Kindle & Kindle Paperwhite under pressure from Kobo & Kobo Aura

The hard times B&N is facing with its Nook HD and Nook HD+ tablets seem like they will greatly strengthen Amazon’s position as the #1 eBook, eReader, and Reading Tablet seller. Good times for Kindle Fire HD and Kindle Paperwhite and the Kindle Store.

Well, not so fast.

It seems Kobo is growing rapidly. Additionally, Kobo’s new Kobo Aura HD eReader is doing well. This puts pressure on Amazon to really deliver with Kindle Paperwhite 2.

Kobo morphing into the type of Competitor B&N should have been

Nate at The Digital Reader shares some figures from Kobo’s Strong Growth Press Release -

  1. Kobo’s revenue was up 143% in 2012. In Q1, 2013 it’s up 98%.
  2. Kobo now has 14.5 million customers worldwide. That’s pretty impressive. Perhaps even more impressive is that Kobo added 2.5 million customers just in the last 3 months.
  3. Hardware sales increased 145%.
  4. Half of the new Kobo Aura HD sales were to new customers. No details on precise numbers, but Kobo Aura HD accounted for 27% of Kobo devices sold at retail.
  5. Rakuten is Kobo’s Parent Company and it’s very strong. Rakuten’s Internet Services Division generated $3 billion in revenue in 2012. Rakuten’s Internet Finances Division generated $1.5 billion.
  6. Rakuten has very strong international presence and solid partnerships. As opposed to B&N, which is US-centric, Kobo is World-centric.
  7. Indie Author titles now account for 10% of Kobo sales (by unit sales, not revenue).

It’s really interesting to see these figures. Keep in mind that B&N’s Nook division sales were actually down in Q4, 2012. While a lot of that is due to poor device sales, it still makes Kobo’s 143% growth last year, and its 98% growth in Q1, 2013, really, really impressive.

Adding 2.5 million new customers in the last 3 months is very impressive too. Of course, these are registrations, so we don’t know how many are paying customers.

Nevertheless, a 14.5 million customer market makes Kobo an important eReader and eBook seller.

Does this really put pressure on Amazon and Kindle?

Yes.

Normally, B&N would have been the one to raise the bar by releasing a HD screen eReader. This year, perhaps because of its disastrous holiday season, B&N wasn’t able to.

That would normally have meant big gains for Amazon. It can keep selling Kindle Paperwhite while preparing a solid Kindle Paperwhite 2 for the Holiday Season.

However, Kobo stepped up and shipped the Kobo Aura HD.

This does a few things -

  1. The ‘new shiny thing’ in eReaders is now a HD resolution eInk screen. Kindle Paperwhite is now seen as ‘last year’s model’.
  2. People start assuming a Kindle Paperwhite 2 is around the corner. Lots of them delay their purchases. Regardless of when Amazon planned on releasing Kindle Paperwhite 2, it’ll have to revisit those plans.
  3. New customers to eReaders hear about Kobo Aura HD. If Kindle Paperwhite 2 were available, new customers would just gravitate to it because ‘Kindle = eReader’. But they hear ‘HD’ and want to check out the Kobo Aura HD.
  4. Internationally, it puts a lot of pressure on Amazon because Kobo has strong presence internationally. Amazon is well aware of the HUGE advantage of becoming the ‘default’ eReader and ‘default’ eBook Store in a country.
  5. Amazon now has to anticipate moves by both B&N and Kobo. Amazon’s strategy so far has been to let B&N take a shot, and then counter. That’s what it’s done with the Nook Color, the Nook Simple Touch, and the Nook Glowlight. If it suddenly starts seeing 1 release a year from B&N, and 1 release a year from Kobo, Amazon will have to adjust its strategy. Things become especially difficult if Kobo does spring releases and B&N switches to Summer or Fall releases.
  6. It ensures there is at least one strong contender left standing. If B&N were to quit the eReader market in 2013 or 2014 or 2015, Amazon would be left with no competition if Kobo weren’t around. Amazon might see a strong #2 fall away, and be promptly replaced by a stronger and more dangerous #2.
  7. It helps Kobo capture more market share. This will become very important in the long run. A strong #2 with 20% market share and a strong #3 with 10% market share is much more dangerous than having just a strong #2 with 20% market share. Things like economies of scale and word of mouth and network effects really come into play once you get to tens of millions of customers.
  8. Kobo can push harder worldwide. Outside of the US and UK, people are neither in love with Amazon to an incredible extent, nor are they already invested in the Kindle ecosystem. For those people, it comes down to better device and better ebook store and better service. While Kobo’s service is supposedly atrocious, their device is now shiny and pretty and HD. Kobo also has a good ebook store in most countries.

