We have a new writer joining the blog, Meaghan Gray. This is her first article and she’s very young, so please be kind.

The Evolution of Technology and How Technology is Influencing Us

Over time, human understanding and development of technology have grown exponentially. From homo habilis and his stone tools to Steve Jobs and his iPad, technological advancements have been a key driving force behind human evolution. As a species, we are innately inclined to wonder at and attempt to improve everything around us. Our imaginations have brought us to a world where technologies previously dreamed of in Sci-Fi films are now available globally.

The radio, television, and, now, personal computers have brought information into our homes in such a way that institutions like libraries and bookstores are quickly losing patronage. A quick Google search will unveil thousands of articles from Wikipedia, news websites, and other sources in an instant. Television and film provide endless hours of easy entertainment with little to no participation from the audience.

If society is so rife with machines that think for us, why would we want to think for ourselves?

With the recent occupy Wall Street movement, some may believe that people today are making significant strides forward socially; however, only a few people are involved and they hardly have a common purpose beyond expressing their general disappointment. Most of us are not inclined to hold to our beliefs so strongly that we would protest to uphold them; perhaps that is the result of not educating ourselves enough about our own beliefs. Most people in the western world receive much of their beliefs and information from radio, television and movies, allowing little time for imagining much else.

The Growing Role of Imagination-Deficient Mediums

Visual stimulus has been an enormous factor affecting human imagination. In an online poll, 66% of voters rated sight as their most important sense,¹ clearly indicating that most people value their ability to see strange and beautiful and interesting things above everything else. The creators of big budget films and television shows truly understand our love for images, often painting rich tapestries of lighting and make-up and camera angles and famous faces and explosions. Critics and average viewers alike continuously agree that the majority of features that focus mainly on the visual wow-factor usually fall flat when it comes to character and plot.

The desire to read epic or romantic or hilarious tales is being siphoned into the film and television industries as well. The two industries’ combined revenue³ casts a large shadow over the book industry’s relatively paltry gross. Even stories already brought to life visually within comic books and graphic novels, such as The Green Lantern and Watchmen, are being shortened and modified for the screen. Despite the limitless budgets of our imaginations and the depth of stories within books, people are increasingly choosing movies and TV shows over novels.

Reading a book for the first time and imagining what the characters look like, how they act, where they are, what they are doing, is an experience unmatched. When movies and television shows cast one individual to a role, design one interpretation of the landscape, and shorten and modify key points within the plot - they permanently affect the way that the viewer will see every aspect of that story. Our imaginations are nullified by the films, thus we do not bother using them at all.

The persistent image of Daniel Radcliffe as Harry Potter keeps readers from properly imagining his wild hair and striking almond-shaped eyes. Adaptations take away our ability to imagine stories as we were meant to imagine them. Some may argue that some of the most profitable modern book franchises of today would not exist without their film counterparts. To them I say that no modern film franchise today could exist without books.

The high number of book re-interpretations by film and television creators shows that they are fast running out of fresh ideas. The audience has become so jaded and sick of the same-old plots that the industries have been forced to drastically change their formula and go back to books. Films and television shows now often pay overly aggressive homage to older versions of themselves or provide a constant stream of Family Guy-esque shows. The romantic and fantastic seem to have been lost.

Where is the Quality Control?

Our endless supply of solutions to problems (apps, sites, quick fixes) have perhaps taken much of the mystery from our lives. With Facebook telling you how your friends are, Google answering every query, and Twitter alerting you of the thoughts of everyone in the world - curiosity is usually cured instantly. Why imagine when you can mindlessly tweet and follow?

As a culture, we have virtually no boundaries. With no filter between thinking and posting, people across the world tweet their every thought. This behaviour has led to a society in which people generally do not think before they speak, nor do they listen to what others say. A great example of this behaviour can be found on any of The Real Housewives programs. The women on these shows screech and scream at each other about respect and class constantly. Every sentence each woman yells contradicts her last. Despite the absurdity of the content, these shows are hugely popular, with eleven versions internationally. While these “reality” TV shows may not be an accurate representation of the entire world’s population now, they are the shows that are shaping the minds of our youth. This behaviour allows no room for trying to understand what we do not understand and to imagine what we do not know.

The lack of filtered content in our society has affected our imaginations in other ways. While the number of patents and products created each year is massive, the quality is hugely lacking. The Internet and excessive lending allow people to have an idea and execute it simply without much forethought. Like the film and television industries, others are running out of ideas and creating absurd and unnecessary reimaginations of projects instead of focusing on new content.

Imagination is being kicked out, but will it turn out to be irreplaceable

We are replacing the uniquely human tool that is our imagination with another uniquely human tool, technology. We are constantly able to create new versions of things, but nothing seems to be genuinely new. Perhaps this is because outstanding things are truly rare, but we feel entitled to a new, exciting, and funny TV show, movie, or video game every day. The world is not populated by seven billion geniuses. It is rare to have a great film, just as it is rare to have a great book; there was not a classically brilliant novel released every month for the past several hundred years.

True beauty is something to be wondered at. It is something that we should spend our lives imagining and we should be bowled over the first time we see it. Instead, we have hundreds of books, films, songs, paintings, sculptures, and so on that are beyond fantastic. The best work of the past centuries is easily accessible. We have become accustomed to the wonderous; thus, we expect it. However, we gloss over the amount of time and effort required to create such masterpieces. We gloss over the imagination and effort needed to create masterpieces.

The want for instant gratification and the death of imagination at the hands of technology will eventually kill every entertainment industry because we cannot produce at the rate that we desire. We definitely can’t produce if we lose our imaginations. We must re-learn how to use our imaginations to see old stories in new ways, to draw inspiration from the past, and to create a brand new world that is the product of our imaginations and not of our tweets and status updates.

What do you think?

Is technology and a focus on instant gratification eroding away our imaginations?

Footnotes:

1. P. Balaram, Current Science 8:1, “Smell, Science and the Press” 5.

2. The Numbers “http://www.the-numbers.com/market/”.

3. Rikard Bandebo, American Business “http://american-business.org/2758-television-broadcasting-industry.html”.

There really isn’t any other way to put it. The wireless delivery turned your Kindle into a bookstore – one that was literally in the palm of your hand, open 24/7, and delivered your book purchases instantly.

There was a slight downside. The use of 3G meant there was a bandwidth charge. With a $9.99 book, which was usually 500 kb or less in size, the bandwidth cost wasn’t a big deal. It was just 7 to 8 cents – less than 1% of the cost of the book. Even if you assume 4 total downloads (2 downloads each on 2 separate Kindles sharing an account) it’s just 30 cents and is just 3% of the total cost.

Note: We’re assuming a bandwidth cost of 15 cents per MB of 3G data. It probably costs Amazon between 10 and 15 cents per MB.

Bandwidth Costs become a huge issue for everything other than books

Contrast the bandwidth costs of downloading different items -

1. A 500 kb book at $10. Assuming 4 lifetime downloads we get bandwidth charges of 30 cents. Just 3%.
2. A 500 kb indie book at $1. Assuming 4 lifetime downloads we get bandwidth charges of 30 cents. Now, it’s 30%. That’s probably why Amazon gives only 35% royalties for books priced below $3. Note: Another factor might be a desire to keep book prices above $3.
3. A 2 MB comic at $10. Assuming 4 lifetime downloads we get bandwidth charges of $1.20. That’s 12%.
4. A blog subscription that’s 3 MB of data per month. Assuming only 1 lifetime download we get a cost of 45 cents. That’s still 45% of the $1 monthly charge.
5. A newspaper subscription that’s 10 MB of data per month and costs $15. Assuming 1 lifetime download we get a cost of $1.50. That’s around 10%. The cost probably goes up a lot if newspapers try to add lots of pictures.
6. A 3 MB game. Assuming 2 lifetime downloads just the data costs are 60 cents. That instantly means that a game with lots of images like Warlock or Dusk World can never come in at $1 or $2. If it were priced at $2 just the bandwidth charges would be 30%.
7. A 2 MB magazine with lots of images. Assuming 1 lifetime download we get a cost of 30 cents. If the magazine is $2, then 15% is instantly going to bandwidth costs.

