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25 posts from April 2006

The eContent Innovator’s Dilemma

As I think a bit more about yesterday’s post, I can’t help think about the points Clayton Christensen makes in his classic book, The Innovator’s Dilemma. Consider these take-away’s from the book, as presented by getAbstract:

Established companies do all the important things right, which sometimes makes these companies fail.

Disruptive innovations usually start by selling to new – or unprofitable – customers.

Established company employees often discover or invent disruptive innovations, but the firm’s most valuable customers typically have no interest in innovation.

The pioneering employees often quit to build new firms to market their innovation.

How true. No matter how many people say that “e-books are a solution looking for a problem,” I wholeheartedly believe we’ll see a demand for them once a viable platform emerges.

Scott Karp on the Profitability of Media 2.0

Scott has a wonderful blog called Publishing 2.0. If you appreciate my blog you’ll really like Scott’s. One of his more recent posts is entitled “What If Media 2.0 Is Less Profitable Than Media 1.0?” He talks about the reduced costs (and profitability) of advertising online vs. via traditional (mass) media. I suspect his short-term observations will hold true in the long term as well.

There are parallels between Scott’s points about advertising and the model in book publishing. For example, I believe that a successful e-book model would probably have to feature products that are lower-priced than their print equivalent. Some publishers are trying to play up the value of the intellectual property and say that the price should be the same for every format. Given that the manufacturing cost of a typical book is approximately 10% of the cover price (rough approximation, no nit-picking on this, please!), you could argue that the e-book price should be approximately 10% less than the print book’s price. (I’m oversimplifying this a bit, ignoring things like DRM costs and the benefit of no excess inventory write-off – to keep things simple, let’s assume these are all a wash.)

Is a 10% price differential on an e-book vs. a physical book significant enough to make the model work? I don’t think so, not as long as the e-book is nothing more than a digital image of the printed book, which is what we see today (e.g., a simple PDF of the physical book). Regardless of the author’s credentials or the unique value of the content, the world has grown accustomed to e-content being fairly inexpensive if not free. Plus, physical books have the benefits of portability (you can read them just about anywhere) and re-usability (after you’ve read it, you can give it to someone else) – these are two key attributes that cause physical books to have a higher perceived value than e-books.

Let’s next assume that the publisher has the ability to sell these e-books directly, cutting out the retailer middleman. This creates a significant savings since the average book in a store is selling for approximately twice the price the store paid for it. (The problem here is that the typical publisher simply doesn’t generate the website traffic levels to compete with Amazon, for example; they also don’t have the depth and breadth of product offerings that you can find on Amazon.)

Combining the 10% manufacturing cost savings and the 50% retailer savings results in a model where the e-book sells for 40% of the price of the printed book. So a $30 physical book has a $12 e-book equivalent, for example.

This sounds good and leaves publishers with roughly the same margins they’ve enjoyed up to now. The big assumption here is that publishers can truly establish a direct selling relationship with their customers. That’s a pretty big leap of faith, at least when considering how the model works today.

A better model is one that allows for a new middleman, one who specializes in e-book sales and doesn’t require the same margins as a physical bookseller. Perhaps they would need as much as 20% of the pie to make their business profitable. Now you’ve got a scenario where that $30 printed book has an $18 e-book equivalent, which is still a pretty good pricing spread…or is it?

Don’t forget that the $30 physical book probably sells for about 35% off on Amazon. Now we’re talking about a $19.50 physical book on Amazon vs. an $18 e-book. The prices just got too close again, unless the e-book reseller is willing to offer everyday discounts like Amazon.

One possible solution: The publisher has to live with a lower price so that the e-book is more of a bargain relative to the printed book. One way to avoid this outcome is for e-books to be something much richer than a simple PDF. The content would have to be reworked in a manner that takes advantage of the e-book device/platform. Links are embedded throughout to related topics elsewhere in the book. Video is integrated to provide a visual way of driving home a point. All this requires more effort by both the author and the editor/publisher, likely causing the publisher to still make less in the long run.

