In the age of the e-reader and tablet, every person that purchases an Amazon Kindle, Nexus tablet or iPad should be viewed as a customer Barnes & Noble will likely never get the chance to serve again.
© 2014, Joseph B. Wikert
In the age of the e-reader and tablet, every person that purchases an Amazon Kindle, Nexus tablet or iPad should be viewed as a customer Barnes & Noble will likely never get the chance to serve again.
Like most technology products, each new version of Amazon's Kindle eInk reader is lower-priced than the last one. There's been speculation that the price will eventually go to zero, perhaps taking a page out of the cell phone model where the consumer commits to a long-term plan. There's no monthly service plan for a Kindle so I always figured Amazon would require consumers to purchase a minimum number of ebooks over a 1- or 2-year period instead.
That makes sense, but there's a bigger play Amazon probably has in mind and I'll bet it will eventually feature their tablet, the Kindle Fire.
I'm sinking in ebook samples. I've stored so many articles that I cringe when I open Instapaper. I almost forgot I'm only halfway through Walter Isaacson's book about Steve Jobs. In fact, there are at least three other ebooks I started and pretty much forgot about finishing. They've just fallen off my radar.
What's wrong with this picture?
I'm drowning in econtent and I'll bet you are too. My nook's user interface is similar to the Kindle's. Virtual shelves are considered a revolutionary content management technique. Really? Why are we so focused on replicating the physical world in the e-reading world? Shelves work fine for print books but why should we limit ourselves to that solution for ebooks? These devices we're reading on are capable of so much more!
Today's e-reading devices are the equivalent of yesterday's dumb terminals. Let's make 'em smarter! I want one with an econtent manager that has the following capabilities:
Today's ebook platforms are pretty hard to distinguish. I switched from a Kindle to a nook earlier this year and didn't notice any difference. This is an opportunity for everyone who's not in first place (B&N, Apple, Google or Kobo) to rise above all the others. They should push aside the physical world metaphors, leverage the capabilities of a digital device and help their customers manage their content and achieve their reading goals.
TOC Latin America was held last Friday in the beautiful city of Buenos Aires. Kat Meyer, my O'Reilly colleague, and Holger Volland did a terrific job producing the event. As is so often the case with great conferences, part of the value is spending time with speakers and other attendees in between sessions and at dinner gatherings
Last Thursday night I was fortunate enough to have dinner with Kat, Holger and a number of other TOC Latin America speakers. We discussed a number of interesting topics but my favorite one was asking each person this question: What happens if DRM goes away tomorrow?
The DoJ suit against Apple and five of the big six has led to a lot of speculation. One of the most interesting scenarios raised is that if the government is intent on limiting the capabilities of the agency model, publishers need to figure out what other tools they can use to combat the growing dominance of Amazon.
Charlie Stross is right. DRM is a club publishers gave to Amazon and then insisted that Amazon beat them over their heads with it. So what if we woke up tomorrow and DRM for books disappeared, just like it has (for the most part) with music?
I was unable to reach a consensus at that dinner, but here's what I think would happen: Initially, not much. After all, Amazon has a lot of momentum. If current U.S. estimates are accurate, Amazon controls about 60-65% of the ebook market and B&N is second with about 25-28%. That only leaves 7-13% for everyone else. And if you've been buying ebooks from Amazon up to now, you're not likely to immediately switch to buying from B&N just because they both offer books without DRM. On the surface Amazon's and B&N's ebooks use incompatible formats, mobi for the former and EPUB for the latter. But that's where it gets interesting.
Converting from mobi to EPUB (or vice versa) is pretty simple with a free tool like Calibre. I've played around with it a bit, converting some of the DRM-free ebooks we sell on oreilly.com. I didn't do those conversions to get our books in other formats. After all, when you buy a book from oreilly.com you're buying access to all the popular formats (mobi, EPUB and PDF, as well as others), not just the one format a device-maker wants to lock you into. I did the conversions because I wanted to see what's involved in the process.
