Disruptive Innovation

Forget CDs — streaming music now makes more money for the U.S. record industry

2 October 2015

From Business Insider:

Streaming is no longer the future of the music industry. It’s the present.

According to RIAA statistics compiled here by Statista, streaming services like Spotify and Apple Music generated $1.028 billion in sales for the U.S. music industry in the first half of 2014, up 23% from last year. That’s still behind digital downloads, but that portion of the industry is shrinking — down 4% from the first half of last year, to $1.268 million.

As far as physical formats like CDs go? That segment is continuing its long plunge, with revenues dropping 17% from the first half of last year, and is now in third place behind downloads and streams.

Link to the rest at Business Insider

Of course, the music business is entirely different from the book business and it makes no sense to compare the two because snowflake.

11 Simple Reasons The Print Book Doomsayers Are Wrong

26 September 2015

From The Huffington Post:

Print book lovers have suffered long under the rise of ebooks and the smug condescension of tech idealists, happy to remind old-school readers that their beloved format is headed the way of the record or the VHS tape.

The death of books has been so completely taken for granted by many that a genre’s ebook sales have been used to argue for a genre’s relevance, or irrelevance, to younger readers.

Well, um, maybe rethink that one? According to The New York Times, print book sales are holding steady in 2015 — and ebook sales have hit a wall. “Digital books accounted last year for around 20 percent of the market, roughly the same as they did a few years ago,” writes Alexandra Alter. In fact, “E-book sales fell by 10 percent in the first five months of this year, according to the Association of American Publishers.”

As a print book lover and advocate, can I just say, with respect: I TOLD YOU SO I TOLD YOU SO I TOLD YOU SO! Ahem. Sorry about that.

. . . .

In fact, as I was writing this, I overheard a young colleague, who covers sports for HuffPost, casually remark, “I like to read a physical book, not just read on my phone.” Paper isn’t just the refuge of the old fogy. As Alter points out, studies suggest even digital natives prefer to read on paper.

. . . .

Here are just 11 simple reasons the print doomsayers have been wrong all along:

  1. Some beautifully designed books offer pleasure in themselves, as aesthetic objects. Why buy a generic ebook copy of a new novel when I could spend a few bucks more — or even, after recent ebook price hikes, the same amount — and get an aesthetically pleasing memento to fill your bookcase?
  2. While ebooks seem to encourage us to fly through a continuous stream of text, certain books just feel more real held in our hands and paged through meditatively. Personally, I will always prefer to read meaningful, thought-provoking books in print, easily able to flip back to previous passages and trace the passage of my reactions almost physically through the book, and I know I’m not alone.
  3. Many studies suggest reading on print is significantly better than reading on a screen, particularly in terms of how much we comprehend and recall.
  4. Some titles, like the latest Fifty Shades knockoff, we may prefer to enjoy privately on an ereader. But if you’re tackling Infinite Jest or the new Marilynne Robinson, you’d probably like to telegraph your accomplishment to those around you by brandishing the physical book. Petty, maybe, but we’re only human, right?

Link to the rest at The Huffington Post

From Wikipedia:

Confirmation bias, also called myside bias, is the tendency to search for, interpret, favor, and recall information in a way that confirms one’s beliefs or hypotheses while giving disproportionately less attention to information that contradicts it.

. . . .

It is a type of cognitive bias and a systematic error of inductive reasoning. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way. The effect is stronger for emotionally charged issues and for deeply entrenched beliefs. People also tend to interpret ambiguous evidence as supporting their existing position. Biased search, interpretation and memory have been invoked to explain attitude polarization (when a disagreement becomes more extreme even though the different parties are exposed to the same evidence), belief perseverance (when beliefs persist after the evidence for them is shown to be false), the irrational primacy effect (a greater reliance on information encountered early in a series) and illusory correlation (when people falsely perceive an association between two events or situations).

A series of experiments in the 1960s suggested that people are biased toward confirming their existing beliefs. Later work re-interpreted these results as a tendency to test ideas in a one-sided way, focusing on one possibility and ignoring alternatives. In certain situations, this tendency can bias people’s conclusions. Explanations for the observed biases include wishful thinking and the limited human capacity to process information. Another explanation is that people show confirmation bias because they are weighing up the costs of being wrong, rather than investigating in a neutral, scientific way.