Kindle Paperwhite is no longer the ‘newest and best and default’ eReader. Well, it might still be best. We don’t know how well Kobo Aura HD works.

However, Kindle Paperwhite definitely isn’t ‘newest’ and it definitely doesn’t have a HD screen which can be used as a marketing differentiator. If enough people start thinking ‘HD’ eInk screens are a big deal, then Kindle begins to slip from its status as ‘the first eReader you think of when someone says eReader’.

What could make Kobo even more dangerous?

Buying Nook Media. That’s what.

If Kobo can get Nook Media for $1 billion or so, it would instantly go from approximately 10% market share to 25% to 30% market share. It would also give it a brand that’s strong in the US.

Worldwide, Kobo could leverage the larger economies of scale to really push for market share.

Finally, you can be pretty sure that a LOT of Nook owners would choose Kobo over Kindle. Kobo can read their existing Nook Books. Kobo supports ePub. Kobo isn’t Amazon.

Could B&N remain a strong #2 based on just Reading Apps?

It’s very unlikely.

B&N might exit Reading Tablets and eReaders. The former seems likely, and the latter seems a possibility.

It’s quite conceivable that B&N stops making devices altogether. That it tries to fight the Book Wars using Reading Apps. There are a few problems with this approach -

  1. Users of a device tend to go with the ‘default’ Reading App. Kindle Fire owners use the in-built reading app. Apple users tend to use the iBooks App. And so forth.
  2. When users don’t go with the ‘default’ reading app, they go with the ‘Best’ or the ‘Most Well-Known’ Reading App. Best Reading App varies wildly by platform. B&N isn’t ‘best’ on any platform except Nook devices. ‘Most Well-Known’ tends to be Kindle.
  3. Outside the US, B&N has no mind share. Most people won’t even know B&N’s Nook Reading Apps exist, or for that matter B&N. On the other hand, if B&N were able to sell devices internationally, users would gravitate to the in-built default reading app (which would be B&N’s own).
  4. Serious Readers want a device focused on reading. The more focused a device is on reading, the less likely it is to have ‘lots of Reading Apps’ and/or the option to ‘choose a Reading App from another ebook seller’. Kindles don’t have reading apps from other stores. Kindle Fire allows sideloading, but Kindle doesn’t allow anything.
  5. On another company’s device, you get taxed and/or get treated like a third class citizen. Apple forced Reading Apps to remove their ebook stores from the app, and also to remove their ‘buy’ buttons. It wanted a 30% cut. Amazon would simply never allow B&N’s Reading App in its Kindle Fire Store. Google could simply hide the B&N Reading App by making it hard to find.

Unfortunately for B&N, there’s only one way to keep fighting the Book Wars – to have both reading apps for other devices and your own devices (both Reading Tablets and eReaders).

It seems inevitable that Kobo will become the Pepsi to Kindle’s Coca Cola

Kobo is making a lot of good aggressive moves. It is fighting in Reading Tablets and eReaders. Its first few efforts have been terrible – However, it has been improving gradually, and at some point of time it’ll catch up. With the Kobo Aura HD it has really put the pressure on Kindle and Nook. Now Kindle Paperwhite 2 and Nook Glowlight 2 have to deliver.

As it grows likelier and likelier that B&N is going to leave Reading Tablets and eReaders. As Kobo keeps improving and pushing and expanding worldwide aggressively. It becomes more and more likely that Kobo will become the #2 eBook seller and the #2 eReader seller worldwide.

Once that happens, Amazon will find that Kindle vs Kobo is a much more dangerous fight for it than Kindle vs Nook. Rakuten is an Internet giant conglomerate (much like Amazon), and knows how to fight the Digital Book Wars much better than B&N.

