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An Introduction to the Future of Books

Amazon's Kindle has become one of the most popular e-readers.

The book world is facing a systemic reorganization. The electronic-book’s climb into public acceptance has forced nearly every publishing company to consider an e-book future, and two distributors — Amazon and Apple — (possibly three including Google Books) are currently vying for dominance in this emerging market. The implications for one of man’s oldest media traditions are massive, and to a large extent, the outcome remains speculative. However, examining contemporary power struggles between e-book publishers and retailers and recent market innovations provides a glimpse of what the e-book market may someday become.

Conventional book production has become a well-known formula: publishers sponsor and collaborate with writers before passing on the finished product to retailers, who ensure they reach customers. However, as with nearly all innovations, e-books have disrupted the status quo.

E-books and e-readers (devices that display e-books) eliminate many of the costs associated with distributing books, such as shipping, printing and storing. Similar to news media’s current transition to online content, in theory e-books remove the need for massive retailers and thus empower publishers.

Paradoxically, however, e-book retailers have shown they still exert plenty of power over publishers—though publishers have begun to fight back.

The recent pricing battle battle between Macmillan and Amazon last January illustrates this relationship perfectly. Since beginning to distribute them, Amazon has reserved the right to price e-books, typically at $9.99. Many publishers have pressured Amazon to raise the price in order to increase profit margins and avoid devaluing physical books; however, Amazon’s massive market power enabled it to resist. In addition, publishers themselves relied too heavily on Amazon for book sales to risk damaging their lucrative relationship.

Macmillan Kindle
Macmillan’s victory over retail giant Amazon could start a trend of publishers fighting back.

Finally, Macmillan CEO John Sargent saw a leveraging point. Shortly after announcing it would enter the e-book market with its new iBooks store for the iPad, Apple met with publishers to discuss a new pricing model now called the “agency model.” This model affords publishers much more power by enabling them to set the price of a book. In exchange, the retailer, i.e. Apple, takes a cut of this price for sales much like an agency would get a cut of commissions. Sargent saw the new model would give his company the power it needed and approached Amazon with an ultimatum: either Amazon follows Apple’s lead and adopts the agency model or Macmillan would restrict the publications of its e-books.

Macmillan CEO  John Sargent
Macmillan CEO John Sargent

The agency model would allow Amazon to make more money selling our books, not less. We would make less money in our dealings with Amazon under the new model. Our disagreement is not about short term profitability but rather about the long-term viability and stability of the digital book market.” — John Sargent, Macmillan CEO.

Amazon refused, ceasing all sales of Macmillan books. Two days later, however, Amazon caved after rumors spread that several other big publishers —  Simon & Schuster, HarperCollins, Penguin, and Hachette — were planning to follow Sargent’s example. The retail giant could not afford to lose so many titles and had no choice but to capitulate.

Apple's iPad

Apple released the iPad primarily as a media-consumption device.

While certainly dramatic, the Amazon-Macmillan battle is most likely a harbinger of bigger struggles to come. Since then, Apple has taken more steps to erode Amazon’s market dominance, including releasing the iPad primarily as an e-reading device.

Here, critics will disagree, but its functionality suggests the iPad was conceived of primarily as a media-consumption device, which fits right into the e-reader market. Up for debate is whether the iPad’s other functions will give it an edge on competing e-readers. Its higher price could also serve to fracture the market into tiers in much the same way as laptop computers — separate sub-markets for cheep, low-end readers and high-powered expensive readers.

Jobs announces iAd
Steve Jobs annouces iAd, an app-based advertising service.

Perhaps even more exciting for true media geeks was Apple’s announcement of iAd, an app-based advertisement service that could revolutionize the e-book revenue model. Some bloggers have already discussed the implications embedded advertisements could have in e-books — and not all are bad. In fact, this new revenue source could open up more flexibility and innovation. For example, ads could allow authors without an expansive infrastructure to finance a book through ad revenue. It could also lead to multi-version e-books  — ad supported versus consumer supported — displacing or decreasing the price readers are currently required to pay.

These revolutions in both corporate power structure and media functionality have far-reaching implications for the future of media consumption. However, current day-by-day advances and struggles are plowing the ground for that future today.

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Will e-books cut out the middleman?