If you've ever used Microsoft Word to save or convert a .doc file to PDF you'd find it's just as easy to go from mobi to EPUB in Calibre, for example. But just because the tool is available does that mean if DRM goes away we'd suddenly see a lot of Kindle owners buying EPUBs from B&N and converting them to mobi with Calibre? I doubt it. Those Kindle owners are used to a seamless buying experience from Amazon, so unless there's a compelling reason to do so, they're not likely to switch ebook retailers. And that leads me to the most important point...
Creating the best buying and reading experience is one way any ebook retailer can steal market share from the competition. Amazon has a pretty darned good one, that's for sure, but there's plenty of room for improvement, IMHO. I'm not convinced any ebook retailer has pushed the envelope on innovation and exciting new features in their devices or reader apps. In fact, these enhancements seem to move at a glacial pace. So what if B&N (or anyone else, for that matter) suddenly invested heavily in reader app functionality that puts them well ahead of the competition? And what if some of those features were so unique and innovative that they couldn't be copied by others? I'd much rather see a competitive marketplace based on this approach than the one we currently have where the retailer with the deepest pockets wins.
Innovation is better than predatory pricing. What a concept. The iPod revolutionized music, an industry that was highly fragmented and looking for a way forward in the pre-iPod days. The iPhone turned the cellular market on its head. Think about how significantly different the original iPod and iPhone were when compared to the clumsy MP3 players and flip phones that preceded them. I believe today's crop of ebook readers and apps are, in many ways, as clumsy and simplistic as those MP3 players and flip phones. IOW, we haven't experienced a radical tranformative moment in the ebook devices and app world yet.
Of course all of this innovation I'm dreaming of could happen today. We don't need to wait for a DRM-free world. Or do we? Amazon has no incentive to innovate like this. They already have a majority market share and it's only going to get larger when the DoJ dust settles.
This is more of a rallying cry for B&N, Kobo and every other device and ebook retailer. If DRM goes away tomorrow nothing much changes unless these other players force it to. But why wait till DRM disappears? It might not happen for a long time. Meanwhile, the opportunity to innovate and create a path to market share gain exists today. I hope one or more of the minority market share players wakes up and takes action.
With all the buzz about the agency model, the Justice Department, allegations of collusion, etc., I figure the time is right for a post about ebook pricing. Here are some quick thoughts as both a consumer and a publisher:
Eliminating waste is always a good thing -- Walmart has mastered this for years. They squeeze every bit of waste out of the supply chain and generally end up with the lowest prices. I'm a frequent Walmart customer and I greatly appreciate this. In fact, the only people who don't like this are (a) other retailers who can't match those prices and (b) ecosystem players who are part of the waste that's being eliminated, including suppliers.
Loss leaders are a great retail model -- Selling some products at or below cost is a great way to bring customers in the door, regardless of whether that door is physical or virtual. I'm sure I've bought many cartons of milk at a loss for the retailer who made it up by selling me other items at a nice profit. It's a model that works, but have you ever seen a store that sells most of their products at a loss, every day?
Taking loss leadership to a new level -- Remember when Amazon first launched the Kindle and pretty much every ebook was $9.99? It's no secret that Amazon was losing money on the majority of those sales. In fact, they still are. Prior to the agency model Amazon was free to set whatever customer price they wanted for ebooks, even if it meant they were selling every single one of them at a loss. That brings up the razor/blades model, where it's not unusual for the razor to be sold at a loss but the profit is made on the sale of the blades. So if ebooks are the razors what are the blades? The ereader device? According to iSuppli, the Fire's manufacturing cost is slightly higher than its retail price. How long can a retailer stay in business when they're losing money on both the razors and the blades? Presumably they're making some money on other products they're selling (e.g., shoes, electronics, etc.) Perhaps. Then again, if they have deep enough pockets they can continue selling all their products at a loss till the cash dries up. In the mean time, competitors will find it difficult, if not impossible, to compete, so they'll disappear. What happens after that? Do prices remain low as products are still sold at a loss? Not if that company wants to stay in business.
