How the Cloud, Expensive Hardcovers, Free eBooks & Windowing Could Save Big Publishing

Solving the Digital Book Crisis

By Lloyd Jassin

The business model in England in the the mid- to late-19th Century was to publish novels in three volumes.  Known as  "triple deckers" they were published at artificially high prices for subscription library sales, and the select few who were willing to a premium for a new release. Cheap reprints came later. Not much has changed in trade book publishing in last 150 years. Expensive hardcover first editions sold to libraries followed by cheap editions for the masses. 

Amazon & Google's Semi-Secret Agenda:  Sell Info About What People are Reading

 

Commercial publishing is doomed if the price of new books continues to fall and Amazon's Kindle Cloud and Apple's iCloud / iBook synch catches on.  And, prices will fall.  Why? Printing and publishing are no longer synonymous, and the perceived value of a digital book file is not very high.  Indeed, may I be as bold as to say that Amazon and Google are not really interested in selling books.  Their semi-secret agenda is to sell information about what people are reading.  It's about ads that are personalized to readers' prejudices and tastes.

 

Cheap and nasty pirated digital editions compete with full price digital downloads. The storm is coming.  Everything you need to know about digital publishing, the music business can teach you. Peer to peer sharing of digital downloads dealt a body blow to the record business. What little is left of the record business is controlled by Apple, who delivers a positively outrageous consumer experience.

 
It is my contention that anything that weakens the sale of bound books sold through traditional brick and mortar stores, threatens the traditional publishing model. However, traditional publishers have elected to publish print books and eBooks at the same time. With eBooks you don't have to negotiate with retailers to get them into stores, and consumers don't have to leave their homes. That seems destructive to both traditional book retailers and overhead-burdened book publishers.   

Cheap prices devalues literature. That's what the remarkable -- and successful -- campaign to adopt agency pricing was about.  Leonard Shatzkin (i.e., Shatzkin the Elder) said it best, "The retail price of any commodity should depend more on the value the buyer places on the product than on the cost to the producer."  So, how does the industry create the appearance of value?   

Windowing

In the movie business, a 'window' is the time between when a movie ends its run in movie theaters and begins its release on home video, television or elsewhere. When a studio considers shortening the time between theatrical release and home video release, they take into consideration the fact that they may be weakening ticket sales, as the audience for the movie may simply wait for the convenience of the less expensive home video release.

The motion picture industry understands that they have to balance the interests of theater owners and the home video market if they are to maintain both a healthy home video and theatrical market for their wares. I don't think the publishing industry is doing a very good job of balancing the interests of bookstores on the one hand, and Amazon and Apple on the other hand.

Neither home video release windows, or hardcover first windows, are popular with consumers. If you publish the eBook day-and-date with the pbooks, you will not expand your business -- except over the short term. The deteriorating status of hardcover, trade and mass market books, combined with piratical eBook versions isn't the end of the world, but, it is the beginning of the end of the existing publishing ecosystem. Putting books on retail shelves suggests discrimination. Each book is subject to negotiation. Digital is indiscriminate. It's about distribution to a mass market without intermediaries. 

 

Tethering the Reader

When will the alarm sound? Amazon and Apple are not your customers, they are your competitors. How do you compete with digital behemoths? With each pbook purchased at a local bookstore, or purchased online, include a free content access code that lets the consumer register that book and access the digital version online.  It will encourage the sale of the pbook and stimulate word of mouth.  Then hold back the digital only version for 60 or 90 days.

While consumers are reading your eBooks, you can be reading them, since you will have established a digital relationship with them.   Currently, Amazon and Apple, who are unwilling to share customer data with you, know your customer better than you do.  Ignoring that fact can be fatal to the publishing industry.   Publishers need to get to know  their customers better.  It's a B2C world.   A key reason for giving away an eBook with a pbook during the "first sale" window is to tether the reader to the publisher - not Amazon or Apple.   Publishers need to collect data on who is buying their books.  They need to own the customer.  It's no longer about the number of copies available.  It's about customer data, so you can sell them more stuff.  If you don't own your customer data, you don't own very much today.  Game over.       