Old Media In Denial: Movie Theaters

Mark Cuban’s production company, HDNetFilms, is trying to reinvent the movie business. This isn’t exactly news, but I got a chuckle out of a recent Wired interview with Peter Brown, CEO of AMC Entertainment. Go ahead…click to the link and read the brief answers Mr. Brown gave Wired…I’ll wait.

OK, now that you’ve read it, did you laugh too? My favorite quote was in response to Wired’s question, “Why deny theatergoers the chance to see Bubble?”:

We want to put up on the large screen a product made with that format in mind. Bubble, and some of these other direct-to-video titles, are simply not. We want to serve steak, not hamburger.

Oh please! This statement is still remarkable even after you scrape off all the excessive arrogance. How do these guys measure quality anyway? I’d take a great story with less than optimal video quality over a weak story with amazing video every single time. I wonder if Mr. Brown has spent any time watching some of the truly lousy movies that find their way into theaters every single month. I know I have and that’s why I go to the theater less and less each year.

No, this isn’t about video quality. This is all about Cuban’s desire to change the playing field, disrupting the model that’s made the theater owners fat and happy. Cuban’s model makes a ton of sense. Why can’t a movie be available in any and all formats from day one?

Good luck Mark – I hope you hang in there and turn the industry on its ear!

getAbstract: A Book Summary Service that Really Works

Their tagline is “compressed knowledge”. I once tried a competing book summary subscription program and was highly disappointed, so I approached getAbstract as a full-fledged skeptic. I’ve now read 6 of their summaries and I was wrong. This is a great service and a real time-saver.

I firmly believe that most of the good information you find in the typical business book can be boiled down to 4 or 5 pages. That’s the model for getAbstract. They carefully read each book, taking note of the key points and condense it down to three headings: Take-Aways, Relevance (What You Will Learn/Recommendation) and the Abstract itself, all in 5 pages.

To convince myself that I’m not missing anything in a summary, I started off with a couple of books I already read from cover to cover. Sure, there were a few memorable stories or bits of background information from the book that didn’t make it into the summary, but overall I truly felt the summary covered all the critical highlights.

On a long flight to the west coast yesterday I wound up reading the Clayton Christensen trilogy:

The Innovator’s Dilemma

The Innovator’s Solution

Seeing What’s Next

I had already read the first one but the summary was a good refresher before I moved on the other two. I’m a slow reader, and even more so with these summaries because I want to make sure I spend some time thinking about each of the take-aways, etc. Despite taking my time, I managed to get through all 3 in about an hour (total). Although I was seriously considering buying a copy of Seeing What’s Next, I’m glad I didn’t – the summary showed that it’s mostly a rehash of the first two books.

getAbstract’s summaries are available on a wide range of topics and in many formats including PDF, PocketPC and Palm. Quite a few are also available in audio format, enabling you to “read” a book on your drive home from work. The subscriptions aren’t cheap ($299/year for an unlimited Gold subscription and $89/year for a 30-summary Silver subscription), but you’ll probably find the timesavings more than makes up for the subscription price.

The Economist on New Media

Here’s a good article from the Economist that talks about various types of media and where things are heading. Some notable excerpts:

In the new-media era, audiences will occasionally be large, but often small, and usually tiny.

“We are entering an age of cultural richness and abundant choice that we've never seen before in history. Peer production is the most powerful industrial force of our time,” says Chris Anderson, editor of Wired magazine.

“Self-publishing by someone of average talent is not very interesting,” he says. “Talent is the new limited resource.”

The last quote above is from Barry Diller, the head of IAC/InterActiveCorp. Later in the article Diller is referred to as an “ignoramus” by Jerry Michalski, a consultant who also has a blog called Sociate. (Speaking of which, I see Diller just lost the head of his search business – Steve Berkowitz, a fellow I ultimately worked for a few years ago, just left and is heading to Microsoft.)

My challenge has been and continues to be separating the good from the bad. There are way too many blogs to sample and it’s impossible to know if you’re really capturing feeds from all the best. Then, if you go too far and only read those with the highest rankings, are you becoming overly narrow and missing out on interesting, new and obscure viewpoints?

