Disruptive Innovation

How Music Got Free

25 July 2015

From The New York Times:

In 2007, with the record business well into a seemingly bottomless free fall, Doug Morris, the chairman and chief executive of the Universal Music Group, was interviewed by Wired magazine. He insisted it was a “misconception” that the labels were caught unaware by the digital revolution that had led to compact disc sales plummeting by 50 percent in seven years.

“They just didn’t know what to do,” said the head of the world’s biggest music company, going on to add that there weren’t really any steps he could take to stem the tide of illegal downloads. “We didn’t know who to hire. . . . I wouldn’t be able to recognize a good technology person.”

Morris, then 69 years old, was vilified for his cluelessness, and told by Universal’s parent company that they would soon be expecting his retirement. But in the taut, cleareyed “How Music Got Free,” Stephen Witt writes that it was too easy to make a power player like Morris the punching bag for the business’s collapse. “The decline of the music industry had affected every player, from the largest corporate labels to the smallest indie,” and no one in 2007 — or still to this day — had figured out a truly effective strategy in response to a new paradigm.

. . . .

Rather than arguing the moral pros and cons of “stealing music,” he examines the stories, and the range of motivations, behind individuals who played a part in this upheaval, from the North Carolina factory worker who became the world’s primary source for albums leaked ahead of their release dates to the well-intentioned British college student prosecuted (and exonerated) for running a popular BitTorrent site in an attempt to create a global music library.

Perhaps the most telling journey is that of Karlheinz Brandenburg, an idealistic German professor who invents the MP3 as a near-perfect way to compress audio files, then watches it lose out as the official industry standard format to a less effective but better-connected rival. In a last-ditch effort to keep their work alive, his team releases the MP3 free, and users soon discover its merits. As his technology gets licensed and bundled into different operating systems, Brandenburg receives a cut from each transaction, and grows increasingly seduced by the resulting wealth and acclaim — profiting from the very sort of piracy he once resolutely decried.

Link to the rest at The New York Times

SaaSing The Music Business

19 July 2015

From Hyperbot:

The music business is about to undergo another seismic shift. And Apple’s streaming service is the tsunami that will force the industry to rebuild. Again.

It was around 2005 when I joined Warner Bros. Records as their new head of technology. I was the 20-something-year-old kid who was supposed to have every answer about all things digital. I remember distinctly the first record I worked on. Not because the record was special to me personally (it wasn’t), but because that was when I began to understand how a “record” was viewed by the record labels and the industry.

Back in the day, two things drove music sales: the record itself and the story that publicists told about the record. There were no iTunes pre-sales or bundling the album with new Samsung phones. Everything depended on first-week sales and chart position, as well as how the record rose or fell during the second week. It was a totally anonymous process. Even the record store owners had no idea who was buying. It was a simple transaction reported to SoundScan.

. . . .

By the late 1990s, the music industry had created a pretty successful promotion and publicity machine. First-week sales were driven by meticulously choosing the best single from the record, getting spins on top radio shows, producing big budget videos for MTV, print and TV promotions, record reviews and interviews with the artists. All things served the commerce transaction funnel.

The results of that first week of sales, along with the radio airplay, helped tell the “story.” If the record charted to No. 1 with millions of sales, the news was used to bolster second-week sales, as well as support the second single on radio and MTV and help launch the tour. The story, the sale and the spins — this marketing dance worked over and over again.

When the iTunes Music Store started dominating digital retail sales, and digital started eating into the total retail picture, the record labels didn’t bother to change the process very much. They just got a level of analysis and quantification that they never had before (for Apple, primarily), as well as higher margins.

. . . .

Music industry professionals never thought about loyalty or customer churn, because the month-over-month cycle (or even year-over-year) was less important than release-over-release.

In fact, the record labels often anticipated that an artist would lose portions of their audience with every new release, in exchange for new fans, as people got older, audiences changed and pop culture evolved.

. . . .

While first-generation SaaS (software as a service) providers were taking hold in the enterprise, a few pioneering streaming music services were making their debut. As Napster fell victim to legal battles, Rhapsody emerged in 2001 as one of the first legal providers of subscription-based music. At that time, the record labels viewed Rhapsody and others subscription services as “just another” source of revenue to support physical retail sales.

