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

Open letter to Hachette CEO Arnaud Nourry: Kill your hardback business

Sir:

I read with interest your comments in the Financial Times of August 31, 2009, regarding the fact that “unilateral pricing by Google, Amazon and other e-book retailers such as Barnes & Noble could destroy publishers’ profits and kill the lucrative trade in hardbacks.” I write to warn you that, if your primary concern is retaining the profit in hardbacks, you will repeat the errors of numerous of C-level peers in media companies, from newspapers and magazines to the music and television industries. Instead, you should be prepared to wipe out your hardcover profits over the next five years to retain your relationship with readers. The real reason Amazon is selling e-books at a loss today is to take the demand-creation relationship away from you.

The hardcover is a package for printed content. Despite it’s wonderful history, the codex form factor in its various sizes of hardbound pages, is just a package, albeit one tightly bound up in the distribution processes traditional to publishing. The hardback book has led the publishing parade for centuries, but has given way in the era of industrial publishing to paperbacks, so that now far more than half the books published are never released in hardback. Hardbacks are seldom profitable, despite what the FT article says, relying on unexpected hits to produce the lion’s share of profit at a publishing house. Predictably successful hardback first editions, such as the upcoming Dan Brown novel, The Lost Symbol, are less profitable than the surprise hit because of the deep discounts demanded by retailers online and off.

Hardbacks are the best way to test the market for viable trade paper titles that will thrive in your midlist, because they are more likely to end up in discount bins than as returns. Rather, I should write “Hardbacks were the best way…” as the e-book is poised to take the place of hardbacks as first-edition-to-market because they can be sampled by chapter and, even, given away to spark readership wildfires. Newspaper companies failed to see that preserving the newspaper killed the news that made the daily edition valuable. The form factor in newspapers and books are deeply integrated into the distribution systems on which these industries rely. Moving books or morning editions from place to place has been the key to profitability for publishing since before any of us were born. It’s over, as newspaper companies prove daily.

Distribution is no longer the hard problem in publishing or any form of information delivery. It’s a competence that Hachette should shed in favor of outsourced relationships with, among others, Amazon and Google. Amazon can move books much more cheaply than any publisher. They could probably print them more cheaply, too. Both Amazon and Google can move virtually unlimited volumes of bits anywhere on the planet at a fraction of the price Hachette can deliver books to retail.

Amazon is not poised to tell Hachette and other publishers that it will pay a smaller share of $9.99, they are thinking about whether Continue reading

Smashwords opens B&N channel for self-publishers

Late Friday, Mark Coker of Smashwords sent the following via email:

Smashwords has signed an agreement with Barnes & Noble to distribute Smashwords
ebook titles, all of which are self-published or from small independent presses.
As you might imagine, we’re thrilled.  Until today, it was difficult if not impossible
for independent authors and publishers to gain such mainstream digital distibution.
Now with Smashwords, virtually any author, anywhere in the world, can receive
broad distribution for their ebook. Additional distribution relationships are
forthcoming.
The Smashwords service is completely free.  We pay the author 85% of the net
proceeds and we take 15%.
We originally hoped to do a formal press release on this news rather than release
it late on a Friday afternoon, but we needed to give our 1,200+ authors and publishers
advance notice so they can prepare their titles for distribution.  It’s tough
to ask 1,200 people to keep such an exciting secret a secret, thus the preempted
press release and my email to you.  We currently publish about 2,600 titles,
double the number from just four months ago.  The books should be listed at B&N
properties within the next 30 days or so.
We posted a link here to inform our authors about next steps:  http://www.smashwords.com/distribution

Smashwords has signed an agreement with Barnes & Noble to distribute Smashwords ebook titles, all of which are self-published or from small independent presses.

As you might imagine, we’re thrilled.  Until today, it was difficult if not impossible for independent authors and publishers to gain such mainstream digital distibution. Now with Smashwords, virtually any author, anywhere in the world, can receive broad distribution for their ebook. Additional distribution relationships are forthcoming.

The Smashwords service is completely free.  We pay the author 85% of the net proceeds and we take 15%.

We originally hoped to do a formal press release on this news rather than release it late on a Friday afternoon, but we needed to give our 1,200+ authors and publishers advance notice so they can prepare their titles for distribution.  It’s tough to ask 1,200 people to keep such an exciting secret a secret, thus the preempted press release and my email to you.  We currently publish about 2,600 titles, double the number from just four months ago.  The books should be listed at B&N properties within the next 30 days or so.

