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.

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.

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.

A la carte and the Apple tablet

Wired‘s Brian X. Chen has a vision of Apple’s tablet with an interesting angle: The potential for a la carte pricing of books. It’s not a new idea, but his point about college students being excited about buying individual chapters of a textbook rather than the whole book rings true to me.

Would publishers consider pricing a textbook by the chapter? I doubt it, but this is something their primary customers may respond to, giving publishers an opportunity to experiment profitably. After all, if a textbook in paper costs $80 and can be broken into 15 $5 chapters that can be sold separately to more buyers than could or would buy the whole book, the possibilities become intriguing.

Offering chapters as free promotions is old hat, of course. What about rewarding buyers of chapters with rewards that encourage more purchases? If, after buying three or four chapters, the reader gets the whole book or credits toward chapters of another book by the same author, that could be an interesting twist.

The rest of the article anticipates Apple’s wiping the competitive table with Amazon’s Kindle and solving the world’s problems with tablet-of-destiny. Chen suggests that application-based delivery of books is a good idea. It isn’t because it represents the ultimate form of DRM–a book that won’t play unless the customer complies with strict rules about the device, application and codebase of the iPod Touch operating system. Apple, unlike Amazon, does not provide forward compatibility for applications or, if iTunes is any indication, will not curate a customer’s collection of e-books for redownloading if the file is lost.

The writer confuses a monolithic distribution technology with convenience. Texts, however, need to be portable to be useful and profitable on the lower price readers expect to pay for e-books. Portability is good for readers, writers and publishers.

Moreover, Chen is eager to see Apple fix e-book pricing with “arm twisting.” That perspective ignores the fact that Apple’s interests are in selling the device (and content that runs on that device, and only that device) but not necessarily with the interests of authors and publishers who need greater freedom to explore creativity than a universally low price point for e-books would allow.

Samsung also leaping into the Kindle cage fight

From The Korea Herald: Samsung takes on giant Amazon in e-books. And, no, we’re not talking about a battle of GIANT WOMEN. “We seek to become a bigger player than Amazon or Sony in the e-book market,” Lew Jae-young, vice president of Samsung Electronics, is quoted saying at a press conference.

The Samsung device, the SNE-50K, which launches later this month in Korea, has an E-Ink display the same size as Kindle 2, no wireless connectivity and touts the first handwriting recognition technology in e-books, which is not true.

The $270.00 (339,000 Korean Won) device will be available through a Korean bookstore chain, Kyobo, and features only 2,500 titles in its current catalog, with a thousand more expected to be added each month. Interestingly, the article states flatly that e-books will sell for 40 percent less than their paper counterparts, so there is no assumption that an e-book must be priced at a specific amount, such as $9.99, to be attractive to the Korean market.

Local language focus may be a boon for Samsung in Korea, where providing double-byte character support and domestic bestsellers can help establish a beachhead for the device.

iRiver’s got another Kindle competitor

iRiver, which dominated the market for “personal music players” or “MP3 Players” back in the days when we referred to portable music by technology acronyms and iPod was just a sparkle in the eyes of a few Apple folks, is reported to building a Google Android-based media player and an e-book reader. But, wait, the devices are “not yet 100 per cent signed off” yet, said iRiver product manager Danny Bejanoff in the article. The company is also developing a Web tablet and e-book reader that will be available in Australia “for testing” soon, according to Bejanoff.

Sounds like a trial balloon.

I believe the device referred to as a Web tablet is, or is related to, the P7, a $209.00 tablet-like device with 16GB of memory already offered by iRiver in the U.S. A $179.00 8GB version is also available.

Fun fact to know and tell question of the day: What company preceded iRiver with the first portable downloadable audio player? It’s not this, which was the first device designed for music playback. Enter your answers in Comments!

Apple’s mythic beast: These tablets don’t come from God

The flurry of reports about Apple’s rumored 10-inch tablet iTouch/e-book reader/Media tablet over the weekend have only one thing in common: All are wild guesses based on exchanged rumors taking on a life of their own.

Notable in today’s Financial Times, for example, is the devastatingly guessy comment from Oppenheimer & Co. analyst Yair Reiner: “I think it will have a lot of the functionality of the iPod touch, but will be quite a bit bigger.” Mashable jumped on the FT’s report this morning, saying it “adds credibility” before going on to list the same set of questions everyone has been guessing about. Will it be a Kindle competitor? Will it be a phone or not? And so forth.