When retail sales in Wal-Mart and Target were strong, streaming was a nice additive source of revenue. In the waning days of physical retail sales, iTunes and Amazon propped up the entire music business, and streaming continued to be a small additional source of revenue.

It appears now that the scaffolding is falling away for the digital music sales cycle.

The problem? The music industry is still organized to support the traditional retail and digital sales cycle. As subscription services become the dominant source of revenue for recorded music, the entire business will have to shift gears to survive.

It’s no longer about pre-sales and Week 1, it’s about nurturing an audience month-over-month to drive loyalty and increase returns on a streaming service platform. All of the promotion dollars and methods to support Week 1 have to be retooled for a longer cycle, up to 6 months in many cases.

Link to the rest at Hyperbot and thanks to Glinda for the tip.

Authors United Epic Fail-O-Rama

14 July 2015

Joe Konrath considers the latest whinings to the Justice Department from Authors United, the Authors Guild, the American Booksellers Association and the Association of Authors Representatives:

More nonsense from Authors United.

. . . .

This is a long one, because their letter was so long. And so, so stupid. Tomorrow I’ll spank the Authors Guild, which did something semi-helpful by blogging about ebook royalties, and then stomped on that good faith with awful opinions about piracy, and by endorsing the following nonsense:

Dear Assistant Attorney General Baer:

We believe that Amazon has gathered unprecedented market power over the world of books, which many experts have asserted make it both a monopoly in its role as a seller of books to the public and a monopsony in its role as a buyer of books from publishers. We believe Amazon has been misusing that power in many ways, and we seek the benefit of your office to address this situation.

Amazon is not a monopoly, via Time Magazine:

While Amazon is certainly a large and growing online retailer, even a liberal interpretation of its share of the domestic e-commerce market puts the figure at less than 50%, which is well below the 70% threshold courts typically require as proof of monopoly power. (…) And even if a court found Amazon to possess monopoly power — as one could somewhat realistically claim it does in the e-book market — that’s still only half the battle, as it must also be proved that said power is being exercised to the detriment of consumers.

Lower prices is not to the detriment of consumers.

. . . .

Good luck trying to show that suppliers are being forced to sell ebooks at a loss, which reduces the supply. There are more ebooks available than ever, with more suppliers than ever. Digital media doesn’t subscribe to the rules of supply and demand. Supply is unlimited, because ebooks can be copied and delivered with the press of a button, with low to no overhead other than sunk costs involving the initial production (editing, cover art, formatting, etc.)

The Big 5 are hurting because they are too stupid, lazy, and inefficient to compete. Not because Amazon is controlling them, or anyone else. And, ultimately, pulishers aren’t suppliers. They are middlemen. Writers are the suppliers–something Authors United can’t seem to grasp.

On its current course, Amazon threatens to derail the benefits of a revolution in the way books are created and sold in America. This shift was brought about by two broad innovations. The first is the e-book, the most dramatic new technology in publishing since the invention of the printing press. Because of the low cost of producing and distributing an e-book, many more authors now have the opportunity to self-publish, and millions of people can read books in formats that better fit their pocketbooks and preferences.

The second advance is the e-commerce technology that makes possible on-line bookstores. This techonology has connected readers with a vast selection of physical books, including rare, obscure, and out-of-print volumes. E-commerce has also made it far easier for small publishers to reach customers around the world.

I might be getting ahead of the letter, but apparently Amazon threatens to derail the benefits that Amazon itself–at great cost and risk–revolutionized.

Also, I hope Authors United spell-checked and corrected “techonology” before sending this. Lots of irony in misspelling that…

. . . .

Initially, Amazon deployed these new technologies in ways that benefited both readers and authors. While Amazon did not invent the e-book or e-reader, it created a platform that made it easy for millions around the world to access e-books, including readers who live nowhere near a brick and mortar bookstore.

But as Amazon has become a global corporation of unprecedented size, scope, and power, it is increasingly engaging in practices that undermine the interests of readers, authors, publishers, and society as a whole. Amazon has used the digital revolution in book publishing to exercise control over the marketplace of ideas in ways that threaten not merely open markets but free speech.

And Gutenberg needed to be stopped because he sold more printing presses–you know, that thing he invented–than anyone else.

If by “threatening an open market” they mean “competing better than anyone else” than they are correct.

