Plastic Logic: And it shall be called “QUE”

"Call me 'Q'"

"Call me 'Q'"

Plastic Logic set the unveiling of its oft-discussed e-reader device at the Consumer Electronics Show on January 7, 2010. The device will be called QUE proReader. Interested readers can sign up for updates here. No word on whether the device name is an homage to the Star Trek character “Q,” which is how the press release explains “QUE” is pronounced, but I get the feeling John de Lancie may be on hand. He used to hang around Apple announcements in Vegas, too.

As we already know, the QUE proReader is aimed at business users and will emphasize portability of Microsoft Office and PDF documents as well as periodicals and books users can purchase from the Barnes & Noble online store. Connectivity includes Wi-Fi and AT&T wireless service.

For those of you eager for product porn, a few tantalizing details are added by the press release, as well as the side view of the product below. The 8.5-inch by 11-inch device will be “less than a 1/3 inch thick” and appears to be metal-backed with a black plastic frame on the “shatterproof” Plastic Logic E-Ink display. Que

The CES venue suggests that QUE will probably ship later in the Spring, as the event is the setting for summer and winter retail product promotions to retailers.

I’m wondering how many new e-reader devices can launch simultaneously without creating a glut in the marketplace. Pricing for the QUE proReader hasn’t been revealed, though it has been positioned as a premium product that isn’t likely to be deeply discounted. If, however, two dozen other e-readers hit the market within a few months, like the $400 iRex announced today, mark-downs are sure to be the order of the day.

It would be good to hear what Plastic Logic will consider a success in terms of units sold by December 31, 2010.

Google Editions defies digital economics

Google today announced it will enter the e-book distribution business with a service, Google Editions, which will sell electronic copies of as many as 500,000 books offered by traditional publishing houses. The service is amazing, because the company has found a way to increase the retail distribution cost of e-books relative to paper books. Think about this—the zero cost copy of an e-book will be the basis for Google keeping substantially more, as a share of list price, to deliver a Google Editions e-book through a third-party retailer than buying directly from Google.

It may seem attractive to retail partners, which will purportedly include Amazon, Sony and Barnes & Noble, but even they’ve got to be scratching their heads about the added overhead Google built into its pricing scheme. An e-book purchased from Google Editions will list for the same price as the same book offered by a publisher through Amazon or Sony, for example, and Google will pay the publisher 63 percent of the list price. But, if the book is purchased in Amazon Editions format through Amazon or Sony, publishers will only get 45 percent of the list price.

Google said it will share the additional 18 percent with the retailer, though “most” of that 55 percent reportedly will go to the retailer. My guess is that by “most,” Google means the retailer will get 25 percent and Amazon 20 percent, or some approximation of that split. This seems a concession to make sure the Google Editions format books are carried by retailers.

Let’s break that down. For a bestseller, which the market has decided should be priced at $9.99, the publisher will earn $6.29 when Google Editions sells a copy. When that same Google Editions e-book is sold through a third party, the publisher will earn only $4.49. Intermediaries increase their share of revenue, even though they’ve taken on no inventory risk.

Publishers get 63 percent for selling directly and 45 percent for a Google Edition book sold through a third-party retail site. It defies all the economic logic of digital distribution. The likelihood that Google will really get more e-books from publishers on those terms compared to those offered by Amazon, Sony or Barnes & Noble to the same population of publishers strains credibility. But, we shall see.

More bad news: DRM

While the Google Editions e-books will be readable in a browser, they will not be unencrypted. Google makes clear that books will come with DRM, because they have created a way to let readers access files when not connected to the Net but without the ability to share those books with others. Books will be tied to a Google account, just as GMail, Google Docs and other services.

The retailers, all of whom have introduced proprietary e-readers and, except for Sony, which offers ePub formatted e-books, should be Continue reading

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

COOL-ER hypes its progress

I am sure this story will be picked up around the e-book-o-sphere as revelatory, proof the e-reader’s time has come: British ebook Reader Becomes Bestseller. It’s a remarkably unchallenged PR effort. Neil Jones, CEO of Interead tells Sky News his e-reader has sold “tens of thousands…in only three months” and that “we are already in profit.” Jones previously described the launch of the COOL-ER as the “iPod moment for ereaders.

