I just sent off some responses for an email-based interview as background for an upcoming article on ebooks in a magazine. I thought that I would share them with you in the raw here to open a discussion on ebooks that we can continue on Buzz or via the comments section of this blog. What are your thoughts about how publishers should approach ebooks?
Questions and my responses:
—It seems like the specifications for e-readers vary widely from device to device, and this year’s offerings look just as varied. Are there particular capabilities or specifications that publishers are really looking for from e-readers right now? What would an e-reader “silver bullet” device need to be capable of?
Some publishers are beginning to consider new content and features for ebooks, such as video interviews with authors and "hooks" into Web content such as social media services. In some instances publishers are hoping that such value-add content may allow them to command higher prices for ebooks than the prices that have dominated for ebooks from major publishers since the introduction of ebooks on Amazon's Kindle platform. To this end a platform such as Apple's new iPad is attractive to publishers, as it offers a device that can work well as a general computer and as a display mechanism for rights-protected content. But there will be relatively few titles that will be targeted for such enriched content. So what is the "magic bullet" platform for ebooks? The one that's been out there for more than fifteen years, I would argue: the Web. Ebooks will do best when they can be linked into Web content effectively, not necessarily on the device on which we like reading book content the best. With dozens of new kinds of mobile devices being introduced every year, now, it would be counterproductive for book publishers to try to target only a handful of devices for commercial success. It's best for ebook publishers to enable their content to "play well" on as many devices as possible and to ensure that what a reader does on one device can lead to a valuable experience for the same person on other devices that they use. For example, if I have just finished reading a chapter in a book about the state of business and economics in China, that's a great opportunity for book publishers to be able to apply metadata and keywords relevant to that chapter to other services that I as a reader may use. Some of those may be integrated into the ebook reader directly, but I'd probably appreciate them in a private email or messaging service delivered on a platform where I can consume or purchase other forms of content easily. Publishers should think of the ebook itself as just one item in a systematic approach to engaging audiences interested in specific authors and topics. Some of that approach may be delivered best via a publisher or a bookseller on their own portal, but their metadata may lead to rich experiences on partner platforms as well, triggered by contextual advertising network technologies or other technologies.
—On a related topic, are there specific capabilities that consumers are now looking for?
One of the key items that consumers ask for consistently is the ability to call ebook content their own and to be able to manipulate it the way that they would other forms of electronic content. Being able to cut, paste, share and annotate book content is key to enhancing its value in the eyes of book-reading audiences. These types of features, though, are the ones that publishers are least likely to offer to consumers without some form of rights management technology controls. While publishers have a right to defend their copyrights effectively, they have to consider carefully how content reuse and sharing can enhance the value of their products. O'Reily Media, for example, is pushing to have DRM controls removed from ebook content that they distribute, so that it can be used more effectively in collaborative environments. Eliminating DRM can also accelerate the ability of ebook content to be used by its purchaser on any number of technology platforms. This will accelerate also the likelihood that someone will actually read a book that they've purchased. In doing so, that reader is more likely to follow up with more purchases of similar content or value-add content associated with that title.
When you think of it, a paper edition of a book has nothing more than the copyright symbol to protect the legal rights associated with its content. Why would publishers want to frustrate consumers who have already demonstrated via music download purchases that they need the ability to transport content that they've purchased to new types of devices easily without the frustration of dealing with incompatible DRM systems? Ebook services need to enforce copyright but also enable the value of ebooks in as many contexts as possible. DRM services as designed today make that relatively hard to do. What is really needed for ebooks is a built-in ecommerce service that enables both the purchase of ebooks on a person-to-person distribution basis and that enables other types of ecommerce for related content and experiences. For example, if someone forwarded me a link to an ebook for possible purchasing or sharing, I should be able to be presented information about attending upcoming book talks by the author near me automatically on an opt-in basis or related titles or videos that are available. In other words, we can use the offering of content sharing as a revenue-generating experience from many angles.
—Are there any particular e-reader devices coming out in the near future (or that came out recently) that really stick out to you as being potentially influential devices?
Apple's iPad is bound to be an influential ebook reading device, if but because it introduces color formatting to ebooks in a user-friendly design, but I think that the most influential ebook technology will not be any one specific device but the ePub ebook publishing standard. This standard is gaining wide acceptance as a common format for ebooks, although rights management services may differ from publisher to publisher for ebooks published using that standard. Cross-platform standards will help to make ebooks accessible on more devices more rapidly than any one "magic bullet" device can afford publishers. The Nook ebook reader released by Barnes and Noble features ebook content published in ePub format and has been a very popular unit so far. Other devices such as Plastic Logic's Que device are promising advanced touch-screen devices for displaying ebooks and other types of electronic documents, but they are very expensive compared to consumer devices. Probably the most important devices are mobile phones, which are the most plentiful media-displaying devices in the world today. If you can reach book-reading audiences on mobile phones, then you don't have a very effective ebook strategy.
—Are there any specific markets where ebooks have the potential to make a big impact, yet still remain more or less unexplored?
Ebooks open up the possibility of both new ecommerce models and the re-introduction of older commmercial models for books in new ways. For example, in the 19th century it was fairly common for books to appear bit by bit in periodicals. I think that it's worth considering how popular authors may prove to be a source of subscription revenues for book publishers via Web portals for periodicals sponsoring such bit-by-bit access to a book, or even via email or direct downloads onto mobile devices. Ebooks are also just beginning to touch on some of the potential for creating new opportunities in packaging content for educational markets.
—Is Apple’s agency model of ebook selling the new standard? Does Amazon have any hope of holding onto its retail/wholesale model, and maintaining control of the pricing of ebooks on its website?
I think that we will continue to see a mix of retail/wholesale and agency models for ebook distribution, but publishers have a lot to gain from the agency model if they choose their partners wisely. Amazon in a sense has an agency model built in to its model in the sense that it enables people to embed "kiosks" for selling books in Web pages. Whether its an agency model or a retail/wholesale model, the important thing for publishers to do is to make people aware of books in as many contexts as possible where people are likely to have interest in purchasing them. Helping Web site developers and individuals with their own social media presences to "dress up" Web pages with information about and from ebooks will get them in front of people at the times at which buyers are going to be most likely to have their attention.
—Related question: If the agency model were to become the new standard, what effect would this have on ebook pricing in general? Are ebooks going to become more expensive all around? And would higher prices benefit the industry in the long run, or potentially harm it?
Publishers are looking for better margins and retail prices from ebooks in general. While the agency model has been held up as a tool to enable better prices and margins, it's not clear that enabling publishers to set their own prices via the agency model is going to support prices and margins in the long run that much better than the retail/wholesale model. The agency model also opens the door to price competition between publishers, as they seek the right balance between unit sales and margins. So it's possible that what we'll see in the agency model is a handful of books at higher price points and a majority of books at lower price points. The main problem that book publishers face is not competition from Amazon or ever other book publishers but rather content that's been born on the Web - including ebooks that have been developed through online services. By managing information about what Web-native ebook content is most popular, this new breed of publisher may develop to become "good enough" alternatives to major publishers that many ebook consumers will be glad to consume their ebooks at price points that will be much lower - and, often enough, better integrated into online content. I think that higher prices via the agency model are fine for established book publishers in the short term, but if they don't use those improved margins to invest heavily in digital-first marketing strategies then they are going to squander the real opportunities to develop profitable ebook publishing strategies for the long run.
—It seems like the multiple competing mp3 marketplaces quickly collapsed into just two or three players as the digital music market matured. Are we going to see the same thing happen with ebooks?