By 2015 we might have Amazon wishing B&N had done better with Nook, and stayed around as an annoying but contained #2. Kindle vs Kobo is going to make Kindle vs Nook seem like a walk in the park.

Was Apple the Sole Architect of the Agency Model?

The Justice Department is painting Apple as the ringleader of the Agency Model. So says The New York Times.

Quick Reminder of the Agency Model.

  1. 5 of the Big 6 Publishers and Apple got together to introduce something called ‘The Agency Model’.
  2. It was seen by some as an attempt to exploit ereader owners and make them pay a ridiculous price for ebooks ($12.99 to $14.99).
  3. It was seen by others as an attempt to slow down the rise of eBooks and eReaders. Perhaps it was both.
  4. Update: From the articles today it seems it might have been Apple’s attempt to stall Amazon’s rise in eBooks.
  5. It led to a long stretch where we had really ridiculous prices for newly released ebooks.
  6. It led to a lot of pain for readers as they either didn’t buy the over-priced ebooks or waited until they were below $9.99. Those that did pay also suffered as they had to pay really high prices.
  7. It has also led to the current situation – Where lots of Publishers think it’s OK to introduce new releases at $12.99 and $13.99 and $16.99.

The Agency Model, in short, was the biggest threat to the rise of eBooks and eReaders. It’s only due to the fact that eBooks had already gathered too much momentum that it failed. Also helping it fail was the strong resistance by readers. Measures by readers such as the $9.99 boycott – which boycotted any books over $9.99 – played an important part.

Now, based on the picture The Justice Department is painting, it seems the architect of all of this malarchy may have been Steve Jobs and Apple.

Here’s an email from Steve Jobs to James Murdoch of News Corporation -

“Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.”

It’s pretty clear that, at least in this case, it’s Apple that’s trying to convince a Publishing Company into the Agency Model.

The Justice Department certainly thinks so -

According to the Justice Department, that e-mail is part of the evidence that Apple was the “ringmaster” in a price-fixing conspiracy in the market for e-books

It’s also quite clear that Apple wanted to block Amazon’s rise -

the government said that Apple and the publishers conspired to fix e-book prices as part of a scheme to force Amazon to raise its e-book price from a uniform $9.99 to the higher level noted by Mr. Jobs in the e-mail, which publishers wanted. That, the department said, resulted in higher prices to consumers and ill-gotten profits for Apple and its partners.

The Justice Department is really going after Apple. It’s settled with The Evil 5 Publishers and now Apple is the sole defendant -

Apple is the only defendant left in the lawsuit after five publishing companies — Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster — agreed last year and earlier this year to settle the charges.

This is really interesting. Wonder why Apple didn’t settle.

Power Corrupts? Apple strong-arming Publishers?

The Justice Department paints a really crazy picture – One where Apple is not only sweet-talking Publishers into joining the Agency Model Mafia, it’s also threatening and coercing them.

Here’s a gem -

In July 2010, Mr. Jobs, Apple’s former chief executive, told the chief executive of Random House, Markus Dohle, that the publisher would suffer a loss of support from Apple if it held out much longer, according to an account of the conversation provided by Mr. Dohle in the filing. Two months later, Apple threatened to block an e-book application by Random House from appearing in Apple’s App Store because it had not agreed to a deal with Apple, the filing said.

After Random House finally agreed to a contract on Jan. 18, 2011, Eddy Cue, the Apple executive in charge of its e-books deals, sent an e-mail to Mr. Jobs attributing the publisher’s capitulation, in part, to “the fact that I prevented an app from Random House from going live in the app store,” the filing reads.

Who would have thought that Steve Jobs set up the Agency Model. All this time we might have been accusing Publishers of being greedy – they might just have been Apple’s Puppets. If all this is true, and that’s an IF at this stage, then it pretty much means the Publishers got conned/threatened/cajoled/blackmailed into joining the Agency Model. That they were just Apple’s puppets to use against Amazon.

Also, remember when Publishers and Amazon were engaging in feuds and books were going missing. Well, Apple had its hands in that too.

the documents quote Mr. Dohle as saying that an Apple executive counseled him that the publishing company could threaten to withhold e-books from Amazon to force Amazon to accept the higher prices.

This is very different from what I had thought the situation was.