Much like hiring a new employee, I find references to be one of the most valuable resources for new content. I keep a close eye on all the feeds coming in through my Bloglines subscriptions. If one of them lists a couple of new blogs as their favorite or just something new that caught their eye, I take a look as well. I’d say that 90% of the new feeds I add to my Bloglines subscriptions are found this way; the other 10% are more random.

Rather than relying exclusively on computer rankings or the occasional reference from a trusted source, does it seem like there’s an opportunity for someone to create a better blog directory, built around the recommendations of experts who read all the posts/comments every single day? They wouldn’t just be aggregating the content…they would also comment on it, provide references to other related commentary, etc.

I know there have been some attempts at this, but they seem to have produced modest results. I’m talking about something as significant as USAToday, for example, having an entire section (online only, of course) dedicated to blogs, updated real-time, applying their editorial expertise to present and summarize the most interesting blogs (and posts) for all the major topic areas. If you trust USAToday for your news, and a lot of people obviously do, why wouldn’t you trust them for your blog news, feeds, etc.?

USAToday is just one example. Virtually any/all major news sources could be substituted for them in this scenario.  (Steve Berkowitz, maybe you should think about this in your new MSN world...) Currently the major news sources seem to treat blogs like a sidebar item, something that’s here today and likely to disappear tomorrow, so why invest much? I’d like to see one of them step up and implement something like this – it’s a real opportunity to take a leadership position and help them look a lot less like “old media”.

O’Reilly’s Computer Book Market Analysis

The O’Reilly Radar blog has three great posts covering the current state of the computer book market (look here, here and here). The third post is perhaps the most interesting. Here are a few excerpts:

Among the "majors" (Pearson, Wiley, O'Reilly, Microsoft, and McGraw Hill), only Wiley and O'Reilly outperformed the market.

Wiley was up 11% overall, with Wrox (up 116%) and Visual (up 46%) leading their growth.

The competitor we have our closest eye on is Wrox, which is resurgent under new management at Wiley.

Wiley picked up Wrox's top 35 titles when it went out of business. Wiley's strong performance with these titles (and new ones they've added since) shows how smart they were to cherry pick the list. While APress' growth has largely been driven by the publication of large numbers of titles (funded by APress' parent and distributor, Springer Verlag), Wrox is getting a lot of bang from each title, with average revenue per title in Q1 of over $19,000, vs. about $13,000 per title at APress.

Of the top 50 titles, Wiley had 17, Pearson had 13, O'Reilly had 10, Microsoft had 8, and McGraw Hill had 2. No other publisher had more than 1.

We here at WROX are of course flattered by Tim’s comments. My fellow WROX colleague Jim Minatel also offers his additional thoughts over on his blog.

Amazon’s “What do customers ultimately buy…” Feature

Have you noticed this feature on Amazon yet? I’m talking about the “What do customers ultimately buy after viewing items like this?” area on the product page. I’m not sure how long it’s been active but I just started picking up on it yesterday.

I assume Amazon has coded all their products with a field indicating which ones are alike. They then use the wisdom of crowds (again) and help prospective customers better understand what similar products are hot. I like the idea but I wonder what impact it will have.

For example, I’m looking at the product page for a Microsoft Press book, Beyond Bullet Points. (This book is currently #1 on Amazon’s Computers & Internet bestseller list – Juliana, I’m not sure if this one is yours, but if so, congrats!) The “What do customers…” section lists the following titles:

36% buy Beyond Bullet Points

17% buy How to do Everything with Microsoft Office PowerPoint 2003

12% buy Presenting to Win: The Art of Telling Your Story

9% buy The Cognitive Style of PowerPoint

8% buy PowerPoint Advanced Presentation Techniques

Makes sense. The #1 book on the bestseller list is also the #1 book on this short list. Hopefully this helps reassure customers that it’s a popular book and a good choice. But what about those books that don’t make the list? Look around and you’ll find plenty of these. What does that mean? Well, every book obviously can’t make the Top 5 list for a given topic, right?

