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.
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.
I had an interesting exchange on Twitter today with Rafat Ali, founder of paidContent.org and a person who I respect and admire greatly for his insights into the content industry (not to mention for having blown the socks off of many a trade pub over the past several years). Rafat had pointed out in a post on paidContent that The New York Times had started to use barrier ads on their iPhone applications, something that he found to be very intrusive. I couldn't agree more on this point; most media companies view mobile applications as little more than Compuserve-like kiosks from which they can serve slightly jazzed-up versions of their Web page content. With that in mind, it shouldn't surprise us that the NYT or any other media company will be intent on carrying over its ad strategies to these walled gardens.
As a follow-up, though, Rafat pointed me towards a good post on pC's mocoNews site that outlined the case for Apple's approach to mobile apps versus Google's more Web-centric approach. Tricia Duryee points out in this article that Apple had considered emphasizing the browser as the focus of delivering content on the iPhone, but then shifted to its App Store as a preferred method for getting people excited about the potential of mobile devices for delivering useful content and services. As she notes:
[T]he biggest problem facing Google will not be convincing developers, but consumers. Apple’s steroid-enhanced marketing machine has drilled into the public thinking that “there’s an app for that,” not that there’s a URL. Clearly after logging 1.5 billion downloads within a year, Apple is on to something and vigorously training the mobile users of tomorrow.
Sorry, Tricia, but I have to smile at that one. While Apple rolled out a very savvy strategy for the iPhone given its market position as a high-end product oriented towards proprietary intellectual property, I think that it's worth noting that a lot more than 1.5 billion Web pages, many of them with embedded applications, are downloaded every day on the Web. The iPhone's app strategy has certainly made mobile technology platforms far more usable and understandable for its early adopters, much as early premium online information services such as Compuserve and the original AOL made the still-crude world of networked information delivery more palatable. Similarly, early PCs benefited from a galaxy of packaged software that used to line the shelves at local stores, providing "user-friendly interfaces" that made still-crude PC technology more palatable.
But today the walled-garden services of Compuserve and AOL are distant memories, and packaged software for PCs is almost non-existent in most local stores, except for a few have-to-buy items like Microsoft Office software (about the most expensive items to be found on any of the shelves at our local Staples office supply store), accounting systems and tax preparation tools. Why? Because for the most part these products and services were attached to more mature technologies that no longer required packaged IP to help people get to the good stuff. In the instance of software, many of the functions that used to require packaged software are now available via cloud computing services, including tax preparation, bookkeeping, spreadsheets and word processing. In the instance of services like Compuserve, it also became a matter of scale: 65,000 or so iPhone apps sounds like a lot of services, but good luck finding any of them once you begin to scale up to more broad markets. Walled gardens are great when you have a cozy crowd, but most people's interests won't be content to stay in them very long when a good search engine can help them to find the next movable feast easily.
This isn't to say that there is not a valuable place for mobile applications in the mix of marketing strategies for publishers and technology companies. Good functionality with good content being fed into it is a winning combination on any platform. But if we were to speed up the clock and have this discussion a year from now, I don't think that people will be waxing as sanguine about the App Store as they are today - and not just because of Google's Android mobile platform hitting the scene. Real applications, as opposed to the lightly gussied-up browser substitutes that most publishers toss up as mobile applications, take time and thoughtfulness to develop and to roll out carefully.
Yes, a Safari browser is a somewhat different platform than a Chrome browser, and so on, but it's not very realistic to compare the relatively minor differences in how these packages handle largely open Web standards such as HTML compared to the larger, glaring differences between iPhones, Palms, Blackberries and Android phones. Mobile applications will be useful, but there is no practical way to expect publishers to deal cost-effectively with this broad array of approaches simply to get their content to and fro. No amount of seductive ads by Apple or any other platform manufacturer is going to be able to conceal this basic fact, it would seem.
The truth is, of course, that many Web pages are in fact driven by very sophisticated applications already, a fact that will be only accelerated by the emergence of HTML 5, which does more to merge programming functionality into the Web environment than previous versions of the basic code for Web pages. The architecture of today's Google Chrome browser hints at where this is really taking us. When you have more than one page open in a Chrome browser, each tabbed page is its own separate program process on your computer. If one tabbed page has a problem, it can stop functioning without affecting the other opened pages. In other words, Chrome as a browser is actually a multi-process program execution environment.
To put it another way, it really doesn't matter whether you're running a Web page or an application, as long as you can get to it easily in a standardized access environment. Why bother with a page of apps and a separate set of Web page bookmarks when you can have one unified environment where you can access whatever is important to you? Once you have that kind of environment, people will want to have billions of choices filtered by a good search engine or recommendation service rather than a few thousand apps that have to be "mother-may-I"ed through Apple before they can be accessed.