We Don't Read eBooks, they Read Us

In the dark ages, Irish monks tethered bibles by book chains to make them harder for the Viking marauders to make off with them.  It's still a good idea.   Sell access to books stored in the cloud, and you own your customer for life.  And, in the process, you sidestep messy DRM issues.  While Amazon, Apple and Google's digital efficiency is not aimed at just books, they are intent on destroying bookstores -- or reducing them to mere curiosities.  They know that books identify readers' likes and dislikes better than their location or what brand of vacuum cleaner they recently purchased.   While there's not a lot of money to be made selling books, there is a lot of money to be made collecting personalized information.      

Free Bonus eBook Included!  

While even free may be too much to pay for a book in the near future, all is not lost.  They key is to publish a bound book bundled -- at no extra cost -- with access to a digital version of the book stored on a remote server (which can be advertising supported).  Bundling a pBook with a free eBook is a  temporary bulwark, not a solution.  The real dilemma is how to create value, when, due to rampant piracy, purchasing a book becomes optional.  Ultimately, the battle for the future of the book, may be about how invested people are in physical objects.    

Cloud computing is on the cusp.  It's about access to your eBook, not ownership of it.  An eBook stored on a remove server can be read on a web browser across multiple devices without interference from Amazon or Apple.  No device or platform lock in.  It's device agnostic.  So, the silliness that accompanied the introduction of the late great Stanza reader will seem, well...silly.   It's about content, not dedicated reading devices, proprietary platforms or multifunction tablets.


For 500 years publishing was a top down, multiple uniform copy, "All Rights Reserved," "No Derivative Works," "You Buy it You Own it" business.  The digital world is not uniform.  In cyberspace no one can hear you scream "All Rights Reserved."

Amazon, Apple and Google are tussling for dominance of cloud computing.   Each has a cloud computing platform that will allow you access, not download books you purchase.   Storage not stores is the future of publishing.  Book publishing was a business built on copyright and the sale of physical copies.  Cloud computing is a business built on secure content stored on remote servers.  Books are owned.   ebooks are not, since, cloud computing is about access to data.   Today, customer data -- not content -- is king.

What Does Print Do Best?

The time is ripe for the traditional publishing industry to ask, "What does print do best?"   Guttenberg's significance was that he made books available in uniform multiple copies.   If done right, a printed book gives the printed word authority.   It also imbues intangible intellectual property with value.   Read the Borzoi Credo.   It  will show you how to compete with probabilistic algorithms and overwhelming probabilities.  While essential for a publisher to have a book available in bound and eBook form on pub date, let the scarcity of retail outlets work to your advantage.   Hold back the stand alone eBook and be nice to bookstore clerks and managers by giving a first shot at retail.   Hardcover first -- but with a twist.  Bundle an eBook with the book.  People who buy books in bookstores talk up books.  They are the same people who, for either love or literature, or social status, opted to purchase -- not rent -- expensive triple deckers in the Victorian era.


Some people just have to read a book when it comes out.   Others can wait several months. If someone must have a  book when it comes out, it can be purchased as pbook bundled with a browser-based eBook.   According to a recent online consumer research survey by Elastic Path, if a favorite author was released initially only in hardcover, 41% of readers would buy it, whereas 39% would wait for the eBook.  Like the home video home video distribution window,  the digital-only version should follow the release of the premium pbook (i.e., pbook bundled with "free" eBook) two to three months after initial release of the premium package sold through traditional bookstores.  pbook first would also address protests by booksellers who can't compete with Amazon, Apple and Google in the digital arena. 

For traditional publishers and traditional booksellers, a premium  "P" / "E" bundled edition is one strategy for fighting the digital book wars.  Yes, I'm talking about defending the system.   But, don't brand me as a supporter of the status quo.   Defending the system need not be at the expense of new business models.   Publishing entrepreneurs can start from scratch with e-subscription models, e-syndication models, e-advertising supported, short term licenses (e.g., Richard Nash's Cursor), and other models that leverage their copyright interests and/or the readers' eyeballs they aggregate.  How one extracts value from their  intellectual property assets (and readers) is up to them.  It's just a matter of how traditional publishers plan to ride out the storm.  