I’m looking forward to see how Amazon also threatens free speech and the marketplace of ideas. Let’s read on…

While Amazon contends that its goal is to serve consumers by eliminating middlemen in publishing (which it calls the “gatekeepers”), Amazon’s executives have also made clear they intend to make Amazon itself the sole gatekeeper in this industry.

Unlike every other company, which limit themselves to small shares of a marketplace without ever trying to grow. I mean, Coke never tries to take market share from Pepsi. That would be unfair.

But what’s at stake here is not merely monopoly control of a commodity; what is at stake is whether we allow one of the nation’s most important marketplaces of information to be dominated and supervised by a single corporation.

Okay, I think I’m beginning to understand. So many consumers and suppliers use Amazon, freely and by choice, that free speech and ideas will be squelched, because…

Uh…

Because there is no other place to speak freely or exchange ideas. Because Amazon has become the sole omnipotent totalitarian power in the universe, because…

Um…

Because consumers and suppliers freely choose it to be.

Ack. And there are 20 more pages of this crap.

Link to the rest at Joe Konrath

The Industry’s Latest Thinking on Disruption and Innovation

13 July 2015

From Digital Book World:

With the digital transition slowing down, many publishers may find themselves with more breathing room than they did just a few years ago, when ebooks were growing at a rapid clip. That’s leading some to make important adjustments to core processes, while others are seeking growth opportunities through acquisitions.

But for all those who welcome the stability of today’s hybrid market, there are some who still warn against getting too comfortable. And since pushing forward on innovative products, distribution models and publishing strategies—not to mention buckling down for broad-based disruption—is arguably harder to do well than fine-tuning a familiar system, we thought we’d turn a spotlight on some of those challenges and contingencies.

To be sure, there’s valid and wide-ranging disagreement over whether publishers even need to seriously rethink what they do.

Link to the rest at Digital Book World which will ask you to register to receive a copy of its report on the subject.

PG hasn’t read the report, but here’s his prediction of Big Publishing’s thinking about  disruption of its business model.

 

How to Survive the Death of the Book

9 July 2015

From Digital Book World:

Founders don’t start companies to fight their future competitors. They start companies to fix something that they recognize—to an extent untrue of most others—as frustratingly broken. Indeed, an entrepreneur’s obsession is so myopic that most early-stage investors struggle to get founders to name their competitors. “We don’t have any,” says everyone ever.

Cute. But virtually every need is served today in some way. Horses provided transportation before the car, encyclopedias worked well before Wikipedia, and I’m confident root canals will seem perfectly sensible until there’s a pill for that. In similar (but less painful) ways, the book was a very sensible solution to a lot of problems for a long time, until it wasn’t. Today it increasingly isn’t. And many entrepreneurs are finding niches ‘without competitors.’

Getting a degree? Use a textbook. Looking up a word? Grab a dictionary. Traveling? Buy a travel guide. Want to be whisked away to another universe for a few hours? A novel, printed in a book. What an amazingly versatile device! Yet in spite of this homogeneity of format, publishing’s problem isn’t a single competitive technology. Rather, it’s the hundreds of small software companies that rise from the cracks to nibble on the feast of available problems to which the book is no longer the best possible solution. It is (ahem) death by a thousand paper cuts.

Examples abound. Tripadvisor reset customer expectations by providing comprehensive coverage of the world’s hotels and attractions with up-to-the-minute information in an easily searchable database. A book simply cannot compete.

. . . .

It looks like the software industry is eating publishing for breakfast. To survive, every publisher must find its path to reinvention as a software company or else decline into irrelevance. If you once sold books to customers to help them solve problems like getting a degree, to entertain them or to help them do their job better, you now had better find a way to do it ten times more effectively with software. Otherwise someone else will. The flaccid argument that software companies don’t understand content is mere hubris.

Of course, this isn’t new news. But the software landscape, and what’s possible within it, is in a perpetual state of ‘new.’ It expands every year, which makes ‘becoming a software company’ a notoriously difficult thing. New technologies haven’t changed the publishers, they’ve changed the customers. And those fast-changing customer expectations set the rules, not the start-ups themselves. After all, the start-ups don’t have any competitors, remember?

. . . .

For a time, we perpetuated the physical-world model of ‘buying’ a book into the digital world. It happened in music for a while, too: iTunes was once the de facto standard for music, back when people bought tracks. Today, it has been rendered far less relevant by the likes of Spotify, which provides a superior experience through an unlimited subscription.