Link to the rest at Wikipedia

New Author Earnings report tracks author incomes over time, but will John Scalzi buy it?

25 September 2015

From Chris Meadows via TeleRead:

John Scalzi takes the time to comment on that New York Times article that I mentioned yesterday. He scoffs at the latest Author Earnings figures on the basis of “the source [being] unabashedly pro-indie (and less-than-subtly in my opinion anti-publishing)” and thence opines that publishers know exactly what they’re doing in raising the price of e-books. They’re intentionally protecting the print market, Scalzi believes, at least insofar as the strategy touches on novels.

. . . .

Scalzi casts this as a primarily anti-Amazon strategy:

Investing time in strengthening alternate retail paths makes sense in that case, especially if, as the article suggests, consumers are happy to receive the book in different formats for an advantageous price. If people fundamentally don’t care if they read something in print or electronic format, as long as they get a price they like, that leaves publishers a lot of room to maneuver.

That’s an interesting notion, not least because of the idea that maybe people really don’t care which format they get it in, as long as they get it cheap. While I’m certainly not in any position to be able to judge the truth of that, I will note that this strategy does serve to drive business not only to the remaining independent and chain paper bookstores, but also to Amazon, who still controls something like 1/3 of all print sales and 2/3 of all online print sales in the US. And they do so in a medium for which there is no agency pricing. Amazon can mark print books as low as they want to—and indeed, they’re often marking them to below the price of new-release e-books.

Scalzi also ascribes significance to the recent Authors Guild survey showing that authors are having a harder time making a living these days.

. . . .

Scalzi also ascribes significance to the recent Authors Guild survey showing that authors are having a harder time making a living these days. Scalzi opines there are three kinds of authors: dinosaurs, who are tied to the old publishing model and might go extinct if it fizzles; mammals, who are profiting from the new indie model; and cockroaches, who adapt to market conditions, are largely model-agnostic, and will thrive no matter what happens. Scalzi writes:

Right now, I think publishing might be top-heavy with dinosaurs, and we’re seeing that reflected in that Author’s Guild survey.

What we’re missing — or at least what I haven’t seen — is reliable data showing that the mammals — indie/self-publishing folks, in this case — are doing any better on average. If these writers are doing significantly better on average, then that would be huge. It’s worth knowing.

. . . .

And speaking of Author Earnings, it has come out with a report tracking the relative earnings of individual authors across seven quarters. For the purposes of the report, it narrowed down the 200,000 total authors it tracked to a subset consisting of 5,643 best-selling authors who made a $10,000-per-year earnings rate in at least two of those seven quarters. Acknowledging that it was surely only a subset of the number of total authors who were earning large amounts of money self-publishing, Author Earnings proceeded to draw what conclusions it could from the data that existed nonetheless.

. . . .

So there are the very numbers John Scalzi wanted—numbers showing that his “mammals” are doing better. But Scalzi probably wouldn’t be inclined to accept them. In one of the comments under his blog post, Scalzi notes:

Speaking personally, I found AE’s historical bias and relatively poor handling and understanding of the data they have as it applies to publishing to be significant enough that my default position on it is to give it relatively little credence until someone else trucks through it and offers up commentary on it.

Well, fair enough. I suppose we’ll see who’s right in a few years, by which time nobody will even remember the doubts Scalzi expressed now.

Link to the rest at TeleRead and thanks to RM for the tip.

John Scalzi left a comment to the TeleRead article:

Since I’ve been invoked:

. . . .

2. Author’s Earning’s numbers: I buy them for what they are, which is a set of numbers which tells a highly contingent story, i.e., what a specific set of writers are doing in a specific marketplace, which AE then uses to tell a very specific story that is comforting to its own set of biases. But, to highlight only one problem, what they downplay, or are at the very least are happy to elide the importance of, is the data left out.

