Archive

Posts Tagged ‘Amazon’

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.

Advertisements

Amazon's new model: speak loudly and carry a big stick

In the past few years, Amazon has become one of, if not the, premier book retailer. Now, as the online retailer attempts to cultivate its e-book market, that strength is paying off.

One account, published in the publishing-industry news letter Publishers Lunch, says the retailer is pressuring all but the biggest publishers (i.e. Random House, HarperCollins, Hachette Book Group, Simon & Schuster, Penguin, and Macmillan) not to pursue the new agency model introduced by Apple earlier this year. Independent publishers looking into the agency model risk being dropped from Amazon all together. In the newsletter, Publishers Marketplace‘s Michael Cader says:

“At least one independent publisher of scale was told categorically by Amazon in a recent phone call initiated by the retailer that Amazon would not negotiate agency selling terms with any other publishers outside of the five initial Apple partners. This publisher was told that if they switched to an agency model for e-books, Amazon would stop selling their entire list, in print and digital form. In conversation, Amazon is said to have reiterated that as matter of policy they are declining to negotiate an agency model with any publisher outside of the five who have already announced agreements with Apple’s iBookstore. Another sizable independent publisher we spoke to has not discussed an agency model with Amazon yet, but is resolved to work with Apple regardless. ‘We’re committed to going forward with Apple,’ a senior executive told us, underscoring, ‘we don’t see how we could allow one retailer, no matter what threats they make, to block our authors’ works from being available at another retailer.'”

It’s hard to say what Amazon’s stance on the agency model will mean in the long run. The agency model appeals to publishers by giving them the power to price books. The retailer then receives a portion of that price. Apple revealed its plan to implement the agency model in conjunction with iPad content earlier this year.

This difference in the two companies approach could make all the difference. After all, what good is an e-reader without content? Some (see Mashable’s Chistina Warren) have even described the divide as an “e-book war.” And it probably is; to the victor go the market.

The crucial question becomes how Amazon will be affected. Will loosing (if they loose) indie titles make a difference? It’s just another dimension to the industry’s zeitgeist question: what will people pay for content?

Amazon, Kindle textbooks sued on behalf of the visually impaired

February 10, 2010 1 comment
Kindle Textbooks

The perfect replacement for textbooks?

When I think of potential uses for e-readers, the first thing that comes to mind is a replacement for textbooks. Texts tend to be large, heavy, expensive and — most importantly for the skimmer in all of us — not keyword searchable.

Amazon’s Kindle would be the perfect device to change all that. College students could load all their textbooks for the semester onto the Kindle and carry it with them wherever they go. Any off-time riding the bus or between classes becomes potential study time. The added convenience lies in the fact that you have every textbook with you at once — no need to plan.

As a student who commutes to many of my classes, I know personally the challenges of deciding what book deserves to be hauled around all day for the unlikely scenario that I have some extra time. Many times, I’ll opt for a lighter book, even if I really need to study for a different class.

The other pop to convenience comes from searchability. E-readers like the Kindle bring CTRL-F to any textbook, making it easy for students to search for the passages they need based on keywords. To some extent, this feature is also available on Google Books, which offers a limited search for free.

With all these features, Kindle seems destined for the classroom, right?

Wrong — at least until all the legality gets settled. In response to a pilot program introducing Kindles to certain classrooms at Arizona State University last fall, The National Federation of the Blind and the American Council of the Blind filed a joint lawsuit against ASU and the Arizona Board of Regents. The organizations claimed using Kindle in the classroom violated the Americans with Disabilities Act and Rehabilitation Act because, while the Kindle does sport a text-to-speech program, the device’s menus are still inaccessible to the visually impaired. ASU settled with the two organizations last month and, as a result, halted the program until access could be improved.

This sounds like an easy fix: just add a text-to-speech navigation feature. However, this incident exemplifies a common problem with new technology as it enters the market. All innovation faces  troubles integrating into the existing infrastructure and law. The key challenge becomes adapting to and changing that infrastructure. These kinds of field tests provide companies like Amazon a clear goal for functionality that they obviously overlooked.

The suit caused Amazon to quickly promise audible menus. In fact, they announced that by summer 2010, the company would release the “Kindle Blind” for the visually impaired — a move that other companies, if they’re smart, won’t miss out on either.

The bottom line: getting people to switch over will be hard, which is why e-reader companies need to cram as many features into those little devices as possible.

And it makes good market sense too. After all, if you’re trying to revolutionize the publishing industry, why not revolutionize the Braille publishing industry too?