Bookstores make traditional publishers relevant.  Things are about to get cheap and nasty, and Amazon and 

Apple are intent on destroying the existing supply chain.

Support is needed for traditional booksellers.  Don't jeopardize those valuable retail relationships by releasing stand alone downloadable digital books day-and-date with physical books.  Bundle them.  Neither the big six publishers, nor their bookseller partners, can compete with Amazon, Apple and Google.  Embrace digital, but, don't undermine traditional booksellers.  

Will Amazon Launch a Cloud-Based Book Service?

Are Advertising & Subscription Revue the Next Big Thing in Book Publishing?  

I've never been one to shy away from predicting the future. If asked, I’d say in the next 24-months, Amazon's Cloud Drive, their controversial cloud based digital music locker, announced on March 29,

2011, will evolve  into a book service, with revenue generated by purchases, advertising and subscription revenue.  Lockers and "lock in" are good for digital businesses that are having difficulty figuring out how to sustain a business based on  piracy prone digital downloads.  Amazon, as a player in the music space, knows that only 16.5% of American internet users over the age of 13 purchased music in the third quarter of 2010.  If purchasing digital content is optional today, how do you make it worth someone's while to buy a down loadable book that is otherwise available on a torrent site?  The answer the music industry has come up with is convenience, quality and legal.   

Does Your Publishing Contract Reflect the Modern Face of Book Publishing?

I believe that what we are watching is Amazon rethinking the future of making money online. Kindle is a only a transitional reading device.   It's a stop along the way toward a multifunction tablet, which is, itself, a stop along the way toward a cloud based service -- a service that stores book and music files remotely.

Some believe the Kindle advertising model, announced last month, is a first step toward  a freemium business model.  Marry the freemium model with a cloud based book service, and you have advertising supported books.  You won't just being storing books that you purchased on Amazon's server, but, reading advertising supported ones.  The latter bears some similarity to the way Dickens sold his novels -- serially, in installments or parts over time.   The future of publishing is going to look more "tailored and personalized."   Until the FTC clamps down on America's patchwork quilt of pro-advertiser privacy laws, revenue will flow from targeted behavioral ads.   

As an aside, a cloud based digital book service is a grand idea for readers as they can gain access to their files from wherever they are, and read those files on  multiple devices, e.g., smart phones, tablets, and their PC's.

The ambiguous digital book future is getting clearer day-by-day. It's not about ebook reading devices, it's about monetizing ebook readers.  Amazon is poised and ready, as evidenced by their willingness to build a business by selling ebooks below what they paid for them.  Google is ready, too.   Free works for Amazon and Google.  It's just bad for publishers.    

The short- to mid-term changes in trade publishing are going to be dramatic.  The music industry were the first movers in the digital space.   Just as technology improved musician's access to customers, it has decimated the music industry.

At the recent "Rethink Music" conference in Boston, one industry leader said cloud services must get past next year.  He was optimistic about Amazon Cloud Drive and Spotify.  His prediction was that the world's 160 million iTunes users will move to the cloud over the next five years.  Cloud services are on the cusp.   It's seems like Amazon is looking to develop a successful business model based on access to content -- not  ownership.   Streaming to one or multiple devices, the ability to sell ancillary services, and social networking features, make cloud based publishing a very exciting prospect.

The legal issues surround cloud and subscription services are plentiful.  They include antitrust concerns.  For example, there's the controversial question of whether Amazon, Google and Apple ("AGA") should own the content they distribute?   It is a good idea that they have a financial interest in the content they sell?   If prevented from doing so, perhaps, it would usher in a golden age of independent publishing. 

If Amazon uses its dominance to crush  the competition -- and there's no evidence that is their plan -- it would be bad for consumers, but good for Amazon.   Perhaps, someone should shake the antitrust cage, if for no other reason that to ensure Amazon, Google, Apple, get the message.   What's Amazing for Amazon, good for Google, or appropriate for Apple, is not necessarily good for you and I.