This is a well-understood phenomenon. Time and again, from cell phone minutes to cable TV, markets have shown that products with zero marginal cost (like digital copies of content) ultimately become subscription markets. This will be true of virtually all markets with digital services as products. People no longer want to buy digital goods, but they’ll subscribe to your service in order to get them.

Link to the rest at Digital Book World

Rise of the sportswriting machines

6 July 2015

From The Washington Post:

There’s a sports writing revolution going on out there and it doesn’t involve sportswriters – thanks to “automation technology,” sports articles are now being written by, uh, computers.

Two companies – Durham, N.C.-based Automated Insights and Chicago-based Narrative Science – are aiming to make sportswriters the next dinosaurs. These companies transfer data into written reports, rendering obsolete the ink-stained wretch sitting in a press box eating free hot dogs.

First there was the driverless car. Now there is the writer-less sports story.

This nation was BUILT on the backs of sportswriters, and THIS is the thanks we get?

. . . .

Can an algorithm really replace a beat writer? I guess so – never misses a deadline, less chance of libel, no bloated expense reports.

According to its Web site, Automated Insights’ “Wordsmith platform uses artificial intelligence to transform raw data into actionable stories and insights [and] creates content with the tone, personality and variability of a human writer.”

. . . .

The Associated Press is using Automated Insights technology to cover more college sports than ever, events it wouldn’t have the manpower to staff. It’s already providing Division I baseball recaps via computer-generated game stories and will expand exponentially, including Division II men’s basketball.

Link to the rest at The Washington Post and thanks to  for the tip.

PG is a big fan of technologies of all types, but he doubts any sports writing computer program will generate anything like the following in the near future:

“Outlined against a blue, gray October sky the Four Horsemen rode again.

“In dramatic lore they are known as famine, pestilence, destruction and death. These are only aliases. Their real names are: Stuhldreher, Miller, Crowley and Layden. They formed the crest of the South Bend cyclone before which another fighting Army team was swept over the precipice at the Polo Grounds this afternoon as 55,000 spectators peered down upon the bewildering panorama spread out upon the green plain below.”

Grantland Rice writing in New York Herald-Tribune about Notre Dame’s 13-7 victory over Army, October 18, 1924

Tipping the Editorial Apple Cart

29 June 2015

From Digital Book World:

Software is at once the existential threat and the messianic savior of the publishing industry. Publishers that pursue transformation strategies and successfully reinvent themselves as software companies will thrive, propelled by the value of their content assets and skills.

This is no simple feat, however. Coupled with the backdrop of financial, technical and market challenges, one overarching challenge makes any publisher’s transformation especially daunting—corporate culture.

Corporate culture shows up across any organization in a million small ways. It’s the set of reflexive behaviors, like default settings, that companies develop over time. It influences everything from how the company hires and how it interacts with customers to the way it develops its products. Corporate culture is the result of countless subtle inputs over time, and as many CEOs have discovered, it’s profoundly difficult to change.

But culture is precisely what must change in today’s publishing industry. From stem to stern, the most successful publishers are rethinking risk tolerance, speed of development, the opinion of the customer and even the structure of their companies. Although culture isn’t good or bad, it can certainly be right or wrong for what a company is trying to accomplish.

. . . .

A few decades back, in the heyday of desktop publishing, publishers were centers of intense innovation, leveraging new software to move from analog layout mechanisms to digital ones. Experimentation with tools like Aldus PageMaker and Quark Xpress led to entirely new workflows. Initial investments, while expensive, yielded exciting results in both the products and the financial efficiencies of the publishing process.

Over the ensuing years, publishers adeptly outsourced the non-strategic parts of their digital workflows. More and more work was done offshore and less of it in-house, and the institutional knowledge of these methods largely dissipated. Business process outsourcing (BPO) companies now own many of those core processes, with publishers providing inputs and receiving outputs, such as illustrations and page layouts.

It’s within that environment that publishers today confront the completely new problem of constructing digital content and products, and they haven’t yet figured out how to do it at large scale. Meanwhile, these same BPO companies are asked to ‘solve’ the digital content problem. They try, but these companies are skilled in process optimization, not in initial problem solving, especially when the end product isn’t yet fully understood by anyone.

