If you were setting up a Publishing company today …

Thanks to Frank for linking to a very interesting article, i.e.

Dumping Print, NY Publisher bets ranch on Apps

The article discusses publisher Nicholas Callaway who is dropping print and switching to apps –

For Callaway, it’s all about apps — small applications sold in Apple’s App Store where books are enhanced beyond the mere text of e-books.

“I have bet the whole ranch on this,” Callaway told Reuters. “This kind of juncture happens maybe once in a century.”

Mr. Callaway is certainly right about us being at a juncture/crossroads that comes about once a century or less. However, is he right about choosing apps?

Various Paths You can Choose

If you were to set-up a Publishing company today, you could choose between a number of options (perhaps even a combination) –

  1. Traditional Print. It is, after all, 85% to 90% of the market.
  2. Kindle and Nook Stores. Release books as digital books.
  3. Apple’s App Store. Release books as apps and ‘enhanced’ books. 
  4. The Internet. Release books as digital books over the open Internet.
  5. A Co-operative of Agents and Authors.
  6. Publishing on Demand – either at bookstores or when orders come in via your website.
  7. New Strategies – Kindle Singles, subscriptions, Shorts, and so forth

Which of these make sense?

Which of these are troublesome?

Traditional Print

There are the obvious advantages – Control, 85% of the book market, an existing infrastructure in form of booksellers and distributors, an existing market in the form of people who buy paper books, there’s a lot known about selling books.

There are the obvious disadvantages – existing Publishers have domain expertise and are scary competition, print books are costly to replicate and distribute, the winners have to cover up for the losers, ebooks are eating up market share, competing forms of entertainment are becoming more compelling.

Perhaps the two biggest concerns are –

  1. How do you compete against the entrenched Goliaths?
  2. How do you compete against the promise of ebooks?

It’s death on two separate fronts – You would need time and money and effort to match or beat the Big 6. By the time you manage to become big and established, your print business might have been eaten up by digital books.

In my opinion, if you were setting up a Publishing company today, it would be madness to focus on being a traditional-style paper book Publisher.

The Internet

Please note that we’re splitting eBooks into two very distinct strategies – ebooks that are sold through ‘evil and closed’ ecosystems like Apple and Kindle Store, ebooks that are sold through ‘open and benevolent’ ecosystems like the Internet and Android.

Does it make sense to set up an Internet-based digital book store? Is it a good idea to choose an ‘open’ platform like Android?

Here are my 3 main concerns –

  1. There’s no way to ensure people pay. So, you are dependent on people’s honesty and generosity and on people feeling your books are worth what you think they are worth. It’s a really bad way to run a business.
  2. The system is set up to exploit content makers. Whether you look at newspapers or music producers or any other content provider – The Internet tends to destroy the amount of money they make. If you’re not a content creator, it’s easy to argue that the Internet is great for content creators by using outliers. The Internet is great for users because they can choose to pay whatever they like – including zero. It isn’t very good for creators.
  3. The people who understand the system, and/or control it, get rich. If you produce books and sell them via the Internet, the people getting rich will be Internet Service providers, search engines, and companies providing technical services – you will not be the one getting rich.

What we have with the Internet is an amazingly lopsided system – Users pay whatever they like; Internet companies get a big share of revenue; Content creators may or may not get a share.

If you have to pick between a closed ecosystem and a completely open ecosystem – only desperation or madness or an allergy to profit would make you pick the open ecosystem.

People who get upset with this approach don’t understand that there is a LOT of money being made – the Internet is not some ‘non-profit entity’ where no one makes money. It would be madness for authors to say – Let Comcast and Verizon and Yahoo and Google make a ton of money while we enjoy the pleasure of selling in an open ecosystem and make nothing.

It’s the same old situation of middle-men eating up all the profit. It’s just couched so well in terms like ‘open’ and ‘good’ that readers fail to see that ‘open’ ecosystems are far worse for content creators than ‘evil and closed’ ecosystems.

Kindle and Nook Stores – Evil & Closed Ecosystems selling eBooks

These have grown from less than 2.85% of the market 2 years ago to 10% to 15% of the market today. It’s quite remarkable.

On top of that, these ecosystems offer a better deal to readers (lower prices, convenience, etc.), a better deal to authors (35% to 70% cut), and reward the platforms richly.

If Amazon and B&N sold ebooks over the Internet – Instead of a 30% cut they would be expected to be happy with 0%. The books would be expected to be free and supported by advertising. By setting up an ‘evil & closed’ ecosystem, B&N and Amazon have managed to reset expectations to something far more realistic.

The only parties hurt here are – the traditional Publishers, the bookstores, the distributors.

Any new Publishing company using ebooks and a closed ecosystem gains several advantages –

  1. The Closed ecosystem ensures only readers who pay, and who pay a price the Publisher sets, are able to access the book.
  2. It’s still books. Digital is just a mode of transport.
  3. eBooks have a huge advantage over physical books when it comes to price and convenience.
  4. The Publishers gets a much larger share while also lowering costs.
  5. It’s new enough that there are no dominant ePublishers. The market is there for the taking.

There’s a lot of upside. The only question is –

Will eBooks stall when they hit 15% of the market? Will they become 50% of the market? Will they take over and be 80% of the market?