Just as the commonly accepted MP3 file format flattened out the music player marketplace, so will the ePub format make it harder for devices to develop proprietary appeal based on file formats alone. In the long run that's a good thing for publishers, since it means that ebooks will be useful on billions of devices rather than millions. Book publishers need to be ready to accept that this is beneficial and to prepare revenue models that are designed to maximize the benefits of rapid and broad dissemination of ebooks, taking into the account the potential power of viral marketing. What could be better than to have someone chatting about a book that they loved at a social gathering and to enable people who hear their praise to experience that book in part immediately via a tap of two mobile phones, as used in the Bump mobile application? Book publishers need to trigger sales based on social interactions far more aggressively - search alone cannot help them to build online revenues effectively.
—E-Ink, color LCD, and other display techs like Pixel Qi: what are the pros and cons of the various display technologies? What seems like the most likely way forward for the e-reader industry?*
While eInk has definite advantages under specific circumstances, such as bright sunlight and limited battery recharging opportunities, the increasing life of mobile device batteries and increasing efficiencies of backlit touch mobile displays are making eInk increasingly a niche device play. The real problem with eInk and similar technologies is not the technologies themselves but the demographics of the audiences that they serve. eInk-like technologies are oriented towards people used to print materials. The younger generation of readers has grown up rarely using paper for reading in general, so being able to duplicate a paper-based reading experience, be it in book, magazine or newspaper format, is far less important to them. Paper-analogous technologies tend to be more important to publishing executives stocked with employees who have skillsets most readily adapted to print-formatted materials. Touch-sensitive displays are particularly appealing to publishing executives for similar reasons, but these technologies will benefit Web-native materials as much as they will traditional media materials, so there's no strong reason to believe that they can develop unique market advantages through touch interfaces either.
—How do you feel about hybrid devices like the enTourage eDGe and iPad, which position themselves as being somewhere between an e-reader and a netbook? Are one-purpose e-readers like the Kindle becoming a thing of the past, or is there still potential there?
I think that there's still definitely a place for limited-function ebook readers. Books are a very personal experience for a reader. Book readers tend to use books as an opportunity to spend one-on-one "quality time" with a particular author, tuning out other stimuli to concentrate on what is usually a very carefully prepared manuscript. With that said, though, people find themselves shifting from a book-reading frame of mind to their online frame of mind fairly rapidly and fluidly. For these situations, having an ebook on a multi-function platform can be very beneficial to publishers, as it may allow them to take those moments of transition to put their book content into more contexts at a time when a reader is most motivated to do so. Publishers have been drawn to simple ebook readers initially because they feel that this replicates their existing relationship with readers more effectively - and they do, by and large. But in limiting their vision of their relationship with readers to their existing models, in part to prevent duplication or sharing of book content, they have shut out books from the billions of people who interact with content and with one another every day on the Web. Standalone ebook readers will continue to have appeal, but these devices must enable readers to interact with the Web through other Web-enabled devices more effectively. For example, though I may not want to do social media sharing of a passage from an e-book via a Kindle or a Nook ebook reader directly, I should be able to build a queue of excerpted passages that I can then manipulate via a mobile phone application to share with others.
My wife was bugging me before Christmas for a nice toy that I would like as a gift, so I thought that it couldn't hurt to get Barnes & Noble's new Nook ebook reader, which, at the time, was due for delivery before the holidays. With a hybrid eInk display for text and Android-driven touch interface for navigation combined with ePub-formatted documents, at least it would be a "walking the talk" gizmo that reflected how I saw what publishers should be doing with ebook distribution.
Unfortunately on Christmas day I got a nice new traveling case and screen protector, but only a placekeeper for the unit itself, which finally arrived the day that the Apple iPad was launched. Hmm, interesting timing. There's really no comparison, though, between the "whats" and the "whys" of an ebook reader like the Nook and a device like the iPad. The nook is all about simplifying and in some ways enhancing the process of relating to printed material, where the iPad is about the multi-sense world of Web media, with books a nice part of its capabilities but one not necessarily likely to appeal to many of its core Web-raised customers.
The Nook definitely has a leg-up overall on its Amazon Kindle rival, in the sense that it combines both the sophistication of a touch interface with a very simple and enjoyable page-turning experience via its eInk interface. I had my doubts about this combination, but, while not perfect, it works out pretty nicely overall. You can swipe your finger across a row of book, newspaper and magazine titles like you would on a touch-screen phone interface, tap once and start digging in. A second or two after your text is displayed, the color touch interface powers down and you're enjoying crisp eInk text, which only improves its readability in bright daylight. That's a boon when on a beach or in a sunny train or plane seat where moving to a better spot is not an option.
The physical controls of the Nook are bone simple. An "on" button on the top of the unit, a bar between the eInk display and the color touch display that activates the touch screen, and page-turning buttons on either side of the screen. The page-turning buttons are just about perfect and a joy to use. Each page-turning button has a pinhole-sized protrusion in its middle, which makes it a no-eyes procedure to get your fingers in the right place, and no edges. It's a seamless case, so there's no place for dirt, dust or sand to get into the controls or to spoil the smooth look of the unit. Best of all, the buttons are repeated on either side - a huge plus for righty-lefty usability and for when you get in those wierd positions that feel great put that put your hands at odd angles.
Downloads of new and updated materials are smooth and effortless, with simple and well-designed procedures. It's a no-brainer to use for all of its basic functions. Searching the Barnes and Noble store is simple and easy via a touch keyboard, which overall is no worse than Kindle's weird Chiclet-style physical keyboard but has rather slow typing response and an early-release Android look and feel that leaves something to be desired compared to the Android-based Nexus One phone that hangs next to me most of the time. Barnes and Noble also provides its own content via "The Daily," a daily newsletter that includes a listing of your latest content downloads. You can accelerate download performance by powering up your Nook on your local wireless network, but it will drain your batteries fairly rapidly. Without a wireless LAN connection or a lot of use of the color display, your batteries can last for days, typically, since the eInk display is not powered once a page is displayed.
While I am certainly open to reading book content on powered displays, I really like this "off" nature of eInk. After a day of staring into backlit computer and phone displays, there's an "unplugged" aspect to the Nook that fits the nature of book reading nicely. Reading books is about sharing some "quality time" with the thoughts of another person. The simplicity of the Nook encourages me to tune out many of my typical daily electronic distractions and to focus on one relationship. Want Web browsing? Go to your PC or phone, please. The only other significant function of the Nook is its ability to play downloaded music, which is a nice complement to reading, if I am willing to tax the batteries a bit. Downloading tunes from a PC is easy via the Nook's standard USB cable, which doubles as the charging cord when plugged into a special AC converter. Economy of design and purpose is the theme with Nook, and overall it delivers on that theme well.
However, the Nook is far from perfect. The delay in getting this unit to market was doubtless getting some of the product development kinks out, some of which still shine through. The most glaring problem with the Nook is its overall performance. Loading large books for reading can take several seconds in many instances, and some large ebooks did not load at all (possibly due to being formatted an older proprietary format not compatible with Nook). Page-turning is quick and smooth enough and bookmarking functions simple enough, but the bookmarks themselves cannot be given easy-to-use human names; you're stuck with a geekish, URL-like name based on chapter numbers that is hard to understand. At times it seems that bookmarks were not being saved. The note-taking capability on the Nook is decent but nominal at best, not something that's likely to satisfy a real student or scribbler often. You can bump up font sizes in the eInk display, but there's only three settings overall for font sizes. An extra-large font setting would be nice for those days when your eyes have had far too much work. Combine these rough spots with the touch keyboard issues, and it's a fair bet that the Nook needs a newer version of Android ASAP to improve performance and a few interface tweaks to boot.