We posted a link here to inform our authors about next steps:  http://www.smashwords.com/distribution

This is a very significant turn, though one that I suspect will be followed by more Smashwords partnerships. The simple fact is that self-publishers are as much a part of the mainstream publishing market as any small house. The barriers have fallen and many authors will test the market without a deal with a publisher upfront. Smashwords makes the market entry very easy and preserves 85 percent of after-retail revenue for the author.

It’s another inventory that, at least now, BN.com and associated readers (Plastic Logic and iRex) can offer directly to readers. It seems certain that Smashwords titles will be available soon in other major online bookstores.

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.

B&N will offer iRex device, too

Dropping in from a flu-induced respite to say: Barnes & Noble is trying too hard. According to The Wall Street Journal‘s Peter Kafka, BN.com, in addition to teaming with Plastic Logic to sell ebooks, now plans to partner with iRex, maker of an upcoming iLiad device the features 3G connectivity and an 8.1-inch screen, described here. BN.com will be the e-book store for both devices.

We get the “we’re more open” argument already, even though every e-book format comes with DRM and compatibility baggage, but the challenge is not merely to sell books but to establish a platform customers can rely on. That comprehensive experience of reading goodness doesn’t come from a shallow focus across many devices, but deep focus on the reader’s experience with an e-book.

It would be a better use of Barnes & Noble’s modest marketplace goodwill to focus on making one device a stellar experience while supplementing that experience withiPhone and other smartphone e-reader applications than to try to sell and support e-books across a growing inventory of devices. Individually, any one device will require a substantial amount of BN customer support, which they are not well placed to provide, and as a group of devices that still are incompatible with half of the e-books or more sold, they increase the complexity of the customer’s choice. So, if BN.com fails to support the devices, even if it is the manufacturer’s problem, they will lose a customer. If their books don’t work with a device, it’s BN’s problem.

Now is the time for focused investment in a pleasing end-to-end shopping and reading experience. Amazon is already poised to compete with compatibility, so Barnes and Noble has nothing to win by spreading its bets. Factor in the Apple tablet-of-destiny (the Journal also reports today Steve Jobs is all over that tablet), which will run all sorts of e-reader apps at launch, and BN’s strategy looks very dangerous. It could be overwhelmed on the customer experience front, the e-book choice front and in terms of its relationships with marginally committed partners—in exchange for a largely undifferentiated (“we’re as open as anyone”) win if they execute perfectly.

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.

Smartphones could be e-readers of choice

Flurry_JulyPulse_eBookActiveUsers-resized-600Flurry, a San Francisco-based mobile applications market research firm, reports a break-out increase in e-book application use on smartphones, particularly Apple’s iPhone. According to this blog posting, Flurry is tracking user sessions (privacy questions about in that statement) and found a 300 percent increase in e-book application use between April and July. The company suggests that translates into 3 million active e-book readers during July.

The methodology isn’t explained, but the firm points to another research group, Apptism, to back up its claim, albeit tangentially, saying that e-book application sales had a 14 percent share of sales in Apple’s AppStore, second only to Games sales, which were 19 percent. There is, however, no explanation about how sales are tracked and reported, something Apple has been disinclined to do in detail.

A little context, if these numbers are valid, which I think remains unproven. They suggest that smartphones are convergence devices that will contest with specialized e-readers, such as the Amazon Kindle and others. If so, the real question to look into is sales per instance of application installed. Here, I think, Kindle would wipe the floor with iPhone e-reader applications. Why? Well, sampling of applications is a typical feature of iPhone and smartphone usage. People buy phones and install lots of apps, but seldom stick with them, either uninstalling them (which is not tracked by anyone) or simply ignoring them. Also, because book titles are usually embedded in an application on smartphone platforms, at least until recently, each book purchased may be counted as an application installation, which skews the real number of installed applications.

I don’t doubt that devices that include e-reader features could easily outsell dedicated e-readers. These numbers don’t support the argument that smartphones will overwhelm e-reader devices, yet. We need per-device or per-application counts of titles sold to determine what’s really going on.

Via GalleyCat

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.