The iPhone App Store has been a very clever and useful marketing mechanism that has allowed Apple to make its platform more palatable and useful in a highly controlled way that's appropriate for any emerging technology. Let's face it, the mobile Web is still a work in progress, making the more sophisticated displays of some mobile apps far more appealing than dealing with the almost-good mobile Web functionality that's available on most platforms today. But given the already mature nature of the Web that's awaiting better browsing via Chrome and other platforms that will not intentionally cripple Web functionality to make more proprietary approaches more palatable to consumers, it's not likely that this artificial Compuserve-like era of iPhone applications can be expected to dominate the mobile content landscape very long.
iPhone apps will endure and even prosper for quite some time, to be sure, just as those early online services such as Compuserve managed to endure for several years after the emergence of the Web. But it won't take long for most content consumers to realize the difference between a transitional technology designed to bolster the margins of publishers and a more satisfying technology that connects them more effectively with the world at large. As long as companies like Apple can create new frontiers of technology that entertain and delight high-end mobile content users, we'll be hearing, "Yeah, there's an app for that" for quite some time. But if history is any guide to the future, it's not likely that any one company will be able to keep that phrase rolling off of their clients' lips when more powerful substitutes are available that intrigue more people more easily. Yeah, there's a Web for that, all right.
I've had the privilege to have moderated many great SIIA panels over the years, but the 24 June Brown Bag Lunch mid-day event at the McGraw Hill building in New York City (online video available) certainly ranks among the most important topics that I've had the opportunity to moderate with some excellent panelists who will stimulate your thinking on how best to monetize content on today's hot distribution platforms. Please register soon, the last Brown Bag Lunch event was a sellout both in-person and online. If you have suggestions for questions that the panel should address, please add them as comments to this post. A panel summary and a list of our truly distinguished panelists follows. See you there!
Google, Kindle, iPhone: How to Leverage Hot Content Delivery Platforms for Profits
Today's publishers are finding both great opportunities and great challenges in using leading-edge technology platforms to deliver revenues for their premium content sources. iPhones, Kindle e-book readers and Google Books and search services are being adopted by both consumers and enterprises to access premium content at a pace that challenges publishers to come up with effective pricing and marketing strategies. Key questions that arise include:
• What are going to be the most successful business models on these platforms for news and information, books and magazines - and what are the up-and-coming platforms that will challenge publishers to keep those business models working? • In locking down deals and settlements for content distribution on these platforms, who are the winners and losers? • How does the availability of premium content on these platforms change how publishers manage the value of their brands? • What will be the emerging role of the open Web in an environment that is seeing more proprietary content distribution technologies emerging?
A panel of leaders from the worlds of media, enterprise and academic publishing and intellectual property management will explore how news, books and other intellectual property from publishers can best take advantage of emerging technologies to generate revenues from premium content in mobile and online markets and on the open Web - and how these platforms are likely to affect how content creators view the role of publishers in delivering them value for their efforts.
Panelists: Alisa Bowen, Senior Vice President, Head of Consumer Publishing, Thomson Reuters Gordon Crovitz, Co-Founder, Journalism Online Chris Kenneally, Director of Author Relations, Copyright Clearance Center
As CNET reports along with others the launch of voice over Internet Protocol (VoIP) phone services via an iPhone application from Skype the world does not seem to be shifting on its axis, yet it's a significant step towards a new era in mobile communications. Already the introduction of Web capabilities on Apple's iPhone became the cornerstone of the appliance's widespread appeal among mobile content enthusiasts, fueled by the iPhone's Web browser that works pretty much as any Web browser should and by the iPhone AppStore's content applications that make use of Web communications. Now that VoIP is available on the iPhone - presumably with Apple's tacit blessing - one wonders who is eating whose lunch in the battle for the future of mobile services.
Certainly in the U.S. you can give the opening round of mobile battles to AT&T, which inked an exclusive deal with Apple for the iPhone's launch similar to exclusives that Apple negotiated elsewhere in the world. But as part of that deal Apple got AT&T and other global carriers to subsidize a huge chunk of the iPhone's retail price, enabling it to spread like wildfire amongst the "gotta have" gadget crowd. Now that VoIP services are beginning to make their debut on the iPhone - followed soon by emerging voice services by Google via their Web sites and, quite soon, via their Android mobile platform - the question becomes, have the mobile phone carriers been subsidizing the emergence of cross-network voice communications that will break their voice and content pricing strategies?