And while the online store interface is smooth and features millions of books from Google Books, Barnes and Noble's own ebook title offerings are still a little bit thin; you'll get most major titles, but don't expect too much peripheral content beyond Google's offerings. Some of the ecommerce for newspapers and magazines is still a little rough also. The online store, for example, lists The New York Times as a $13.99 subscription. For, what, a month? A year? It doesn't say. The subscription provides only a subset of NYT information, which is a bit annoying, but you get at least the highlighted stories that you're likely to want to spend time with in an "unplugged" mode on the Nook.
Finally there's the color touch display, which feels comfortable to use if you're used to touch-screen phones and is generally a pleasure to use, with easy-to-use menus and features that are well-designed overall. The main annoyance here, though, is that after a day of touching the screen of my Nexus One, it feels kind of awkward to look at content in the eInk display that's controlled in the touch display below it. A full-touch display such as in Plastic Logic's new Que document reader would be ideal, but I am not interested in hauling that much hardware around. A Nook slips comfortably into my parka pocket and is not hogging up any significant space on the coffee table next to my favorite reading chair. And again, since book-reading is about getting into the words more than fiddling with features, I am willing to live with the compromise.
I am not really sure that you can call the Nook clearly superior to the Amazon Kindle as a machine, but it's definitely a sleeker and more flexible unit overall with better design and more potential for improvement via its Android underpinnings, as well as more potential to get your content to play nicely in other ebook readers via its use of the ePub formatting standard. I was unable to test out the book-sharing feature yet with another Nook user, but this is certainly an important first that deserves at least a nod of appreciation for the many efforts that Barnes and Noble has put in to replicating some of the most important parts of the book-reading experience. Nook's titles are a little pricier than those found in the Kindle store, but that's a small price to pay for the ability to use content on other ePub-compatible readers. Lock-in to the Kindle system is the price to pay for it's cheaper titles, a price that I am not willing to pay.
And I suppose that's the point of the Nook at the end of the day. It's a great little reader that will allow one to prepare for any number of great new ebook-displaying products that will be coming out in the years ahead. With the Kindle, or, for that matter, materials on the iPad purchased via Apple's online store, you're likely to have a more restricted range of technology options moving forward. It's not clear that standalone ebook readers will be with us much longer, but for those wanting simple functionality in a rugged unit with great battery life that will be highly usable in any number of conditions that would be daunting to many advanced display units, the Nook offers a good reading experience and the ability to escape without hauling around a pound of books - or Jeff Bezos' business model hangups, either. That's good enough for me today, at least.
With the media industry salivating over Apple CEO Steve Jobs' announcement of the new iPad as if it were awaiting an injection of Viagra, you'd think that the machine would do everything except change a flat tire. Well, the hoopla is over, and the iPad is...a large iPhone, essentially. Nice, sexy, though functionally not really a breakthrough device compared to the impact that the original iPhone had on mobile markets. However, then the other shoes started to drop after the klieg lights on the announcement stage began to cool off a bit. The two key factors: price and e-book packaging.
First, the price. At $499, the iPad is coming out at a blow-away price point that will make its purchase an attractive and simple alternative for many people who would otherwise be considering a PC or Mac as their next step-up from a mobile phone - or a slightly more pricey unlocked Google Nexus One superphone. This matters in a big way to global markets, where billions of people who are experiencing Web content for the first time on mobile phones will be looking for their next step-up device for content consumption.
Keep your eyes open also for possible subsidies on this price point as mobile network-enabled versions of the iPad hit the market. Just as King Gillette figured out how to give away razor handles to sell disposable razor blades, Apple will find many ways to lower the cost of hardware acquisition to lock people into their software and ecommerce services. Since the iPad technology and apps are largely warmed-over iPhone components, one assumes that not much R&D was required to launch this model, so there must be a good amount of "wiggle room" in the iPad's pricing for such deals.
Its aggressive price point also pegs the iPad as a highly attractive alternative for educational markets, the original market that launched Apple's growth years ago as a scrappy alternative to then-crude PCs. Given the average college student's expenditures on textbooks, an iPad equipped with ebook versions of those texts that they can use for most other schoolwork along with their favorite entertainment will be a very appealing option. It's also a price point that pretty much resigns most existing ebook readers to also-ran status as cost-effective platforms for people on the go. What do you want at your train or airline seat as a light PC alternative, an ebook reader or something that can also play movies and help you get some emails done? Problem solved.
The other factor that is very appealing on the face of it is Apple's decision to deploy an iTunes-like eBook store with content formatted in the ePub open-standards ebook and emagazine format championed by the International Digital Publishing Forum for several years. Having an ebook reading software package that will, in theory, be compatible with content purchased from any ecommerce service using ePub-formatted content will be a great boost to ebook, enewspaper and emagazine sales. However, the caveat with Apple's use of ePub standards is that ePub leaves the door open for the optional use of proprietary DRM tools, such as those used in Apple's iTunes store and Barnes and Noble's online ebook outlet.
If you're happy using iTunes on whatever platform you're using, then chances are Jeff Bezos over at Amazon just bought himself a huge headache after having alienated publishers with onerous revenue share agreements to get content in Amazon's proprietary Kindle format. I've said it often that the proprietary Kindle format was a dead end, but no more so than today. In a sense I wonder if the publishing industry went along with the proprietary Kindle early on as a ruff of sorts to keep the combination of Amazon, Google and open standards from running away with the entire premium content ballgame while they developed a more palatable alternative. That may be giving the people involved too much credit, but it's curious. Perhaps it's not too late to dust off some of those "GoogleZon" memes, after all.
Now that the book industry and other media producers have an alternative to Amazon's stranglehold on them, it will be interesting to see whether they will find themselves in a new Catch-22 situation. Have they run from Amazon's dominance only to discover that the grip of Apple's DRM on ePub-enabled content winds up being an even worse stranglehold in the long run? Time will tell, as will the details that unfold over the next few weeks regarding the iPad's compatibility with premium content purchased from non-Apple outlets. If it's easy-peasy to pull up content purchased elsewhere in ePub format on the iPad, then publishers will have done themselves a great favor. If they drank too much of Steve Jobs' Kool-Aid and allowed it to be hard to use other DRMed or non-DRMed content via Apple's ePub reader, then it will be a more-of-the same dilemma for publishers overall.
While the media industry seems ready to declare Steve Jobs the next David Sarnoff, their "homeboy" genius of content, technology and human insight, the overall reaction to the iPad by consumers so far seems to be warm but not necessarily hot. If you love Apple products already, then you're probably going to plunk down your five Franklins as soon as you can. If you're a person who's already equipped with a decent PC, an iPhone or Android-enabled mobile device, then you're probably saying, "Oh, a big iPhone, neat" - and then going back to surfing the Web. iPad as a gizmo is nifty, but it's not grown new capabilities that people haven't seen before in one form or another. If you're an enterprise I.T. manager, you're probably saying, "Oh, brother, another device to deal with, thank goodness it's basically just an iPhone" - which may simplify adoption at schools and universities especially.
And if you're a book or magazine publisher, then you're probably feeling pretty good at the moment - but then, perhaps, realizing that Jobs spent most of his demo showing how great it was that the iPad rendered Web pages and YouTube movies so well. Sorry, dear publishers, the Web is not going to disappear just because there's a handy new netbook that does DRM the way that you want it to. The iPad will definitely be a boost for print-formatted electronic content, but this is highly unlikely to address key revenue and cost issues that are ultimately the enemies of many publishers. By the time that iPads start coming out in March (and in April in mobile network-enabled configurations) , competitors will be that much further down the road towards their own cost-effective tablet and touchpad interfaces that are likely to be committed to open standards more aggressively.