Let me use myself, here. I have a pretty good idea what I make out of Amazon Kindle sales (it’s a nice amount, thanks for asking). But I also have a pretty good idea what I make outside of Amazon Kindle sales, and also what the *percentage* of my sales and income is *from* Amazon Kindle sales. For example, for Lock In, Amazon Kindle sales represented roughly 18% of the book’s total sales in North America. What’s not noted there? Print sales, electronic sales in other venues, audiobook sales (not being considered for the purposes of this exercise: foreign sales and TV option sales).

18% of sales of one book isn’t chicken feed, but it’s also manifestly not the majority of my sales of that book, either, nor of my income from the book. Amazon Kindle is also likely *not* the majority of sales/income for a very large number of “traditionally” published books, either. However, it’s not outside the realm of possibility that Kindle sales *are* the majority of sales (and also income) of Indie-pubbed authors, most of whom still don’t have easy access to bookstore sales, and some of whom may have exclusive deals with Amazon.

Link to the rest at TeleRead

PG will note that one of the fundamental tenets of surviving disruptive innovation is to avoid clinging to legacy distribution channels at the expense of new distribution channels.

The graveyard of tech companies is filled with tombstones of large organizations that dominated their markets in the 1980’s and 90’s and tried to protect their existing distribution channels when technological change allowed new, more efficient distribution channels to appear.

Protecting print distribution by penalizing ebook distribution is a losing strategy.

PG will note one more obvious item – KDP and other ebook distributors are a new, more efficient distribution channel for authors to deliver their books to readers. Traditional publishing is the older, less efficient channel.

It was common for graveyard companies to tout the added benefits their legacy distributors/channel partners provided to end-users. In case after case, it turned out that the end-users liked price and efficiency in obtaining the product/service more than they liked “added benefits.”

Barnes and Noble results and the latest news from Perseus

15 September 2015

From Mike Shatzkin

The most recent Barnes & Noble financial results — which appear to have discouraged Wall Street investors — aren’t good news for the book business. They show that the sale of books through their stores is flat at best, as is the shelf space assigned to books. And it would take a particularly optimistic view of their NOOK results to see anything but an accelerating slide to oblivion for what was, for a time a few years ago, the surging challenger to Kindle.


The real failure we see at B&N, which almost certainly affected the NOOK business as well as the stores, was that the customer knowledge within the dot com and NOOK operations apparently has never been used on behalf of the store business. This might be blamed on organizational silos that ran these three components as separate businesses. The failure is otherwise hard to explain. How hard can it be, really, to dig up email addresses of people who bought a book by a particular author to let them know s/he’ll be autographing books near where they live sometime soon?

Or, putting that in terms Barnes & Noble should relate to, might you not be able to charge the publishers a promotional fee for doing that? (AND you’d drive more traffic and sell more books!)


The people who own and run B&N are plenty smart. Before the game changed and was complicated by the online option, they had organized their supply chain to give them real competitive advantage over Borders and all other book retailers. But they were tripped up by a combination of Amazon’s longer-term view as an upstart in the 1990s and early 2000s when B&N was an established and profitable company. This was a classic “innovator’s dilemma”, failing to employ a new technology to maximum advantage because a legacy position was being defended.

Amazon was willing to lose money for many years to build its customer base. That was how they could build their stock price. B&N was a profitable company at the top of their category. Profits were how they grew their stock price. This not only discouraged deep investment in the early years of online bookselling, it discouraged the kind of discounting from their online store that Amazon did. Both of them knew that discounted books online put competitive pressure on the brick-and-mortar business. That was fine with Amazon. It was not appealing to Barnes & Noble.


When B&N decided to go after the ebook market with the NOOK, organizationally they did it with a dedicated and largely independent effort, not an integrated one. That might have been necessary. But it also might have been B&N’s last chance to build on its one distinctive advantage: having a strong store base and a real dot com business. (Borders never had the latter and Amazon, of course, doesn’t have the former.)


But the time B&N has to change the reality that they can’t seem to grow their market share continues to shorten. The one big advantage they are likely to retain over their competitors in Seattle — who are certainly growing theirs! — will be a cooperative attitude from the publishers, who live in fear of Amazon’s growing power. But even that advantage has its limits.

Link to the rest here.

As a long time reader of Mikes blog I have to say this is one of his better posts. Some of this will no doubt be read by many here as information they already had, but the break-down is spot-on.