3G wireless downloads were a magical, low-cost solution for a $10 book - because the book was just 500 kb in size.

3G wireless downloads turn into a bit of a nightmare when we consider content that’s large in size or low in price.

People everywhere are noticing this. Publishers Weekly talks about the struggle for comic book publishers (found via Teleread) -

… while there is a nascent market for comics on e-book readers like the Kindle and B&N’s color device, the Nook, Amazon’s recently introduced digital “delivery fee,” charging publishers 15 cents per megabyte to transfer a book’s file to the Kindle, has forced some comics publishers to rethink using the Kindle platform.

 

While novels are text-based and unlikely to run up a delivery charge much over $0.02, graphic novels have a much higher bandwidth, and could be forced into a lower payment/royalty rate and higher list price because of their file size, directly because of these Amazon fees. 

Publishers Weekly mentions there is a list available from Amazon that suggests minimum pricing for books based on file size -

1. A file over 3MB can’t be priced below $2.
2. A file over 10 MB must be priced at $2.99 or higher.
3. This is in addition to the requirement that you have to price a book between $2.99 and $9.99 to get a 70% cut.

This is all news to me. However, it does make sense. Amazon must pay for bandwidth used - it can’t really afford to sell 10 MB books for $2 if the bandwidth charges for a single download come to $1.50.

Things are exacerbated by the fact that customers have no concept of bandwidth charges

The real dagger is that all this is invisible to Kindle owners.

No one, that includes me, makes the mental jump that the content (book, newspaper, game) has to pay for the cost of bandwidth. We’re used to paying for the data separately. We compare Kindle content prices with content prices outside the Kindle Store - where we are paying for the data separately.

If you get a magazine subscription online you tend to contrast that with the Kindle price – without factoring in that you pay a separate fee for your Internet connection. If you get a $1 app in the iPhone App Store you don’t factor in that you pay AT&T for a data plan.

There’s no way Kindle content can be competitive – unless it’s really small in size.

Does Amazon even realize this is a problem?

That might seem like a strange question. However, it’s worth asking because Amazon’s current approach seems to be to fix a symptom and not the actual problem.

What’s the real underlying problem?

That there’s a 15 cents per MB data charge.

What is Amazon fixing – Not sure. It just seems that Amazon is passing on the bandwidth charges to content creators and asking them to factor that in when pricing their content. That’s not a solution.

Neither is it a solution to ‘educate’ Kindle owners about data charges. No matter how much you tell them about it, they won’t like it. You can’t really say – You pay $20 per month for the Internet. Just divide that across the 100 things a month you download and turns out that it costs you 20 cents per download.

With the Kindle the download charges show up in the content price and that makes content seem more expensive than it really is.

The real solution would be to eliminate the download charges.

Basically, content could be clubbed into two categories -

1. All content where download charges are less than 5% of the price. This content would use the ’free’ 3G. 
2. All other content. This content would come with the option to be downloaded via your PC. In return you would get lower prices. You could still get this content via ‘free’ 3G, for a higher price that included download costs.

Of course, we haven’t looked at one very important option.

Does WiFi provide an easy solution?

I think it does.

In fact, we could look at every scenario where there is a high data charge, and figure out how to use a combination of WiFi and PC downloads to eliminate the download charge. Please note that when the download charge is less than 5% of the price we would just default to 3G.

1. Kindle WiFi owners – Should never have to pay any download charges.
2. International Kindle Owners – Should have the option to use WiFi or PC download software. Then they would no longer have to pay the international premium.
3. Subscriptions – WiFi option, PC download option. Let users plug-in their Kindles to their PCs - the subscription would be downloaded via download software and would be transferred over to the Kindle.
4. Large Size Books – WiFi option and PC download option.
5. Apps and other content. WiFi only.

It’s a choice between two inconvenient options -

1. Make everything 3G by default. It’s easier but everything costs more. In some cases, a lot more.
2. Make everything that’s not small in size a WiFi download or a PC download. It’s not as convenient but it’s cheaper.

Let Kindle owners make the call. For every person who’s willing to pay $3 per month for automatic newspaper downloads via 3G, there will be a few people who’d rather choose WiFi or PC download and not pay AT&T that $3 per month.

Amazon has to figure this out quickly

The download charges are leading to a lot of problems - higher prices for content that has a larger file size, higher prices for anything that has images, content providers having to choose between raising prices and skimping on images, Kindle owners feeling prices aren’t as good as they could be.

It all points to one single underlying problem – AT&T’s ridiculously high download charges. 15 cents per MB is $153 per GB.

The high download charges are something only small-sized $10 books can afford. For everything else in the Kindle Store the download charges are an albatross. The only effective solution is to get rid of download charges or bypass them.

Why should users and content creators be paying 15 cents per MB to AT&T? If WiFi and PC downloads are available, why not take advantage of them?

iPhone and iPad allow reading apps – But they don’t allow eBook Stores to be embedded in reading apps. This seems negligible – but it’s not.

Let’s explore why finding a direct path to customers is the biggest challenge eBook stores face.

Kindle locks out most other ebook stores

Amazon has the smartest strategy when it comes to rival eBook stores -

1. It doesn’t allow ePub. 
2. It doesn’t allow ANY DRM’ed format - other than its own.
3. It doesn’t allow any generic eReader apps.

That leaves only the Kindle Store, and eBook stores that will sell DRM-free ebooks in one of the formats supported by the Kindle.

How do you tap into the Kindle owner market?

You go to the browser, or you go DRM-free.

The first is difficult because the Kindle’s browser isn’t the most straightforward. Imagine trying to run an eBook reading website inside of that. Google has the right idea – It just doesn’t have the required browser capability on the Kindle.

Going DRM-free is something most Publishers aren’t going to buy into. We only have a few smaller Publishers, like Baen and O’Reilly, trying it.

For the moment, the answer to ‘How do you tap into the Kindle owner market?’ is – You don’t.

Nook allows ePub stores – But You have to Fight the Power of the Default

B&N plays ‘open, but not really open’ very well -

1. The default ebook store on the device is the Nook Store. It provides 60 second downloads (via 3G or WiFi on Nook, via WiFi on Nook Color). It’s ALWAYS the path of least resistance.
2. In theory – every ebook store has a shot at Nook owners, provided it uses ePub. In reality – B&N just has to be as good as every other store, or not too much worse, and it will always win out, due to being the default option. 
3. B&N has an upcoming Nook App store, and it isn’t going to let Kindle for Android, or any other ebook app/store, in.
4. Any books you buy from the Nook Store, have special DRM on top of the Adobe DRM. Which means that you can’t read them on another eReader. So you’re locked into staying with a Nook. B&N does exactly what Kindle does – it locks you in via the books you buy. It just manages to do this in parallel with supporting ePub.
5. B&N segregates books you buy from Nook Store, from all other documents. So, for books you buy from other stores, you can’t do things like placing them on your home page.