Yes, this means that Google is still very much in the mix for premium content. Google's Chrome OS will be available in the next year, and rest assured that this next-generation computer operating system will have some deployments that will be remarkably iPad-like. Already its Android operating system is the basis for Barnes and Noble's Nook ebook reader being shipped in a few days, equipped with ePub-formatted content. Could this alliance form the basis for another end-run around Amazon for book and magazine publishers? It seems that not too long from now we will start thinking of Google and Apple the way that we used to think of television and radio networks, with Microsoft striving to get its own new-generation devices into the mix as well.
In the meantime, there are TiVos, Playstations, mobile phones, ereaders and a galaxy of other gizmos that will keep both the iPad and any other particular device from being a "magic bullet" that will solve the distribution problems of media companies definitively. All hail Jobs, today's knight in shining armor for a content industry still struggling with the realities of the Web some fifteen-plus years after the launch of HTML-based graphic browsing on the Internet. Then let's look at how many gray hairs some of us have gained since that time - and accept that the iPad is just another beautiful, functional tool from Apple that cannot stave off the effects of the Web indefinitely. Even with Viagra, you have to come down to life size eventually, after all.
Amazon Kindle has always been an odd duck of a platform, a proprietary e-book reader that bundled wireless access with a device that offered a very limited range of functionality. But as the first major e-book platform with an integrated ecommerce function, it gained early followers and a lot of media hoopla. Enter Apple, which is trying to become the default delivery mechanism for a galaxy of mainstream media content sources via its soon-to-be-released whiz-bang iSlate platform, including book content from Harper Collins. All of a sudden last year's bright, shiny thing from Amazon seems not so bright and shiny after all, prompting a late move by Amazon to open up its Kindle platform more aggressively to software developers.
As noted by CNET, though, this is way too little at a time in which software developers are inundated with platforms begging for appplications to make them stand out from the crowd. To boot, premium applications will have to pay a healthy chunk of their revenues to Amazon, presumably to cover the cost of downloads, which is bundled into the Amazon service from a consumer perspective. Kindle readers on iPhones and other platforms may help to buoy Amazon's overall e-book strategy, but it is highly doubtful that the Kindle itself has much of a lifespan as a multi-functional content delivery platform. In turn, this puts pressure on Amazon's overall sales picture, as a generation attuned to iTunes downloads may be more willing to add books to that list of items to cram into their portable devices than to shift to downloads on the Kindle platform that's centered around yesterday's content formats.
The vision of the Kindle was myopic from day one, too bent on luring timid publishers into the e-book era before others became premium e-book download kings. While this did leverage Amazon into an early advantageous position for e-books, its focus on a pioneering device locked it in to formats and concepts that reflected the fears and limitations of the book publishing industry more than it did the realities of a Web-enabled world of a multitude of content formats, publishers and delivery channels. Its onerous cut of Kindle e-book revenues also gave publishers a good reason to work with other platform providers to get a better piece of the action. The net result is that Amazon is in strong danger of becoming a book distribution channel that fails to lock in a new generation of book readers on emerging mobile platforms.
With Apple setting itself up as a primary download competitor, the question becomes whether Amazon wants to continue to try to be the Microsoft of e-books via its proprietary approach or to become the Google of e-books in response to this challenge. In other words, is Amazon willing to admit that it made a huge mistake in not aligning itself more with a cross-platform, open standards approach in preparation for the inevitable platform battles that required stronger technology partners? There may not be a black-and-white answer to this question, but clearly Amazon needs to focus more on channel strategies and content publisher relations than on multi-function platform development. This is especially important in light of media companies that manage multi-channel products - "Avatar" lives as a movie, as a game, and, inevitably, as videos, books and so on. Amazon should be focusing more on the question of how to be a download king for content of all kinds rather than a gizmo king.
The logical leading partner in this would seem to be Google, with its emerging Android and Chrome OS platforms, options that weren't on the table in any serious way a couple of years ago but which are now coming to market aggressively. Microsoft will certainly be in the mix also, but it's playing catch-up in mobile platforms at a time in which Google is preparing to soar past many established vendors with its cross-platform Android operating system. In February the Barnes & Noble Nook e-book reader will be the first model delivered to consumers based on Google's Android operating system, opening the door to thousands of applications that could be integrated with e-books easily on that device, as well as on other Android-based devices. While there are notable flaws in the Barnes & Noble strategy - too few books, no reader yet for other mobile devices - its use of the ePub standard for its downloads and an incorporated lending model is closer to what will help book publishers to integrate with many other kinds of content and platforms quickly and profitably.
Book publishers have, predictably, dug themselves into an early hole in the race for digital markets by rejecting standards that would make cross-platform use of e-books a simple thing for consumers. One of the great things about books traditionally is that they didn't require a special technology to use them. Why would publishers go out of their way to balkanize their market into dozens of different proprietary formats that can only discourage people from picking up books in general? While it will take some time to undo this damage, there is still time for book publishers to avoid the mistakes of the music and video industries and decide on formats that will encourage cross-platform use of e-books as simply and inexpensively as possible and which encourage developers to create functionality around e-books that enhances their value and their integration into Web-based content, collaboration and community services.
While there may be some sucking up of pride in Amazon's C-suite to make these things happen, they are absolutely necessary if Amazon is to extend its early ecommerce successes based on Web standards into mobile markets. Perhaps Amazon forgets that if it weren't for Web standards, the world would not have discovered its leading ecommerce services in the first place. Amazon needs to re-discover its appreciation of the power of Web-oriented industry standards for e-books and re-establish itself as a company that can carve out the broadest opportunities for content ecommerce via the widest array of content platforms. While this may not always sound like music to the ears of its publishing partners, it's the only way in which it will be able to offer a sound alternative to media companies that are locking themselves into proprietary platforms that will inevitably place Amazon in an awkward relationship with them. I don't put much hope on this happening in the short term - some changes at the top in Amazon may have to occur for this to happen - but it's likely their best road to success in the years ahead.
This year's International Consumer Electronics Show was awash in more tablets than a local pharmacy, with both actual models being shown and overarching buzz from Apple's anticipated iSlate tablet offering expected later this year. While many of the new tablet models were largely warmed-over versions of netbooks or smartbooks, some were oriented towards executives and (presumably) wealthy students who would be willing to pay close to a thousand dollars for a tablet that "acted" like a paper document. Two key models making their debut at CES in this column were the Hearst-sponsored Skiff newspaper and magazine reader and the Que document and e-book reader from Plastic Logic.
The Skiff initiative from Hearst is far more than a tablet gizmo, encompassing distribution on a number of platforms including smart/super phones, PCs and other devices on which their clients would presumably want to view content laid out in traditional print format - and pay presumably premium print prices for it. The reader itself has a display almost as large as a typical notebook PC, with wafer-thin construction, eInk-like resolution and touch-screen activation. The Que reader is a similarly "thin is in" device, but the content that it can manage is oriented towards both traditional media and enterprise document management. The idea behind both devices is that you can have the convenience of digital storage and display without the hassle of dealing with Web-oriented content formats.
The real rationale behind these initiatives, of course, is more of a regressive approach to content than a progressive approach. The Skiff screams at its audience, "Print formats are still relevant, darn it!" while the Que burbles out, "Web sites for collaboration? Nevah hoid of it." And in common to these devices both traditional publisher and enterprise document management business models hope to thrive by locking in support for bright and shiny new high-tech toys that amuse people enough to let them forget that they are paying not just for a pricey device but for outmoded ways of looking at content aggregation, integration and contextualization. The Web site for Skiff tells people first that it's a "publisher-friendly" device, meaning that publishers can obtain revenues from lock-in via proprietary formats while changing as little of its outlook on its revenue streams as possible.
