Kindle Review – Kindle Fire Review, Kindle 4 Review

Before we jump into discussing the share of publishing each company is trying for let’s look at two different ways of looking at the publishing pie -

First, is the break-up of book costs from the book cost analysis post -

Author – 8-15%. 

Publisher – 25-35%.

Printing – 10%.

Distributor – 10%. 

Retailers – 40%. 

A lot of companies are looking at these slices and basing their thinking and strategy around it.

The second way to look at publishing is -

1. Book Authoring. 
2. Pipeline Part 1: Book Selection. 
3. Pipeline Part 2: Book Distribution. 
4. Pipeline Part 3: Book Retail Points.
5. Credibility with Readers.
6. Reading Device.
7. Platform.

The ultimate simplification of this view would be Author - Pipeline – Device – Reader. 

Now, let’s jump into what each company’s strategy is.

Amazon – The Platform Approach

Amazon are taking the second view and see this as the Future of Publishing -

1. Books created by Independent Authors and Publishers. 
2. Pipeline belonging to Amazon.  
3. Reader relationships with Amazon.
4. Kindle as the reading device.
5. Amazon as the platform underlying all of publishing.

The best way to think of it is as a rival eco-system to the current Publishing Model. As it grows perhaps it exists in parallel, perhaps it takes over most of Publishing.

Google – Incremental Content and Pipeline Takeover

Google is approaching it in 2 steps.

The first step is to get everyone on board and hand over the entire pipeline to Google i.e.

1. People go to Google Books for all their book needs.  
2. Google sells all books.
3. Publishers and Readers trust Google.

The 2nd step is to own a large part of the content, all of the pipeline, and let the pipeline grab the lion’s share of profits -

1. As soon as Google Books is the destination, Google will control the entire eco-system.  
2. As the move for owning orphan works hints, Google will try to control as much content as possible.
3. Let publishers and authors compete against each other. See search or search advertising to understand what will happen.

Sony – Device and Book Store.

Sony seemed to be caught in the old Publishing model and focused on just providing a device.

Their recent moves indicate that they have gotten some data indicating there is a lot more to the current rise of eReaders. It would not be a surprise to see them copy Amazon’s strategy and add on lots of sources of books i.e. give up total control of the pipeline in exchange for owning the main channel of the pipeline.

Apple – The Platform.

It’s hard to say what this is without seeing the device and content offerings first.

Apple would probably be happy with the App Store model of letting creators fight it out and taking 30% off everything. Its an interesting thought that giving 30% to Apple might end up being the best option for Publishers.  

Publishers – Providers of Quality Content and soon Powerless

Publishers are in a tough position. It really does seem that control of publishing is going to pass over to whoever owns the pipeline.

Publishers are uniquely positioned to totally miss the importance of being ‘the source of books’ and are liable to let some company use quality content from Publishers themselves to steal control of the pipeline.

Barnes & Noble – Book Store

Barnes & Noble are positioning themselves as the ebook provider of choice for devices that are rivals to the Kindle.  

It’s a risky strategy as they don’t have the pipeline or the device. Sooner or later whoever owns the pipeline and device will leave out Barnes & Noble and go to Publishers directly.

Indigo is trying to do the same thing with its Short Covers offering.

This is arguably the least forward thinking strategy.

Time, Hearst, Content Providers – Distribution Channel and Content

The first, and only, smart idea from a content creator is the rumored Time reading device.

Content providers have what readers really want i.e. good books, good magazines, etc. If they build out their own device and their own distribution channel they will get a chance to exclude distributors and retailers.

Content creators need to look at the 40% they give retailers and the 10% they give distributors and then look at the second view i.e. content + pipeline + device. They can finally go direct to customers and they should.

Whatever channel content creators offer their products on (whether Google Books or the Kindle) will become the ‘book destination’ and will assimilate all the power. Once that happens Publishers will be lucky to get 25% of book prices.

Publishers should be especially wary of companies like Scribd that are offering to give Publishers 80% of revenue – the more generously benevolent an offer from a for-profit company seems, the likelier it is that they intend to take advantage of you.

Authors – Unaware of their Power

The Internet allows authors to set up their own pipeline. It’s a lot of work and risky. However, the pay-off is huge.

Once an author has a following and brand recognition, a direct to customers channel, that no middle man makes money off of, should be a priority.

Scribd, DocStoc - Mini-Google Strategy

Scribd and other document sharing sites want to do what Google does i.e. first own the pipeline and then start expanding into more and more of the publishing eco-system.

After that, shift most of the profit making into the pipeline.

The 5% Strategy

The hypothetical dream company is one that creates a platform and pipeline and wins the publishing war by offering a ridiculously high profit share (95%) to publishers and authors.

If you think about it –  

1. At the basic level, there is content creation and content consumption.
2. Publishers have a role to play to ensure quality of content.
3. Everyone else is a middleman.
4. Every company fundamentally wants to grab control of the Pipeline and/or Device and make profit disproportionate to the amount they contribute.

It’s a company’s function to make the most profits with the least effort so we’re hardly at liberty to criticize their efforts. However, all these companies are at risk.

If a company were to come in and say -

It’s not like we write books.

Creating a platform isn’t the toughest thing in the world.

5% of  a very large number is quite large.

And then set up a platform that just charged 5% for distributing ebooks, they would take over.

The 5% strategy would blow everyone out of the water sooner or later.

Their approach to device makers would be – sell the devices and make money off of that. Let us be the pipeline.   

Of course, once they were the pipeline, it’d be rather difficult for them to honor the 5% promise .

Closing Thoughts

It’s interesting to see the current lack of strategy from publishers. They have the option to club together and free themselves of distributors and retailers and instead they’re stumbling around aimlessly.

Publishers are letting some of the smartest companies in the world make inroads into Publishing -

1. Amazon is evolving into the platform for all of Publishing.
2. Google is trying to flip the publishing model on its head and make the pipeline much more profitable than the content.
3. Apple is happy to take a 30% cut off of all sales for doing next to nothing.

The illusion that a group of companies can band together and control different parts of the publishing ecosystem is very alluring. To the point that publishers and device makers are happy to let some other company become the central hub for books.

Truth is the minute a company controls the pipeline it has zero reason to share profits with its erstwhile partners (that are now at its mercy).

Filed under: evolution, publishing Tagged: | future of publishing