eBooks / eReaders

This is a very interesting development - TechCrunch

Kindle Worlds joins Kindle Singles and Kindle Serials as a way for authors to earn money from digital publishing, and the best part is that in this case you don’t even have to be all that creative – the idea is to let fans create stories around original properties from other authors, offering them up for purchase on the Kindle book store. Amazon then pays out royalties to both the original rights holder, as well as to the fan fiction author, with the author making around 35 percent of all net revenue for works over 10,000 words.

There’s also a new revenue model aimed at shorter works, which would be between 5,000 and 10,000 words and will typically sell for under a dollar. Under this scheme, the author’s cut will be a digital royalty of 20 percent.

Fanfic writers can sign up now at the official Amazon Kindle Worlds website, and the company expects to launch the Worlds storefront in June. There will be over 50 commissioned works included in the store at launch, Amazon says, and then it’ll be launching its self-serve submission platform for all authors to add their own completed works for consideration.

Kindle Worlds will initially just have the licenses to the Gossip Girl, Pretty Little Liars, and the Vampire Diaries book series. The Mary Sue asks all the questions that occurred to me, so allow me to praise by copying it:

This whole thing raises a slew of questions, among them how transparent the guidelines to determine what “reasonable” will be, whether Kindle Worlds will accept fics already published, how many people will be willing to pay for something that’s always been free, how much Amazon will charge, and if/how the availability of free fanfic will be affected. I’d also be curious to know how much the rights owners get compared to the writers’ 35%. I can see being cynical when it comes to the money aspect of this; giant corporations (the publisher of Gossip Girl, Pretty Little Liars, and Vampire Diaries is owned by Warner Bros.) will be making money off of the labor of their fans. That’s not a viewpoint I share, though, because that’s what happens anyway: Fans put thousands of hours of effort into creating fic, graphics, crafts, etc., expecting nothing in return other than the object of their fandom being good. The fact that some of those fans will now be able to get paid for their efforts if they so choose is amazing

Finding a way for aspiring authors to not just write fan fiction, but build a reputation by siting them in existing (well read and loved) worlds. This interests me because its an early sign of how content rights are being rationally restructured for the digital world. Easy to do, low cost - Ronald Coase would be nodding, saying "I told ya"

I just pray they never get the rights to Middle Earth....

There is a very interesting situation developing developing with eBooks in the USA - Matthew Ingram at GigaOm sums it up well:

As expected, the Department of Justice launched an antitrust lawsuit against Apple and several of the major book publishers on Wednesday, alleging collusion and price-fixing behavior on e-books as a result of the “agency pricing” model. As my colleagues Jeff Roberts and Laura Owen have reported, three of the publishers named in the suit have decided to settle while two have chosen to fight the charges, and the states have jumped into the fray as well. The argument from publishers is that they need to be able to set prices on e-books, because otherwise Amazon will increase its monopoly and decimate the book industry. So who should we be rooting for, the giant electronic retailer or the giant publishing houses?:

This echoes an interesting debate at the FT Digital media Conference a few weeks ago, where a panel discussion was held on just this topic, Tim Hely-Hutchison, the CEO of Hachette made the following points:

- Hachette's eBooks went from 1% of sales in 2009 to 10% in 2010, 30% set for end 2012. Mainly substitution, mainly driven by black and white eReaders, kids and young adults are most vibrant market. eBook readers continue to buy print books.

- Agency model pricing (as it is called) was introduced by publishers to stop giant corporations with deep pockets giving away books as a freebie (aka Amazon et al) to sell their other stuff - the aim is to keep competing distribution channels viable.

- Alternative is wholesale model where one large player (ie Amazon) often sells at below cost, will mean one or few dominant players and the whole industry bing "pwned" by it.

- In early days consumers can't understand open v closed options, so Hachette et al have to act to save market.

- eBook prices initially went up, but are coming down now - steady decline across all countries and genre, also in UK for eg there is 20% VAT on eBooks, but not on paper books.