I am hard-pressed to think of an army of executives who have to already juggle laptop PCs, smartphones and other gizmos who will find their world to be truly simplified by this emerging world of proprietary devices. There's little doubt that the tablet format for devices will begin to pick up steam this year, especially those that are touch-enabled devices that help to eliminate the need for physical keyboards. But much of the tablet buzz is smoke and mirrors for journalists, hiding the broader reality that most major publishers are faced with a world in which their revenue streams are drying up and unlikely to be propped up for very long by proprietary tablet plays. None of these devices seem to address the primary issue facing their operations: namely that the Web as a whole is far more interesting and engaging to its readers than any given publication.
Publishers do need to focus on quality editorial operations, to be sure, to ensure that they have a product that's worth the premium prices that they hope to extract on their tablet devices. But their real competition is not bloggers or online aggregators, but other Web formats. The ease with which video can be displayed both on PC and mobile devices and the rapidly accelerating integration of voice services into Web services is creating an environment in which an enormous amount of information is being created and shared with people around the world well before it ever gets into words. The prevalence of status posting services such as Facebook and Twitter make people aware of the first and best news coverage of an event to the point that follow-up reports are as redundant to the general public as they are to stock traders equipped with real-time news feeds.
Yes, the experience of print is engaging, and, often, seductive. But in an online world built around relationships, context and collaboration, investing heavily on keeping up the appearance of the seductiveness and power of print seems to make about as much sense as an 80 year-old investing in a fifteenth round of cosmetic surgery. Premium publishing models are important, but investing in outdated business models to drive premium revenues again and again is a non-starter. It will help to stem the tide of the Web no more than 3-D television or other diverting forms of repackaging. The movie "Avatar" succeeded not because of 3-D images but because it appealed to generations young and old who are moving into new forms of relationships with information and experiences via the Web, enveloped in them constantly to the point that publishing is becoming part of who they are, as I infer in Chapter 10 of Content Nation.
With this in mind, I think that the most important "tablets" are already in many people's pockets - Web-enabled smart/super phones that provide touch-activated access to content and applications that free people from heavy and expensive PCs. Most of these devices cost a fraction of the price of the premium tablet units being promoted for sale. When touch-sensitive tablet devices based on Google's open-source Chrome OS debut later this year, the need for price-sensitive access to full-display content will be underscored yet again. The publishing industry will never grow, much less survive, if it insists on locking its hopes into the most expensive delivery mechanisms available when cost-effective alternatives abound.
What publishers should be focusing on is enabling their content for cross-platform distribution as effectively as possible, demanding premium price points where warranted based on the contextual value of their communities, features and services, not on the fleeting value of a handful of specific devices. If we are headed towards a world in which people will be able to wave an RFID-enabled phone at an item to purchase it, or similarly to execute a business agreement, then publishers need to jump off yesteryear's bandwagon and tool content to be valuable where organizations generating products and services will be thrusting their marketing investments. Gimmicky tablets will prevent this no more than Cinerama-produced films stemmed the rise of television in the 1950s and 1960s. So congratulations to the tablet producers for sucking money out of publishers who should be investing elsewhere. Hopefully next year's CES will see some more sensible solutions to content display and distribution that will be true boosts to publishers.
It seems as if there's hardly a week that goes by lately without some major announcement from Google, Microsoft and other technology providers that has major repercussions for the content industry. In the past week, we've had not just a major announcement but a major rumor surfacing anew that has me thinking about how Google's strength as a marketing organization is in defining new markets that others are often unwilling to develop. In other words, where many publishers and technology companies focus on gaining slices of the same old market share pie, Google seems to be becoming the leader in defining whole new kinds of content markets to bake.
On the product announcement front, Google used the unveiling of its Chrome OS operating system as an open source platform to give a quick demo of its still-developing features (video). As I highlighted in ContentBlogger in July, Chrome OS, targeted for release next year, will be a computer operating system expressly for devices such as netbooks that use mostly Web-oriented content and applications. The result is a machine that can operate with minimal local data storage and that can boot up to a login prompt in seven seconds and get on the Web in just a few seconds more. So in less time than it takes the typical mobile phone to get ready you can access Web content and applications easily.
The Chrome OS interface is no real surprise to those already using Google's Chrome browser to look at the Web - it is, in essence, the same. There is a permanent "tab" open to allow one to start applications, which operate in tabs much the same as Web pages do currently in the Chrome browser, or you can have the applications pop up from the bottom of the display as "panels." Web links can activate apps as well, such as in the above display, which shows a music clip on MySpace playing after clicking a link on a Google search results page. The demo also showed how data in the Chrome OS "cloud" from any tabbed window can be pulled into Google Docs for more sophisticated manipulation and how games and ebooks from Google Books can be viewed easily and stay as persistent content in a given tab or as full-screen applications.
People expecting the "wow" factor that Microsoft or Apple has tried to engineer into its most current operating systems are likely to be underwhelmed by Chrome OS, a non "wow" factor that was echoed in a recent poll that I conducted in Google Wave. In the poll, only a plurality of people felt that Chrome OS would have a major impact on computing in two to three years. After all, who is going to get excited about an operating system that looks and acts just like today's browsers? I think, though, that this is where the pies come in. With only about a fifth of the world's population having access to the Web, Chrome OS as an open operating system is perfectly positioned to help the other five billion people who do not have Web access to build content in the clouds very cost-effectively. Most of these people will never see a PC in their lives and will find a Chrome OS device to be perfectly adequate. Of the 1.4 billion people who have access to the Web already, most of their time is spent on the Web anyway. That leaves Apple Macs and devices using Microsoft Windows 7 to go after the relatively affluent and sophisticated markets that have a lot of sophisticated gizmos in their homes and enterprises, a significant market, to be sure, but one in which the need for content outside of the cloud will be a diminishing factor. All of a sudden Chrome OS has the ability to make the entire PC-based marketplace look like a niche market.
Underscoring this positioning of an expanded global cloud as an expanded marketplace pie is the recent repackaging of the "Google Phone" rumor by TechCrunch. If Michael Arrington's latest "confirmed, super-high confidence information" is to be believed, Google is going to start advertising a Google-branded mobile phone device in January that will be built by an OEM hardware partner to Google's own specifications. In the short run, one assumes that this will be an "apples-to-apples" competitor for Apple's iPhone, supporting applications and Voice over IP telephony in a way that is less compromised than Google Android implementations found on smart phones released so far. But with heavy investments in Google's Android operating system by handset manufacturers such as Samsung, HTC and Motorola and a still-fragmented U.S. mobile market to navigate, it's doubtful that such a "Google Phone" is going to make enormous headway in developed markets any time soon based on just these features.
Instead, the more likely play for Google's potential phone device is a new market altogether: ad-supported mobile VoIP telephone and Web access. In other words, in the middle of a global recession and with a huge number of people who have yet to touch either a mobile phone or the Web, what better price point for a mobile phone service could you have than "free?" The features of Google Voice already await people needing voicemail and phone call redirection, so people falling off of telephone calling plans as the economy continues to tighten may see access to phone calls through ad-supported broadband and Web "hot spots" to be a "good enough" telephony and Web combination while they await funds to get more high-powered services from major telephone carriers. For those who could never afford or deal with mobile Web access, the Google Phone may offer a simple and affordable way into mobile communications that would be a stepping stone to a Chrome OS-powered netbook device.
All of this in the short term is likely to be fairly underwhelming stuff for people looking for the "what's in it for me for better results this quarter" solution to all of their content market problems. But in a sense that's the exact point. Google is one of the few companies in the content and technology industry that has been investing very patiently in long-term market development goals that will broaden their potential revenue base by huge magnitudes. Others have been innovators, to be sure, and profitable in their own right. But by plodding away at technologies and content services such as Chrome OS, Android, Google Apps, Google Wave and Google Voice, and by continuing to refine existing services such as its search engine, ad networks and YouTube videos, Google learns how to build a larger market in which they can satisfy at least 80 percent of its daily needs.
