Kindle Review – Kindle Fire Review, Kindle 4 Review

It’s fascinating to see the tussle as various companies try to capture a piece of the ebook pie for themselves.

First, a few of the latest pieces of news -

1. MacMillan want to institute a 20% cut for authors on ebooks – lower than the currently prevalent 25%. Publishers Weekly have a great article on it.  
2. Vodafone Germany will launch their own eReader platform in March 2010. They’ll preview it at CeBit Germany and are in talks with several German publishers and have proposed a 50-50 split in revenues.
3. LibreDigital announced AllAccess which will sell ebooks for all eReaders and the iPhone and for PC and Mac.

There’s a very simple thing happening here.

This is how the Books Pie was split up (more on book cost analysis) -

Author – Creation. 8-15% Royalties. 

Printing – 10%.

Publisher – 45-55% (includes Author’s Royalties and Printing).  

Distributor – 10%. 

Retailers – 40%. 

Consumers. Just the paying part

Suddenly we have a new model with eBooks.

• A lot of publishers and authors and readers are stuck in the old model. 
• Some readers are getting greedy and want something for nothing.

Which makes it perfect for companies to step in and steal a piece of the pie (of course, they are just helping).

So far, there is only one piece of the ebook pie that is settled -

Authors get somewhere between 15-25% from traditional publishers and more from other channels. 

That is the only part that’s decided. The remaining 75-85% is up for grabs.

Publishers are confusing and confused

Publishers keep confusing me with the things they do -

1. Scribd is helping pirate ebooks and they sign up with Scribd.
2. They want to cut the share for authors on ebooks.
3. They turn off features like Read To Me that would increase ebook sales.

There are some things that are probably going to happen that Publishers aren’t prepared for -

1. Prices are going to be $9.99 or lower.
2. eReader companies are going to be a major channel and the hardware. They are going to have a lot more control than simple retailers did.
3. eBooks will not be able to subsidize the costs of physical books. This is the BIG thing everyone is missing.  
4. There is no easy way Publishers can increase their share of ebook list price higher than 40-50%. There just isn’t.
5. There are a LOT of ways Publishers’ share can go down.
6. If Publishers don’t create their own distribution channel i.e. a platform like Vodafone is creating or an all-access service like LibreDigital is, then Publishers will have zero leverage.

Publishers are believing the ‘do nothing and increase your revenues’ sales pitch

Instead of doing something to increase their share, Publishers are giving in to their greed and going with options that magically promise to increase their revenue and share of the ebook pie.

Scribd is giving them 80% so they sign up with Scribd.

Why do the hard work to build a great platform for readers if Scribd will give them 80%.  

Publishers are going to get massacred if that is all they do. There is no conceivable way that Publisher’s share of the ebook pie can increase while they do absolutely nothing to increase the value proposition of books or make things better for readers.

Why is it that every single company in the Publishing Industry (Amazon, LibreDigital, Barnes & Noble) and several companies outside Publishing (Google, Vodafone, Apple) are building platforms and distribution channels and Publishers aren’t?

Distributors and Retailers are trying to Build Platforms

Almost every big retailer and distributor is building a platform -

1. Amazon has a big lead.  
2. Barnes and Noble has finally woken up and they’re so desperate they’re willing to open up their platform to Google. On the plus side they’re trying to be the store for other eReaders.
3. LibreDigital has the right idea to sell content to all eReaders.

What share are these companies asking for?

This varies widely. However, it doesn’t matter. If Publishers don’t have a channel they have no negotiating power.

What are Publishers going to say – We’ll sell ebooks ourselves? From our 2,000 different websites.

It doesn’t matter whether it’s Google or Amazon or Apple. If the main channel for ebooks is controlled by another company they can (and will) take the lion’s share of the profits.

It’s definitely not going to be less than the 40-50% current retailers take.

New Companies are trying to build distribution networks or platforms of their own

Look at the new entrants i.e.

1. Vodafone.
2. Google.

Everyone is trying to be the platform and provide content to everyone.

It’s them thinking -

1. The 40%-50% share that retailers and distributors used to get is there for the taking.
2. We get that share for doing next to nothing.
3. If eReader companies are dumb enough to open up their devices and turn their eReaders into dumb pipes, we’ll be glad to take advantage.

Google’s Initiative

Google is going to do a few things no other company can. They have to if they want to take on Amazon -

1. Discount ebooks using the share they are supposed to get.
2. Make all/most book related searches point to Google Books and Google Editions.
3. Provide lots of free/cheap orphan works and free public domain books (they already do the latter).
4. Bring in ads and perhaps other ad related revenue and drop prices even further.  
5. Push the FTC to get Amazon to open up the Kindle.
6. Create some free high value reading feature like the free turn by turn GPS feature they added.  
7. Introduce some killer reading app on Android to improve reading on eReaders.

In the most extreme case, Google will start pushing an eReader OS modded off of Android – using Android Apps and their own customizations.  

At least 50% of the eBook Pie and 100% of the eReader pie is up for grabs

The 50% that used to go to Distributors and Retailers is going to get grabbed by someone else because Publishers have done nothing to improve books or add value for customers.

In addition, Publishers are going to be at the mercy of whoever becomes the platform for publishing.

We are basically left with two big pieces -

1. 50% or more of the eBook Pie.
2. 100% of the eReader Pie.

Amazon is best positioned to get both. The strongest challenge is from B&N-Google and Sony-Google. If Google beats Amazon they will have both Publishers and eReader makers at their mercy.

Filed under: publishing Tagged: | future of publishing