Year: 2009

Most university presses are realizing a decline in revenue in this current economic climate. But rather than whine about it, some are seeing opportunity. Of those, the press at Massachusetts Institute of Technology (MIT) is taking opportunity to the next level: action. The answer? eBooks.

In today’s soft economy, the eBook system has acted as a way out of financial shortcomings. According to Rebecca Schrader, Assistant Director of Finance of MIT Press, a large portion of the university press’ e-book sales comes from users of the Amazon Kindle, a portable e-book reader that has access to over 250,000 books.

According to Schrader, university presses throughout the country have experienced similar declines in sales. A recent survey published by the American Association of University Presses estimates an average 10 percent loss in sales and revenue between July and December 2008.

As a result of declining earnings, university presses are also starting to take different approaches to their business models.

And MIT isn’t alone in their need to shift focus from print only to print+eBook publishing. Yale, Cornell, and the University of Michigan Press also plan to cut back and increase their eBook publishing programs.

While it’s no surprise that text book publishers are heading toward broader eBook publishing initiatives quicker than the general book publishing industry, what university presses learn along the way will be of great help to the big houses in NYC and others around the country. That is, if they’re paying attention.

Envy: it’s a powerful thing.

Verizon Wireless (NYSE: VZ) and AT&T (NYSE: T) are both looking at e-book readers as a new source of income, having eyed up the success of Amazon’s Kindle, which uses Sprint (NYSE: S) Nextel’s network to allow consumers to download digital books to their devices. The e-reader interest is part of a larger drive to find additional wireless devices to connect to networks, as the US’s wireless market for cell phones reaches saturation point.

Bloomberg quotes AT&T’s head of emerging devices Glenn Lurie as saying the Kindle has done a “phenomenol job” and that the network wants to be part of that market. Lurie told the news service, “There’s a whole bunch of ways to monetize that type of device. That’s coming, it’s coming fast. We’re going to be part of it.” Lurie didn’t mention any potential partners, however, or any timing on when such a device might be available.

The key sentence here is, “there’s a whole bunch of ways to monetize that type of device”. Sounds like part of that monetization could be ads. Like, popup ads, and ads embedded into content, like right in between paragraphs on the page of your most favorite novel.

Hope I’m wrong.

Think the eBook discussion focuses too heavily on the tactile differences with print? Over at Booksquare [source unavailable], it’s OK to let digital books be different from paper books. I agree.

Now…about that bacon smell, you just might have something there, Kassia.

I read with interest a post from Evan Schnittman of Oxford University Press which outlined conflicts between a current print publishing business model and the emerging eBook business model. According to Schnittman, the incompatibilities between the two models means that consumer stand-alone eBooks must fail in order for existing print models to continue.

How does the publishing industry fund the creation, editing, design, production, marketing, e-warehousing, and sales of ebooks, if the income isn’t there? How do ebooks cover the huge advances needed to buy books if we cannot generate the cash, especially at their extremely low, discounted prices, cover the advances that an entire industry has come to require? The answer is that ebooks, alone, cannot.

What this means is that unless a very different model evolves, ebooks can never become the dominant version of content sold by book publishers. It means that ebooks will always be priced to sell, but sold as an afterthought, not as the primary version of a work. It means that the need for blended e plus p models will evolve, in order to take advantage of all the great qualities of ebooks, while providing the financial support and structure that print offers. It means that consumer ebooks, as a stand-alone version of an intellectual property, must fail.

As you can imagine, there’s lots of opinions expressed in the comment section of Schnittman’s post. Many mention the obvious: that print business models must change in order for publishers to survive (and thrive in) the eBook business. Thinking up a new model might be easy enough, but what about changing the culture inside these publishing houses? It seems publishers are their own worst enemies in this regard. The “we’ve always done it this way” thinking is a major contributor to the less than sound decisions book publishers make when it comes to eBook development, marketing and sales. What else explains their habit to instantly apply existing print models to the eBook business? Their entire infrastructure is built upon the print model, so it’s no wonder they struggle.

1. Publishers need to have the will to bring in new people (i.e. new ideas) and avoid the career folks who’s corpus of knowledge is based on the past 3 decades (or more) of the book publishing business. They need to implement an eBook business model that eliminates the risks inherent in the print model. There are already a few out there that they can adopt. Once they do…
2. They need to develop a direct relationship with the end-user customer so they can effectively execute the eBook model.

That’s a tough road to travel though, since the book publishing industry has, for the most part, completely avoided the customer and embraced the retailer. Of course, this all made sense before the Internet. Unfortunately, book publishers didn’t grasp the importance of the customer relationship when the web came along, and now they have allowed Amazon, Google and others to own the critical data. Amazon not only knows where the customer lives, they know his buying habits, and more importantly they know his credit card number. How many publishers have any of this stuff? How many publishers recognize the value in it? How many would know what to do with the data if they had it?

The success of the eBook business for traditional book publishers will depend on the relationship they have with the end-user customer. Every day they willingly give this away, they lose the one sales channel that will matter most. Yet, none of this will matter if they continue to embrace the vicious cycle of today’s print business models.

Samsung and Fujitsu enter the market with eBook reading devices.

Let me say up front that I’m not a big fan of dedicated eBook hardware. Call me jaded ever since I bought the Rocket eBook (now living in a cardboard box somewhere in my garage). I’ve seen/held/experienced most all of the gadgets on the market, and while many of them include compelling feature sets, and adequate reading experiences, they remain elusive to the broad consumer market due to high prices and complexity. Until these constraints decrease, devices like these will remain locked within the realm of the early adopters.

As long as book publishers have a say, DRM, or Digital Rights Management, will be around for a long time. Yet while most every consumer of digital products has encountered DRM in some form, an almost equal percentage of customers hate DRM with every fiber of their soul. But publishers aren’t swayed by what bugs customers. Why? They don’t know who their customers are. They don’t talk to them, they hardly hear from them, and they rarely consider their preference when building digital products.  When the book publishers customer is a retail partner, the end-user is just a number. And numbers rarely tell you more than what sold and what didn’t sell. Numbers don’t tell you why. And therein lies the problem. Many say the book publishing industry is headed down the same road as the music industry.

You see, it was those record executives who decided to lock music up on CDs and hard wire digital files to proprietary music players. They thought that would solve all their business model problems, but it didn’t. The MP3 music format waltzed in and before they knew it Napster came along and permanently changed their industry. Now, some 15 years later, and after tens of millions of dollars in losses, they are finally coming around to the notion that customers want to download music and play it on their iPod, their computer, and burn the same files to CD. And you know what? Those customers made iTunes the biggest selling music retailer in the world.

Yet book publishers believe their fate is somehow different than that of the music industry. In the opinion of some, DRM is the only way they can protect their authors and remain viable. That may be true, so long as authors need publishers, and many of them are proving they don’t. More and more writers are publishing books themselves, marketing them on blogs and through social media, and giving away digital editions. And the funny thing? Their print sales are increasing, not decreasing. Just ask guys like Chris Anderson [source unavailable], and Cory Doctorow. Their success should scare book publishers to death. But are they listening? Are they aware? Do they know the real answer is less DRM? In a word, no.

I’m not total advocate for unprotected eBooks. In some categories, proprietary eBooks are successful because they are tied to powerful search software, or unique value added hardware appliances. Yet in the general trade category, fully DRM’d eBooks have a short shelf life. Their complexity and restrictiveness only frustrate the end-user.

NPR recently aired a story on the subject of DRM (catch it here). I think the viewpoint of the end-user and the publisher is represented well. I can’t help but listen to it and feel like history is replaying itself. A tough business lesson is about to be taught once more.