As Google expands into developing nations and "digital natives" markets more rapidly than many of its competitors, the slice of the "old" 20 percent that can be satisfied by more specialized technologies will continue to look smaller and less powerful as a content market play. With everything to gain and little to lose, Google's greatest barrier to competitive forces is the unwillingness of its competitors to risk everything to play on the same ground. The sophisticates who follow the content industry will continue to be underwhelmed by many Google products and services - until they recognize that in large part it is becoming the content industry as we will know it.
A few years ago I blogged about Microsoft's then-CEO Bill Gates' appearance at the annual Consumer Electronics Show, in which his brand was sharing a good deal of the CES limelight with Google and Yahoo. No longer did the Microsoft brand alone command the attention of tech mavens: it was content and content-oriented features that were carrying the day. While Microsoft still enjoys an enviable position in the marketplace, there is no doubt that its ability to project presumed dominance in consumer and enterprise markets faces many challenges.
Ticking the clock ahead to today's world, it would appear that Apple may have had a similar passing of the market mojo moment at this year's Apple Worldwide Developers Conference. Steve Jobs failed to deliver the event's keynote address, presumably due to health issues, but it may also have been because Apple's usual razzamataz had few blockbuster announcements off of which to leverage. The news from WWDC was about incremental changes, all good, but mostly about trying to deal with the challenges of positioning Apple as a premium brand in a world that is pushing pricing down on many bright, shiny objects.
By contrast, bright, shiny objects were found everywhere at very reasonable prices at the recent Computex Taipei event across the Pacific from WWDC. Computex featured an abundance of netbooks and thin client desktops and tablet panels running many different kinds of operating systems software, including Google's new Android O/S that was seen running alongside smart phone and netbook versions of Microsoft Windows. Windows was the first cross-platform operating system to start driving down the cost of content delivery electronics, and Android is following in its footsteps with an open-source operating system that helps to drive down the price of a smaller, cheaper and more portable generation of electronics significantly.
Apple has always managed to create a unique niche for its products by focusing on highly appealing designs and features. For example, at WWDC announcements included a slot for SD memory cards in some of its lighter new Macbook laptops - perfect for the photo and graphics afficionados who form a strong core of Apple's support. Great stuff, but ultimately still the stuff of niche brands. Call it the BMW approach to content delivery: ultimately, a Macbook or even an iPhone doesn't do much that a Windows or Android-equipped device won't do similarly, but dang, it just makes some folks feel so, well, you know..."in." Some people will always pay a premium price to be a part of that club, whatever is on the inside of it, so Apple-branded devices are not going away any time soon.
From a content industry perspective, though, the Apple wave queued up by the soaring success of the iPhone is about to gain a new sense of perspective over the next several months as netbooks and tougher competition from newer smart phone models begin to elbow into the limelight. The real star of the show is the Web, with cloud computing resources the co-star. Yes, mobile applications are helping to fuel up excitement about smart phones and other devices, but when a device with 1GB of memory can handle virtually any multimedia content display requirements, it's not realistic to think that proprietary hardware or operating systems are going to enable publishers to have technology partners that can help to buffer them against the competitive forces of Web publishing. You can increase storage for downloads to enjoy when you're not Web-enabled, but for most people the content that they want resides in the cloud and appears on whatever standards-compliant device makes it useful. Toss in the increasing availability of wireless broadband Internet connectivity and the "why" of platform-captive content makes less and less sense.
More and more inexpensive appealing devices to deliver content are pouring out of Taipei, China, South Korea and other low-cost producing markets every day, many of them aimed at global markets that have participated only marginally in the Web experience so far. While many premium content producers continue to focus on the upscale content platforms as their salvation, already more than a billion YouTube videos are viewed daily around the world. A premium strategy will work if you can attract people's attention well, but at this point in time there are really not enough fundamental technology differentiators in Apple or any other existing technology platform producer's products to justify a strong reliance on premium platforms as a buffer for intellectual property licensing. In short, the battle between the Web and platforms is over, for now, and you can put the crown securely on the virtual noggin of the Web.
If content producers want premium platform barriers to entry for their products they will have to have technology partners that are investing much, much more heavily in breakthrough innovations that deliver real differentiating value. The iPhone was merely the first in a wave of devices that are providing incremental improvements in performance in what was already a marketplace headed towards commoditization of mobile technology platforms. In the meantime, a floundering world economy is pushing more people towards cost-effective content technology solutions. Dear publishers, say goodbye to your love affair with the iPhone - before it's too late. Learn to love netbooks, a galaxy of smart phones and any other device that can get you people who whant your content on the line, and then prove your value from there.
The New York Times, The Wall Street Journal's Walt Mossberger and other prominent lights are weighing in on the launch of an application on Apple's iPhone that enables reading e-books compatible with Amazon's Kindle mobile device, with many analysts cooing about this as a huge event. There's no doubt that Kindle e-books have everthing to gain from leapfrogging out of a pond of half a million Kindle devices into a lake of thirteen million-plus iPhone owners (just in time for "Content Nation," which is now available on Kindle). Better yet, since the Kindle application does not tie down Amazon to any exclusive marketing deal with Apple, the doorway is open for Amazon to march onto Nokias, Blackberries and phones equipped with Google's Andriod application. As people owning Kindle-compatible book titles move from one mobile device to another, the Kindle Store on the Web will make it possible for them to use their e-book on any equipped device, "closing" their book on one gizmo and being able to "open" it on another one at the same spot. Think of it as an iTunes for books that's not tied down to any particular player. Not much to complain about here at first glance: it's the creation of the first true mass market platform for electronic books from major publishers. Kudos to Amazon and to the publishers that are playing with them to advance Kindle sales.
But let's look past the first glance and get to what this really means for book publishing. The good news is that Kindle books can now reach the relatively affluent and educated audience that has enough money to buy iPhones - many of whom may have the money for both an iPhone and a Kindle reader but not necessarily the desire to lug around two book-reading gizmos all of the time. Now e-books get to take a major step towards the "nearly everywhere" profile that Web content has on both Internet and mobile-based devices. The bad news, though, is that the book industry, already beholden to Amazon almost as much as music companies are beholden to iTunes for electronic sales, appears to be repeating the mistakes that are likely to prevent their revenues from growing quickly enough to sustain their business models. Put simply, book publishers have turned over the keys to their electronic printing presses to Jeff Bezos and said, "Knock yourself out, you know what to do more than we do." E-books will progress only as quickly as it suits Amazon - and on only those platforms that suit them.
A benevolent monopoly of this kind for electronic book distribution might be beneficial for publishers if it had global reach, but those 13 million iPhones represent only about half of the greater New York City metropolitan market. A good chunk, to be sure, but a far step away from, say, the 1.6 billion people using the Web or the billions of mobile phone users around the world. And even within that universe of 13 million iPhone users, a fair amount of those people fall into the category of folks who Steve Jobs believed would never really read much of anything. In the meantime the audience for books continues to get grayer and grayer. To put it another way, I don't see all that many people in book stores toting around iPhones. The Kindle packaging for iPhone solves a key licensing and distribution problem for book publishers that's likely to improve their profits in the short term, but it does not come even close to building marketable exposure for books on a scale that is likely to draw attention away from other forms of electronic content.