As for the changing landscape of B&N and its effect on the Big Five Randall views it as self-fulfilling. The dwindling shelf space at B&N will eventually lead to only the bestsellers being available. This will reduce the mid-list titles to an even smaller portion and effectively lock the Big Five into the blockbuster model for the remainder of their existence.

However, if you find yourself in sudden need of a birthday card, stuffed animal, calendar, scented candle and cup of coffee, B&N is your place for one-stop shopping. 

Drake scores year’s first platinum album

12 August 2015

From Yahoo News:

Drake on Monday become the first artist to release an album this year that has sold more than one million copies in the United States, ending the latest industry drought.

The Canadian rapper’s “If You’re Reading This It’s Too Late,” which he put out digitally without prior warning in February, has sold 1.007 million copies as of the week ending Friday, tracking service Nielsen Music said.

. . . .

In a sign of the growing dominance of digital music, Drake — a close collaborator of Apple — released “If You’re Reading This It’s Too Late” on iTunes two months before physical copies hit stores.

Brick-and-mortar retailers have for years resented artists who put out their music first digitally.

Link to the rest at Yahoo News and thanks to Antares for the tip.

Why That Ebook May Cost More Than The Hardcover

10 August 2015

From Thought Catalog:

It’s Not Over ‘Til The Big Dog Barks

Indie publishing is still growing and it seems that established publishing is at a standstill.

Mike Shatzkin’s column of August 5 may be the one in which we someday remember hearing a new sermon, the beginning of the endgame.

But Shatzkin is not delivering a benediction yet:

This is not a death-knell for anybody. This is a changing world for everybody.

His essay is The publishing world is changing, but there is one big dog that has not yet barked.

True, that headline sounds like bad Dylan. But this write is one of Shatzkin’s best, replete with even-handed accommodation. It’s an important and different homily. Take this line now and just hold it in your mind. We’ll come back to it more than once: “Publishers might have boxed themselves in with their return to Agency pricing.”

For now, note Shatzkin writing:

Hugh Howey told me this was happening in a private exchange three months ago. I didn’t believe him. I do now.

Told him what was happening?

We’re hearing widespread but totally unofficial reports that big publisher ebook sales are dropping noticeably when their new higher Agency prices are activated.

‘To Keep Ebook Prices Artificially High’

The author and commentator Kristine Kathryn Rusch walks us through her surprise at finding a long-awaited new hardcover at Amazon selling for less than the ebook price on its release date.

In Business Musings: Price Wars and Victims, she writes about pre-ordering Sara Paretsky’s Brush Back, and by the time the release date had arrived, “the Kindle edition was $13.99 and the hardcover was $13.”

Rusch asserts that new-Agency terms create a condition in which publishers’ higher ebook pricing will diminish the level of royalty percentages they get from Amazon on those ebooks.

. . . .

Here is the line in which you read Shatzkin  at his most “surprising,” as she puts it, on the subject of Agency (and we’ll return to it yet again in a bit after finishing with Rusch):“Publishers might have boxed themselves in with their return to Agency pricing.”

. . . .

What appears to be happening, writes Shatzkin, is that higher Agency pricing by publishers may be placing  the majors’ ebooks right out of the market for many potential buyers. And at a bad time:

Recent data seem to show that, for the publishers, the growth in the retail ebook market has slowed down or stopped (at least for the moment), while Amazon’s ebook sales apparently continue to grow. The share of the market controlled by the publishing establishment — the Big Five publishers and others — is starting to be slowly eroded. This does not yet suggest that an author’s best bet is to go out on his/her own and we may be a very long way from that. But it does suggest that life may get increasingly difficult for publishers.

Something for everybody, right? The gatekeeper-haters will be giddy about “life may get increasingly difficult for publishers.” But note that Shatzkin hasn’t cued up the theme from Exodus outside the front doors of the Big Five. “We may be a long way from that.”

. . . .

And this week, we have Michael Cader at Publishers Lunch on Simon & Schuster (S&S) where CEO Carolyn Reidy tells him:

“We consider ourselves more flat” than down after leaving aside last year’s big releases this time, “and we hope to end the year up a bit.” …Reidy noted, “Obviously our goal is to grow revenues, but there are so many factors to it. Not just the switch from physical to ebooks, but the pricing on ebooks, and the changes in how ebooks are sold; all those things factor in.”