Are we to Believe that Publishers were merely Sheep? Being used as Pawns by Apple to fight Amazon’s lead in eBooks?

That’s certainly the picture that The Justice Department is painting.

If this happens to be true, then my (non-legal) thought would be -

Couldn’t every single person who

  1. Had to pay more than $9.99 for a book.
  2. Had to wait for months for a book’s price to drop to $9.99.
  3. Had to skip a book because it was $9.99.

Couldn’t every single person in these three categories sue Apple for money lost and anguish caused?

Surely, if we waited 1 entire year to read a book by our favorite author because we weren’t willing to pay $13.99. Then we wouldn’t be very happy with Apple if Apple were the ringleader. Apple who hatched this entire plan? Apple who convinced Publishers and even threatened them into joining? Apple was the cause of our wait and discomfort?

Apple, inadvertently, tried to destroy the entire rise of eBooks and eReaders.

This bit from Reuters clearly shows Steve Jobs and Apple didn’t care about readers -

 the Justice Department said that Steve Jobs, Apple’s CEO at the time, “conceded the price-fixing conspiracy” when he told his biographer that Apple had “told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that’s what you want anyway.’”

‘Yes, the customer pays a little more’. Who cares about the readers?

Who cares if readers have to shell out more money. Who cares if some person has to wait an entire year to read a book they really, really would have loved to read when it was released.

Amazon might come out smelling of roses. Consider this part from The Washington Journal -

Apple said Amazon also considered the agency model and spoke in detail to publishers who at one point offered an exclusive arrangement that would cut out Apple.

Wonder what happened there. Did Amazon not take the exclusive arrangement because it wanted to do the right thing? Because it thought the Agency Model would kill eBooks?

Summary of What we Might or Might Not know about the Agency Model

So, it’s all a bit convoluted -

  1. Apple may or may not have started the idea of the Agency Model.
  2. Apple seems to have played go-between and facilitator between Publishers.
  3. Apple threatened at least one Publisher and perhaps that played a part in that Publisher joining the Agency Model.
  4. Steve Jobs’ solution involved ‘the customer paying more’. If true, it shows a striking lack of empathy for readers. Which would make sense given Steve Jobs though ‘people don’t read any more’.
  5. Amazon was offered something akin to the Agency Model and an ‘exclusive’ and either declined (for what reason?) or something else happened.

If the accusations made by The Justice Department are correct, then it paints a really bad picture of Apple as ‘Instigator of the Agency Model’, ‘Bully that threatened Publishers with dire consequences, including not approving Apps, if Publishers didn’t join’, ‘A company that doesn’t care about readers and customers, which suggested price increases for customers that went beyond reasonable prices for ebooks’.

It’s not a pretty picture. If The Agency Model really does turn out to be Apple’s brainchild, that would mean a lot of trouble for Apple. Beyond the obvious PR damage, it might open up Apple to a lot of lawsuits from a lot of people very upset about having to pay extra for ebooks. From people angry they had to skip/delay reading books they really wanted to read. It’s also not the right thing to do. Perhaps Apple’s moral antenna was not receiving the right signal. You’re just holding it wrong, Apple. It’s supposed to point to Heaven, not Hell.

Are we at the inflection point of maximum vulnerability for eBooks?

In some ways the current stretch seems like the exact opposite of end 2009.

End 2009 – eReader sales were assumed to be less than a million, eBook availability was limited, eReader prices were pretty high (around $299), eBook market share was only around 3% to 4%. For all practical purposes, there was absolutely no threat from eReaders and eBooks.

Now (Early 2011) – eReader sales are supposed to be over 10 million, eBook availability has more than doubled in the last 12-16 months, eReader prices are down to $139, eBook market share is 10% or higher. There seems to be little doubt that eReaders and eBooks are here to stay.

Just as End 2009 seemed dreary and harmless to Publishers, the current period seems to be bright and shiny and full of promise for eReaders and eBooks.

However, we only have to look back to what happened in end 2009 to see how dangerous complacency can be.

The End of 2009 Inflection Point

A few things happened at the end of 2009 that dramatically changed things -

  1. B&N announced the Nook. Nook’s feature-list looked like a prioritized list of Kindle customer pain points with PDF support, library book support, and a lot more. It even came in at a lower price.
  2. Amazon matched the price and some of the features.
  3. Amazon ended up selling perhaps a million Kindles in the holiday 2009 stretch. B&N sold perhaps half a million Nooks.

