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4 posts from January 2015

What’s the biggest obstacle facing Oyster, Next Issue, Spotify, et al?

I used to buy ebooks from Amazon but now I read almost exclusively on Oyster Books. Years ago I subscribed to a bunch of magazines and now I read all but one of them through Next Issue (The Week is the only exception). It wasn’t that long ago that I bought CDs and music tracks but now I’m mostly streaming through Spotify.

Since I’ve wholeheartedly embraced the content rental model, what’s preventing me from dumping Oyster for Scribd, Next Issue for Zinio or Spotify for Rdio?

The answer is “almost nothing.” All of these rental services face the enormous challenge of building customer loyalty. Since I don’t own the content and I’m on a month-to-month agreement with them, I can easily leave at any time. And when I switch, I leave almost nothing behind.

Contrast that with the likes of Amazon, where they focus on walled gardens and making it hard to leave. If you’ve built a large Kindle ebook library you probably don’t want to abandon it for another retailer and another reading app, particularly since you can’t bring your old books with you.

You might figure this is no big deal as customers who leave for a similar service will be offset by ones who go the other direction and switch from the competition. As with pretty much any business today though, it’s generally far more profitable to maintain an existing customer than it is to acquire a new one.

So how will these rental services deal with this? The most obvious answer is to expand their catalogs. But they’re all doing that and we’ll eventually reach a point of equilibrium where catalogs are almost identical between the services. Publisher exclusives could impact this, of course, but I’d like to think publishers learned their lessons from walled gardens and won’t make a similar mistake with exclusive distribution deals.

Another way rental services can distinguish themselves is to create more unique features in their apps. The competition will likely copy those features though, so any gains here will be short-lived.

Lower pricing isn’t an option either as that can be quickly copied and is nothing more than a dangerous race to the bottom.

How will this all play out? As much as I hate to admit it, I think all of this only further strengthens Amazon’s position. Amazon specializes in customer loyalty. That’s why so many of us first look to Amazon when buying almost everything these days. They’re also terrific at linking services together. Look at how Amazon Prime has evolved from free two-day shipping to now include Prime Photos, Prime Music and the Kindle Owners’ Lending Library. Critics will argue that none of these add-ons are as good as what consumers can find through other competitors; the difference is Amazon offers them for free, as part of Prime, and you can bet these add-ons will continue to improve over time. Lastly, when it comes to low prices and losing money, well, Amazon is the king.

The lesson here is that while consumers will continue flocking to the rental model, the lack of customer loyalty means the leaders today may not even be relevant tomorrow.


How crowdsourcing will ultimately add value

Most publishers cringe at the thought of crowdsourcing. Publishers often believe they exclusively own the art of content curation and they feel threatened when they sense others encroaching on their turf.

It’s hard to argue with that logic, especially in our disrupted world where the publisher’s role is under attack from self-publishing, free content and authors with their own platforms. That’s why every publisher should rethink the role they play and determine how to remain relevant in the years to come.

I believe crowdsourcing will eventually be a very powerful tool for all publishers. One of the key problems with crowdsourcing today is that it’s little more than a buzzword and most crowdsourcing efforts are poorly coordinated and leveraged.

Imagine this scenario in the future: A newspaper publisher allows members of their community to create remixes of the paper’s original content. Additionally, they not only allow, but they actually encourage the community to integrate it with content from other sources, including the “competition”. These derivative works will benefit from the interests and curation skills of highly passionate community members. It’s a blend of bloggers and “professional” content, for example. 

What’s in it for the community curators? If the publishers are smart, they’ll create affiliate programs where the publisher sells access to these crowdsource remixes and the curators earn a share of the resulting revenue. This also helps those curators build brand names of their own, potentially ones the newspaper might want to hire full time. Think of it as a feeder system for new content talent.

Now let’s look at the opportunity for book publishers. What if the publisher allowed the community to create their own editions of books? Let’s say you want to read that new blockbuster book about marketing strategies. What if a marketing guru read it before you, highlighted all the critical elements and inserted additional, relevant notes from their years of experience? Now you have a book that has significantly more value than the original edition. The publisher can probably charge more for this edition and pay the marketing guru a portion of the incremental revenue. Over time you’d see multiple digital editions of books. Would you pay more for the “Seth Godin Edition” of that marketing strategy book, where Godin didn’t write it but he highlighted the important stuff and inserted a bunch of related insights?

Most existing publishers will balk at all of this, worrying about the additional layers of complexity, a modified review process, etc. As the incumbents reject it we’ll see yet another new chapter of The Innovator’s Dilemma unfolding right in front of us as startups will fill the void; after all, startups don’t worry about new processes and whether it’s OK to break the old rules.


Revisiting Pew’s view of digital life in 2025

The Pew Research Center released a report last year called Digital Life in 2025. You’ll find a summary of it here and the downloadable PDF is here. I should point out that the report is now almost a year old, but since the vision is for ten years out, it’s still quite relevant and an interesting read.