The agency model prevents brand erosion -- Think of the premium products you've bought or admired. Oftentimes their prices are higher than most of the competition's. What would happen if those prices were suddenly significantly reduced? Would those products retain the full value of their premium brand? Highly unlikely. And shouldn't the owner of that brand have a say in what price is associated with it? Again, it's OK for a short-term loss-leader model but I'm talking about selling something at or below cost for years and years, not just for a day or two. Over time the value of that brand is affected. That's why I think publishers should definitely have the option to go with the agency model so they can manage retail prices and not let their brand lose value. Btw, consumers will ultimately vote with their wallets. If they feel the publisher's prices are too high they'll stop buying and that publisher will either need to make adjustments or go out of business.
Fixed prices vs. price-fixing -- In the U.S. we're so used to competitive retailer discounts that we're surprised to hear of the fixed price models used in other countries. For example, in Germany the price you pay for a book doesn't change from one retailer to the next. They're all required to sell them at the same price. Obviously there's a huge difference between Germany's fixed price law and the price-fixing the Justice Department is alleging. Germany's model doesn't lend itself to squeezing out waste like the U.S. model but I'll bet it prevents one deep-pocketed retailer from putting their competitors out of business.
I don't work at a big six publisher but I believe publishers should have the option to choose between the agency and wholesale models. The key issue though is that the Justice Department has suggested that Apple and a number of publishers colluded to keep prices high. I think this article by Gordon Crovitz in The Wall Street Journal sums it up quite nicely, particularly in the closing two paragraphs. Read that piece and ask yourself if the Justice Department's efforts will actually fix or merely add to an existing problem.
What's your opinion of the pricing questions and allegations currently facing the book publishing industry?
The name is a mouthful: Asus Eee Pad Transformer Prime. Don't confuse that with the Asus Eee Pad Transformer. Yes, the Prime is the newer generation device. Maybe they should have just called it "Prime." Either way, it's the new tablet in my life and, for the most part, I love it. If you're interested in buying one all I can say is "good luck." They're extremely hard to find. I got mine at my local Fry's. It was the last one in stock and it had already been opened. They gave me the same warranty as an unopened one though, so I was delighted to get it there.
After a few weeks of use here are the pros and cons I've found to owning an Asus Transformer Prime:
Android -- Jumping from iOS to Android is a liberating experience. You definitely have the sense that you're getting more access to the device's capabilities and that you're more in control. Also, I've downloaded and installed a few dozen apps on the Prime and my Android phone (Samsung Galaxy S II) and I've never spent a penny on a single one. There's a downside to that too, of course (see below).
Unique device combo -- The Prime comes as a tablet in a box, just like the iPad. But Asus takes you a step further by offering a keyboard accessory that fits the Prime like a glove. It's a $150 option, which means that buying it makes the Prime a higher-priced option than an iPad, but it's worth it. Those who say a tablet should exist without a keyboard are wrong. I find the combination of keyboard and touch screen outstanding and, of course, you can always disconnect the keyboard if you want a standalone tablet.
Battery life -- The battery in the Prime lasts longer than the one in my first-gen iPad. But if you get the keyboard accessory you suddenly have access to much more power. That's right. The keyboard has a battery inside as well. Asus claims the two together will give you 18 hours of power but I'm finding it to be more like 12-14 hours, max; and that's while using wifi and actively using the device, not letting it drop into sleep mode. So if you're looking for a powerful tablet that won't run out of juice on a long overseas flight it's hard to find anything better than this one. (Bonus: I can recharge my Android phone from the keyboard battery, so it's like having my own tiny power plant on a plane. I wonder if I could start selling charges to other desperate passengers...)