Add up all the ways in which B&N makes it inconvenient to use any other store, and the smart way it creates lock-in by adding its own DRM on top of Adobe DRM, and it becomes extremely tough to compete with the in-built Nook Store. B&N’s pretend-open system is close in effectiveness to Amazon’s totally closed system.

How do you tap into the Nook owner market?

There’s the tantalizing prospect of simply providing DRMed books in ePub format. However, you have to make your store more convenient than the Nook Store. Therein lies a big problem – Nook Store is on the device itself, and there’s no way your store can get on the device.

You could hope Nook owners root/hack their Nook, and get your eBook store’s Android app. You could price your books lower, and hope the lower prices get Nook owners to buy books from your store. However, those are both long shots.

All B&N has to do is ensure Nook Store is as good as your store, or close.

There’s no clear answer for how you could tap into the Nook owner market. Cutting prices, introducing a new paradigm like free books, trying browser-based books – These are all things worth trying, and they are all things that are quite likely to fail.

Kindles and Nooks might not be worth fighting for

If a user buys a Kindle or a Nook, and you run an ebook store, you might as well consider that reader a lost customer.

For Kindles, there’s no way in.

For Nooks, the easiest path leads to the Nook Store. You’ll have to expend so much effort to overcome that natural advantage, you might not be able to make any money.

Which leaves us with all the devices that do let in ebook apps and ebook stores.

Being an eBook Store on an iPhone, or Android Phone, or another semi-open device

It’s important to understand the context.

All these devices are not letting in your ebook store because they are open. They are letting in your ebook store because they want people to feel there are lots of options. Which will make more people buy their device.

So, they let you in, and then they set-up their own stores as the default option. You again have to fight the power of the default. In addition, you have to fight Kindle Reading Apps and Nook Reading Apps.

Does it sound like fun yet?

Since the App Store providers want to make sure that you stick to doing your role (providing choice so that people buy their device), and don’t steal too much of the profit, they put in restrictions such as no in-app purchases unless you give them 30%.

Which means – Not only are you competing against the default option, you also have to send your users to the browser to buy books. That’s two strikes.

Luckily, it’s possible to work around these two restrictions. Kindle for iPad, Nook for iPhone, and other apps like Stanza have shown that it’s possible to work around these restrictions and succeed.

The Tiny Window of Opportunity

It’s a tiny window of opportunity - but it’s there. If you can fight off the power of the default, and the inconvenience of in-browser purchases, you can sell your ebooks to all these casual readers buying phones and tablets.

the simple option – Build Your Own eReader

Strangely enough, the simplest way to find a direct path to customers is to create one yourself. Build your own eReader.

Take Kobo. It might not have the fanciest eReader – However, it’s managing to sell it to a decent number of people. All those people are then presented with the Kobo ebook store as their #1 option. It’s actually a very decent store, and it finally gets a fair (well, slightly more than fair) chance.

Compare that with the headache of trying to do one or more of the following -

1. Getting browser-based books to work on the Kindle.
2. Convincing Publishers to release DRM-free books.
3. Competing with the default Nook Store on the Nook.
4. Going with other devices, and a user experience where books are read in an app, but bought in a browser.
5. Going with other devices, and fighting off the default store, the Kindle Reading App, and the Nook Reading App.

It’s so much simpler to sell readers your own eReader, and ensure your eBook Store gets a fair chance.

In the world of eReaders, outside of the little Kindle clique, lie a variety of stores and eReaders that mingle freely. Amongst that milieu one store has begun to attract quite a lot of attention.

Stumbling on to the Kobo Store

Yesterday, the Kobo Store had a one-time use 50% off coupon – a coupon you could use on one out of a few hundred books. Today, it has a 20% off coupon valid on 40 or so books.

On top of these offers is this enticing claim -

Between 13th and 26th December, spend over $35 and get a 45% off coupon. Spend over $25, and you get a 35% off coupon.

Let’s get this straight – First, there’s 50% off, then there’s a coupon for another 35% off?

That does sound very compelling.

There are also a few other things working in Kobo Store’s favor.

Wonder of wonders – The store isn’t restricted to the US. Nor does it make things difficult – In fact, the store is reasonably easy to search through. Plus, unlike the Nook Store, its books work on any eReader. Finally, it uses the mildly awkward Adobe Digital Editions to authenticate books for devices, and not custom-made, super-awkward software like Sony Reader does.

It’s also a civilized store – not asking eReader owners to do anything untoward like enter special passwords.

3 Magic Words

Bought a book. Now reading it on the Nook Color.

There was one magic moment. The book bought from the Kobo Store had this in the ‘Book Info’ section -

Permissions set by the publisher

Allow viewing: on any device.

It’s such a strange contrast. My Kindle books are permanently welded to the Kindle, and to Kindle Reading Apps. My Nook Books are similarly intertwined with B&N’s offerings. Yet, here is a Kobo book that doesn’t discriminate.

3 magical words - on any device.

All it takes is one purchase

After that one purchase everything changes -

1. Kobo has my credit card information now.
2. Reading a Kobo Store book makes me a Kobo customer.
3. The realization hits home - There is an option other than hacking Nook Color to run Kindle for Android. 
4. The 3 magic words are now stuck in my subconscious.
5. It becomes apparent that the Kobo Store is pretty decent. Prices for some books are higher than Kindle Store, and the range is less – But it’s decent.

That 50% sale paid off with this eReader owner – Kobo becomes the default store powering my Nook Color.

The Nook Store won’t even let me buy books. My US credit card has a Canadian address, and that’s not good enough for B&N. Understandable – given all the profit they’ve been making recently.

Kindle Store won’t let me read books on Nook. Hacking an eReader just to run Kindle for Android is a bit extreme – especially when Nook Color works really well as is.

Kobo Store is a valid threat to Kindle Store

Kobo eReader lacks punch. It also lacks personality, features, infrastructure, and any hint of excitement. It’s the type of device Steve Jobs has nightmares about. He probably screams – Not a Big Blue Button. For the love of God. Off with his head! - in his sleep.

Yet, Kobo eReader has the support of a Kobo Store that is quite impressive.

Here are a few of the Kobo Store’s advantages -

1. The books work on any eReader that supports ePub.
2. You can take your library with you if you switch devices.
3. It works internationally. Not sure which countries other than US and Canada.
4. It’s very aggressive with discounts and coupons.
5. It’s managed to incorporate a lot of free books from Smashwords.
6. It’s a decent store – easy to navigate, clear and clean-cut, beginning to get user reviews.
7. There are good Kobo reading apps for other platforms.

Perhaps most importantly, it doesn’t make any big, huge mistakes. There are some horrendously priced books – However, that has more to do with the kind and benevolent Agency Model.

Amazon has no option but to sell ePub editions to eReader owners whose eReaders support ePub

Here’s a suggestion from K H Acton -

What if Amazon SOLD ePub books along with its proprietary format, but limited the Kindle to the proprietary format. Then it could keep Kindle customers using the best ebook store around AND open the best bookstore to the ePub readers.

It’s an absolutely brilliant suggestion.

Look at the threat Kobo Store poses, and the suggestion is not only brilliant, but also timely. It would be a proactive move that would prevent Kobo Store from eating up the entire non-Kindle market.