Pointing to one article riddled with guesswork does not add credibility to the rumors reported. Another article in the FT today, which discusses Apple’s efforts to revitalize the “album” in music sales, at least has some sources speaking on the record. The only named source in the tablet article, Mr. Reiner, quoted above, offers speculation. A source, described as a publishing executive said of the tablet: “It would be a colour, flat-panel TV to the old-fashioned, black and white TV of the Kindle.” That is a characterization without any detail from someone speaking off the record—why speak off the record if you aren’t leaking substantive information? Why let a source play authoritative expert when they are offering guesses?

Wild-eyed guesses. That’s all people are running with, because everyone dearly desires a good horse race to report. There is no horse race, there is a breeding program underway that will yield a lot of mules and a few thoroughbreds. Watching a breeding program can get very dull, sometimes gruesome. Unfortunately, most press are looking for “winners” and “losers” rather than seeing that features and traits developed in each generation of device are the only Darwinian players in this story. No one device or platform will win, because media is a deeply fragmented marketplace with broad choice for buyers.

Here’s what we can be sure of:

  • Apple never races to meet Christmas season deadlines. The company manufactures enthusiastic buyers whenever it wants, making the primary claim of the rumors, that the device must launch between September and October, ring hollow.
  • The market evolution underway now assumes that people are going to adopt specialized devices for different activities, such as reading, watching movies and browsing the Web. We have computers, televisions, radios, personal media players and myriad other devices that do most of these same things.
  • No one, not even Amazon with the Kindle and its almost 800,000 units sold, has brought about the adoption of a new activity specifically suited to a small computer with a screen capable of displaying text. It’s still just reading and we’re being asked to buy another device to do it. Whether e-readers will catch on in the current form is still very much up in the air.
  • The first substantial change in publishing as a result of these devices will be in magazines and newspapers, which will find renewed vitality when they don’t kill as many trees.
  • Readers who buy books—the third of Americans who read more than one book a year—are not going to give up paper for formats that will be obsoleted or lacks substantial enhancements over paper, except for short-lived information, such as newspapers and magazines. Anybody remember interactive CD-ROMs, which did sell millions of units and went absolutely nowhere. The benefit of these devices is not eliminating books from people’s lives, yet that is how many characterize every step, as the “end of books.”
  • Kindle is the ultimate newspaper and magazine reading device, since it provides the benefit of relieving readers of a lot of trash. No more piles of old magazines and newsprint; instead, your subscriptions will all be stored for reference and searching on a Kindle. However, any portable device, including a computer, can do the same thing. An Apple tablet could offer this, too. So, choosing a device becomes a matter of preferences and priorities. The Apple tablet addresses different priorities than the Kindle.
  • Any device introduced as a Kindle-killer will be hyped, and any product Apple makes will probably be very pleasing to the eye, the ear, the touch and, because Steve Jobs will not ship a monochrome screen in an age of rich media, as he is no fool, Apple products will not deliver the long battery life that characterize e-reader devices.
  • Steve Jobs will not introduce a device for a market of less than 100 million. An Apple tablet will have to combine functionality to appeal to many target users in addition to readers.
  • All the devices on the market and in the offing will involve trade-offs between different classes of functionality. The Apple tablet, if it even exists, will aim for the video market and e-books will be an afterthought supported by third-party developers, meaning readers will only embrace it if they also feel strongly about carrying movies and television along with them.

Relax, the world will not end or dramatically change when Steve comes down from the mountain with his tablet, if he even does so this year.

Does this mean “free” is working?

Chris Anderson’s new book, Free, will no longer be free on Kindle. It will be $9.99, only until August 21. But, buyers get a free copy of Anderson’s previous book, The Long Tail (currently listed at $9.56). Does this mean “free” strategy is working? Does the price go up again after August 21? If so, this is the first book to pursue a mark-up strategy as the title fades to the midlist.

Amazon won’t allow associates to link to the offer, so the free offer certainly collapses part of the value-chain, the online word-of-mouth marketing component, that we all thought was important to e-books. I still think Hyperion and Anderson need to do a full disclosure of the accounting for the title and the ancillary revenue it produces.