How many tens of thousands? Sky’s Jeff Randall let that slide. What is a “profit” on a device that sells for £189 ($311 U.S) in “every country on the planet“? That’s an expensive launch. If Interead has sold 20,000 devices, for instance, it has $6.2 million in top-line revenue. It’s doubtful that the fully loaded cost of getting those devices designed, manufactured and marketed was less than $6 million. Who knows, maybe they’ve sold 30,000, which would put the device somewhere in the low- to moderately well performing e-readers by sales in its first three months—Kindle sold about 370,000 units in its first year by my estimates.

But an iPod moment? iPod sold 378,000 units in its first year (2001-2002). With Kindle and Plastic Logic coming to market in Britain and worldwide, respectively, in 2010, it’s hard to see COOL-ER sustaining its sales momentum without substantial additional investment in marketing and upgraded designs in the face of both dedicated e-readers and smartphone/PC competition, which will increase dramatically next year.

Scrutiny of these kinds of claims is needed. It has been delivered forthwith.

There is also no clear definition of what constitutes a “bestseller.” Marketers make up lots of this as they go along to regale the press and stupefy customers.

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

Sony Reader goes “Daily” with Kindle competitor

During its previously scheduled product launch of the Sony Reader Pocket ($199) and Touch ($299) Editions today, Sony dropped its would-be Kindle-killer on the market, a $399 AT&T 3G-enabled Reader called “Daily Edition” that will ship in time for Christmas, if an e-book reader is on your last-minute shopping list. This Christmas, it may very well be.

Does 7-inch Daily Edition, which sells for $100 more than the 6-inch Kindle 2, bring enough oomph to the market to make it a must-have for the holidays? The answer will depend entirely upon whether Sony’s move to ePub format and close embrace of Google Books, which can be downloaded free through its online bookstore, will tip the buyer’s decision in favor of Sony. While it is a 3G-enabled reader, comparable to the Kindle and its WhisperNet service provided by Sprint, the Sony Daily Edition will not allow Web browsing, which the Kindle does, according to various sources, notably Publishers Weekly.

The Sony press release suggests that there might be an upgrade path to full Web connectivity: “There are no monthly fees or transaction charges for the basic wireless connectivity and users still have the option to side load personal documents or content from other compatible sites via USB.” I have queried Sony PR about what “basic wireless connectivity” means and whether there will be options for additional service. It isn’t entirely clear that Google Books will be downloadable over the air or only via PC download—since there is no revenue to support 3G downloads, this needs to be clarified.

Unlike the Kindle, the Sony Daily Edition offers handwritten note entry (stylus included with the system) and built-in links to local libraries, which can “loan” electronic copies for up to 28 days through the Overdrive.com library collections service. A social network for discussing literary. And the devices will be available at physical retail outlets, including Best Buy and WalMart, making it easier to try than the Kindle.

Amazon is prepared to counter the perceived accessibility of Sony’s ePub strategy by both opening the Kindle readers to ePub and making its proprietary format readable on a wider range of devices. Sony may have the cheapest e-reader with the $199 Pocket Edition (sans wireless connectivity), but this still looks like a fight that is going to be waged on Amazon’s terms.

The Lost Symbol will be a dollar sign

The Da Vinci Code sold more than 81 million copies worldwide. Dan Brown’s new book, The Lost Symbol, will be released simultaneously in hardcover ($16.17 at Amazon, a 46 percent discount) and for Kindle ($9.99) on September 15th. Five million paper copies of the book will be printed, one digital copy will be encrypted several million times. Likewise, Sony is certain to offer the book at the same price or lower in its e-book store, taking its losses on The Lost Symbol to drive sales of its Reader devices.

What we will witness is a test of how far hardware vendors will go to increase unit sales of their respective devices. Since Random House will collect between $12 and $13 per copy from digital channels, the hit to Sony and Amazon’s top-lines will be substantial. Each will pay millions to keep The Lost Symbol at the top of their device’s bestseller list. The symbol lost in all this hoopla will certainly be a dollar sign, but it may result in greater uptake in e-book formats generally and, perhaps, a “winner” among the current dedicated e-book readers.