Cader tells us that S&S ebook sales were 20.1 percent in the second quarter, as opposed to 22.3 percent at the same time last year. Reidy denies that this has anything to do with the publisher’s newly negotiated Amazon contract for ebook sales. This is the Agency question, manifested on many sales pages by that famous note from Amazon: “This price set by the publisher.”

Asked whether their new ebook terms have weighed on those sales, Reidy replied, “What we do know is it hasn’t. We’ve done a lot of studies of this and our unit sales are absolutely holding. So we’re very pleased with the new arrangement, and the results of it. There can be effects from pricing changes, but now the pricing changes we’re doing ourselves.”

. . . .

At a time when the ebook adoption growth rate was high and fast, price points were less important than those sheer numbers that made so many boats float. That’s a cogent observation from Cader. Now that all our dinghies are lying lower in the water, “the anecdotal reports I’m getting,” Shatzkin writes, “suggest that the price increases aren’t being so easily swallowed in the current round of Agency pricing.”

. . . .

In an interesting comment at Shatzkin’s site echoed by a couple of others, the Canadian publishing consultant Thad McIlroy proposes that “decoy pricing” is the publishers’ game with their comparatively high ebook prices. McIlroy:

Why do this? Because the overall success of any new title is significantly influenced by its presence in retail outlets. Depending on how you define “book retail outlets,” and how popular the title, there are some 5,000 locations in the U.S. that will prominently display proven and potential bestsellers. Within the current publishing business model this exposure is an essential part of the sales ecosystem.

. . . .

There’s now so much content competing for the traditional book customer’s eye — including the self-publishing avalanche of titles, of course — that the plethora could erode the traditional hold on the brass ring. It can also make it impossible for most independents to gain even a modicum of traction.

And for the moment, we can put aside questions of quality and value. Sheer volume is creating a howling cacophony of competition out there.

In a comment suitable for needlepoint, Shatzkin puts it this way:

The modern digital problem is that in this day and age the book (ebook) that I wrote in my spare time and put up on Amazon myself doesn’t look any different than the one by a star author with a big house behind her. Ten years ago, the star author would have been in the bookstore and my self-published book wouldn’t have been, at any price.

Imagine what would happen if self-manufacturers could flood the automobile market with hundreds of thousands of homemade cars that looked as good as Detroit’s models? That’s what’s happening in books. It’s a hobbyists’ heyday, and no market in any business that I can recall has experienced such a sudden and deep influx of amateur material, some of which, as Shatzkin says, “doesn’t look any different” from the professional wares.

Today? The self-published ebook that Shatzkin is describing appears right alongside the big dog’s trade-house ebook.

Link to the rest at Thought Catalog

PG says the Big Dog writers will be among the last to leave Big Publishing.

Why? Because Big Publishing (PG initially mistyped this as Pig Publishing) is designed to provide excellent service to monster best-selling authors. When a Big Dog calls his/her publisher, someone at the publisher will take the call. The contracts Big Dogs sign are worlds away from those given to other authors.

Most importantly, the compensation paid to a Big Dog is much greater, as a percentage of the publisher’s gross, than a Little Dog author receives.

However, for all the paeans sung to the dead-tree book and the traditional bookstore, both of those institutions are sinking, faster in some areas than others, but they’re sinking.

The percentage of Americans living within 15 minutes of a traditional bookstore is notably lower than it was five years ago and will decline further during the next five years. We are never again going to see a five year period that includes an increase in the number of traditional bookstores.

With every smartphone doubling as an ereader and discount bookstore, where are the millions of new young customers for paper books from paper bookstores going to come from? Traditional bookstores will look more and more like AARP recruiting centers (except for the minimum-wage bookstore employees).

Children’s books are often cited as a paper bastion. Those who believe this won’t change have never observed a precocious two-year-old with an iPad. Yes, parents may not trust a toddler with an expensive new iPad, but a lot of parents are on their second or third iPad and don’t much care what the kids might do to the old one.