I have no problem with Amazon (or any other retailer) reporting the top titles on a subject, but I wonder if it’s ultimately going to create even more of a gap between the bestsellers and the rest of the list. If you’re looking at the product page for title X and you notice that it’s not one of the 5 books listed in the “What do customers…” list, are you more inclined to second-guess your decision to buy title X? After all, 70-80% or more of customers who already came this way apparently picked some other book, one of the other 5 listed. Do you really think title X is the right one for you when apparently the vast majority of earlier customers didn’t think so?

Am I overanalyzing this? Perhaps. But I think this might be an example of too much information causing us all to act like a bunch of lemmings.

P.S. – I didn’t buy into the Amazon Prime program when it launched last year but I couldn’t resist signing up for a free 90-day trial membership today. I just need to remember to opt out by 7/19 or I’ll get hit with the $79 fee… Has anyone else signed up for the trial membership? I was surprised to see the offer – I wonder if it hasn’t been as popular as Amazon had originally hoped…

P.R. Honesty

Stacey Miller’s Book Promotion blog originally caught my eye last month. Her latest post entitled Does Book Promotion Increase Book Sales? is nothing short of excellent. Don’t click over that post in the hopes of hearing an expert tell you what percentage sales increase you can expect from a successful P.R. campaign though. No, Stacey chooses instead to be 100% honest and tell you that book sales aren’t her area of expertise and she therefore had no idea what number to provide.

Honesty! I love it. This is exactly the type of open communication blogs are intended for, right?

If you’re looking to hire a book P.R. expert I’m sure you can find quite a few who will take a stab at how many more copies there services will sell for you. Or, you can take a leap of faith with someone who’s going to tell the truth and do her best to avoid disappointing you. I know which one I’d pick.

My Publishing Swicki

I’ve mentioned before that I’ve got a fascination with the wisdom of crowds, the benefits of digg over Slashdot, etc. Thanks to Mark Cuban’s blog I just discovered a search tool that leverages the tendencies of others: Eurekster’s swicki.

This is a cool technology and one that could indeed impact Google. Eurekster is so convinced that their search results are more relevant and better sorted that they even offer a “compare results to Google” button on every results page. Go ahead, try it out. I built a publishing-focused swicki for my own blog in about 2 minutes (see the top right corner of the page).

What’s Your “Google Plan”?

Whether you’re an author, publisher or playing some other role in this business, you need to ask yourself “What’s my Google Plan”? Let’s face it. Google continues to grow and grow, expanding and investing in many areas inside and outside of search. They’ve quickly become what is arguably the most important technology company since Microsoft. So what’s your “Google Plan”?

You’re either “with” Google or you’re competing “against” them. You might be both for and against, I suppose. Any of those three choices is far better than the fourth one: Ignoring Google. I can almost guarantee you that option #4 leads to extinction.

Far too many answers that used to be found almost exclusively in a book, magazine or other print product are now being found in a much faster, easier and often free way via Google. What are you doing about that? Are you leveraging the 800-pound gorilla and all the eyeballs it represents? Are you coming at it from a different angle?

Here are three common myths that might cause you to ignore this question:

It’s not my responsibility and I’m sure someone else must be working on this in my organization. (Don’t count on it – there’s a lot of denial out there!)

Google won’t be the king forever. If I wait long enough someone will knock them off. (So what? Even if that happens you’re still faced with the same problem: Easy and often free solutions online!)

Our products are available in all formats, not just print. (What percentage of your sales is coming from non-print products? If you’re not rapidly closing in on 50% of your sales coming from non-print products I would argue that you haven’t solved the problem. Don’t feel overly comfortable just because you happen to offer your print product in e-book formats as well; e-books aren’t the answer today and who knows if they ever will be?)

What’s my “Google Plan”? It contains bits and pieces from option #3, both “for” and “against”. I’m sometimes guilty of believing any/all of the myths stated above though, so I think I need to spend more time asking my colleagues and myself “What’s Our Google Plan”?