1. With Sony’s terrible Reader Store, and B&N’s ‘ePub that works only on Nook’ fiasco, the Kobo is the clear #1 choice.
2. If Amazon lets that status quo remain, soon Kobo will be making a ton of money from eBook sales.
3. That would put Kobo in position to mount an all-out attack on Kindle’s lead – in both eReaders and eBooks.
4. If Amazon sells books in ePub format, to eReader owners whose eReaders support ePub, it becomes the best eBook Store for them instantly. That prevents Kobo from being their #1 option.
5. It would curtail the Kobo threat - Before it became a huge one.

Amazon can ill-afford to let a single rival store become the eBook source for all non-Kindle devices. Kobo is threatening to do that with its excellent, ‘works on any device’, ebook store.

Will Amazon make a proactive move to fend off Kobo?

Kobo Store is likely to grow into a big and dangerous threat to the Kindle Store. You could argue that Kobo isn’t yet a real threat – that Amazon should wait 2 years to see if Kobo or another ePub store manages to unite the ePub hordes.

However, there’s no point in launching ePub support for non-Kindle eReader owners after another store has established itself. The real value would be in making the move now.

Amazon has shown a tendency to let its rival eReaders and rival stores make moves first – PDF support, books in the browser, touch. It waits for the move, measures/estimates the impact, and then counters. With Kobo, it’s a different situation – Kobo is wrapping up customers and becoming stronger. Amazon needs to be proactive – It needs to stop the rise of Kobo before Kobo gets to the stage where it turns into a monster.

What might Kobo do to become a bigger threat to Amazon?

Kobo can actually do a lot -

1. Match Kindle Store on ebook prices across the board.
2. Release an eReader that looks like it’s at least trying.
3. Target Nook and Sony Reader owners more aggressively.
4. Keep expanding its international reach.
5. Find a way to sell to Kindle owners.
6. Release a Kobo Tablet.
7. Target Nook Color owners very aggressively.

Perhaps the biggest opportunity for Kobo is in targeting all the new Nook, Nook Color, and Sony Reader owners. Kobo’s already good enough to become the eBook store of choice for non-Kindle eReaders – It just has to get the word out.

The threats to Kindle and Kindle Store keep multiplying

Kobo is the latest addition to a long list of significant threats to the Kindle.

Nook Color is currently the single biggest threat to the Kindle – ever. Nothing else is even close – Nook Color makes the iPad seem like an overweight sumo wrestler trying kickboxing.

Kobo Store seems a distant threat – However, it’s almost as dangerous as Nook Color. Kobo Store can sell books to every single non-Kindle eReader. It might end up being the one eBook store that rules the entire ePub world.

The other threats we keep hearing about. Yet, they aren’t the ones Amazon should worry about first. Nook Color and Kobo eBook Store will end up being the biggest challenges for the Kindle.

Reasons that NewsLabs is a worthwhile idea

The Collective Idea

It’s akin to a blog network where each blog is an individual journalist’s work and brand. The real power is the collective aspect -

1. Successful News Journalist A can send his readers to successful journalist B or even to upcoming Journalist C. 
2. There are economies of scale – hosting, coding, marketing, design, and most other costs.
3. Specialization and lessons can be shared.  

There is an incredible amount of power in bringing together a few hundred very good journalists and linking them to each other.

Journalists can focus on their core competency and build their brands

The collective idea and the support of NewsLabs means that journalists can focus on creating great content -

 The idea is that the writer writes and NewsLabs does everything else: Ad sales, “community management,” promoting the work on Google, Facebook, Twitter et al, and so forth.

Being able to focus on their core competency and the opportunity to build out their own brand gives journalists a lot of freedom and motivation to create quality content.

On their end NewsLabs have to figure out some way to become more than just a producer of journalistic brands that newspapers snap up or that leave for their own sites.

The Community Idea

If NewsLabs takes this in the direction of KK’s 1000 True Fans and let’s the journalist’s true fans financially support the Journalist this could be all the revenue they need.

The other aspects are not very efficient - it sounds great to build social networks and forums and let people socialize but people don’t spend money on either.

They said in an interview that they have 40 journalists registered and another 100 interested.

Taking Journalists with proven experience and Focus on Quality

It’s good to see that the first three journalists they have are all very experienced. They also seem to be focused on quality journalism and quality content and not just mirroring the content factories.

Founders have technical skills

Both the CEO and CTO have solid technical skills. It’s essential because otherwise news companies just get fleeced at all levels by technically adept companies.

Quick summary

There are three very good ideas here – Journalists as Brands, Brands organized into a Collective, Focus on Quality.

Some of the obvious candidates to be added are – Selling Content and not something else, 1000 true fans, Customers of Good Intent, Choosing Good Channels, Setting themselves apart.

It’s a model that could not only work but also scale up remarkably well.

Unfortunately, there are currently a lot of flaws in NewsLabs’ model. Mostly to do with the fact that NewsLabs are still too tied up with models that worked in the past and models that never worked.

Reasons that NewsLabs might fail

They want to make money off of things other than content

Their focus is on making money off of things like Job Boards, Advertising, and making money off of the Brand.

This is a really flawed idea we’ll discuss later – Why give away what people come to you for and what they are willing to pay for?

At some level it’s depressing that even News Start-ups don’t think their content is worth enough to ask customers to pay for it.

To make things worse want to sell their content to news sites – which is madness. That content is their identity and differentiator.

Infinite competition and lack of differentiation

Media Memo point this out -

My concern is that the help NewsLabs says it can offer doesn’t solve the real problem:

            The economics of Web publishing are brutal, and in most cases they only work on a Google (GOOG) or Yahoo (YHOO)-size scale.

Media Memo are right – The Web is brutal and there is a lot of competition.

It’s basically two points – move away from the web, don’t position yourself as news content. Let’s start with the latter.

Having News in the name and being ‘news’ oriented

The biggest mistake any content company could make is position their content as zero-value news.

Breaking News is better than News. Editorials and Op-eds are better than news. Analysis and Reports are better than News.

Anything is better than news which has been devalued to zero.

Lack of adequate funding and they’re taking too little

It’s a start-up and it’s going up against giants. They’re taking only 20% of revenues when the revenue is amorphous things like advertising and branding related things and job boards.

How are they going to survive?

They should go find a billionaire who’s willing to give them $10 or $20 million to test out their idea over 5 years. Not VCs and other profit-driven entities who just want to make money and don’t care about what, if any, impact the survival of journalism has on democracy (or whatever reasons journalists have for being overworked and underpaid).

Plus journalists are desperate – Take another 30% and put that into building great infrastructure which helps both the company and the journalists.  

It’s focused on hiring journalists

Along with the good (experience, skills, committment) they get the bad – All Journalists are trapped in the failing business model of newspapers.

All those beliefs are going to be impediments as they try to work with new models. Even journalists that have worked for 3 to 5 years will have lots of trouble letting go of what they know. The ones who’ve worked for 20 years are going to really, really struggle.

The perception (and perhaps the reality) that laid-off Journalists are being targeted

If it’s about branding and quality they need to hire the very best.

The whole giving away content and making money off of something else mistake

Let’s consider a few of the models that have worked for newspapers and news sites -

1. Selling content.  
2. Giving away content and selling ads in print. 
3. Giving away content and selling ads online. 
4. Selling content and ads and classifieds.
5. Giving away content and selling Classifieds.
6. Selling breaking news and breaking financial news.
7. Selling exclusive analysis and in-depth reports. 

There were always one of two key things – selling content or having a captive audience that had no option other than to consume what was attached to the content (classifieds, advertising). With the Internet the second is gone. That only leaves content.

There are three big mistakes news sites make when they try to make money online -

1. Assume they can trust another company or even users to pay for what content is worth.  
2. Assume that they can no longer sell content. 
3. Assume that users MUST or WILL do something in return for the free content they get.