Ken Auletta recently wrote a very comprehensive (read: long) article in the The New Yorker’s Annals of Communication column chronicling the power struggle between Amazon and Apple in the post-iPad world. The article is good for anyone looking to catch up; for the quick bullet points, see Auletta’s interview on Fresh Air.

At first, the distributor clash was seen as a boon to publishers, who suddenly found themselves with a competitor to Amazon that offered more flexibility in pricing power. However, Auletta notes this view could be naive. In fact, publishers could face being cut out altogether.

“Amazon has actually made some deals with authors — Stephen Covey is one — and has actually approached authors and editors to try to hire editors to work for Amazon and to procure books for them. [And they’re] offering authors a much larger commission than the commission they get from hardcover publishers.”

It seems Amazon, though recently defeated in the pricing battle with Macmillan, has taken steps to circumvent publishers entirely. Of course, these indications may be premature, but even so it raises the question: What role should publishers play in the emerging e-book market?

Retailers have steadily encroached on the value traditionally added by publishers. As the line continues to blur, publishers could face a shrinking need of their services—a far cry from the e-book panacea many had in mind.

Categories: Uncategorized

'the people formerly known as the audience…'

If you are even remotely plugged into the digital media debates of our time, you’ve probably encountered Jeff Jarvis, author of What Would Google Do and a persistent openness extremist. Despite my description of Jarvis’ views, I happen to find much of what he says compelling, and I particularly liked the way he recently expressed his dissatisfaction over the iPad.

An overreaction? Probably. But I can certainly get behind his rationale. Jarvis believes the iPad’s limited ability to create content is a deal-breaker. I agree. The new Web is all about creating and sharing, not passively consuming. In particular, I like the way Jarvis’ expresses this sentiment in his resent talk at re:publica 2010 in Berlin (about 37:00 on the timeline):

“The problem with the iPad is I couldn’t see a use for it…That scares me: that we move back from a world where we, the people formerly known as the audience, become an audience again.”

Also, check out his comments on why the media loves the iPad (read: because it gives them back the control that the Internet has democratized).

Don’t get me wrong; I’m not a Jarvis fanboy in every respect. However, I do think he forces us to consider our preconceived notions about digital media, and his arguments, if not compelling, at least serve a provoking pedagogical function.

Ads in E-books? iAd and its implications…

Jobs reveals mobile advertising. Could they find their way into e-books?

Apple recently revealed plans to release OS4 for iPhone this summer and a similar update to the iPad in the fall. While the new OS supports many mouth-moistening features for Apple nerds, one particular feature has media developers drooling a bit more than usual. iAd will allow in-application advertising, opening the Pandora’s Box of advertisements in your favorite mobile device.

It was inevitable. The ad-serve model has been the mainstay of media companies for decades, and so it was only a matter of time before mobile apps too found a way to tap in to this explosive revenue source. But, as many have noted, the iPad has a special emphasis on e-books, and it isn’t a stretch to imagine a Blade-Runner-esque future of ad-embedded e-books. Think that sounds horrible? Well, belay your anger for a second and imagine the possibilities.

Ad-embedded e-books may hold an interesting opportunity for publishers and readers.  The traditional advantage of the ad model is it allows displacement of pricing; instead of paying for content, audiences suffer through ads that companies pay for to reach that audience—the audience pays a reduced amount for the content they consume. As Joe Wikert from TeleRead points out, publishers should consider making two versions of their e-books—one with ads, the other without. The ad-enabled version could be priced far lower and potentially distributed more freely than the ad-free version because publishers would collect revenue regardless.

Maybe I’m just a media nerd, but this could be an interesting, albeit a bit stomach turning, workaround for many e-book revenue problems. Thought I hate to say it, there is no free lunch e-book—at least this way consumers may get greater freedom…brought to you by ads.

Categories: Uncategorized

It's finally here…

It’s finally here. After all the hype and anticipation, after months of collectively holding our breaths, the future of e-reading has arrived, and this blog just wouldn’t be worth its salt if I didn’t cover it. I am, of course, referring to the recent debut of the Kobo e-reader!

What? It’s not like anything else came out this weekend?

But regardless of my interminable love for all things Kibo, all this weekend’s iPad noise hasn’t gone unnoticed. The initial reactions seem positive, though I’d say at least 30% less fan-boy crazy than with previous Apple releases. I — and probably most people — am a bit wary of the iPad, staying home on opening day to lurk on geeky tech-review websites and determine what Apple’s new product is really about.