So you can see this as anti-trust, or as anti-anti-trust, just as easily (Adam Tinworth liveblogged the panel session over here).

Clearly the book industry is determined to avoid music's fate, and determined not to be screwed by one dominant supply chain. Now I think these disruptive technologies must be left to disrupt in part, but I hope the US DoJ looks at the "anti-anti trust" issues of handing supply to one or two dominant players, and ensures that it doesnt inadvertently tip us from Publisher oligopoly to Amazon/Apple monopoly.

But eBooks still have a bigger strategic problem in my view, around DRM and the restrictions in usage. As one panelist demonstrrted by showing a paper book with a big padlock on it (as in the picture above) and pointing out you don't own the Ebook you buy, you rent it - and you can't read it and can't share it if its owner doesn't want you to. That is going to continue to drive piracy no matter who wins.

One of the things I have felt, from the inception of online books, is that reading 300+ pages of a novel is too damn hard on them - in my view they are for snack sized media - a good academic paper, a short story or so. Every medium has its "optimal" mode and this - in my view - is the eBook's. Thus it is with some interest I read about Kindle Singles:

Today, Amazon is announcing that it will launch "Kindle Singles"--Kindle books that are twice the length of a New Yorker feature or as much as a few chapters of a typical book. Kindle Singles will have their own section in the Kindle Store and be priced much less than a typical book. Today's announcement is a call to serious writers, thinkers, scientists, business leaders, historians, politicians and publishers to join Amazon in making such works available to readers around the world.

"Priced less than an average book" is interesting - in my view full length e-Books should be priced less than an average book, I think the industry is still music c 2000.

Of course, 100+ years ago writers such as Dickens were serialised in much smaller chunks than their full tome novels. For those interested in applying for this newest of New Mediums, you can register interest over here.

Kindle Singles also puts me in mind of the digital version of "dating by cruising the bookstore" - I'm sure one can build (ahem) Yet Another Social Network for this - a sort of literary lovegety

SAI notes that more Kindle e-Books were sold on Amazon on Xmas day than real books:

On Christmas, the company sold more Kindle books than physical books.

Yes, this is obviously the result of everyone who got a Kindle for Christmas (lots of folks) firing it up and ordering a bunch of eBooks on a day in which most physical-book readers weren't shopping. But it's still important and impressive.

The Kindle's economics are still lousy for Amazon: The company loses money on new releases and makes only a modest amount on older titles, thus losing an estimated $1 per Kindle book.

Actually, whats more amazing is that punters will pay those prices for them, but, to paraphrase PT Barnum, there's an early adopter born every minute.... The bit I find amusing though is that the economics of an e-Book are lousy for Amazon - following the above link leads to this analysis:

Amazon accounts for about half of US e-reader sales currently and is losing money selling e-books. Here is how:

- Book publishers are standing their ground on wholesales prices – selling books at about $12 to distributors regardless of if it is a print copy or digital copy.
- Amazon sells them for $9.99, losing about $2 per sale.

Clearly companies like Amazon have to start selling e-books at print retail prices or book publishers will have to lower their wholesale prices. We think it will be the latter.

Given that, like CD's and Newsprint, a large % of the cost of a paper book is physical production and distribution, its amazing that publishers have managed to keep those prices up.

Like CD's and Newsprint, this is not sustainable longer term however, there is a limit to the suck...er, I mean early adopters. Not only that, but publishers already de-risk book sales by the remaindering system (unsold books are not charged for and are sent back at publishers' expense) and Amazon de-risks physical delivery by making the user pay extra.

I suspect in a year or so we will hear the loud wails of book publishers joining the music and news choir's refrain that the Internet is ruining their livelihood, when its clear that a lot of the reasons are self-inflicted. But its not as if they haven't had ample warning, after all music publishing hit this issuel in about 2005.