Users are coming to the site for content. The entire Internet is built on content. Quality content is what drives everything - even low quality content is propped up by quality content.

Newspapers have to start looking at sites that actually make money off of content and the ways that money is made from content. Very, very few of those models involve giving away content for free.

If you can’t sell your main product you need to find another line of work

Newspapers and news sites and journalists need to face the grim truth – If their news content isn’t good enough to get users to pay for it then they need to quit.

It’s very simple -

1. Create great quality content and sell it.  
2. If you can’t get people to pay for your content – Quit and do something else. 

Quality content costs money to make and sooner or later people are going to realize that and start paying for it. By choosing a ‘content has no value, let’s trick users into something else’ model news organizations are killing themselves and the value of content.

It’s best for everyone if all the ‘give away content’ companies die out so we can move to a ‘pay for quality content’ model sooner.

Why Should Content Be Free?

The post makes some very good points -

1. Video content costs money to produce, to distribute, and to consume. 
2. Ad based free video consumption is very unlikely to work. He mentions that even YouTube and Hulu can’t get ads to work and are trying to move to subscription models - that’s a very compelling argument.
3. Cost of distributing video over the web might get cheap but it’ll never be free.
4. Internet being an open platform does not mean all content on it should be free. 
5. Successful content models (like MLB.tv) often come from companies that never gave away their work for free.

The two really good points the post makes is that there is such a thing as a distinction between quality content and non-quality content and that content creators need to stop giving away content.

The central question that the post asks i.e. Why Should Content Be Free? is never really addressed. So we’re going to take a look at a lot of reasons that content is free.

Reasons it’s easy for Content to be Free

While content shouldn’t be free there are some very good reasons it’s so often free on the Internet.

It’s in the best interests of users (in the short term) for content to be free

The absolute biggest reason it’s easy for content to be free is that it really benefits users.

Users are in a million different ways preferring free content and encouraging content creators to make their content free -

1. Free content is watched more, downloaded more, and so forth. 
2. Users lavish love and praise and thanks on people giving away their content training them to do it more and more.
3. Some users actually buy the content after they get it for free which is additional incentive.
4. Take any user feedback survey – There’s always a pressure to lower prices and to choose advertising based models.

Content creators need to understand that users will always choose free if presented with the option and if not presented with the option will try to push content creators in that direction.

In users’ minds content should be free because it’s better than content being paid.

It is easy for users to rationalize what’s in their best interest

It’s really easy for users to choose a free, non-sustainable model and start believing that it is sustainable and actually better for content creators than a paid model because they can rationalize it.

That’s why some readers aren’t happy with $10 ebooks, why some users feel advertising (which they don’t click on) should subsidize everything, and why a lot of users feel very comfortable using free offerings and turning a blind eye to the consequences for content creators.

It’s very easy to train people to believe something that benefits them. A lot of the time people do this themselves.

It’s in the best interests of Internet Companies (short term and long term) for content to be free

If users are consuming content and not really clicking on ads it doesn’t really hurt the advertising company if it earns money based on number of times the ad is shown.

For them content is their raw material. The packaged product with content and advertising is their product sold to users and they get paid by advertisers based on the number of people who view their product. It’s in their best interest to have content be free so they get their raw material for free and have more and more of it to package and give to users.

Except for Google and the search engines every advertising company (to be precise 90% of them) are either preying on naive users or preying on naive advertisers.

Most of the Internet benefits from free content.

The House always wins

The Internet is very similar to a casino where you are under the illusion that you can come in, give away free content, sell ads against it, and make more than you could have otherwise.

Regardless of what content creators pretend – the truth is that they only chose to give away content and depend on advertising because they were greedy and thought they could make more money this way than they would by selling content.

However, just as in a casino, the House always wins. The Internet won, its users won, and its companies won – content creators got rewarded for their greed.

Internet companies are a lot smarter than content creators

Individual content creators and content companies just aren’t as smart as Internet companies.

If you consider the evidence -

1. Using a platform that other companies can make money off of.
2. Making content creators work for free for the promise of big rewards.
3. Making people work for free for the reward of virtual rewards and things like karma.
4. Making people pay for virtual gifts.
5. Convincing content creators that advertising would support them.
6. Taking up all the branding.
7. Taking up all the goodwill so users are thankful to Internet companies instead of content creators.

The Internet companies thoroughly beat content creators and played them for fools. Content creators have no room to complain because they weren’t motivated by anything other than greed and fear.  

We have platforms that gather and rank low quality content

A great example of how Internet companies are smarter than most content creators is the creation of platforms like YouTube and Flickr.

Let’s walk through the logic – creators and users come up and upload content, the platform offers you the invaluable service of sharing that content, users consume the content and rank it. At that point you have a huge amount of content – the best of which is easily accessible and can compete against paid content.  

Then the platforms sell for tens of millions of dollars (Flickr) or billions of dollars (YouTube) and the new owners try to monetize off of advertising or use the goodwill generated to make money in other ways.

What do content creators get? A share of advertising, recognition, happiness. That recognition and small share of advertising is enough for most content creators.

Why? 

There is desperation and some content creators are already earning nothing

If you’re a hungry upcoming content creator or just hungry for people to appreciate you then getting a platform to reach other people is enough.

Most people uploading content on the Internet are earning nothing from it – It doesn’t matter to them that they will continue to earn nothing. For them it’s all upside because they might get recognition and they might become very popular and they might get a contract down the line and a TV show.

That hope is enough. Without the platform they didn’t have any hope – Now they do.

There is infinite competition and free sets you apart

A big reason content creators are desperate is that there is a sea of competition and it’s almost impossible to stand apart.

If you’re free in a world of $1 content you win – you’re noticed, you’re easier to try out, and you get more exposure. Of course, soon everyone is at $0 and then the advantage is gone – However, no one is going to go back to $1 now.

It’s only the big, successful content creators that are able to move to alternate channels – TV, movies, published books, and so forth.

Everyone else continues in the sea of $0 infinite content.

Free is the path of least resistance

Content creators are lazy – they’ve spent all their effort and psychic energy and time on creating the best content they could.

Which would you choose -

• Work really hard on marketing and positioning and reaching customers and follow-up and sell content for $5 each.
• Put your content at $0 and let it do the marketing and hope somewhere down the line you figure out how to make money. 

For nearly all content creators Free is the path of least resistance.

It’s like all the books that claim you can become a millionaire by working 10 hours a week. They are so lovable and cuddly because it’s what we secretly hope for. That’s exactly what Free and Advertising supported Free are – they are incredibly alluring because they promise you’ll never have to sell anything and you’ll not have to work hard.

Free means you don’t face rejection

A related big benefit of free is that you don’t face rejection. If your content is free and 1 million people consume it for free you can lie to yourself you’re a success.

If you placed it at $10 you might have had to face the truth that only 27 people bought it.

The Advertising supported model myth is alive and well

This comes back to the fact that it benefits advertising companies, the Internet and users that content creators believe they’ll eventually make back their money from advertising.

It’s very, very attractive because of a few reasons -

1. The Path of Least Resistance concept we discussed above.  
2. Search Engines have shortcuts that take users where they want to already go. Those shortcuts are misinterpreted as ads by content creators who don’t realize that users want to go to their content – They are not going to leave that delicious content and go somewhere else.
3. It’s a mass delusion. Everyone else believes it.

The biggest reason it’s so attractive is that content creators are often greedy and think they can get things easily or get more than they deserve.