That holiday season was the foundation for everything that has happened since. The shift was so huge that by early 2010 Publishers were jolted out of their complacency and introduced the Agency Model. They even partnered up with Apple to weaken eReaders.

Basically, Publishers’ complacency through most of 2009 came back to haunt them.

End 2009 became one of the most important inflection points in the rise of eBooks and eReaders.

Are we at a 2011 Publisher-created Inflection Point?

There are three interesting things happening -

  1. The Big 6 Publishers are finally putting up a united front. All of them are now on The Agency Model – which becomes significant since they do have access to the majority of the literary talent.
  2. By using $15 and $13, Publishers have, in effect, bifurcated readers into ‘people who can’t wait/people who don’t mind spending more’ and ‘people who boycott higher prices’. They might not have shifted everyone to $13, but they’ve shifted enough people to be able to stick with the Agency Model for the short term.
  3. eReader and eBook companies are creating problems for each other. Apple is attacking eReader apps through its 30% tax, Publishers are forming partnerships with smaller retailers like Diesel Books and Scribd, Google is throwing its hat into the ring. Each new competitor is giving Publishers an opportunity to create one more Divide and Conquer crack. Each new competitor is confusing readers.

It’s an interesting theme – Publishers are uniting and they’re helping create divisions amongst everyone else.

Will eBooks be able to make it across the big divide?

Now, the Big 6 Publishers are all on the Agency Model. That means 60% of the ebooks sold, and perhaps a similar percentage of the best titles, will all be $13 at launch. It also means they will stay at $13 for 3 to 9 months after release.

A lot of people were buying eReaders because of cheap $9.99 books. If eBooks are almost as expensive as hardcovers the main reason to buy a Kindle or a Nook Color is gone?

Most of the advantages of the Kindle and the Nook Color aren’t obvious until you start using them. 60 second downloads doesn’t fully register until you actually get a book you want within a minute. No one’s been able to explain the benefits of eInk in language users understand – You have to read on it to get it. The list goes on.

For the rest of 2011, and perhaps for all of 2012, potential eReader owners will have to decide between -

  1. Buying an eReader and getting Indie titles for $1 and published novels for $13.
  2. Sticking with physical books and getting hardcovers for $14 and $15.

60% to 70% of the time the books people will want, will hear about, and will be waiting for – will be the $13 ebooks. Those can’t really compete effectively with $14 hardcovers.

Will indie authors be able to make up the difference? Will the FTC or some European Government strike down the Agency Model? Will published authors start leaving Publishers?

Something has to happen for eReaders and eBooks to regain their huge value for money advantage. The Agency Model has completely destroyed it.

We tend to underestimate inertia

The 10% of readers who have tasted freedom, who own eReaders, and who know all about lower prices and indie authors are not going to quit ebooks.

However, what about the 90% who don’t realize all the benefits?

Any reader who is new to ebooks needs a huge impetus to push her past her inertia. It’s only then that she makes the switch to eBooks. That impetus has mostly been provided by low-priced books. The belief/reality that you would save a lot on books was a big reason so many people jumped fearlessly into eReaders and eBooks.

If eBooks are $13 at launch, the ‘cheaper books’ motivator is gone.

eReader companies will have to find some huge benefit that replaces the value/motivation ‘books at $9.99 or less’ used to provide. It can’t be something you only understand after owning an eReader. It has to be something potential eReader owners instantly see the value of.

It’s hard to imagine what the answer could be - Perhaps a free collection of back list titles and public domain titles. Perhaps some completely new feature. Perhaps a $79 eReader. Perhaps a $10 per month all-you-can-read subscription plan.

We are at another crucial inflection point - Random House joining the Agency Model has triggered it. How eReader companies and readers react will determine whether this is the inflection point that will take eBooks to 50% or whether this is the inflection point that stalls eBooks at 20% of the market.

The Kindle, libraries, subscription plans, and the big transition

Thanks to Joe Siegler and Roger Knights for writing in about a very interesting post by Mark Cuban on How Amazon will/should/could probably do a Netflix for ebooks. Thanks to Kitty for a link to The 26 loans limit on ebook lending by libraries.