This brings us back to those music publishing companies which had such high hopes for the DRM-enabled iPhone agreements that they signed only a few years ago. This "magic bullet" seemed great at the time - and it certainly has been great for Apple's profits. But it did little to slow the rapid erosion of profits from music sales at most of the major music publishers. Put simply, the insistence on having packaging that seemed to protect their existing business models only delayed the point at which music publishers had to face that their models were going to miss the lion's share of revenues that could be generated online from music. What they saw in the Web was the world's largest music store. What they should have seen was the world's largest theatre and radio station rolled into one.
Book publishers in general don't suffer from the electronic piracy problems that plagued the music industry, so no doubt it seemed like a logical step to move into rights-protected distribution that enabled book publishers to manage industry metrics in much the same way that they have managed metics on print book sales. But in focusing on protecting their existing business model, like the music industry the book industry is largely delaying the more troubling question of how they can make the most money possible from the global audience of billions who engage the Web and mobile devices daily.
Kindle book packaging is useful for traditional reading, but how, for example, can it facilitate even the most basic collaborative use of books? Basic uses of books such as discusions via book clubs, classroom discussion, fair-use excerpting, note-sharing and other value-add services are nowhere near the surface of the stack of potential Kindle developments. Beyond replicating basic uses of print books there is little if any thought given as to how multimedia can be integrated into Kindle books effectively. For example, the online version of the "Content Nation" book has about a dozen video clips embedded in the text. Even still photos of most of these clips did not make their way into the print edition because of traditional print publishing standards. Yet these same clips would be great to have in an electronic, Web-enabled version of the book.
While it's possible that an aggressive roll-out of Kindle readers on most major mobile devices could help to stave off some of the worst problems that are looming for book publishers, the truth is that they are years behind in developing the real opportunities for books in electronic format. Book publishers are facing the same revenue gaps that confront music, newspaper and magazine publishers that waited far too long to build robust online revenue models that could sustain them as their traditional revenue sources moved into legacy status. In the meantime the Google e-books initiative that builds on their book-scanning initiative promises to put millions of book titles on electronic devices that are no longer controlled by book publishers. In other words, Kindle may just turn out to be the "eight track tape" solution for books - a technology that seemed to be extremely popular at first with the public for listening to tape-recorded music but that turned out to be a dead end for early adapters when more flexible and higher-quality technologies came along.
Every time publishers resist the fundamental dynamics of the Web, they usually come to regret it. Traditional book publishers still have an opportunity to redefine their future independent of the Kindle, but it's more likely that the explosion of alternative online book publishing services will begin to overtake Kindle-based books over the next few years as sources of content that are more flexible, more shareable and more attuned to the needs of new generations of readers to whom the term "cracking the books" is largely a metaphor. Traditional books and book publishers will live on, and Kindle will help them to live on for many years to come. But in the meantime a new book industry is being defined that will be the true future of books - with or without Kindles.
The world tripped over one another to ooh and aah at the latest version of Apple's iPhone, a somewhat sleeker model with 3G wireless Internet access and a software development toolkit that enables applications to be built for the iPhone that can take advantage of all of it's "new hotness" interface features. Prominent among the new applications at launch is Microsoft Exchange, a shot across the bow to enterprise users equipped with Blackberries and feeling that, well, they're just not as hip as the next sales and busdev guy. Toss in promised interfaces to home appliances and Microsoft's home strategy takes a bit of hit as well.
Also prominent is the new USD 200 domestic price tag, presumably subsidized by AT&T in much the same manner as other mobile phones to promote mass sales and mass usage of AT&T services. Now people wanting to keep up with the tech-leader Joneses down the street can pile on and join the fun. Put these factors all together and you have a highly competitive platform (albeit one that still lacks a keyboard) that makes consumer and enterprise content accessible in mobile markets as never before. That's the good rah-rah news, in any event.
The not-so-good news is that the exclusive deal with AT&T puts pressure on other mobile carriers to come up with their own deals that can compete with AT&T at a price point that's much closer to attainable luxury for most folks. Supporting a plethora of platforms has hindered the ability of applications developers to create software that scales to markets and has drageed down enabling full Web access on 3G networks, hobbling the ability of U.S. carriers to prepare for this inevitable moment of challenge by Apple and AT&T. Instead of focusing intently on content, most mobile carriers have focused too much on the tech of the platform, instead of viewing mobile devices as just another blank screen that can be painted with content from any application.
However, these aggressive moves by Apple and AT&T may be more a preparation for emerging competition. Microsoft or Google or both will benefit from other mobile carriers and device makers trying to create more cost-effective alternatives to the iPhone now that the USD 200 price barrier has been breached. Microsoft is the more likely beneficiary in the short term, but with profitability becoming an issue, especially with the cost of 3G Web services pushing margins down, Google's Android cross-platform operating system is likely to emerge as the platform that allows more profits at lower price points for both mobile device manufacturers and carrier networks. As noted in TheStreet.com recently a preview version of an iPhone-like phone equipped with Andriod offered touch-screen operation, 3G Web access, software development interfaces for applications and many other features which are likely to come in close to iPhone functionality without the content and software licensing baggage that comes along from Apple.
There's no doubt that the iPhone will continue to be the Lexus of Web-enabled phones for a while, but there's also no doubt that the world has been waiting for the Toyota version to show up for a while. Especially in burgeoning markets like China and India, where Apple's licensing strategy is likely to be less appealing, Android-equipped phones that enable integrated Web access and language-independent hardware are more likely to be the global winners in mobile communications. So while the hoopla around the iPhone 3G launch looks hot for today, remember that in the fall we're likely to be talking about a different perspective on its future.
It seems kind of silly beyond a certain point to call Amazon's launching of an MP3 store news, but with about 2 million audio tracks available for 99 cents or less and reduced-price album downloads it's at least significant that major content vendors are beginning to offer what consumers have been creating themselves for years. The delay in both music publishers and content distributors accepting that cross-platform, DRM-free music distribution via the common MP3 file format was already the de facto standard of the music industry from a consumer's perspective has to be one of the most monumental strategic blunders in publishing history. After years of struggling against MP3s with lawsuits, DRM schemes and other ineffective techniques to persuade the marketplace otherwise it took Apple's proprietary lock on music distribution via its own DRM scheme to awaken at least some music publishers to the need to let consumers be customers and not just licensees.
The real enemy of the music industry is not music copying but consumer attention. With social media, games, mobile devices and online video capturing more of the music industry market's attention span it no longer pays to limit the ability of consumers to move their basic content to where it's valued the most. MP3s enable music and other audio to move quickly and efficiently into to social contexts that are most likely to create consumer enthusiasm for a product quickly when it first gains attention and popularity and enables "long tail" content to get the exposure that it needs to allow consumers to get enthusiasm that will lead to purchases. Amazon's recommendation system is ideal for such purchasers, enabling content that would otherwise be obscure to become immediately relevant to a browser turned on to an artist that they had not known previously. From that point on out it's up to music producers to become more intelligent about how they merchandise the talents and following of an artist to maximize revenues, but singles sales are a great starting point.
With Microsoft and others investigating audio watermarking capabilities it won't be too long before the ability to distribute audio content without DRM and with appropriate audit trails for copyright abuse becomes the industry standard across the board - a factor which should enable music companies to begin to take full advantage of the Web's radio-like ability to broadcast enthusiasm for artists effectively. As to whether the leaders in music publishing will remain the ususal suspects remains to be seen, but by adopting MP3s as a default distribution medium for radio-quality audio they stand a chance on reinventing themselves in time for the next generation of music lovers.