Expandability -- Where's the SD slot on the iPad? That's a trick question, of course, as Apple doesn't want you to add memory to it. I had to make plenty of compromises on my iPad because of this limitation. The amount of video I could keep on it was limited and I never bothered putting my music on because it would have taken up more than half the iPad's memory. That's no problem with the Prime. In fact, Asus goes a bit overboard here. You'll find a microSD slot on the tablet and a full SD slot on the keyboard. The memory upgrade options on the Prime are endless.
Speed -- Can you say "quad core processor"? That's what you get with the Prime and that means it's a screamer. You'll notice the impressive speed while you're downloading apps or running a whole bunch of them at the same time.
Android -- OK, Android has it's plusses and minues. As I mentioned above, I haven't paid for a single app. There are plenty of paid ones out there but none that I need. And even some of the paid apps in the iOS ecosystem are free (or have free equivalents) in Android. So if developers aren't making much money on Android what's the incentive for them to continue building on that platform? That's an important problem that needs to be fixed. At this point though, I'm starting to feel like I should never have to pay for an app; that's not a good model for Android's long-term viability, at least if the goal is to have a rich app ecosystem.
Missing key apps -- Speaking of apps, I really miss both Zite and Flipboard. Zite is definitely an app I'd gladly pay for on Android. I feel like Google is asleep at the wheel on this aspect of the platform. They seem to want to let the app world develop on its own but I think it desperately needs an injection from that mountain of cash Google is sitting on to push it over the top. Would it really cost Google that much to pay developers to port some of the key apps from iOS to Android? No, but it would make a world of difference in the platform's app experience. And while they're at it, why not invest in a couple of totally new apps that don't exist on iOS. Isn't it worth Google's time/money to create a killer Android app or two? I think so.
App glitches -- This is probably where Apple shines the brightest. Every so often I'll open an app that thinks I'm in portrait mode when I'm really holding the tablet in landscape mode. Sure, some apps require one mode or the other and that's fine. What I'm talking about is a situation where certain app operations flip the orientation for no good reason. It might be when I'm tweaking the settings or doing something else and I have to awkwardly hold the Prime (with keyboard attached) at a 90 degree angle to read it. Silly. I guess there's a good reason why Apple has a review process for their apps while pretty much anything can get into the Android app Market.
Do I miss my iPad? A bit. But I still have visitation privileges on evenings and weekend when I'm home so I still get my Zite fix from time to time. Do I regret spending more for this Prime+keyboard than a comparable iPad? No way. I'm thoroughly enjoying the experience and trying to figure out how I can move all my docs to the cloud and start leaving my MacBook Pro at home.
I've been to several of O'Reilly's Tools of Change (TOC) conferences before but this is my first experience as one of the conference chairs. Now that I've had a first-hand view in preparing for next week's TOC NY 2012 I can tell you that Kat Meyer and the rest of this team are nothing short of amazing. As we put the final touches on pre-conference prep I wanted to point out a few of the reasons why I believe next week's event will be the most inspiring, unique and memorable TOC ever:
Executive Roundtable -- We've partnered with Publishers Weekly to host an executive roundtable on Monday, 2/13. It's separate from TOC itself and is a by-invitation-only gathering of approximately 100 industry CxO's and other influential leaders. We've received more requests than we can accomodate for this initial roundtable but we're planning for this to become a quarterly event. If you're interested in receiving an invitation to future executive roundtables email me with your name, title and company so I can add you to our list.
Top Secret Announcements -- One of the perks of being a conference chair is that you get the inside scoop on announcements some of the speakers are planning to make at TOC. I'd like to share each of them with you now but I'm sure Kat would ban me from the conference. You'll just have to wait till next week to learn the details. If you won't be there, be sure to tune into our Twitter hastag (#toccon) to keep up with all the news.
Digital Petting Zoo -- Don't you love that name?! Kudos to Kat for coming up with the idea and the name, btw. Where else can you go to test drive almost 40 tablets and dedicated ereaders? Nowhere. We've spent a great deal of time and effort gathering a wonderful assortment of devices for all attendees to tinker with, so if you've wanted to take a closer look at the ereading hardware landscape be sure to swing by the petting zoo on Wednesday. It's not just hardware on display either, btw. We've got a few content providers spending the day there to showcase the latest in content development and presentation.