When publishers reflexively outsource these supposedly non-strategic processes, the outsourced work is either frustratingly poor in quality or impossible to scale up. Instead, publishers themselves must first invest in the problem-solving, just as in they did in the ’90s with desktop publishing. Only then can the optimization of outsourcing begin.

. . . .

I’ve often marveled at the power editorial teams wield within publishers. They’ve traditionally controlled budgets, product roadmaps and sales teams, all in one. Talk about influence! But this cultural hallmark is unattractive to engineers and designers, who expect to be at the center of the discovery and decision-making processes of a software company. It’s the age-old MBA-meets-engineer cliché on the grandest of scales: “I’ve got a great idea, all I need is an engineer to build it for me!” Alas, the engineer, if she’s smart, has her own ideas.

The publishers that successfully shift their internal cultures to be technology-driven, rather than editorial-driven, will more quickly adopt methods and practices that favor the transition from publishing to software. These companies will, in turn, attract better talent. And the virtuous cycle will accelerate.

Link to the rest at Digital Book World

The author of this piece doesn’t use the term, but he is talking about disruptive change in the publishing world.

One of the common responses to disruptive challenges is “Let’s disrupt ourselves!” and change the disruptee into the disruptor. Perhaps the disrupt yourself strategy has worked somewhere, but PG can’t think of an example.

One of the reasons that startups are the most common creators and exploiters of disruptive technology is that a startup has no preexisting corporate culture to slow it down (or defeat it altogether). Disruptive technology doesn’t just disrupt companies, it also disrupts the management within companies. Many of the old kings and queens will lose out under the vastly different new business structure and they invariably manage to submerge the innovative new ideas beneath established corporate fiefdoms and processes.

PG suggests that tradpub corporate culture is the ultimate reason it will find survival in anything resembling its current form almost impossible in an ebook/ecommerce world.

He’s mentioned it before, but since most big US publishers don’t own themselves, but are owned by large international media conglomerates, PG says the corporate culture challenge is even more daunting. You not only have to change the culture of the publisher, you also have to change the culture of the conglomerate managers who are at least one step removed from understanding the disruptive business challenge and the need for change.

A tech startup is expected to lose money, often for a long time. Figuring out how to disrupt an existing business is very difficult work. Mistakes will definitely happen and U-turns will probably be necessary.

Conglomerate bosses become very nervous about any plan that expects to lose money and can’t demonstrate a clear path to a profit. Mistakes and U-turns are anathema.

Where Uber and Amazon rule: welcome to the world of the platform

9 June 2015

From The Guardian:

Hardly a day goes by without some tech company proclaiming that it wants to reinvent itself as a platform. Back in March, when South Korea banned Uber, the company promised to let local taxi drivers use its platform – along with its matching services.

Facebook pulled a similar trick in early May: having run into trouble with its pseudo-humanitarian effort to provide free internet access via a project called internet.org, it, too, promised to turn it into a platform. Now, internet.org users, most of them in the developing world, could also enjoy free access to apps other than those developed by Facebook.

Some prominent critics even speak of “platform capitalism” – a broader transformation of how goods and services are produced, shared and delivered. Instead of the tired conventional model, with individual firms competing for customers, we are witnessing the emergence of a new, seemingly flatter and more participatory model, whereby customers engage directly with each other. With a smartphone in their pocket, individuals can suddenly do things that previously required an array of institutions.

Such is the transformation we are witnessing across many sectors of the economy: taxi companies used to transport passengers, but Uber just connects drivers with passengers. Hotels used to offer hospitality services; Airbnb just connects hosts with guests. And this list goes on: even Amazon connects booksellers with buyers of used books.

. . . .

[I]nstead of adhering to a precise and rigorous code that spells out the rights of customers and the obligations of service providers – the cornerstone of the modern regulatory state – platform operators rely on the widely distributed knowledge of participants in a service, hoping that the market will eventually punish those who misbehave.

In the free-market utopia of thinkers such as Friedrich Hayek – the true patron saint of the sharing economy – your reputation would also reflect what other market participants know about you. Thus, if you are a nasty customer or an ill-mannered driver, everybody else will soon discover this, and specific laws to police your behaviour are rendered unnecessary.

. . . .