If you don’t have time to read the entire 60-page document I’ll summarize it for you with two bullets:

  • The Internet becomes more like electricity and,
  • It’s all about access, not ownership

You could argue we’re already living out the first point today. The web is ubiquitous and thanks to inexpensive, powerful sensors and embeddable devices, the Internet of things that we’re rapidly heading towards means everything will soon be connected and burying us in even more data.

I think it’s terrific that my home’s thermostat can now be accessible from my phone. I’d love this concept even more if it meant that digital content operated more like electricity.

Today, however, I need a variety of apps to consume and manage all my content. Here’s a short list of some of the content apps I use on a daily basis: web browser, Oyster ebook app, Kindle ebook app, Next Issue magazine app and Evernote. If electricity operated this way you’d need a set of international travel adapters and converters to work with all the different plugs in your house, at the office and on the road.

I’d like to think that one day we’ll have a universal digital content app that lets you do it all. I’m not sure that will happen by 2025 though, not when all the major players insist on building and reinforcing their walled gardens.

The second point, about access, not ownership, is already playing out in the music world. iTunes helped break the chokehold record labels had when they used to force us to buy entire CDs. In the next stage of disruption, services like Spotify are helping tear down the dominance Apple built with iTunes.

More recently we’ve seen the same phenomenon in other digital content areas. Next Issue gives me access to dozens of magazines, including their archives, as long as I keep paying them every month. Then there’s Oyster and Kindle Unlimited, which offer similar broad, unlimited reading options for ebooks. As I mentioned last week, these ebook services will undoubtedly expand in the next 12-18 months, becoming your all-access pass for the topics and genres you love most.

If you have the time, I recommend reading the entire Pew report. The two items I covered here are the ones that resonated most for me but the report is loaded with plenty of other insight and perspective from quite a few industry experts.


What to expect in 2015 (and beyond)

Publishing is a pretty slow-moving business. That statement is solidly supported by the fact that the Kindle is now more than 7 years old and the majority of digital content revenue still comes from “print under glass” format. We’re still basically consuming dumb content on smart devices, regardless of whether it’s a book, a newspaper or a magazine.

Because the industry moves at a glacial pace I don’t think we’re likely to see any earth-shattering breakthroughs in 2015. What I do think we’ll see are some seeds of change being planted and a few of the next steps in the industry’s evolution. 

With that in mind, here are five important developments I expect to see in 2015 and beyond: 

Content expansion in all-you-can-read subscription models – No, I’m not just talking about more book publishers participating in services like Oyster and Kindle Unlimited. That’s a no-brainer. What I’m referring to here is that these book reading services will expand into other types of content, including newspapers, magazines and born-digital content that currently sits behind a paywall. And as this happens, watch topic-based, vertical subscription options sprout up within the platforms (e.g., all-you-can-read subscriptions for sports enthusiasts, fiction fans, hobbyists, etc.) In short, these services become your all-access pass to all paid content forms for your particular area of interest.

Content becomes smarter – Publishers have allergic reactions to phrases like “enriched content” or “content enhancement”. That’s largely because of failed experiments with native apps and tools that force a publisher to abandon their existing editorial and production workflows. Just as TV didn’t stop with radio shows in front of a camera, the way content is produced, distributed and consumed will evolve and begin to leverage the smart devices consumers already own. Soon the e-editions will be more than just a cheap alternative to the print edition.

Bundles and sponsorships drive more revenue – Consumers have been trained to expect lower prices for digital editions. Publishers like to blame Jeff Bezos for this but I believe there’s plenty of blame to go around. After all, how many e-editions actually have less functionality than the print version? For example, have you ever tried sharing an ebook, digital newspaper or digital magazine with a friend after you’re finished with it? Prices aren’t going up anytime soon and publishers are anxiously searching for new income streams. Look for bundles and sponsorships to fill the void. That next money management ebook you buy might include an offer for a discounted (or free) subscription to Fortune magazine, for example. Or perhaps that same ebook is offered at a lower price for the month of April thanks to a sponsorship from Charles Schwab. The possibilities are endless.

Successful brands will no longer defined by containers – What are the first things that come to mind when you think of the ESPN and Sports Illustrated brands? I’ll bet it’s “television or cable channel” for the former and “magazine” for the latter. This, despite the fact that both have thriving websites, apps and other digital properties. But that’s precisely why a brand like Bleacher Report can come out of nowhere and draw so much interest and traffic. Yesterday’s brands are often tightly coupled with containers like books, newspapers, magazines and TV while the most popular, highly valued brands of tomorrow will have no particular container affiliation. In fact, being tied to a specific container will be a major drawback in the future.

Content reuse surges – Today it’s almost considered a gimmick when content can be redeployed in new manner. Book content is sold in pieces and collections of short-form articles get remixed, becoming long-form content products. This is a tiny revenue source today, but that’s largely because content isn’t being acquired and developed with reuse in mind. Eventually every piece of content will be looked at through the lens of reuse. This means that every piece of content will be part of multiple products from the start. Compare that to today’s model where reuse is typically an afterthought and redeployment doesn’t happen for months or years after the content was first published.

What do you think of these five items? Agree? Disagree? Are there other areas I’m overlooking that you believe will strongly influence the publishing industry in 2015 and beyond?