These two posts are linked by the fact that they cover opportunities to take advantage of the big transition in Publishing.

Transition = Opportunity for everyone to get a larger share of the pie

The reason there’s so much discussion and hand-wringing about ebooks is that we’re in a time of major transition. Everyone thinks they can get a better deal than they had before. Everyone thinks they can get a bigger share of the pie while doing less.

  1. For readers and indie authors, it’s freedom and a revolution.
  2. For readers, it’s an opportunity to get cheaper books and to get more of the type of books they want to read.
  3. For indie authors, it’s a shot at getting read, and at making money. 
  4. For Publishers, it’s a disaster and alien and scary. It’s also an opportunity to cut out lots of costs without lowering prices. It’s a shot at eliminating the used books market and limiting losses due to libraries and lending.
  5. For Published authors, it’s a chance to get a larger share of the profits. At the same time, they don’t want to go from little competition to infinite competition.
  6. For Libraries and Bookstores, it is, unfortunately, a challenge to their very existence. There’s little to no upside.
  7. For new Publishers and for platforms, it’s an opportunity to get a 10% to 30% cut on all of book sales. For them it’s all upside.

For everyone involved, it’s an opportunity to tilt things more in their favor. It’s also a threat as they have to make sure they don’t get destroyed by the changes the transition brings about.

Those last two sentences are the critical one here. And the only ones that matter.

There’s no point in discussing the symptoms and the side-effects of this transition/upheaval. There’s even less point in pretending that any of the interested parties is sacrificing themselves and not acting in self-interest.

Everyone is trying to do two things -

  1. Tilt things in their favor.
  2. Minimize possible damage.

Let’s start by discussing how we readers want to get more than we used to. Or to be precise – a lot more than we used to.

Readers are being just as unreasonable as everyone else

Here are a few things readers want -

  1. Prices between $3 and $10. Roughly half of what they were paying.
  2. The same features as physical books i.e. lending and reselling.
  3. Ability to share between various eReaders on one account, and read on other devices.
  4. All the best things about ebooks i.e. search, remembering your place in a book, etc.
  5. All the physical book benefits – the ones mentioned above, page numbers, etc.

It should be painfully obvious that readers aren’t sacrificing at all. We are getting a lot more than we were getting earlier, and yet we want even more.

On top of getting a lot more value for money, we also want the following – the power to decide the winners, more of the books we want, convenience, ease of use, time savings.

Will readers get everything they want?

Firstly, if it isn’t clear yet to everyone involved, in a truly free market readers will have total control and will squeeze authors and platforms to breaking point. It won’t be intentional - It’ll be a direct result of the fact that authors want to be read a lot more than readers want to read.

This is a fundamental fact that no one can do anything about. It just matters a lot more to authors to be read than it does to readers to read. For an author, readers’ time and validation are more valuable than any money they give. The freer the market, and the closer it reflects reality, the higher the chance that authors will be paying readers to read their books.

Yes, there will be bestselling authors whose work readers pay for. However, those will be more than balanced out by newer authors and less well-known authors paying readers to give their book a shot.

Strengthening this will be a belief that every author has – I just need to get 1,000 people to read my book. Then word of mouth, and their reviews, will make me a bestseller.

At some level, it’s best for authors if there is some artificial barrier. With ebooks available the only barrier left is a real one, i.e. quality of books. However, there needs to be some artificial barrier to add on top of that. Indie authors will eventually figure out a way to deliver high quality at low cost. At that point, everything will break down.

If some company doesn’t figure out a really solid artificial barrier that prevents every author from giving out their potential masterpieces for free – Well, everything will go to zero. Except perhaps books from an exceedingly small group of ‘bestselling authors’.

Switching over to Libraries

There are two competing things here -

  1. Libraries and the crucial role they play - Equality, education, reading, and so much more.
  2. The fact that libraries are the least well-positioned for the current transition.

Should people be upset that Harper Collins wants a limit of 26 ebook loans? Not really.

On the one hand, Harper Collins gets to eliminate the used book market and gets to limit user lending to one or zero loans per book sold. On the other hand, Harper Collins will probably end up earning less on ebooks as prices go down.