Content Creators and Advertisers think people are still as naive as TV audiences in the 1950s were

It’s easy to believe we are still in the 1950s when running a few TV advertisements would get 30% of the population into cigarettes or make them believe Product X is better than Product Y because shiny, happy people like Product X. It created generations of consumers and a consumer culture that is still alive and well.

The Internet is very different – The stuff that actually kills users online is far more advanced and powerful than advertising. It’s things like virtual games and companies pretending to help people. On the Internet advertising is an ancient trick that no longer works – Most users have learnt to totally ignore advertising. 

It’s basically two things – A lot more people are smart and immune to being manipulated. The people who are still vulnerable have far more powerful forces pulling their strings.  

Content creators just aren’t in a position to trick people with advertising.

It’s really hard to get people to pay for content on the Internet

It’s important to understand that content creators are trying to beat the house by asking people to pay for content. The whole system is set-up to get content creators to give away their content - the only way out might be to get off the Internet.

The Internet’s ethos makes free seem natural

There are beliefs on the Internet like ‘Information Should Be Free’ and ‘Ecosystems should be open’ that would get laughed at in the real world. On the Internet these make perfect sense because the Internet is built on a university ethos of free sharing of information.

There are 95% content consumers and 5% content creators. If you think of the Internet as a democracy it’s easy to understand why the content consumers are able to push the notion that free content is the most natural thing in the world.

There are always people who really do want to give away their content

The problem is exacerbated because there really are people who totally believe in the free concept and give away their content for free.

Lots of people give away their code and programs for free.

It’s hard to sell content of any type when there are some people who are giving away the same (or similar) content for free.

There is a huge amount of low quality free content

It’s also tough to sell content because there is so much free content.

Let’s say a movie studio is trying to sell a movie online. Its competition includes -

1. YouTube. 
2. Free music videos. 
3. Indie movie makers who share their movies for free.
4. Pirates.
5. People who get into theaters with handy cams and then upload low quality movies.  

Out of dozens of options the official movie download is just one and it’s the only one that’s paid.

There’s less demarcation between quality and non-quality content

Lots of reasons why the gap is lesser now -

1. By giving away content, content creators have devalued their content.
2. The huge number of options make it difficult to distinguish quality.
3. The platforms, and even the whole Internet, handicaps quality content on purpose.
4. Users handicap quality content on purpose – they want it free so they pretend they don’t value it.
5. Content creators have been shifting resources from creating quality content to things like trying to fool people.

In a sense content creators have been doing everything possible to prove their content isn’t worth much including giving it away free and lowering its quality.

Lots of people give away content to sell other things

Lots of companies have begun to use content as a happy hour free drink that gets people in the door and gets them to buy other stuff.

Doctor’s websites have free health guides. Travel sites have free travel magazines. Authors have free short stories to sell their novels. It just goes on and on and on.

If you’re selling content and everyone else is giving away content to sell other things you’re in trouble.

Some companies use free to gather customer goodwill and customer information 

Equally as problematic are companies that give away free content to create goodwill.

All the major email providers are free – Why are they doing it?

Because they want to sell their other products, they want to create loyal customers, they want to safeguard their other products, they want customer information, and lots of other reasons.

Facebook is in the same bucket – It’s using free to get customers into the system and get their information and sell them to advertisers. 

Some Internet Users have a lot more time than money

For better or worse, there are a lot of people online who have 5 hours to kill and $1 or less to spend. They are ALWAYS going to choose free and cheap content.

If you have an absolutely great book that costs $10 and takes 3 hours to read you’re never going to make a sale to these people. Ever. It gets even worse when you think of countries where people have even less to spend.

One reason a lot of Internet users have very little money to spend is that they paid so much for their Internet device and their Internet connection. They expect content to be free and so do the ISPs and Computer manufacturers - Luckily for them content creators are happy to be stupid and play along.

Some Internet Users don’t care about quality of content

Perhaps the biggest reason it’s difficult to sell content is that there’s always the 80% of users who don’t care about quality.

Take books – 20% or so of the population actually pay for books and make up 80% of the book purchases. The other 80% is happy to read TMZ and Perez Hilton and pretend they read books.

There’s little hope for Paid Content

Content creators took a system that was built to exploit them and fed themselves to it.

You have 10 years of training, companies that want to exploit you, users that want content for free, and a set of rules and beliefs that are against you.

Why would you still try to sell content online? Why would you be super stupid and give away content for free?

The big threat is that if you don’t have free content users will go away somewhere else.

Is it really a bad thing to lose ‘users’ that don’t pay you anything, don’t even click on ads (which would generate a semblance of income), and after all of that curse and deride you for trying to get money for content that ought to be free?

Perhaps the highlight are these parts -

Let’s divide content into two broad groups.

• Content without well-defined form (Formless Content ^{(Fig. 1)})
• Content with well-defined form (Definite Content ^{(Fig. 2)})

Formless Content can be reflowed into different formats and not lose any intrinsic meaning. It’s content divorced from layout. Most novels and works of non-fiction are Formless.

 I only see one obvious ruleset:

• Formless Content goes digital.
• Definite Content gets divided between the iPad and printing.

This is a marvellous way to divide Content.

By explicitly stating that Formless Content is unaware of its container, and that most novels and works of non-fiction are Formless, Craig Mod has put forward the case for eReaders.

The only thing linking us to formless content contained in physical books is our attachment to the experience of reading the physical book.

eReaders are perfect for Formless Content

The Kindle and the current crop of eReaders are perfect for formless content -

1. The screen almost matches the comfort of print on paper.
2. The ability to change fonts and line spacing and column width makes them almost better than books. 
3. You get the speech to text function (for books where Publishers haven’t disabled it and for your own documents).
4. The battery life lasts for weeks.
5. You can read the screen in sunlight.
6. They are light – lighter than hardcovers.
7. The screen size is close to ideal - a good mix of readability and portability.
8. You can read and hold them with one hand.
9. You can search through books and search the Internet (well, on the Kindle you can).
10. You can add notes and highlights (although it’s still basic).

There are still improvements to be made – better note taking, page numbers, and so forth. However, the gap between eReaders and physical books is small enough for eReaders to be very good substitutes.

Then you throw in the advantages – 24/7 store, wireless downloads, store loads of books – and eReaders edge ahead.

75% or more of book sales are going to be eBooks in 5 to 10 years

The majority, perhaps the vast majority, of books are formless content. The nostalgia we have for physical books is easily satisfied by having a few physical books. eReaders are already beginning to edge physical books and keep improving.

With time the advantage eReaders and eBooks will have over physical books – in terms of price and convenience – will cause physical book sales to become secondary to eBook sales.

There will only be a few reasons left to choose physical books -

1. When you need definite content – content that has a form linked to the physical book. 
2. When you want to relive your fondness for physical books.
3. When you want decorations for your room or house.
4. When you want to signal what you are reading to others for status or courting.

Add those together (and whatever reasons you come up with) and you still can’t justify buying a majority of physical books.

Look at what’s happening – Publishers already see that eBooks are going to eat into physical book sales and are trying to kill eBooks.

iPad eBooks and Hardcovers will become luxury items

When you see Publishers get excited about everything they can do with the iPad or talk about the beauty of the physical book they’re basically expressing the same thing -

1. An ability to create definite content.
2. The ability to make things pretty and special and high-end.
3. The opportunity to make more money.

If you take most books they don’t need anything beyond the words. They don’t need high-end aged paper and they definitely don’t need video snippets and voice overs.

