Joe Wikert's DisruptorFest

Computer Book Market Midyear Report

O'Reilly colleague Mike Hendrickson recently posted this summary of the computer book market at the midyear point.  The overall results are disappointing though hardly surprising.  The image below pretty much sums things up...if you click on it you'll see the red line is 2009 to date and sits below every other year on the grid.

Although the first six months have been rough I'm optimistic about the prospects for the rest of the year, particularly for O'Reilly.  We've had a number of new hits recently including The Geek Atlas, The Twitter Book and Cloud Application Architectures.  We also continue to experiment regularly on non-print platforms, especially the iPhone (note the previous link is to iTunes).  One of our goals is to make sure our content is available in whatever format the customer needs it in.  That's why we offer our products in DRM-free ebook bundles off our website, for example.

Then there's the ongoing diversification of O'Reilly into areas like conferences and webcasts, just a couple of the areas our competitors typically don't venture into.  In fact, I recently returned from OSCON 2009 and was blown away by the scope of topics covered and the quality of the presentations, many of which were made by O'Reilly authors.

So while the information Mike presents in that post is sobering, it's important to keep an eye on the future.  We've got a terrific list of publications coming through the balance of 2009 and are also well-positioned for the economic recovery everyone is talking about in 2010.

Slate on Book Industry Napsterization

Slate's Jack Shafer suggests publishers will bring about a Napster effect if they force Amazon to raise ebook prices.  I found myself agreeing with Shafer on some aspects of his article while totally disagreeing with him on others, so let's look at it piece by piece.

He starts off by making it sound as though all publishers oppose Amazon's typical $9.99 Kindle book price.  We don't, or at least I don't.  There's no question that if $9.99 is the new pricing ceiling for ebooks it will have a profound impact on the industry, but that could be a very good thing.  As I've said many times before, quickie conversions of print content to econtent isn't the model of the future.  That's not adding value.  That's simply squeezing every last penny out of the intellectual property.  And as long as DRM is part of the formula customers may feel the e-version has even fewer benefits than the print version.

The cannibalization issue is real in some publisher's minds and it can't be ignored.  That's why I was disappointed but not surprised by Sourcebooks recent decision to delay the ebook version of one of their upcoming titles.  It's an interesting contrast though: Here I am trying to find new and innovative ways to use e-platforms to get content out before the print product and Sourcebooks is doing the opposite.

I wonder if Sourcebooks has ever thought about the Kindle customer.  I haven't bought a single print book since I got my Kindle over a year ago.  I refuse to buy print books for myself, mostly because I want to get the most out of my $360 device investment.  Every Kindle owner isn't as rigid as I am on this but I wonder how many are.  I'm the type of customer Sourcebooks is at best delaying income from and at worst walking away from.

Shafer is right to note that gadgets are the key reason book publishing hasn't been Napsterized yet.  Sure, there's been plenty of piracy in our industry for many, many years, but it's never rivaled the music industry's problem.  I'd also argue that the 3rd-generation Kindle, the DX model, still isn't even as sexy as the original iPod.  It will be interesting to see if Apple ever comes out with that "media pad" device, also known as the "iPad", which could completely change the playing field.

Many of us try to pinpoint where the publishing industry is on the iPod timeline, but Shafer makes a good point with this statement: "the electronic-book market finds itself roughly in the same place the market for MP3s was in 1999, the year after the release of the first portable MP3 player."  So for the ebook world, 2009 is really 2 B.i. (Before iPod), but imagine what the world might look like when we get to 5 or 10 A.i.

The quote by Forrester Research analyst Sarah Rotman Epps is painfully true: "Publishers are in denial about the economics of digital content."  The $20 or $25 hardcover novel is likely to face a $9.99 ebook pricing ceiling going forward.  Deal with it.  Figure out ways to build franchises around these products so that the book sale is not the only income stream.  At the same time, start thinking about how the book needs to evolve.  Ebooks don't have the same constraints as print books.  Publishers and authors, what value can be added to your products in e-format that you've been unable to add in print format?

Cheap Copies of the Original

That's what most content on my Kindle feels like today...cheap copies of the original.  Quite a few books look like the print to e- conversion was done so haphazardly that nobody ever bothered to look at the finished product.  As publishers we fret about the prospects of $9.99 price ceilings for ebooks and yet we treat that rapidly growing sector as a quick-and-dirty way to make an extra buck or two.  Where's the R&D, the investment in future platforms and products?  Btw, Walt Shiel recently wrote a great blog post related to this called Kindle Errors and Typos.

Walt is right that many of the problems we see today are the result of corners being cut and the e-opportunity viewed as nothing more than a way to squeeze a few more dollars out of the investment we already made in the print product.  That's OK to a certain extent, but for some publishers that's their entire e-strategy.

Here's the fundamental problem I have with this: As long as customers view these products as cheap copies of the originals they'll never even achieve the same value as the originals.  So if that's your strategy, get used to the $9.99 ceiling because it's not going up.

Cleaning up the conversion process is important but it's not going to change the $9.99 ceiling either.  What's really needed here is a fresh look at the way content is designed, acquired, developed and produced in the e-world.  And as a visitor wisely commented recently elsewhere on my blog, this issue will become even more important as ebooks become a larger percentage of the overall book market.  All that overhead and fixed costs found throughout large publishing houses simply can't be supported if the industry switches to a $9.99 model.

Ebooks won't become 50% of the market overnight, but the percentage is growing and isn't likely to stop.  There are a couple of options here.  Publishers can get leaner and meaner as they adjust to the new model or they'll choose to invest in the future and start building more compelling eproducts and eplatforms.  The ultimate winners will attack both of those fronts.

In-Book Ads? Let the Whining Begin.

It's going to happen.  It's not if, but when.  I'm talking about the day when you'll find ads throughout ebooks.  This Fast Company article provides a nice overview, including some info on a few related patents recently filed by Amazon.

If you're a purist and who's totally offended by the idea of ads in a book, get over it.  My guess is you'll have the option to pay more and still get ad-free ebooks.  Tightwads like me, on the other hand, will gladly deal with the minor inconvenience...and we'll save a few bucks along the way.  Heck, I miss the ads in the Kindle magazines I subscribe to, so what does that say?

The world of content is rapidly changing, including how it's monetized.  More options are a good thing, no matter how bad this idea sounds to you today.  I'm just curious to know more about what Amazon plans to do with the money they'll earn from all these in-book ads.  Will they pass any of the income along to publishers and authors?