Kat "Clash City Rocker" Hannaford in Gizmodo has it in for e-Readers - she does a rather good fisk on their well documented major shortcomings, ie overpriced books and DRM worries:

With ebooks costing between $10 - $15, you're forced into continually feeding your Kindle/Reader/Nook/Other-warm-and-nurturing-sounding-device with cash, and as the ereaders are so physically large you also need to invest in a manbag just to avoid being mugged. Did we say mugged? We meant "laughed at." There's a reason why you don't see people using them on public transport.

Such shock that a proto punk would defend books - its a mixed up world Anyway, her argument on the death (or at least ongoing zombie status) of th e-Reader is that a combination of poor pricing and good enough other devices will see them off:

Any company that attempts to own market share in that area is fighting a losing battle. Consumers won't buy an electronic book when they can get a paperback for the same price or even less, and when they can lend it to friends, read it in the bathtub or even sell it on and make a percentage of their money back.

......

During September of this year, there were more ebooks added to Apple's App Store than there were games, according to San Francisco-based analysts Flurry. There's an obvious advantage to reading an ebook on an iPhone, as chances are you already own one. You don't have to fork out several hundred dollars on a new device that just displays lines of e-ink. iPhones are devices which serve more than one purpose, and while some ereaders allow for music playback and even gaming, you'd never buy one just to play MP3s on.

So, 3 comments and 2 predictions:

- Firstly, Kat is right with pricing - thats is the biggest impediment to it taking off in any big way. Its like "what have we learned from the CD market"

- Secondly, DRM needs to be sorted. There needs to be a trusted system that does not hand all power to the producer and can be changed at will. There have been enough cases of DRM systems going out of business or failing. We suspect there needs to be a pricing difference, with DRM'd stuff being much cheaper (ie un -DRM'd is sold on the assumption of copying)

- Thirdly, the iPhone is only a good enough today as the current crop of e-readers use old technology, but if you look at the next generation devices such as Plastic Logic's reader* there is an order of magnitude change in quality.

Now, the predictions:

- e-Readers will run alongside books, not replace them. When we did our research on the e-Reader market for Plastic Logic 2 years ago, we came to the conclusion that the major early market would be "road warriors" who would use the e-Reader to ensure they didn't need a second man bag to carry all their papers. It will be some time that they move out of this market and hit mass market price points - and even when this happens, history tells us that new technologies take some of the market away but usually co-exist

- Kat is right when she thinks that e-Readers are an interim phase - However, I think she is neglecting Moore's Law - go out 6 cycles (about 10 years) and you are looking at something two orders of magnitude cheaper and much, much lighter - it will be a commodity that we use in a semi-disposable manner, so it can be used in the bath and shower. It will also do other things, like do your singing in the shower for you. (I note that the biggest complaint when local newspapers close is the loss of the crossword, maybe that will be the killer app)

(Update - see Moore's Law vs Learning Curve discussion in Chris Edwards' comment and my replay - I used a 75% learning curve to get to 5% of the cost in 10 years)

And Kat shows a stunning lack of sensitivity to all us fusty techies when she says:

Our grandchildren won't be housing first edition ebook copies of War and Peace in an antiquated Kindle, passed down from generation to generation. There's no opportunity to get sentimental over an e-book, and when it comes to works of fiction and non, which have had thousands of man-hours injected into them, surely that's the reason people read them?

You mean I've been storing my Sinclair Spectrum in vain? (I note an interesting trend among teens to start listening to vinyl LP's again, so there's a future in the past)

* Disclosure - we worked on the early day specification of the Plastic Logic e-Reader

One of the risks of owning digital media is that in many cases the supplier's hidden claw is there long after purchase. This was made obvious when people realised that there was a reproduction limit on the number of times they could move their own (paid for) copy of iTunes songs, and was really brought to the fore when Microsoft and Google turned off DRM on media services, rendering a whole lot of (paid for) collections useless and offering scant recompense (See our coverage here).