If you take most readers they don’t care about anything other than the words. They don’t care that for $10 extra they can get leather covers or that for $5 extra they can play a game based on the book’s characters.

Publishers like to paint an image of everyone reading high-end hardcovers and $20 iPad eBooks because they want to make more money. Readers aren’t buying it – they just want to read and want good value for money.

A book is built of words – everything else is external.

The battle between simplicity and profit

Plain text books on eReaders and paperbacks are enough for most people – The words are in there and there’s a simplicity and the focus is on what the author has written.

Profit dictates that Publishers drum up random reasons for charging more – that they pretend that including a leather cover or an iPad game makes the book better. It doesn’t – it creates an illusion that we are getting more value but we aren’t. There are obviously some books that need definite content and need a physical hardcover – However, not every book does. In fact, most books don’t.

The simplicity of books that are pure text and priced well is always competing with the profit motive to make books complicated and dress them up and price them ridiculously high.

We all know who’s winning out so far. We all suspect that simplicity and low prices are going to win out in the end. We just don’t know how much bloodshed there’s going to be in the interim.

Scribd’s strategy for Kindles, eReaders and mobile devices

Scribd’s strategy can be summed up as ‘become the universal, open platform that works across all eReaders, phones, and mobile devices and turns the devices into dumb pipes’. It can be broken into a few key parts -

1. Focus on the long tail of content. Also include published books. Get Publishers to offer DRM free books.  
2. Target all Devices – Create Apps for phones and devices that allow apps. Use features like ‘Send to Kindle via email’ when Apps aren’t possible.
3. Let readers access and read content from Scribd on all the above devices without letting device manufacturers get in the way.  

Scribd are also switching from PDF to ePub (courtesy FT’s article on Scribd and DocStoc) and that definitely helps.

It’s a pretty bold strategy and Tammy Nam of Scribd has this to say -

We’ve flipped the equation. So much of the conversations so far have been around the e-Reader device, but we’re flipping it to say the device itself is irrelevant.

It’s about the content and giving people the ability to consume that content on whatever device they have.

The Device itself is irrelevant?

That’s the last thing Amazon and Apple and eReader companies want to hear.

How far along is Scribd in its plan for global domination?

It’s interesting to see where Scribd is -

1. 10 million documents.  
2. 50 million visitors a month (allegedly). 
3. Tie-ups with Publishers including Random House and Simon & Schuster. 
4. They have a screen-shot up showing a ‘send document to mobile device’ feature that caters to owners of the Kindle, Nook, iPhone, Android phones, Windows Mobile phones, Blackberry, Palm, Jetbook Lite, Entourage Edge, and iRex. 
5. It has tie-ups with Onyx (maker of Onyx Boox) and Interead (maker of Cool-er).  
6. It introduces an app for iPhone and Android devices next month.
7. Guardian UK mentions that a Scribd Kindle app and an iPad App are also in the works.
8. It’s also adding APIs (courtesy Connected Planet Online) -
   

   Scribd is also making public a series of APIs, the Scribd Open content Platform for E-Readers and mobile Devices (SOPED), which gives device manufacturers the ability to integrate Scribd’s search, social and other functionality into their devices.

   It’s first customers for the platform are Interead and Onyx International.

There is, however, a pretty big roadblock on Scribd’s path to world domination.

The DRM Free Flaw in Scribd’s strategy

Here’s a comment from Scribd’s CEO -

Adler said that platform-agnostic selling was a significant step forward that would not only encourage more people to buy ebooks, but could also convince publishers to sell unprotected files, rather than encumber their products with anti-piracy locks

Don’t really see how anything Scribd is doing could convince Publishers to sell unprotected files. Their CEO’s suggestion is almost laughable given Scribd has been one of the biggest sites for online piracy - As soon as DRM Free versions will be sold they’ll show up on Scribd for free download.

If the whole strategy is based on convincing Publishers to sell their books without DRM then Scribd might have a long wait in front of them.

On the other hand if they go with ePub and Adobe DRM then they could reach a lot of devices (although not the Kindle) and not have to wait for Publishers to ditch DRM.

How can Kindle and other devices avoid/survive attacks of this sort?

As a device, platform, or infrastructure provider it’s always interesting when enemies attempt to turn you into dumb pipes.

There are a few powerful ways to avoid this -

1. Keep out enemies – Either by not allowing apps or by having strict controls. That’s why there’s a strict review process for iPhone Apps. 
2. Use the power of the default - People tend to go with the first, obvious choice. Having the Kindle Store as the default store means people usually buy from the Kindle Store (provided price and range are good).
3. Match enemies on price and range. This is especially powerful when used with the power of the default.
4. Make alternatives difficult to use. ePub stores aren’t a threat to the Kindle because few people have the time to convert ePub documents to Kindle format.
5. Integrate the store with the device in multiple ways.
6. Fight the ‘open’ and ‘free’ concepts by highlighting the limitations and pointing out that it’s just strategy.
7. Highlight the amount of effort and investment that goes into creating a device and platform and making it succeed. 

At many levels it’s a war of perceptions.

The company selling books is trying to make the eReader company seem irrelevant and closed and evil and if it can convince readers of this it has a better chance. It shouldn’t be that hard for people to see that building and maintaining a device and a platform is much more valuable than writing software that exploits that infrastructure and turns it into dumb pipes. Unfortunately, people are easily swayed when their self-interest aligns with that of the ‘open, benevolent’ company.

You have to ensure that readers’ self-interest aligns more closely with you.

Channels of Good Intent and Why Scribd is bad for books

Scribd is popular for pirated books, it’s supported by advertising (as opposed to content sales), most of the documents on it are free, there is no DRM, it’s focused on random document sharing, and there is no quality bar for documents that are shared.

Perhaps most importantly Scribd has attracted users who don’t intend to pay for books and it reinforces their behavior. It’s basically a channel of terrible intent.

Contrast that with a channel like the Kindle or Nook that has people who’ve paid $259 for an eReader, where people are paying $9.99 for books, which has most of the best books, which has DRM to ensure piracy doesn’t get out of hand, and comes with a good supporting platform.

These are channels of very good intent.

Fundamentally, companies like Scribd are trying to pollute clean, good channels with their 10 million free, low quality documents just to be able to make some small amount of money. There’s no grand plan to help reading or make things better for readers. Scribd is just taking free, low quality content (hidden under fancy terms like ‘long tail of books’) and swamping readers in the hope that it works out.

This post will do exactly that – with a focus on how newspapers are mistreating eReaders and Content.

Newspapers tend to blame their tools

For a long time newspapers (and magazines) grumbled about eReaders -

1. They had no color and no video.
2. The business model was terrible as part of revenue went to bandwidth and Amazon – allegedly leaving only 40-50% for newspapers.
3. People weren’t paying as much for high quality content as they should.

Then we got the iPad with color, video, and a 70% cut for newspapers.

Guess What? Newspapers still aren’t happy and still think the arrangement and prices aren’t good enough.

Newspapers always find a way to blame extrinsic factors

Newspapers seem to live by the creed of ‘It’s not me, it’s you’.

They are creating top-notch content, they are serving customers excellently, they’re running the most efficient businesses around, and they’re perfect.

It’s the fault of the Internet and Amazon and Apple and readers and blogs and other sites that newspapers are struggling.

Consider an example -

Newspapers got greedy and tried to entice people in via free content and then sell them to advertisers.

Keep in mind that it wasn’t about making things easier or better for customers since they didn’t focus on additional services for paying subscribers.