Attendee Diversity -- We always encourage attendees to connect with one another and that's one of the key reasons for the Attendee Directory. If you're registered for the show be sure to get the most out of that directory. And as you look through it, I'll bet you'll discover the same thing I did: We have an incredible array of players from all areas of the content industry. Attending TOC means you have the opportunity to meet and mix with folks from every sector of publishing as well as other media industries. It's sort of like Woodstock's "three days of fun in the mud", but without all the mud.
Startup Showcase -- Back by popular demand, this was one of the most popular aspects of TOC 2011. This year we once again received way too many outstanding startup submissions. It was extremely difficult narrowing down the field but we came up with a list of 11 finalists that I think you'll be impressed with.
Change/Forward/Fast -- In case you missed it, "change/forward/fast" is the theme of TOC 2012. The message it conveys is that our industry is moving forward at an incredible pace and, in order to keep up, you better be experimenting with new forms of content development, delivery and pricing. That's the heart of TOC 2012 and our goal is to provide a platform for those who are leading change and provide an opportunity for the entire community to learn more about what's working and what's not.
Have you signed up to attend TOC NY next week? We're running ahead of last year's attendance levels but we've still got a few slots left. Don't wait till the last minute though. Sign up now and reserve your spot at what undoubtedly will be an outstanding experience!
My question is simply this: Why all the fuss? Apple's intent has never been to improve the book publishing industry. Just like Amazon and any other ebook vendor, Apple's goal is to capture share of this rapidly growing segment. In Apple's case, they've simply decided to offer an authoring tool that's capable of creating some pretty darned cool products. If Amazon were to do the same thing and create a terrific authoring tool for mobi or KF8 format would the industry be as upset? I don't think so.
How is this any different from the App Store model itself? Developers are creating apps for the App Store and they know they'll only run on an iOS device. They also realize they'll have to go through Apple's approval process before getting into the App Store.
Prior to the release of iBooks Author the content creation and distribution model looked like this:
The exact same model still exists today, even with the introduction of iBooks Author. That's right. Apple's EULA doesn't really lock you into their distribution channel for your content. That restriction only applies to a "book or other work you generate using [the iBooks Author] software." All they're really trying to do is prevent you from tweaking the output of their tool to create content for other distribution channels. OK, that's kind of annoying but far from the lock-in nightmare so many people are describing it as. Based on my interpretation, you're able to use the same content as input to the iBooks Author tool as you'd use for a mobi-formatted product you want to sell on Amazon.
(I should also point out that I'm far from an Apple fanboy. Anyone who knows me realizes I dumped my iPhone last year for an Android-based Samsung Galaxy S II (and yes, I love it). I also tried to dump my iPad for a Kindle Fire but found the Fire user experience to be very disappointing. I'll probably make the jump to another Android tablet later this year, once key apps like Zite are available. In the mean time though, I want to make it clear I'm not here to shill for Apple. If anything, I'm currently in a stage where I'd prefer to buy devices that aren't made by the content providers. Samsung is high on my list, for example.)
Apple doesn't have an objective to move the publishing industry forward. They see an opportunity to reinvent this industry and they feel they can do so within their own, closed ecosystem. It's as simple as that and it's consistent with everything the've done in the App Store up to now.
Let's also not forget that the iBooks Author tool is free. It's not like we paid Apple $50, $100 or more for some authoring tool that we thought could work for all content formats and distribution channels. If the tool's feature set is compelling enough I'd like to think the other ebook vendors (e.g., Barnes & Noble, Amazon, Kobo, etc.) will have to come up with something at least as powerful for their own platforms. If not, they get left in the dust and Apple gains share. Seems pretty fair to me.