If ebooks continue to do well, Publishing will be taken over by Publishers who are fully committed to digital. Publishers that only do print books, and Publishers that optimize for a mix of print and digital, will not survive. It’s hard to survive when 50% or more of your effort is geared towards a very inefficient form of product distribution.

A Publisher selling eBooks through Apple’s iBooks falls into the same category as one optimizing for Kindle Store and Nook Store.

However, there’s a completely separate category that Apple and companies like Vook are promoting.

Apps as the new Books

There’s a mix of two interesting elements that is causing some companies to go with ‘enhanced’ books and apps and video books –

  1. The belief that books need to somehow be improved. That they should be supplemented with video and social aspects.
  2. The belief that the only way to keep books alive is to morph them into something other than books.

These are both very interesting beliefs.

There are, however, a few things to keep in mind –

  1. Apps are a completely new and foreign domain. To make books successful as apps you need mastery of not only book publishing, but also software and technology.
  2. Apps are very, very new. Electronic Arts and GameLoft and a few other companies are the only ones seeing consistent success. We don’t know how sustainable apps are for app-making companies.
  3. The App Store controls everything. Publishers are used to having tons of options for where they can sell their books. Even with ebooks there are options. With the App Store there is nowhere except the Apple App Store for paid apps.

It’s very rare to find companies that can master more than one domain. To make consistently successful ‘book apps’ companies would have to master so many domains that it makes you wonder if it’s just a dream.

Finally, it’s always in the App Store’s interest to equalize things and there are very few barriers to entry – you are guaranteed to get infinite competition.

A Co-operative of Authors & Agents

New Publishing companies should consider creating a co-operative with Authors & Agents. A Publishing House similar to the Big 6 but focused on the most efficient means of getting books to readers.

Here are a few reasons why a co-operative might work –

  1. The only people interested in keeping the value of books intact are Authors, Publishers, and Platforms.
  2. By banding together Authors and Publishers become very powerful. They cannot be exploited by geeks bearing gifts or anyone else.
  3. Everyone’s skill sets mesh together to create amazing domain expertise which is unmatched. Authors and Publishers know more about writing and publishing books than anyone else – Might as well make the most of it.

Everyone other than the author, the publisher, the platform, and the reader is a middle-man preying on inefficiency. A parasite who will try to gradually become more and more powerful and squeeze out all the profit for itself – even if it means no profit for anyone else.

The only actual defence is for authors to band together with people who are interesting in selling books for profit.

This also makes sense if you consider that the real challenge to books is from other forms of entertainment. If the market for books doubles everyone in books will do well – provided they keep the value of books intact.

In a Huge Market Transition no one is to be trusted

Most dangerous by far are companies which have suddenly taken an interest in books. Companies who want to steal the rights of creators and reroute all the profit to themselves.

Another threat are the new middle-men. Companies that see an opportunity to replace Publishers and Booksellers and become the new gatekeepers. Any company asking for more than a 25% to 30% cut falls into this category.

However, the other participants are not to be trusted either.

If readers are given free rein to rationalize they will stop paying for books. If Publishers are given the option, they’ll drag us back to the days of gatekeeping. If platforms are left unchecked, they will start claiming a 50% share. New Publishing upstarts will soon be trying to carve out 50% of the pie for themselves. Authors too will try to take advantage of the circumstances.

It’s an interesting time to be in the book industry. Everyone wants to exploit this Huge Transition in Publishing for personal gain. It’s fortunate that readers and Publishers are some of the smartest people around. It doesn’t take a genius to look at what happened to newspapers. It’s easy to see the devaluation of content being promoted by companies that use content as their fundamental raw material.

Authors have to figure out a way to prevent Internet companies and service providers from stealing authors’ content. Closed ecosystems might be the only solution.

New companies have to figure out a way to preserve the value of books while providing a better value proposition to authors and readers than what platforms and publishers are providing.

Are there going to be a group of new Publishers that manage to connect Authors with Readers in an optimal manner? Will they be able to preserve the value of books? Or will the existing Big 6 and the existing Platforms end up being the eventual winners?

6 thoughts on “If you were setting up a Publishing company today …”

  1. The problem with apps is that unless you’re willing to develop for multiple platforms, you’re shutting out a sizable portion of the population. As we watch the Android market share continue to grow, focusing solely on Apple’s App Store seems to be foolish, because you’re only going to be able to reach a shrinking portion of the market. This is not even including RIM’s small, but still present, app store and the thousands of people using Blackberries.

    Until we have a platform agnostic app market (which will only happen over the smoking ruins of Apple HQ and Steve Jobs’ cooling body), apps are never going to have the reach that either traditional publishing or electronic publishing through standard formats is going to have. Callaway is setting himself up to fail, as he’ll find that he is not in a sustainable marketplace.

  2. “The belief that the only way to keep books alive is to morph them into something other than books. ”

    Nobody wanted this when it was called ‘CD-ROM’, nobody at all! It’s possible they want it now but I find it unlikely.

  3. I think it is also important to consider the genre. Some books (romance, crime fiction, illustrated reference) can really succeed as e-books. Poetry, literary fiction, and others are enhanced by their physicality, so print is the better option. There is also the idea of limited- edition printing of e-books, so print and digital can work together instead of being mutually exclusive.

  4. I liked this post a lot! Very smart and insightful points here about the future of publishing. As someone who has a Kindle now, I’m always interested in these topics because I think it’s an industry that will be changed drastically in time.

    Reblogged your post!

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