In reality, though, such a perfectly liquid and dynamic reputation marketplace is nowhere to be seen. A recent lawsuit in the US highlights its absence. Uber drivers have been accused of discriminating against disabled people by refusing to put their wheelchairs in the boot of their car. One would think that anti-discrimination laws that apply to taxis would also apply to Uber. Uber says it has anti-discrimination policies – and that it’s not a taxi company, it’s a technology company, a platform. Here, there is clearly no easy feedback mechanism to assist disabled travellers: this is what consumer protection laws are for.

. . . .

What is it that Uber’s platform offers that traditional cabs can’t get elsewhere? It’s mostly three things: payment infrastructure to make transactions smoother; identity infrastructure to screen out any unwanted passengers; and sensor infrastructure, present on our smartphones, which traces the location of the car and the customer in real time. This list has hardly anything to do with transport; they are the kind of peripheral activity that traditional taxi companies have always ignored.

However, with the transition to knowledge-based economy, these peripherals are no longer really peripherals – they are at the very centre of service provision. Today, any service provider, and even content provider, risks becoming hostage to the platform operator, which, by aggregating all those peripherals and streamlining the experience of using them, suddenly moves from the periphery to the centre.

. . . .

Few industries could remain unaffected by the platform fever. The unspoken truth, though, is that most of the current big-name platforms are monopolies, riding on the network effects of operating a service that becomes more valuable as more people join it. This is why they can muster so much power; Amazon is in constant power struggles with publishers – but there is no second Amazon they can turn to.

. . . .

This, however, still doesn’t address the question of just how much power we should surrender to these companies. A publishing industry ruled by Amazon and Facebook might produce lots of innovations – but is there any guarantee that it would actually produce any significant articles or books?

. . . .

Most platforms are parasitic: feeding off existing social and economic relations. They don’t produce anything on their own – they only rearrange bits and pieces developed by someone else. Given the enormous – and mostly untaxed – profits made by such corporations, the world of “platform capitalism”, for all its heady rhetoric, is not so different from its predecessor. The only thing that’s changed is who pockets the money.

Link to the rest at The Guardian and thanks to Dave for the tip.

Now is a good time for a reminder that PG doesn’t always agree with items that he posts.

PG will point out that nobody is forced to give their money to Amazon or Uber or Airbnb. People voluntarily choose to give their money to these organizations because Amazon, Uber and Airbnb provide something that’s better than the alternatives available.

How fast does your e-book grow?

5 May 2015

From Futurebook:

The prevailing mythology around tech is that the giant internet companies will dominate globally, just as they do nationally. They are borderless and all powerful. Facebook has 1.44 billion monthly active users, YouTube 1 billion unique users. So what happened with e-books? Five years ago pundits were talking about how Amazon, Apple, Google and Kobo would roll out globally to meet the worldwide demand for e-books: an eco-system built largely in America for a global audience. But something got lost in translation. Like the print-book market, the global e-book market has become complex—pulled in different directions by local nuances.

The Global E-book Report 2015, compiled by Ruediger Wischenbart, shows just how different each market can be and how this should alter how we think about this transformation. While both the US and UK have seen robust e-book growth for a numbers of years, leading to digital as a proportion of overall trade sales at about 30%; in mature book markets in non-English speaking countries the rate of progress has been much slower, and in some cases non-existent. As the report notes, in these non-English speaking countries (including Germany, France, Spain, Italy, the Netherlands, and Sweden), the market share of e-books within the trade segment of the book market is below 10%, ranging from as little as 1 or 2%, to 4.3% in Germany. More alarmingly, even at such low levels of penetration, the report adds that growth is showing signs of flattening out.

However, the non-arrival of a robust digital segment is a double-edged sword. First, without the fillip of digital growth, these markets have not been as sheltered from the global recesssion as other sectors. As the report, suggests in much of continental Europe, for the last several years, book markets have seen sales decline. Some countries, with relatively robust overall economies, like Germany or France, saw a modest, yet nevertheless steady decline in book sales. In others, like Spain, or Italy (or Greece, where no reliable data are available), the crisis impacted on the book trade with full force. In Sweden, the report also notes, that a mix of highly specific local factors brought about the sharpest decline in decades.

. . . .

Publishers have largely been spared, but the report found that all across Europe the pressure to consolidate has mounted significantly in recent years, resulting in a widening list of mergers and acquisitions among trade publishers. The report suggests that the impact of digital can hit even before it makes a material difference to sales, particularly with the arrival of those global companies such as Amazon, or Apple, prompting a period of re-adjustment by the incumbent players.