The library ebook loan concept is stuck in the middle.

If Publishers get a chance to eliminate that, they will. Perhaps in the long term it hurts word of mouth – However, Publishers don’t know where they’ll be in 10 years. They aren’t concerned about the long term.

It just seems strange that the used book market is gone, lending is close to zero, ebook prices are lower than hardcovers, and in the midst of all of that libraries just keep functioning as infinite loan machines.

Publishers’ job is to eliminate library lending. Not to reduce it, but to eliminate it. It’s the role of libraries and readers to prevent that. It’s that simple. It’s a transition and things could go either way. To pretend that Publishers will care about the greater good or the long-term implications is being naive.

Subscription Plans

Subscription plans are beautiful because they make both parties happy.

  1. Readers feel they can read as many books as they want. They can read any book they want.
  2. Publishers and platforms feel they get a guaranteed amount of money per reader, they get it every month, and they get more money than they would if they sold books individually.

That’s the key thing here – both parties feel they get a better deal. It’s one of the few possibilities, out of all the ones being explored, that results in a win-win situation.

Well, perhaps it isn’t really a win-win but it sure feels that way.

Mark Cuban brings up ebook subscriptions in a very practical way, i.e. by talking about how Publishers could turn their back lists into a source of solid revenue.

Netflix in its brilliance helped content owners monetize their libraries. Their re-runs . All those shows and movies that were gathering dust earning bupkis.

Who else has huge libraries of content that is gathering dust and earning bupkis ? Publishers. Book publishers to be specific.

Who is going to be the first to go to those publishers and offer the biggest publishers 10, 20, 30, 50 million dollars for multiyear rights to freely distribute their books online to E-Readers ?

He suggests that if Amazon offered a subscription plan, where Readers could access any book that was more than 1 year old (and not in the top 20 sales lists) for free, it might get millions of readers to bite.

It probably would.

Mark Cuban also thinks it won’t be long before someone offers a subscription plan -

Bottom line is that it won’t be long before a Netflix or Prime for E-Books happens and takes hold. Someone is bound to do it. The publishing industry needs the money far worse than the movie industry did. Their monetization of their libraries is horrid.

Yes, there are three very simple reasons why ebook subscriptions are bound to happen -

  1. It is perhaps the only big strategic move left. It’s the only way anyone can catch up with Amazon. It’s the only way Amazon can get a further advantage over competitors in an Agency Model era.
  2. It’s very easy to get both Publishers and readers to bite. Publishers get to monetize their backlists, and readers get unlimited books – every book ever published before 2009 sounds amazing. For both parties it seems to be a real deal.
  3. It is perhaps the only sustainable plan left.

The chances are slim that it will be done properly – because Publishers may very well feel killing off ebooks is a worthier goal than making money from their back lists, and because Publishers might not be able to get over their ‘stuck in the 1980s’ attitude.

However, ebook subscriptions will happen and will play a big part in the Book Wars.

Coming back to the Transition

It’s worth keeping in mind, when people cry out about the unfairness of it all and about the death of sacred things, that everyone is just trying to use the transition to get a better deal for themselves.

We have a bunch of very intelligent people on each side, and they’re all trying to outwit each other. Since it’s people in the world of books everyone is able to articulate their arguments very well, and use words to great effect.

The beauty of the arguments doesn’t change the fact that we are all driven by self-interest.

There are still a few win-win solutions possible, and subscriptions are one of the best. Hopefully, someone pulls it off and saves us from the race to zero.

Yet Another Example of Statistical Lunacy

A blog/site called Asymco that calls itself ‘Curated Market Intelligence’ exhibits its special brand of intelligence with a claim that ‘Apps are 15 times more popular than ebooks’.

It throws in a few more gems -

Books are a 400 year old medium. Songs only 100 years old and apps a mere 10.

For three centuries, the book medium had a monopoly on solitary entertainment. The download data shows how quickly new media displace the old. Therefore, in this context, it’s perhaps fair to say that Steve was right three years ago when he said “People don’t read anymore.”