The obvious conclusion there was don't buy digital music through any form of proprietary system - if you pirate it, or buy CD's it stays yours.

Next up in the digital media own goal stakes is the Amazon Kindle, which has turned off hundreds of users' (paid for) copies of George Orwell's books. Gloriously ironic, as the EFF notes:

In George Orwell's Nineteen Eighty-Four, the protagonist Winston Smith labors in obscurity to make information appear and disappear at the whims of the Ministry of Truth:

This process of continuous alteration was applied not only to newspapers, but to books, periodicals, pamphlets, posters, leaflets, films, sound-tracks, cartoons, photographs — to every kind of literature or documentation which might conceivably hold any political or ideological significance. Day by day and almost minute by minute the past was brought up to date.

It would appear the publisher changed its mind about offering an electronic edition of Orwell's books, and according to the NYT apparently Amazon, whose business lives and dies by publisher happiness, caved in.

Lesson for anybody that wants to learn it is don't buy a Kindle, either buy the book in (uncancellable) paper or pull it off the 'Net and put it on your PC/IPod/etc where it stays safe. By the way, the prices of eBooks vs their costs make music prices look positively tame.

Its great when you can talk about work you have done, and great companies you have worked with. Too often in cutting edge tech work, the NDA's are pretty constrictive. Anyway, this week Plastic Logic unveiled its next generation e-Reader, using flexible pages. There is a video of it over here from DEMOfall.

As the article we've linked to notes, however:

Other bloggers have overreacted somewhat by predicting that the Plastic Logic reader will kill the Kindle, but that isn't going to happen. There's more to providing a good e-book experience than industrial design. The Kindle is very well supported by Amazon, and it has that unique free-forever wireless-data link. But if Plastic Logic can find a partner with ties to the publishing industry and solve the wireless problem, the result would be a serious challenge to Amazon.

Exactly - the lesson, from the iPod onwards, is that the end device needs to be supported by an end to end supply chain to capture maximum value. I'm sure Plastic Logic is well aware of this. But, having seen the technology in action, all we can say to anyone contemplating buying an e-Reader is check these ones and maybe wait till they come out.

(Update - from Drew Benvie's blog a link to El Reg talking about a toaster that acts like a printer. Seems like a very similar space to our work on e-Readers really. Prompts the thought - will Plastic Logic make plates, shower curtains and the like that one can read? )

In recent weeks there has been quite a lot of puff about the Amazon Kindle being the "iPod for Books" - this piece by Jack Schofield in the Grauniad punctures that to an extent:

Yes, but perhaps only after it becomes a newspaper reader. One of the drawbacks with today's ebook readers is the price of the hardware, which ranges up to £400. Even after this year's $40 price cut, Amazon's ebook reader, the Kindle, costs $359. Not many people buy enough books to recoup the cost. However, if it could replace a printed newspaper, regular readers could probably recover the hardware cost in a few months - or they might be given one free.

The Kindle has been very successful by ebook standards, and Citigroup analyst Mark Mahaney has just doubled his projections for Kindle sales to 378,000 units for this year, 934,000 next year and 4.4m in 2010. "Turns out the Kindle is becoming the iPod of the book world," he told Citigroup clients.

The numbers are small compared to other consumer electronics devices. For comparison, Apple sold around 8.2m iPods in the US in last year's Christmas quarter, Nintendo's Wii sold 2.9m and Microsoft's Xbox 360 2.4m. Mahaney's estimate of Kindle sales is exactly the same as the iPod sold in its first year. However, the iPod entered a market that had been pioneered by devices such as the Diamond Rio, and the huge success of Napster's file-sharing service meant there was plenty of free content. Amazon is having to create the market itself.

What surprises me is that its even got this far - this generation of e-Readers are still pretty hard to read and are expensive to buy. Also, as Jack says, there is not a body of low cost books to read - book pricing for e-Books still has not nearly discounted the move from physical products. After looking at the plastic ink e-Readers now in development (disclosure - we have done work with the next generation e-Readers), I think I'll pass for now.