The Lost Symbol is the title that could make or break the current generation of e-reader devices, firming up reader’s investment in the platform and format in which they read digital books. I don’t think that Dan Brown’s latest will sell millions of Kindles on its own, but it will be the title that converts some readers to Kindle or Sony Reader. Both Sony and Amazon see royalties paid on this book as a sunk cost they expect to recoup from hardware sold. If the hardware revenues don’t follow, this book may convince one or both of them that dedicated e-readers aren’t the best business.

If there are approximately 3 million Kindle-compatible devices (Kindle hardware and iPhones running Kindle for iPhone) and some 500,000 other dedicated e-reader devices, as well as perhaps six million other software-only readers installed, electronic sales of The Lost Symbol could account for up to five million copies, matching the first print run. That will be a huge accomplishment.

However, because e-reader hardware is still too expensive for most consumers, e-book sales will likely be slower than print sales after the initial release, especially when paperback editions appear. The key market to watch then will be e-reader application installs on smartphones and computers. Since e-book applications that run on phones and PCs carry little migration cost, we can expect to see an explosion in sampling of reader apps if digital copies of The Lost Symbol are going to pace paperback sales. The only possible channel through which The Lost Symbol could continue to sell 50 percent of total copies sold in digital format is e-readers on phones and PCs.

In the long run, the economics of reading will drive adoption of common formats not incompatible e-reader hardware. I’d be very surprised if Dan Brown’s next book isn’t offered in a single digital format—most likely ePub—that can be read on any device or in any e-reader application. By then, Kindle will be compatible with ePub, because Amazon’s goal is to grow share of books sold, not just to be a e-reader hardware vendor.

ePub format wins critical victory—will it help Sony compete?

Sony Readers will offer only ePub-formatted books through its eBook online store and devices, dumping its BBeB proprietary format, according to The New York Times. This is an important step toward compatibility between e-reader devices, one that will challenge Amazon’s dominance in e-books to date, because Kindle will soon be markedly separate from Sony, Plastic Logic and other devices that support ePub. HarperCollins and Random House have signed on to the Sony ePub initiative. HarperCollins already offers ePub books.

ePub isn’t the ultimate solution to the question of an e-book standard, but it does solve the basic problem of making books readable across multiple devices. As Gartner analyst Allen Wiener told the Times: “If you see some Adobe executive up on stage with Steve Jobs when they announce the tablet, at that point Amazon has a lot to worry about.” Adobe Systems developed ePub as an “open” alternative to other e-book formats, however it is also pushing its PDF format as a solution for presenting formatted documents—Amazon promotes PDF formatted books for the Kindle DX. There’s no absence of a relationship between the two companies. ePub can still be made into a proprietary format by developers who add, for example, a proprietary DRM (in contrast to its built-in DRM) or display extensions to the basic text display capabilities of ePub.

Amazon can solve this problem by updating its existing Kindles and adding ePub support to new units, something I believe is already on the calendar. Jeff Bezos only has to make an announcement that Kindle supports ePub, which he has foreshadowed, to prevent a user migration. Amazon can retain its lead by adding ePub versions to its store, allowing buyers to download ePub versions.

So, while it is to Sony’s credit that it is leading the way toward document portability, the initiative still lies with Amazon.

Still waiting for the hockey stick: IDPF Q2 e-book numbers show growth accelerating

IDPF final Q2Following up on Monday’s analysis of the growth of sales in e-books, the IDPF has released final Q2 e-book sales figures, which totaled $37.6 million. It shows accelerated, not exponential growth. That makes the resolution of early problems with e-book publishing, such as providing customers assurance their e-book files will be readable across devices over time all the more important, because any backlash now will cut off growth. It will be interesting to see if the Amazon 1984 event will stunt growth in sales.

Growth year-over-year reached 224.14 percent in Q2, slightly above the estimate provided here. More encouraging is the quarter-to-quarter growth of 45.75 percent, which is only a slight decline compared to Q1 growth of 53.57 percent. In previous years, the second quarter’s growth has fallen off more steeply from Q2, so the numbers suggest that growth is established based on the wider adoption of devices.

Nevertheless, the e-book market growth remains well below the exponential increases everyone would like to see. It’s a delicate time for this market.

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