And ever-helpful Amazon will sell you an armored Fire tablet for kids for $149 that includes a two-year, no questions asked replacement warranty in case the dog eats the tablet.

Of course, Amazon is also happy to sell you a lot of children’s books to read on the Fire. Those children’s ebooks will, of course, always remain pristine with no torn pages or grape-juice stains.

This is a massive disruptive change for the traditional publishing and bookselling business. This change will only move in one direction.

Smart Big Dog authors (and most of them are smart) are often respected leaders in the world of tradpub, but they are not and will not be leaders in the disruptive change that is in process today. Big Dogs will be among the last to leave a publishing system designed to serve their specific wants and needs. The war will be decisively won by the time the Big Dogs move.

The Self-Published Authors Standing On Your Lawn

8 August 2015

From author Gene Doucette via HuffPost Books:

Print journalism’s death rattle

Let us all bemoan the demise of the intrepid reporter, that guy or gal whose job it was to doggedly suss out an Important Story, do the necessary background work, meet the informants, verify the facts, and stand up for The Truth and speaking that Truth to Power.

Alas, his/her job was taken by the nerdy, obnoxious blogger, trader of unsourced gossip, unverified facts, and inventor of lies about good people to get page hits, unconcerned with Truth in favor of what will get attention.

Now… let’s turn off whatever movie we’re watching and rejoin reality.

For reasons I’ve never been entirely clear on, when the newspaper industry began its slow decline, the very best version of the professional journalist was compared to the very worst version of the Internet blogger, and somehow–perhaps we recently watched All the President’s Men–we all went along with it.

. . . .

I think what happened next is instructive. If we can imagine, for a moment, that the institution of newspaper reportage spoke with one voice–I personally hear the voice of an old man who wants me off his lawn–that voice would say these things:

  1. “Bloggers don’t have the training or connections like we do! Nobody will read them to get The Truth!”
  2. “Okay, maybe SOME people will read them! But not our core readers! Our readers know Quality! People who get their news from the Internet are idiots!”
  3. “Fine, most people are getting their news online, which is proof of the decline of modern civilization, and it’s the bloggers’ faults!”
  4. “We’ll go online, dammit, but we’ll charge for it. Of course people will pay, because we’re better than the free news and everyone knows it!”
  5. “What do you mean, that didn’t work??”

I’m actually here to talk about the publishing industry and not the newspapers, but I’m bringing up newspapers because the slow death rattle we’ve been hearing for about a decade from print journalism sounds an awful lot like the one we’re hearing now from the big publishing houses.

. . . .

Today’s ongoing discussion regarding traditional publishing versus self-publishing is being framed in more or less the same way as that of the intrepid fictional reporter against the venal fictional blogger, and for more or less the same reasons.

Self-published authors, we are led to believe, are scheming “writers” who aren’t good enough to land an agent or a publisher, have no interest in improving the craft–and show no respect for that craft–eschew editing they are badly in need of, and, in short, don’t deserve to be published, period.

In contrast, traditional big market publishers are producers of high quality curated works that have been thoroughly edited and expertly marketed, and are in every sense superior for it.

. . . .

We need to stop comparing the very best example of one category with the very worst example of another. It is absolutely true that there are self-published authors in dire need of improvement, an editor, and a better understanding of how to write. Also, there are indeed books put out by big market publishers that are of the highest quality, and that may not have otherwise existed were it not for this industry.

But let’s keep in mind that it’s equally true that big publishing can produce pure dreck, and high-quality novels can spring from self-publishing. For some reason we aren’t comparing quality-to-quality and dreck-to-dreck.

. . . .

For publishers, the change in the market was the development of e-books as a viable publishing option, and most of what we’ve heard in the industry since has sounded a lot like old man journalism yelling at us to get off the lawn.

First, they accuse self-published authors of being unworthy of readers. When that doesn’t work, they blame the readers for not recognizing quality. When that doesn’t work, they blame the medium itself–which is in this instance means blaming the inventor of the e-book market (Amazon) rather than the medium, but it amounts to the same thing.

Link to the rest at HuffPost Books

Here’s a link to Gene Doucette’s books. If you like an author’s post, you can show your appreciation by checking out their books.

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…


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…


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

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