The report also found that though digital penetration across trade books may be still small in these non-English speaking markets, but there were pockets of excitement. The report states, that “anecdotal evidence has it that in the e-book top segments, like blockbuster fiction or romance, e-books can account for 30 to 40% of sales, or even more – and so in some specific cases even in countries with a particularly low presence of ebooks, such as France.”

Link to the rest at Futurebook

It is common for those in an industry being disrupted by a more efficient and lower-cost technology to look for signs that the changes will not be as complete or destructive as feared. After all, the classic disruption pattern is for the new entrants to start by selling to underserved and less-profitable customers of the legacy industry. Government intervention in the form of price-fixing or taxes can impact the way the disruption occurs.

However, PG says it is inherently so much more efficient to create, copy, distribute and sell ebooks than it is to deal with cases of dead trees that bits will beat atoms in the book world just as they have everywhere else. How much growth is there in the print circulation of newspapers these days?

PG has read newspapers for approximately forever and two physical newspapers still land on the driveway at Casa PG every morning. However, it’s more of a habit PG has developed than anything else and those papers are read less and less frequently with each passing month. Someday in the not-too-distant future, PG will stop paying for dead trees on the driveway.

The important ebook enabling technologies for most of the world will be internet access and smartphones. Not a lot of people will purchase smartphones to read ebooks, but, once they have smartphones, ebook purchasing or borrowing or pirating is a low-cost or free additional value the smartphone delivers.

PG hasn’t seen any indication that smartphone sales are slowing down.

 

Publishing’s Digital Disruption Hasn’t Even Started

24 April 2015

From Digital Book World blogs:

Imperceptible, invisible almost, but it was there at the London Book Fair this year—publishers quietly clapping each other on the back and breathing a collective sigh of relief: Phew, thank goodness that ebook thing is over. Now let’s get back to real publishing.

I’m being a little facetious, of course. But this year’s trade show did see a genuine departure from the maelstrom of anxiety and excitement over the rapidly developing digital market that has dominated the last few fairs.

Most publishers seem to believe the worst is now over, that the industry has survived an inconvenient tsunami warning that turned out to be nothing but an unseasonably high tide.

But is the industry blind to the coming tempest? I certainly believe so.

The music industry thought that disruption was over by 2011 when their sales began to recover somewhat. Despite digital units accounting for 64% of music sales, the consensus was that the market had stabilized and was back to business as usual. Then in 2011 a Swedish start-up called Spotify launched in the U.S. After only four years in the mainstream, it now has over 15 million subscribers  and 60 million active users. The Spotify business model has truly disrupted the music industry, with artists now looking at nontraditional ways of generating sales other than records as their staple income.

Any parallels for authors and books here?

That’s admittedly a question publishers are as tired of asking as trying to answer. But the important thing to note is that while a change in format initially affected business models, the streaming element brought about disruption in the music industry that has stubbornly staid put.

Likewise, for anyone to think that the digital disruption book publishing has experienced in the last few years is over or receding would be foolish in the extreme. In almost every other industry that has experienced disruption in recent times it has followed a very distinct pattern.

. . . .

Phase 3: Appealing Convergence is when the disruptive and incumbent parties come to work together, as according to Sinofsky, “even when technologies are disrupted, the older technologies evolved for a reason, and those reasons are often still valid.” The market begins to stabilize. There is widespread acceptance of the new technology and early adopters mature, allowing the industry to settle in with a harmonious blend of, in our case, print and digital.

This is where I believe publishing sits today in 2015.

For further evidence, look no further than the reported plateauing of ebook sales, the resurgence of print titles in 2014, and the talk of ebooks going “out of fashion.”  Some more reasoned commentators have highlighted that print vs. digital is also not a battle to the death.

The danger here is that complacency sets in, and publishers revert to print cycle–thinking and fail to plan for the future.

Phase 4: Complete Re-imagination is in Sinofsky’s view the “last stage of technology disruption…when a category or technology is re-imagined from the ground up.”

Think of how other industries are being disrupted. Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.

As Sinofsky writes, “Re-imagining a technology or product is a return to first principles. It is about looking at the underlying assumptions and essentially rethinking all of them at once.”

Link to the rest at Digital Book World blogs

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