My brain is overwhelmed by the number of mistakes -

  1. Songs are only 100 years old? Guess all the people singing songs through the centuries had no idea they were just imagining things.
  2. Books are a 400 year old medium. Obviously. The Bible really wasn’t a book. Neither was the Aeneid or the Bhagvad Gita or The Art of War.
  3. Apps are a 10-year-old medium. Really? What about software – If you remove the ‘lication’ from application does that make it something else entirely?
  4. Books had a monopoly on solitary entertainment for three centuries. So true. It’s not like you could walk down to the park or watch the waves or go fishing or hunting or paint something or write.
  5. People don’t read anymore. Yes, that would explain why over 10 million people have already bought a dedicated reading device. It makes a perfect paperweight. It would also explain why Apple is trying to kick out other reading apps - it wants to keep the zero book sales to itself.

Luckily for us we can focus on the most beautiful mistake of all, for else we would be stuck here all day discussing Asymco’s special brand of intelligence.

Comparing iBooks sales with iApps sales is lunacy

Surely, even for Apple fans, it’s a bit hasty to assume Apple is the whole wide world.

Apple isn’t the biggest ebook retailer. That would be Amazon. It isn’t the second biggest ebook retailer. That would be B&N. Apple isn’t even the biggest ebook seller on its own platform – that would be Kindle for iPhone.

Apple probably has 5% or so of the ebook market. So, it makes perfect sense to compare 5% of the ebook market with the Apple App Store which is the largest app store.

To confuse things further, a large percentage (somewhere between 10% and 20%) of apps in the App Store are books. What percentage of app downloads are book apps? Perhaps 5% to 10%.

There’s absolutely no way to make this comparison with a straight face.

Let’s make our own illusions

Let’s assume there have been 1.25 million Kindle Apps sold since launch of the Kindle App Store. In the same time period 375 million Kindle books were sold. That means that eBooks are 300 times more popular than apps.

That sounds pretty stupid doesn’t it. Perhaps we should put up some charts to make it look less stupid.

What about time and money?

Surely, we have to figure out amount of time devoted and amount of money spent.

A typical app is $1 or $2 and is discarded after 30 minutes. The 30 minutes average is after including the really good apps that give people 20 to 30 hours of playing time.

A typical song is $1 and lasts 3 minutes. If we assume it’s listened to 20 times, that gives us 1 hour.

A typical books costs between $5 and $10 and takes 3 to 6 hours to read.

How can you compare the three?

If someone pays $20 and spends 15 hours on Stieg Larsson’s Millenium Trilogy – Is that the same as buying 3 Tower Defence apps for $1 each and playing them for 3 hours?

Obviously, in Asymco’s world it is.

Apple sure isn’t behaving like a company that thinks people don’t read any more

Let’s look at all the ways Apple is displaying its strong conviction that people don’t read any more -

  1. Introducing iBooks software.
  2. Touting 100 million book downloads. Note that Apple doesn’t mention whether it’s paid downloads or not.
  3. Kicking out Sony.
  4. Getting ready to levy a tax on Kindle and Nook reading apps.
  5. Getting Random House on board.

Wow – that’s exactly what we would do if we thought a market had no future. Not.

People who don’t read LOVE to pretend that everyone else doesn’t read either

If there’s any sure sign that playing apps all the time, and not reading books, leads to a special type of intelligence – it’s this article by Asymco.

You can imagine the author taking a break from Angry Birds and thinking – Throwing birds at pigs is getting boring, let’s throw some mud at books instead.

It’s not enough for people who are not into books to spend their time developing special intelligence from apps - they also need to demonstrate how apps are so much better, so much more popular, so much more artistic, and so much more fulfilling than reading.

While we readers are wasting our time reading Virgil and Shakespeare (we are obviously under some sort of delusion since books didn’t exist until 400 years ago), the true Renaissance men of our age are discovering new ways of throwing Birds at Pigs. They are floating in the sea of perfection that is apps, savoring these delicious little morsels of special intelligence, while we waste our brains reading and thinking.

It’s rather strange, isn’t it. There are never any articles from people who read, attacking people who play apps. We readers don’t really care – Reality is far too interesting to worry about what the price of corn is in Farmville. But there is something about reading that upsets people who don’t read - something that forces them to constantly attack anyone who reads, and reading itself. It’s almost as if in the midst of feeding candy to monsters and bypassing the laws of physics with birds the appficionados worry that all the unreality they are swimming in might pull them under.

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