For myself, iPad aesthetics were a given. I was more concerned with the pad’s functionality. Can you blog from it? (via Mashable: apparently so.) What apps will be available? How will this fit into, or improve, my life?

Less helpful though sometimes comical, I even succumbed to the ubiquitous man-on-the-street interviews.

Your mileage may vary, but after a quick tour of the tech-geek blogosphere, I’m still firmly on the fence. Sure, the iPad looks sexy. The thought of consuming media from the sleek tablet while relaxing in a sphere chair is appealing. But that seems to miss much of the power of web devices: the ability to create in-depth web content, not just consume it. For my current needs — always away from home, all the computing power I can get, quick reliable word/media processing, able to run Adobe products, never a spare moment — this device just doesn’t fit.

But then, I may be atypical. The reviews are far from over.

NYTimes & iPad: A conflict of interest?

From the beginning, the relationship between The New York Times and Apple’s iPad could be characterized as cozy. However, looking back on the nuances of both Apple’s iPad marketing and the Times’ Apple coverage, one has to ask: What’s really going on here? At the very least, both companies seems to afford a number of favorable-coverage coincidences. At most, it could be a case of outright cooperation — just short of quid pro quo.

The following images were captured from www.apple.com:

On the homepage of apple.com.

Among all the rotating slides, The New York Times seems to be the only content displayed that isn’t an Apple application. Similarly, listen to this glowing review of The New York Times iPad application:

Apple seems to have been struck by Times fever, but then, Apple is a company. Companies regularly strike promotion agreements with each other. The more concerning question is: How will a purportedly independent news company deal with all this promotion?

New York Times coverage of iPad.

New York Times coverage of iPad.

Catching any bias in The Times’ coverage of the iPad takes more subtlety, and it’s difficult to tell if and when coverage might have been affected. However, there does seems to be a dearth of negativity surrounding the iPad, and surprisingly little coverage of Apple’s recent censorship of a German photographer’s website. One would think a media company looking to start a substantial distribution deal with Apple would be more concerned with the company’s stance toward censorship.

CEO's mussings hint at new business model: the e-book library

While trawling the blogosphere for e-book insights, I came across an interesting post by Eric Hellman questioning the future market for e-book rentals. I’ll admit it’s something I haven’t given much thought, and it could hold substantial implications for e-books.

According to Hellman, John Sargent, CEO of Macmillan publishing, spoke briefly at a Publishing Point meeting in New York City. During audience questions, Hellman asked Sargent about the future relationship between libraries and e-book distribution.  Sargent’s comments suggest he’s given some though to the publisher-library relationship in an e-book-dominated future. The following is Sargent’s response, excerpted from Hellman’s blog.

“In the past, getting a book from libraries has had a tremendous amount of friction. You have to go to the library, maybe the book has been checked out and you have to come back another time. If it’s a popular book, maybe it gets lent ten times, there’s a lot of wear and tear, and the library will then put in a reorder. With e-books, you sit on your couch in your living room and go to the library website, see if the library has it, maybe you check libraries in three other states. You get the book, read it, return it and get another, all without paying a thing. ‘It’s like Netflix, but you don’t pay for it. How is that a good model for us?’

‘If there’s a model where the publisher gets a piece of the action every time the book is borrowed, that’s an interesting model.'”

I agree.

These could simply be off-hand remarks from Sargent, but in light of Macmillan’s recent agency-model victory over Amazon, we can be sure the company isn’t afraid of trying new things.

Is a rental model possible for e-books? It seems likely. Apple has already had success with movie rentals via its iTunes store, not to mention the video-rental behemoth that is Netflix.

Could a rental market pay off for publishers? That’s harder to get a beat on. It seems unlikely that e-book publishers and distributors will allow free borrowing on the same level as contemporary libraries. After all, the physical restrictions and limitations mentioned above have always provided a significant incentive for consumers to buy their own copy of a book. However, none of these restrictions apply to an e-book, which can be copied and distributed almost effortlessly — at least in comparison to physical print. Thus, no inherent incentive exists to pay for a copy — ignoring the opportunity for added content, ease of access, etc.  It seems reasonable to assume publishers will at least try to get a commission on e-book rentals. I would not be surprised if the big publishers start making quick inroads with distributors like Amazon or Apple on a rental model.