Guest Column : The Kindle—Igniting the Book Business
Amazon's Kindle has raised issues for book publishers, such as appropriate pricing options for e-books.
June 2009 By Peter Olson And Bharat N. AnandBook businesspeople are about to make the same mistake that has devastated the music and newspaper industries: worrying about whether a new digital format will cannibalize their traditional business rather than focusing on how to make the new format more competitive with other digital media.
Recently, there has been a flurry of alarmist articles about Amazon’s Kindle 2, mainly addressing the following questions:
1. How does the current digital reading experience compare with the printed book?
2. How should e-books be priced in relation to p-books?
3. Will the print book industry disappear?
The real issues are:
1. How can we enhance the reader’s overall experience—not just reading, but browsing, purchasing and library-building, and not just through print or digital media, but through a combination of both?
2. How can we create pricing options that will increase demand for books and offset the decline in book readership?
3. How can we build a new business model that is attractive to authors and sufficiently profitable for publishers and online retailers?
Asking baby boomers whether they will forego their affinity for printed books is irrelevant. The key to the future is whether e-books will be interesting enough to Generations X, Y and the millennials to capture a significant portion of their entertainment spending.
Other companies will enter into competition with Amazon. Sony and Apple almost certainly will introduce enhanced e-readers, and in all likelihood, new entrants will be tempted to invest in the format of the future. The ensuing competition will result in improved e-book readability and drive down prices for the devices. What will this mean for the book business?
First, online retailing is poised for a second wave of innovation. The innovation of the Kindle was not to improve e-reading—many earlier e-readers offered a very similar reading experience—but to dramatically alter the purchasing experience through its wireless capability. Similar innovations are destined to occur in browsing and marketing. Until now, book covers designed with “dust” jackets to sit on shelves for prolonged periods of time have been the basis for the online positioning of books; obviously publishers could do better by designing online-oriented cover versions that would not only be more eye-catching and dynamic, but potentially even interactive.
Similarly, the digital version of a book could be a portal to additional information about the author or content—imagine learning, right after reading “Lolita,” about how Vladimir Nabokov came to write the novel, or getting a visual demonstration of Robert Millikan’s oil-drop experiment right after reading the chapter on electron charges.
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e-Books are not a revolution in reading, but an evolution. Those publishers who recognize an opportunity and evolve their business to incorporate e-books will still be in business down the line no matter what mix of e vs p exists in the future. I don't see print books disappearing, any more than I see 5 year olds reading kiddie books on a Kindle. Those buggy whip manufacturers who switched to fishing poles are probably still in business, even though there is still a market for buggy whips, albeit a very small one. In the long run the decision on whether e-books will be more or less successful is up to the readers, not the publishers.
As a publisher I find your financial model flawed. I don't know of any publisher that gets a 10 to 1 markup from manufacturing costs.
This article has been featured in a lengthy look at e-books on The Know Something Project at http://www.knowsomethingproject.com. Thanks so much for this perspective regarding the potential impact of the Kindle on the publishing industry.
I've been offering my novel, 'Mankind's Worst Fear' on Kindle for several weeks now, but sales didn't bump up until I dropped the price to $.99 and promoted it on Kindle threads, as recommended by those active on the threads.
Just like in p-books, how many readers are willing to pay a high or higher price for a novel by an unknown author as opposed to an established author?
And since the primary goal of a new author is to build a following to promote future sales, pricing incentives are a relevant tool.
Kindle readers rely on reader reviews as well, making it even tougher for a new author to get recognized until he's established himself in a variety of online venues.
With newspapers, a third of their buyers still prefer paper. While I've checked out Kindle and another reader, I still prefer a hard back novel. Can't get past the shopping experience of browsing a book store or dropping in at a used book fair. You can't hold an electronic book, feel its texture, experience the thrill of fingers grazing across the upright bindings as you seek the special aura exuded by a book that is looking for you to take it home.
Hi, Zoe -
The article ignores the secondary market.