CNET News reports in the past tense on the net neutrality movement, the effort by a coalition of online publishers and technology companies to keep U.S. telecommunications companies from charging different rates for Internet access based on arrangements with content partners. CNET notes that in the wake of last year's successes in stalling changes to current policies and new focus on carving up the 700 MHz radio spectrum for wireless broadband access the movement has become fragmented. The original "It's Our Net" group has reformed as the Open Internet Coalition, trimmed down from 148 to 74 members, with major technology and portal players such as Microsoft and Yahoo out of the picture. Notably Apple was never a part of this coalition, a fact underscored by its interests in acting as a "toll gate" of its own sort as it uses its iPod and iPhone proprietary platforms to pressure media companies into price cuts for premium content.
All of this could be relatively moot except that while legislators and companies may be focused on other things the communications companies who have so much at stake have certainly not forgotten their original goals in opposing net neutrality. In a parting gift to communications companies outgoing U.S. Attorney General Alberto Gonzales filed an ex parte filing (PDF) with the U.S. Federal Communications Commission suggesting that net neutrality regulations were not necessary to ensure open competition. The absence of Yahoo and Microsoft from the coalition and their advancing plans to develop premium content services may also imply that they see themselves becoming more like Apple and being able to dictate content pricing and licensing terms to a broader array of content providers through alliances with communications companies.
In the bigger picture, then, the fight for neutral access to publications over public infrastructure is far from over and in fact widening with the 700 MHz spectrum also in play. In all of this traditional publishers have been largely in the background, with no apparent major role in the lobbying efforts. This seems to be wishful thinking at best, akin to the efforts of publishers to ignore the Web in its early days, but now only worse since such a large percentage of their growth depends on it. The New York Times reported dwindling revenues from their ever-smaller print editions yet a 28 percent increase in online revenues, to cite one example of robust online revenue growth. If there were a chance that newsprint or mailing costs would go up publishers would be all over it: why do they ignore potential regulations that may have a huge impact on the profit margins of their most promising new source of revenues?
In the meantime the opting out of Microsoft and Yahoo from the net neutrality movement and the non-participation of Apple points towards what many publishers hope: that a handful of major portals can help along with communications providers to re-create the cable television model and create a brand advertising Nirvana where consumers behave as they ought to and pay for premium access. Yet with user-generated content and search engines providing more context for content than ever before it's not clear why consumers will be persuaded easily to opt for being charged premium prices for access to specific sources when flat-rate access has been such a successful way for them to determine for themselves what's worthwhile content.
In largely ignoring the net neutrality debate publishers' hopes for controlled access are more likely to fall prey to communications companies and portals who will take higher percentages of their revenues from their online content through access channels that are not optimized for audience growth and that will give them less autonomy on pricing. The open Web may be a bit more of a wild and wooly place for some publishers but for those that have embraced it most efficiently it has been the most promising revenue and profit driver in an era where many channels are becoming far leaner and meaner. It's time for publishers to think about what's really in their best long-term interests and to begin to embrace net neutrality as an essential component for both audience and margin growth.
Sometimes it seems as if Apple can't win when it comes to playing the media game. After having been roundly criticized by some for having too much control over pricing via its iPod-compatible DRM content packaging and moving towards a more open model for content access Apple let the NBC television network take a walk when it wanted both higher pricing and tighter DRM controls. Ars Technica reports that NBC has opted to go instead with Amazon's Unbox video ecommerce service to package its content for online, home entertainment and mobile distribution. This will allow NBC to sell entire season series of their television shows at hefty prices - about 30 percent off of a per-episode purchase - and in doing to retain some sense of traditional syndication revenues as they move to online distribtion of video content.
It's the syndication picture more than anything else that's at issue in this move, with NBC doubtless having concern that an easily pierced DRM scheme would enable audiences to download episodes that would enable them to bypass both cable networks and affiliates to build their own libraries of shows. The fact that Amazon Unbox also enables access to their video content via TiVos also underscores NBC's desire to solve syndication revenues once and for all.
But in opting for the Unbox approach NBC has doomed their ability to reach growing mobile audiences with the latest and most appealing devices available. Unbox is locked into Microsoft's largely orphaned "Plays for Sure" DRM technology, which supports a dwindling pool of mostly also-ran mobile devices. Given Unbox's ability to support only two licensable devices per purchaser the chaotic environment for delivery platforms is not likely to enable audiences to ensure a smooth transition for their libraries from one platform to another - or to be able to switch to whatever device the rest of the family is not using at the moment to catch their favorite reruns.
As with other types of premium content Amazon is very happy to work with content producers who have long-established business models that they don't want to let go of in the rush for online profits. Video is a good target for these types of services as the delivery mechanism enables on-demand fulfillment with few in-between hassles with one of the most popular and well-managed online ecommerce services. And although Plays for Sure wound up being a good idea that few content and technology producers decided to support at least Amazon has a somewhat open mind to making cross-platform content access a reality. As Microsoft moves to a new generation of its DRM capabilities it could be that this deal is as much about moving to Microsoft as it is about moving to Unbox.
But while Amazon benefits by appealing to established content marketers and becoming a potential cross-platform haven for content producers the timidity of publishers and producers to move to new models will likely hamper Amazon's efforts to become a leader in new premium business models in the long run. The status quo on syndication revenues seems to be just fine for most traditional video content producers just now as they try to adjust to a rapidly shifting revenue mix, but hiding out in the Unbox is likely to create about as many problems as if they had tried to move to the platforms that consumers desire most. Other video producers more willing to work with those platforms will be likely to open up broader audiences for content syndication over time and have more access to market demand on the platforms that consumers want most.
At the end of the day this deal is a battle of the brands, with traditional content syndicators having a hard time adapting their brands to platform providers eager to create their own locks over premium content distribution. What's missing from this mix is a willingness from content producers to make some compromises that will enable them to adapt truly platform-agnostic content packaging that will allow them to meet today's revenue goals as well as tomorrow's as consumers shift rapidly from one type of technology to another. If content producers don't manage this well the value of their content in syndication is bound to diminish rapidly. For now consider NBC's move a noisy vote for here-and-now revenues - with the future of syndication left to other executives after the current batch has parachuted elsewhere.
You have your choice of horror stories to choose from as AT+T sends out its first service bills for Web access via Apple's iPhones. USA Today covers an active text messager who had her 300-page bill delivered in a box (YouTube video below) while a design consultant who got socked with roaming charges for Web access had to cough up USD 5,000 to settle his everyday use of the mobile web. The culprit in both instances is message units, with AT&T's by-the-byte metering making single-page Web downloads as much as USD 20 per page or more in some instances. With rates like this one can only wonder what mobile Web carriers would have in mind if they decided to start adding on fees for high-traffic Web sites as some of them are proposing for general Web access.
While AT&T dismisses these as extreme examples of billing charges the fact of the matter is that it's indicative of how little phone carriers have come in accepting what creates value in content access today. We have had more than a decade of flat-rate Internet access services and increasing use of free or flat-rate telephony to accelerate the growth of electronic publishing but still the major carriers want to play by the old rules - to the long-term detriment of publishers. The most likely consequence of this early application of inflexible metered billing is to heighten the appeal of proposals before the U.S. Federal Communications Commission to make new frequencies available for broadband wireless access more open to competition and transparent access to content and supporting services.
The same threats to revenues faced by publishers as telecommunications companies try to impose tariffs on land-line Internet access are already in place in a mobile marketplace that will represent an increasingly significant portion of publisher revenues - if we can get beyond USD 20-per-page Web downloads. AT&T's clumsy handling of billing may back-handedly do publishers a great favor by letting them see both the promise of a device like the iPhone and the inordinate restrictions for its use to access the Web. Publishers know already that print revenues will no longer fill the bottom line as before: it's time for publishers to push aggressively in the U.S. Congress for a more open, flat-rate approach to mobile Web access that will help them to build online revenues as quickly as possible and to promote more accessible and profitable mobile services that will help them to do that more effectively.
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