Unfortunately, newspapers got taken to the cleaners by aggregators and other Internet companies that understood how to really work with the Internet.

How did newspapers react - Did they work on figuring out the Internet better? Did they try intelligent new models?

No. They are still blaming others and the New York Times keeps drumming up their paid content plan in 2011. One year on the Internet is the shift from MySpace to Facebook and NY Times thinks it’s doing a huge step by implementing a paid content wall one year in the future.

No matter what happens newspapers find something external to blame.

Newspapers don’t see content as their calling card and eReaders as their allies

In addition to blaming extrinsic factors newspapers are making two additional critical mistakes -

1. They are viewing customers as their product instead of content. They want to sell readers to advertisers instead of selling content to readers. 
2. They see channels of good intent (iPad, iPhone, Kindle) as their enemies and not as allies.

Newspapers produce content, not cattle for advertisers

Consider the focus newspapers have had -

1. We want to get lots of readers in the door and then sell them advertising.
2. We want to get customer information so we can develop marketing plans and sell that information to advertisers.
3. We want to give away content free and entice readers who we then monetize.

Were newspapers producing high quality content for readers to buy or were they providing trusting subscribers to advertisers?

Not only was newspapers’ approach morally dubious it was also strategically myopic -

1. They had no expertise with the Internet.
2. The real money-making point is before reaching the content – not after getting to the content page. 
3. Newspapers had little expertise in advertising online.
4. Their brand and trust was gradually transferred to aggregators and other sites.
5. They didn’t invest enough in quality content.

Newspapers thought they could fool people into clicking on advertisements and instead they got fooled into devaluing their content and making other companies rich.

Newspapers are attacking their only allies – channels of good intent

On the Internet readers expect free and almost never pay for subscriptions. Yet, newspapers continue to give away their content for free online - searching for an El Dorado of advertising revenue that hasn’t materialized in 10 years.

On the Kindle and iPhone (and soon on the iPad) readers are willing to pay $10 to $15 a month. Yet newspapers want to exploit those good customers by pushing for higher prices, lesser features, and poor service.

What would a smart company do when choosing between a $10 a month channel with little piracy and a free channel with loads of piracy?

Pick the former and close out the latter.

What are newspapers doing?

They are sabotaging the good channels – Instead of turning the Kindle and iPhone into channels will millions of paying subscribers they want to limit them and strengthen the Internet which is a channels of tens of millions of non-paying non-customers.

Newspapers ought to be written for users, read by users, and bought by users

Advertising based newspapers cannot work

We’re no longer in a world where people are gullible and you can sell them to advertisers.

The only companies succeeding with ads are search engines and they don’t really run ads. ‘Well targeted, relevant ads’ are code for ‘Taking users where they already wanted to go’.

That’s why you never have ads for tractors when someone searches for shoes. That would be advertising and that would not work.

The only people actually clicking on ads are the ones that don’t realize they’re clicking ads. Everyone else is clicking text ads that don’t look like ads and aren’t really ads – they’re shortcuts to where users already want to go.

Newspapers need to go back to their original purpose

Newspapers started off as news and analysis written for, read by, and bought by users.

Somewhere along the way they turned into elaborate, hidden advertisement machines. Instead of trying to find great content for readers they started focusing on creating great consumers for advertisers and companies.

All we hear from newspapers is how they would like things to be, how bad things are for them, and what helps them.

Customers have become a secondary concern. Is it any wonder that customers are turning away from newspapers?

Newspapers should consider selling content

Newspapers are all excited about Skiff because it allows for ads.

Think about the ridiculousness of that -

1. Advertisement supported newspaper sites haven’t worked online.
2. The Kindle and iPhone have customers gladly paying for content.

Yet, newspapers want to focus on eReader devices that allow ‘rich advertising’.

No user wants ‘rich advertising’ – newspapers have become so delusional that they’ve forgotten users want quality content and nothing else.

Newspapers’ core competency is supposed to be content. Yet they want to try everything possible to devalue it and give it away while they try to sell ads – something that they quite frankly suck at. Most importantly – it’s something that doesn’t help their customers.

Why don’t newspapers just focus on creating and selling high quality content?

However, what about short stories and serialized books?

The Atlantic started selling short stories for the Kindle priced at $3.99 each at the very end of 2009. It’d be interesting to see what their sales numbers were. The surprising thing isn’t that The Atlantic is trying this out – it’s that every other magazine and Publisher isn’t.

There are a lot of reasons why short stories on eReaders make a ton of sense.

Shorter Attention Spans make short stories a better choice for eReaders

Once eReaders expand beyond people who have been reading books constantly they’re going to run into people with much shorter attention spans -

1. People who are trained by TV to expect breaks every 10 minutes and to watch shows of 30 to 60 minutes.  
2. Users who’ve played video games all their life. 
3. Internet surfers who switch between websites every 10 minutes.

It’s not going to be easy to take these people from 5 to 15 minute increments of attention to 4 to 5 hour periods. Much better to ease them into reading with 30 to 40 minute short stories.

Short Stories require less of a time commitment

There are a lot of times when you’d rather read a short story than jump into a full-blown novel -

1. When you’re a bit tired.
2. On your commute.
3. At the doctor’s office.  
4. When you don’t have that much time.
5. When you can’t afford to have a book eat up half your sleep time.

A short story is less commitment and that makes readers likelier to jump in.

Choosing between a 4 hour book and a 2 hour movie is a tough decision. Choosing between a 2 hr movie and a 30 minute short story – not as much.

Short Stories require less of a monetary committment and lead to more profits

There’s lots of research across various fields to show that people spend more when it’s smaller figures -

1. $5 a month subscription software is easier to sell than a $50 software license.
2. Small plate restaurants get people to spend more.
3. $1 apps get bought without thinking.

The idea is a rather simple one -

1. Sell your content in smaller pieces for a lower price.  
2. Set up a subscription to get regular payments.

In either case you end up reducing the friction in the purchase process and also get customers to spend more overall.

Publishers and Authors do it to a certain extent with book series – However, there’s a lot more that can be done.

Imagine $5 a month subscriptions to top authors where you get a quarter or half a book every month. Imagine $2 and $1 short stories from top-notch authors.

Short Stories are easier to create

Publishers are constantly whining about how risky books are and how much time and effort and money goes into each.

Well, instead of a huge novel that takes 2 years and hundreds of thousands of dollars, try out a short story that takes 3 months and $10,000.

It’s a good way to test an author or a concept or even a particular eReader’s customer base.

Even in terms of profitability it might be better to sell 4 short stories a year for $2 each than to sell one novel every 2 years for $10. More sales, less risk, more customers, and you can consistently deliver stories to your regular readers and fans.

Why aren’t indie authors trying out more short stories?

All the indie authors selling their books for $1 or giving them away really ought to consider novellas and short stories.

They take less time, you can get quicker feedback, you can send out 4-5 a year, and even if you sell them for $1 you can make decent money every year.

Readers too are more likely to finish a novella as opposed to your version of War and Peace.  

So … Will we see a revival of short stories?

There have been sporadic claims that short stories are coming back and sporadic successes – We are yet to see either a constant stream of short stories or a regular set of successes.

It’s bound to happen though.

The more you get eReaders and eBooks into the main stream the more we get readers who don’t have the time or the attention span for reading entire books.

Think about all the pursuits that are popular today – blogs, social networks, social games, games, movies, TV. Except for books and some of the games all the others are bite sized – 15 to 30 minutes, sometimes less.

Reading needs to address that and 4 hour books aren’t the way to do it.