As I said, if there is no secondary market for ebooks, then the price for ebooks *has* to drop more.
If sales are linked to a device, then the resale would require re-linking (new authorization) which means also de-linking (de-authorization). I have to go through re-authorization with Adobe PDF ebooks when I get a new computer; the books only work on one computer. Apple iTunes had device authorization when it launched; recall that now record companies are selling songs without DRM.
The kind of technology that facilitates a secondary market is also necessary if libraries are to be a player in society. It's already possible for libraries (and private companies like O'Reilly and its Safari service) to "loan" ebooks that are web-based. Why not those that are device-based?
So there is DRM and authorization technology in the ebook realm today that could be modified to allow for resale or lending.
I don't know why the Adobe Digital Editions software works with Sony ebooks and not with Amazon's Kindle.
The reason you can't resell ebooks is because you aren't actually getting rid of your copy. It would be a copy you sold, and that's worse than piracy as it already stands. (i.e. it would be 'actual' piracy, making profit off another's work.)
At least when a reader sells a physical copy used to someone else, they don't get to keep that copy.
You can't resell used digital content for this reason.
Publishers also need to rethink DRM. Just as there is a lively market in used printed books, there _could_ be a lively market in used ebooks. Without this market, I believe the price for an ebook will need to fall much further.
wow. a surprisingly insightful analysis from
a man who used to be in the dinosaur head.
considering how far you went, it is perhaps
understandable you couldn't go all the way.
you're trying to find a way for publishers to
continue to exist. except that they will not.
> Lost in the doomsdayer debate
> about publishers’ future is that
> their unique role as intermediaries
> has always been about discovering
> and promoting talent and content
the part about "discovering" talent is
outdated, because there's no reason
that _everyone_ cannot be an author
-- write what they want and put it out.
(yes, after having had someone edit it.)
there just are no gatekeepers any longer.
and the part about "promoting" talent
is outdated, too, and you yourself have
told us why. specifically, you mention:
> recommendations through
> enhanced regression analysis
it's usually called "collaborative filtering",
and it will be the magnet that extracts
the needles from the content haystack.
the personal needles for each one of us,
customized to our individual preferences.
now -- given that system as the backdrop --
"promotion" will become fully unnecessary.
indeed, anyone engaging in "marketing"
will have the stink of death upon them,
since if you have to advertise something,
it must mean that the system couldn't
find anyone who would l
The article also implies that physical books will pretty much disappear. While music may be shifting to largely digital, there is plenty of evidence that enhanced physical products have a committed audience. Book publishers who can produce 'enhanced' physical products will continue to prosper. In the UK Penguin books have released their first titles in the original covers. How a bout a limited run of Grove Press original editions? Or JM Barrie first edition reproduction - especially if it tied in to a new production of Peter Pan?
And what about other shifting and disappearing costs in a digital world. The retailer also does not have to pre-purchase and stock titles in warehouses or on bookshelves.... Why should their margin remain static?
Brilliant? Yikes, this is terrible. Made up numbers and "anaylsis," more dreck from pretend experts lining up to swing at the straw man.
Most publishers are ahead of these recommendations, but the actual cost structure of producing ebooks looks nothing like the imaginary (albeit hypothetical) model cited above.
Printing costs (which are a very small percentage of a book's total cost) disappear, but bandwidth costs dont, and neither do personnel costs, either for publishers or online retailers. Or do you think Amazon and Google don't employ real people? The very real (and cool) interactive innovations that ebooks allow create marketing and distribution costs of their own, and the author's hypothesis that "half" of publishing costs will disappear is, well...nebulous.
As a freelance book designer and layout artist, I'm not as optimistic that we shouldn't worry about e-books cutting into the print book market.
I'm also curious about what portion of the $5 wholesale cost is taken up by design & production costs.
Brilliant article. Ebooks are the wave of the future and if the traditional publishers don't get on board as you suggest, then they will go the way of the dinosaur too.
WC