether e-book versions of The Lost Symbol will cannibalize hardback sales or be additive. Only a few weeks time will answer this question, as the initial hype wears off and sales become more “normal.” Based on pre-orders, the book has been in Amazon’s best sellers list for 150 days; all those copies were delivered in the last 24 hours. Currently, The Lost Symbol is #1 in both Amazon’s book and Kindle stores. Shortcovers is reporting its biggest sales day in its short history, exceeding its previous one-day sales by 100 percent.

Fast Company‘s Kit Eaton dissects Stephen Windwalker’s claim that e-books will outsell hardbacks, based on day-one figures that are largely guesswork. Eaton suggests that while Kindle sales may be strong, it doesn’t mean that e-book versions of The Lost Symbol will outpace hardcovers. With one million copies sold after such an intense marketing Continue reading

The cold realism of a former publisher

Daniel Menaker, former Executive Editor-in-Chief of Random House and fiction editor of The New Yorker writes in the Barnes & Noble Review about the realities of publishing, including the dynamic and paradoxical pressures of choosing books that will produce a market success. A must read for BooksAhead readers, as it strips away the mythos of publishing to reveal the true business. For example:

4. Financial success in front-list publishing is very often random, but the media conglomerates that run most publishing houses act as if it were not. Yes, you may be able to count on a new novel by Surething Jones becoming a big bestseller. But the bestseller lists paint nothing even remotely like the full financial picture of any publication. Because that painting’s most important commerce color is the size of the advance. The second-most important color is the general level of book-buying. The volume of sales of the No. 6 book on the New York Times fiction bestseller list in 2009 is significantly lower than the volume of the No. 6 bestseller five years ago. Four and three and two years ago, too, almost certainly.

Highly recommended. Read it, think. Menaker describes a rapid tectonic shift to e-reading, over the next decade, which will catch a lot of attention in the e-book blogs, but this is not a column about e-books. It’s about the current limits on editorial investment and their potential to change.

UPDATE: Mike Shatzkin has a typically penetrating and thoughtful piece about Menaker’s article.

Reading Steve Jobs: Why 45 e-reader devices don’t make a market

Thomas Jefferson hacked bookstands for partial continuous attention

Thomas Jefferson hacked bookstands for partial continuous attention

As I develop the coverage here at BooksAhead, I have decided that trying to break news stories about e-reader devices doesn’t add a lot of value for the reader, especially when there are few differentiating features or functionality. Way back in the early 90s, when a new Ethernet interface card for the Mac—I was networking editor at MacWEEK—it became clear that an occasional summary article covering all the recent releases would be more useful than many individual articles announcing yet another Ethernet card.

However, sometimes a real breakthrough would come along, and that would get an individual article. The most important change in the early networking card market was something subtle and largely unheralded: The addition to writable ROM chips to cards eliminated the need to return a card when its software was defective. Yet, for several years, Ethernet card developers hesitated to include EPROMs in their products. Once they did, new features proliferated, such as Simple Network Management Protocol (SNMP), because cards could be updated in response to changing technology rather than having to be replaced. It sounds trivial, yet it made a huge difference.

The e-reader device market is looking a lot like the Ethernet card business back then: It’s a developing commodity market. Price is becoming the only differentiator, but the functionality is still very limited compared both to books and what e-books could be. The action will soon turn squarely on format and networking of documents, just as the Web became relevant when the browser changed hyperlinks from navigating between documents to navigating within parts of many documents.  Two hundred years ago, Thomas Jefferson designed a bookstand for reading several titles to accommodate the limitations of books (the idea is older, but Jefferson’s is one of the most elegant solutions to the problem). Readers want to use books and the knowledge and enjoyment they contain, not just consume them.

I’ve been doing a lot of thinking about this issue since I wrote about the ePub standards maintenance process beginning a couple weeks back. There are huge business opportunities in the Continue reading