If this is the case, then I can't say that I can offer them much sympathy. AT&T happens to be the carrier for my local telephone service, which still has me guessing virtually every time whether a call to the towns next to us will be a local or "long distance" call. If I didn't need a copper-wire circuit for my home's burglar alarm I'd be done with them altogether. While VoIP is hardly a perfect voice medium, for eighty percent of our communications is just fine. Moreover, for many younger people spending more time texting than speaking on their phones it may be more than enough most of the time. In the meantime we're stuck with voice and data plans on most mobile carriers based on the premise that voice is a doggone hard service to provide. Well, that's good for the tech players such as Apple who want someone to subsidize their push into mobile services, but it is at the expense of a broader iPhone-less marketplace that is in effect subsidizing the upper end of mobile content comsumption.
This is not a scenario that is likely to change gracefully for the communications carriers. Web and VoIP-based services are going to start dominating mobile communications far more quickly than many imagine, especially as Google Android's cross-platform mobile operating system offers struggling communications companies some alternative pricing and marketing strategies. In the U.S., for example, Sprint is moving to lease out some of its underutilized mobile bandwidth to device and services vendors other than smart phones. How long is it before a number three or number four mobile carrier begins to smell the coffee and begin to offer pricing that reserves traditional mobile voice communications as a "just in case" or high-quality backup to a predominantly Web-based communications plan? Not long, by my estimate.
Content companies should bear in mind this more-rapid-than-expected shift towards Web-biased mobile carrier pricing when contemplating their own mobile pricing and marketing strategies. Already with the iPhone AppStore publishers and other content suppliers see the outlines of a premium content strategy that emphasizes functionality as a key part of their services as much as information. But as the Web and VoIP push in at an accelerated rate to drive more competitive carrier pricing, it's likely that revenues from these applications are going to be the icing on a much bigger cake of content services for the greater marketplace that will resembe more the Web as it is today than any return to a Compuserve-like "walled garden" era of application-enabled services.
The iPhone AppStore is a model for the emerging electronic newsstand era, but the content that will power the most successful of those applications will not come from a particular branded content producer oftentimes. The subsidization of iPhones by the carriers makes the prospect of endless premium content revenues enticing, yet as those subsidies fall by the wayside and the broader marketplace turns to mobile Web content it's doubtful that the novelty of mobile content applications alone will be enough to power publishers' mobile revenues. In short, the mobile Web has arrived and is going to drive publishers to have to confront the same issues of commoditization and increased competition that it faces today via desktop and laptop content consumption. Most publishers may look at Skype's move as little more than a bird flying by, but for those that know it's the canary in the coal mine of old-era mobile communications content pricing.
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.
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.
CCC's new licensing deal for academics, a take on Nature's blog pushing for more innovation in scientific publishing and what really happened when the iPhone debuted.
Kudos to David Pogue at The New York Times for a great review of the new iPhone from Apple. David's general view is that the appliance lives up to its hype, but he points out a number of key shortcomings, such as inferior text input (keys appears on the flat glass display), downright awkward phone call initiation, the need to ship it back to Apple after a year or so to get the battery replaced (a la iPod) and inferior network performance from AT&T. But while the iPhone may turn out to be the worst of both worlds for people already attuned to sophisticated mobile devices such as Blackberries (no coincidence that the splash ad for this article was for their new sleek model) the key to the iPhone's appeal centers around its ability to be a content-serving device like no other. GPS-keyed maps make the device a traveler's godsend for navigating unfamiliar territories and coming up with nearby services. The intuitive interface enables a user to shift to Web content seamlessly in a full-featured browser that comes with a very affordable (USD 20/month) internet access plan that may yet knock the legs out from underneath many an online content deal.
Ah, but with limitations there, as well. Flash and Java are not enabled in the browser, so the tons 0f online video and animated content available online is out of bounds. Of course there's video and audio from the iTunes store, which is most probably the point: after years of platform ju-jitsu from Microsoft to frustrate publishers it's Apple's turn to make it that much harder to come up with a platform-independent distribution strategy. But common file formats such as PDF, Word and Excel are accessible via iPhone so it will at least be useful for serious reading to some degree. And unless you're in an AT&T wireless hotspot broadband performance isn't going to be an option in most instances.
I think of the iPhone as a very portable Microsoft Surface - an appliance that is ahead of many technologies' ability to sustain a very compelling product vision but that nevertheless gets people jazzed about the possibilities of a new way of looking at computing. Unlike Microsoft's table-bound Surface, though, the iPhone is perfect for a younger, mobile generation not interested in plunking down thousands of dollars for a major piece of...furniture? But iPhone's most important impact on the content marketplace is likely to be its ability to create demand for broadband wireless on a mass scale, demand that's likely to fire up competition from other wireless carriers to deliver both more coverage and more effectively enabled interfaces to the Web. AT&T wins this round for Web access, but what will happen when Verizon enables YouTube access? Consider this iPhone debut the launch of the real mobile Web - with some frenetic developments yet to come.
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