Article in the NYT re the inexorable rise of the eBook, Kindle style. Its worth linking to for this quote alone:

Do you remember what it was like back in the old days when we had a New Economy? In the 1990s, jobs were abundant, oil was cheap and information technology was about to change everything.

Then the technology bubble popped. Many highly touted New Economy companies, it turned out, were better at promoting their images than at making money — although some of them did pioneer new forms of accounting fraud.

I suspect we will find that The New Economy 2.0 will have its own share of stars of fraud and flop.

However, I do take issue with some other thoughts in the article. Firstly, this:

In 1994, one of those gurus, Esther Dyson, made a striking prediction: that the ease with which digital content can be copied and disseminated would eventually force businesses to sell the results of creative activity cheaply, or even give it away. Whatever the product — software, books, music, movies — the cost of creation would have to be recouped indirectly: businesses would have to “distribute intellectual property free in order to sell services and relationships.”

For example, she described how some software companies gave their product away but earned fees for installation and servicing. But her most compelling illustration of how you can make money by giving stuff away was that of the Grateful Dead, who encouraged people to tape live performances because “enough of the people who copy and listen to Grateful Dead tapes end up paying for hats, T-shirts and performance tickets. In the new era, the ancillary market is the market.”

Except that it is not a "free" transfer from goods to relationships - as we explained in our articles in FreeConomics Part I and Part II, if your free lunch is usually being paid for by offset funding, and / or by your data being chained up, there is a price to pay. What is often forgotten in the "rush to free" discussion is that by and large, if another piper is paying, they will want to call the tune at some point. That bit of the bargain is too often neglected by the Freeconomists - but not by Ms Dyson, I note .

Also, making money from T shirts as a famous band (with all that Big Label spend gone in already) like the Grateful Dead is one thing - being further down the Long Tail means its a lot tougher, and this has become clearer in the interim as the network power law has just allowed the rich to get richer.

The scary thing is I find myself arguing these economics with the NYT author who is none other than Paul Krugman. Hmmmm. Second thing I'd take issue with is this thought:

According to a report in The Times, the buzz at this year’s BookExpo America was all about electronic books. Now, e-books have been the coming, but somehow not yet arrived, thing for a very long time. (There’s an old Brazilian joke: “Brazil is the country of the future — and always will be.” E-books have been like that.) But we may finally have reached the point at which e-books are about to become a widely used alternative to paper and ink.

That’s certainly my impression after a couple of months’ experience with the device feeding the buzz, the Amazon Kindle.

Not the bit about eBooks being the perpetual next year's technology (along with the mobile internet), but the bit about the Kindle replacing books. I don't buy it (literally).

We've done a lot of work on e-Readers in the last two years or so, and there are 2 things that they are still struggling with:

(i) The kindle generation is still too small creen and not natural light enough for most people to find reading an easy pleasure. A few road warriors reading papers they'd otherwise have to read on laptops yes, the mass market - unlikely yet according to our analysis. We need to await the next generation of displays

(ii) Price point - not just of the Kindle, but of total (legal) ownership. Despite the price cut, its still $359.00. And the reduction in price of the average books in eBook form is - according to the Amazon Kindle site for say Clay Shirky's "Here Comes Everybody" - a whopping great reduction apparently from S25.95 to $15.42 - except that elsewhere on the Amazon site the actual book is only $17.43 Hardcover. Somehow a $2.00 reduction for a zero dead tree edition does not seem to be that great a deal. I need a lot of those to (c 180 in fact) to justify the $360 outlay!

Unless you were thinking of going to BitTorrent for Clay's book, which we could not condone as that, after all, is Piracy. Or the inevitable future, as Esther Dyson would have it ?

Better get started printing those T Shirts, Clay