In the mean time, I plan to do some hands-on testing with iBooks Author. At first I was discourged because you can't download iBooks Author unless you're running Lion. I'm still on Snow Leopard but an O'Reilly colleague sent me this link which shows you how to tweak a couple of settings so you can download and run iBooks Author on a Snow Leopard system. I just tried it and it works fine. (You just have to carefully read and interpret the steps since it's a translation from French to English!)
I'm a huge hockey fan and even though I pay Comcast extra for the NHL Network I only get to see a few games a week, most of which don't interest me. I want to see my favorite team, the Pittsburgh Penguins, but they're not on the cable channels frequently enough. I'd like to have access to every Penguins game and the only option for that is NHL's GameCenter LIVE subscription. It costs $169 though and, being a cheapskate, I resisted signing up...till now.
I coughed up $169 over the weekend and I'm glad I did. Now that I've used the service for a few days I've discovered there are a number of lessons GameCenter can teach those of us who manage other types of content:
The ongoing value of the direct sale -- When you sell direct you capture 100% of the transaction. There's no middleman. So now the NHL has a direct relationship with me and I'm no longer some unknown customer with Comcast in the middle. The NHL now has an excellent opportunity to upsell to me, especially since they'll quickly discover my preferences.
Trust your customers -- I was amazed to discover that I could use my GameCenter account on more than one device at the same time. That means I can watch one game on my iPad while another is playing on my computer. I'm assuming this means I'll be able to share my account with my son (who's also a big NHL fan). If so, we could both watch the same or different games simultaneously. That was a very pleasant surprise, btw, as I expected them to lock the second device out. Think of this as the equivalent to a DRM-free ebook. I'm sure the NHL doesn't want me posting my account credentials for anyone to use but their system is loose enough to surprise and delight. I can't wait to watch two games simultaneously (on different devices) when a couple of good ones are on at the same time! Btw, this is how all types of content access should work. But with all the restrictions and limitations we encounter every day in the digital world I was blown away to see how liberal GameCenter's access policies are. This makes me like them and their product even more. Trust is an amazing thing, isn't it? :-)
Make sure your content is available everywhere (including direct!) -- This sounds so obvious but it's so frequently overlooked. Sure, some of the NHL content was available to me via cable but I wanted more. Are you only making your e-content available on the "big" sites? Are those sites reaching all your potential global customers? Probably not. Once again, that's why you need a strong direct sales presence and the ability to serve that content globally.
Make sure it's on every platform -- I can watch games on any of my devices. That includes Mac, Windows, iPad, Android phone, and yes, even my Blackberry Playbook. Are all of your ebooks available in EPUB, mobi and PDF? Those are the key three today and if your content isn't available in all of those formats you're definitely missing some platform opportunities. More importantly, when a customer buys your product do they receive it in all those formats? Unless you're selling it directly as a multi-format product (like we do on oreilly.com) I'll bet the answer to that is no. Don't force your customers to buy mobi today and epub separately tomorrow, for example. That's irritating. Give them all formats in one transaction. This once again underscores the importance of having a strong direct channel. After all, you're probably safe assuming the big e-tailers are only going to offer the format that best suits their needs, not the customer's.
Pricing shouldn't be a race to the bottom -- At first that $169 price tag sounded awfully rich to me. But the more I looked into the service the more I realized it's actually quite reasonable. That's mostly because the NHL is delivering a very high quality product without the limitations found in other services (e.g., MLB's AtBat). All the games I care about are featured and the video is somewhere between standard and high def; pretty remarkable considering it's coming in via wifi. Every ebook doesn't have to be $9.99 or less. Consider your product's overall value proposition before you give in to the pressures of a low-priced solution.
In the old days (say, 2006!) it was easy for publishers to completely handle all aspects of content management internally. Now it's more challenging thanks to seemingly ever-changing tools, specs and platforms. Firebrand Technologies founder and president Fran Toolan recently sat down with us to discuss a variety of content management topics. Key points include: