Disruptive Innovation

Riding the Juggernaut That Left Print Behind

21 July 2014

From The New York Times:

Even if you aren’t one of those people worried about media consolidation — there are many in that number — the big bolt of lightning last week that pierced a summer of ennui in entertainment and publishing news was hard to resist.

The unrequited bid that Rupert Murdoch’s 21st Century Fox made for Time Warner Inc. had it all: defensive consolidationstaking shape in both distribution and content production; two like-size media behemoths in an awkward, high-stakes dance; secret meetings; board intrigue; and a naked grab for size and power. Plus, there was the gift that keeps on giving: Mr. Murdoch on the prowl.

It was as if a big train with the word FUTURE emblazoned on its side was revving up. But it was difficult not to notice that one car had been uncoupled and would not be leaving the station.

Even though both companies involved in the merger discussions were built on print franchises — Mr. Murdoch’s newspaper empire, and the storied Time Inc. magazine brand — neither owns print assets anymore. In fact, 21st Century Fox is in a position to make a deal and Time Warner is an attractive target partly because they both got rid of slow-growth print divisions. To the extent that the proposal offered a crystal ball on the future of media, print doesn’t seem as if it will be much a part of it.

Mr. Murdoch moved onto his next quarry only after he had quarantined his own print assets under a separate public company. And Time Warner took on new allure when it shed those dowdy old magazine properties that now trade under their own ticker. Print has lost value in business realms because it has, in fundamental ways, lost traction with you and me.

. . . .

Between the flood of information online and the wall-to-wall television coverage, what is left for print?

. . . .

I am a faithful reader of The Journal’s and The Times’s print edition. Both are built on a wonderful technology for discovering and consuming news, and a large part of their profits still reside in that daily artifact. But when big things happen, I stayed glued to the web, at The Times and other great news sites.

Nothing can compete with the shimmering immediacy of now, and not just when seismic events take place, but in our everyday lives. We are sponges and we live in a world where the fire hose is always on.

Link to the rest at The New York Times

Can the publishing industry do a better job of managing change than the music industry did?

21 July 2014

From Talking New Media:

The news that Amazon had launched a new eBook subscription service, Kindle Unlimited, seemed like the perfect piece of information to pass on to an acquaintance – a verocious (that’s almost a real word) reader of what she describes as mostly trash novels.

“I haven’t bought a book in months,” she told me this morning. “Don’t have the time.”

Another person I know, name withheld, said the same thing about magazines. “I used to subscribe to a bunch of them, but just don’t have the time to read them anymore.”

. . . .

It’s tough to live in a household made up of publishing veterans where the only one actually consuming digital publishing products is the one that writes about them

. . . .

We are in the middle of a revolution in the publishing industry that will prove to be no less disruptive to the industry than what occurred in music over the past two decades.

. . . .

One can look at book publishing and possibly see that it shares much in common with the music industry: the move to digital, from single product sales to streaming, consolidation in retail distribution, new competitors, etc. But with magazines and newspapers there is the added complications that arise when considering the role of advertising.

What we are seeing is many changes occurring at the same time. Reader habits are changing as many readers consider the web and social media formats that challenge for their reading time. At the same time there are platform changes brought only mobile devices and tablets. On top of all this, distribution and retail channels are evolving quickly as book chains fail, digital newsstands and bookstores become publishing competitors, and brands that once depended on publishers become publishers themselves.

Link to the rest at Talking New Media

Barbarians at the Gate! Indies vs Big Publishing

16 July 2014

From author Amy Erie:

The Fall of Rome is still debated. How could such an empire fall? Various theories are floated; taxes were too high, barbarians joined the army, borders became too porous, corruption and incompetence were rampant.

But I would argue that these were mitigating factors. Empires always fall for the same reason.

They stop adapting.

Adaptive Capacity is the technical term for an ecological or social system’s response to changing conditions in the environment.

A system that cannot adapt, self destructs.

Traditional publishing is just such an empire, built over half a millennium (if we go by the invention of the Gutenberg press) the industry has had a long run. Now, e book publishing and print-on-demand technology have changed the landscape. Within a short amount of time, the book market has transformed. Some of the new players are Amazon Kindle Direct Publishing, Kobo, Apple iBookstore, Barnes & Noble Nook Press and distributors like Smashwords and BookBaby.

. . . .

The Amazon/Hachette debate is not just a negotiation, it’s a skirmish between the new world and the old. The latest salvo comes in the form of a letter signed by a number of brand-name authors who support Hachette’s point-of-view. In response, a petition was circulated and signed by the indie writing community supporting Amazon.Why did a simple business exchange create two opposing camps? Because the argument represents deeper, more treacherous currents between a crumbling empire and an evolving system.

. . . .

Before Nielsen’s BookScan arrived in 2001, the only data publishers collected was the zip code of the brick & mortar store selling the book. Bookscan was initially greeted with skepticism, then suppressed. Publishers had already seen what happened when Nielsen’s Soundscan hit the music industry in 1991, irrevocably shifting the power base and heralding the rise of previously ignored music genres like rap and christian. The new data threatened publishing’s control of perceptions. By 2004, publishers were purchasing data at $100,000 per year and not letting anyone see it, including authors. Writers in the system report being stonewalled or receiving book sales reports that were six months old. This careful parsing of data served publishers well, allowing them to control the perceptions of writers and readers.

They were continuing an old tradition pioneered by the New York Times Best Seller List, which releases rankings, but not actual sales figures. These rankings are based on a mysterious process of unverifiable estimates and surveys of secret reporting bookstores.

. . . .

When JK Rowling’s book sales unexpectedly overwhelmed the list in 2000, taking all the top spots, they needed to take Rowling off the adult list because her sales undermined a system that brought in tremendous revenue from publishers who bought ads. So the NYT Children’s Bestseller List was created in order to accommodate Rowling’s swelling numbers. As the NYT editors at the Book Review put it at the time, “The change (in the NYT Bestseller List) is largely in response to the expected demand for the fourth in the Harry Potter series of children’s books.”

So by the time barbarians showed up at the gate, publishing had built a bloated, convoluted system that relied on manipulation of data, brick & morter bookstores and an antiquated remainder’s system.

What could go wrong?

. . . .

Publishers did not understand the technological frontier. The Internet was just another way to sell books. Amazon was an outlet, not a competitor. But Amazon’s CEO Jeff Bezos did understand the potential of the Internet. He was playing the long game and was willing to explore innovative programming, algorithms, data-mining and exciting new ways to track reader habits.

On the surface, the Internet was a communications curiosity, but revolution was in the air. In 1993, the year Amazon appeared, the Internet only communicated 1% of the information flowing through two-way telecommunications networks.

By 2000 (when JK Rowling was being tossed into the kiddie pool) that communication figure grew to 51%.

By 2007 the Internet carried 97% of tele-communication information. 2007 was also the year Amazon introduced The Kindle, offering free e books in the public domain and cheap downloads of new books.

The Kindle sold out within five hours.

. . . .

In late 2007, Amazon was also beta-testing a structure for writers to self publish, offering 70% royalties. In publishing circles, this was heresy. A cold war started on the Internet. The old guard released a torrent of saber rattling blog posts, warning aspiring authors not to self publish. It’s dangerous! Reckless! they shouted, insulting Indie writers, calling them vanity press, substandard and illiterate. Like priests defending their temple, publishers, writers, agents, trade organizations and bookstores closed ranks. There was no way e book writers would cheat their way inside the hallowed gates of publishing. Publishers even fought for out-of-print back-lists previously left to rot. Bookstores refused to stock indie books or anything from Amazon’s Publishing Imprints.

The most unsavory aspect of this predictable reaction was the marked lack of concern for art. But publishing had jumped that shark a long time ago. (Anyone who’s ever walked into a Barnes & Noble and witnessed the geegaws and novelty books piled high on the bargain tables knows what I mean).

. . . .

So far, Big Publishing’s reaction to the brave new world of e books shows a lack of adaptive capacity. They have tried to force Amazon into capitulation with their old system rather than adapt to new market forces.

When technology is involved and those in power lack vision, a deadly form of myopic denial can develop. This denial of reality pervades the publishing industry at a time critical for its health. The more publishing refuses to look toward the future, the bigger the chance it will decline and collapse. Instead of Visigoths, Vandals and Huns, the publishing industry is defending itself from a strange and wily opponent, the future. The problem is publishing companies see this paradigm shift as an opponent rather than an opportunity.

Link to the rest at Amy Erie and thanks to Robert for the tip.

We (self-publishers) are the existential threat, not just Amazon

7 July 2014

From author Dominick Bosco:

This Amazon-Hachette battle is not business as usual. It’s the end of business as usual.
It’s not “just business” when writers not even published by Hachette start signing screeds against Amazon and flinging barbs at self-published writers.

This is not about agency pricing or a bigger cut of ebook royalties.

This is about the barbarians (that’s us) at the gate.

From this point on, the Big 5 are going to fight every step tooth and nail. They and their minions will pour giant cauldrons of steaming abuse on self-publishers while they whine that Amazon is a threat to Western Civilization. Prepare yourself. The Whining Steaming Abuse Machine is just getting warmed up.

. . . .

The picture we should have in our minds is of an army being pushed towards the edge of a cliff by a giant Amazon box. What’s pushing the box? We are. The indies.

It’s not Amazon taking a bigger cut of the pie that will push legacy pub off the edge.

Link to the rest at Dominick Bosco

Amazon Prime Music Just Set Streaming Music’s Price

28 June 2014

From The Street:

For much of the last year, companies have been scrambling to create their own Pandora and take a piece of the growing — but poorly monetized — music streaming market. Amazon may have just stumbled upon the solution.

In a message to Amazon Prime members in mid-June, Amazon unveiled Prime Music, a collection of more than a million songs and hundreds of playlists available to Prime members through the Amazon Music app. The service is accessible through Amazon’s Kindle Fire and Fire TV products, Android and Apple iOS devices, Samsung Smart TVs and speakers and just about any Mac or PC.

. . . .

So what separates Prime Music from Pandora One or Apple’s iTunes radio and its recently purchased Beats Music? Prime customers are already paying for it, bundled with a bunch of other services including two-day shipping of Amazon marketplace products and Prime video streaming of movies and television shows.

. . . .

Apple attempted to work around them with with iTunes Radio — and its failing attempt to use streaming to sell music downloads — but it discovered the streaming audience doesn’t care about buying music. Only about 2% of iTunes Radio listeners ever hit the “buy” button to download a song.

. . . .

All of the above are just an attempt to wring money from music that consumers are loathe to pay for anymore. The number of music download purchases dropped for the first time in 2013, according to Nielsen and has just continued to plummet in the first half of 2014. Interactive streaming like that offered by Spotify and Beats Music increased volume to 34.28 billion streams in the first quarter of the year from 25.44 billion streams during the same period in 2013. With music executives putting 1,500 streams at the equivalent of a full digital album, streaming equivalent albums have increased by 10.1 million units so far this year as download sales dropped by roughly 9 million units, according to Nielsen.

. . . .

When Amazon raised the price of Prime for new members from $79 a year to $99 earlier this year, it faced the same question that’s still puzzling Pandora: Where’s the value? Amazon responded by securing proprietary streaming content for its video service and tapping into its supply of cloud-based music content to cobble together a streaming service. It may not be quite as intricate as what Pandora offers or tailor its playlists to a user’s profile as the Music Genome Project does, but it’s a streaming service that existing Prime customers get as a freebie and that new customers see as added incentive to sign on for Prime service.

Prime Music does what the Fire Phone can’t and what Apple’s iTunes infrastructure won’t: It enhances the overall value of the service. Amazon’s Fire products have had a tough time keeping pace with Apple even at lower prices, but the integration and bundling of all of Amazon’s offerings — marketplace, video, audio, e-books, etc. — under one payment and on several different devices is making a strong pitch to consumers. Amazon isn’t pleading with them to ditch Netflix, Pandora or even iTunes on-demand services, but showing them how much Prime can offer under one roof.

. . . .

Amazon, however, took the extra step of setting up an all-inclusive pricing scheme and shoving everything else into it. Instead of streaming music and bringing in zero for it while hoping consumers find it in their hearts to download the occasional album, Amazon gave itself a base membership price to work with and built up. It’s not unlike what Costco did by making membership fees the foundation of its retail model, and much of that bulk shop’s growth and ancillary offerings including tire shops, auto sales and travel services are bolstered by that base consumer investment.

Link to the rest at The Street

PG says the music business started experiencing technology disruption with the introduction of the iPod and iTunes in 2001. No two disruptions are the same, but it’s instructive to study the development of different disrupted business.

A publisher’s journey to tech and back

17 June 2014

From Arthur Atwell:

I used to be a textbook publisher for two multinational companies. And when you’re a book publisher you realise pretty quickly that you either make books for rich people, or you sell cookie-cutter textbooks to government. Most people in the world – perhaps six or seven billion – could never buy the books you make.

Most South Africans, we can be fairly sure, live their entire lives without owning a book.

A 2006 study showed that “80% of South African children were not yet reading with comprehension after five years of schooling.”

. . . .

Well, all traditional publishing works like this:

  1. The publisher develops a finished product, based on their best guess of market needs.
  2. Then manufactures it.
  3. Stores it.
  4. Ships it.
  5. Then a retailer displays it.
  6. Sells a few copies.
  7. And returns or destroys the copies not sold.

This is very expensive: not only are there multiple links in the supply chain adding costs and very little value, but the risk of getting the initial product design wrong is high. Many publishers will tell you that only one in ten books makes money. So, as a result, the industry’s customers must be wealthy to pay for all this, and its retailers must be located close to those wealthy consumers. This is as true online as it is in bricks.

. . . .

Only a disruptive innovation could solve this problem, an innovation that fundamentally changes the way that books are made and distributed.

. . . .

Importantly, none of these innovations really spurred more reading among those who hadn’t bought books before. Maybe 45 million South Africans, ninety per cent of us. We were just making more products for the wealthy, and leaving everyone else behind.

Meanwhile, the digital divide, between the Internet haves and have-nots, kept getting worse as the lure of technology drew in more and more institutions, leading them to provide digital products for the wealthy, and to stop providing paper products that the poor once shared in.

. . . .

It took several years for me to realise that the innovation we needed in South Africa would not come from a new, first-world technology. Adopting new technologies requires disposable income and the space and time to learn new things, and human beings are stingy and don’t change quickly.

. . . .

Given the ecosystem of devices, data, support and credit cards that they require, ebooks are just as exclusive as traditional books. Their overheads are just easier to take for granted when you’re rich.

. . . .

So I realised we wouldn’t solve the problem in South Africa by throwing ereaders at schoolchildren, or asking everyone to read their textbooks on tiny feature phone screens. I’m glad some of my closest friends are working on that stuff, it’s important for the future, but right now we need something really simple to bandage our reading crisis. Something that requires no new infrastructure or technology.

Link to the rest at Arthur Atwell and thanks to Alicia for the tip.

Publishing is More than Books

16 May 2014

From Hugh Howey:

The disruption of the publishing industry can be seen far beyond mere books. Trade publishing (general fiction and non-fiction books) are heavily impacted and get most of the attention, but think of all the other forms of publishing that have been hammered, some of them into near non-existence. Once you start looking, you see this impact everywhere:

  • There’s map and atlas publishers, which have been decimated by the GPS units in our cars and smartphones.
  • There are the phone books that we now throw straight into the recycling bin, replaced by Google and the like.

. . . .

The effect the internet is having on publishing cannot be fully appreciated, I don’t think. Publishing has long been about the transmission of language and knowledge. Digital does this better in so many ways. In fact, trade book publishing is somewhat protected by nostalgia and our fondness of books (it’s certainly true for me). While we wring our hands over the disruption in trade books, entire other swaths of the publishing industry are collapsing.

Link to the rest at Hugh Howey and thanks to Sandra for the tip.

PG will add that the publishing of paper books for various types of legal research, formerly an extraordinarily profitable undertaking, was destroyed by digital replacements around the turn of the century.

What Makes People Think Ebooks are a Disruptive Innovation?

14 May 2014

From Baldur Bjarnason:

By and large, a disruptive technology is initially embraced by the least profitable customers in a market. Hence, most companies with a practiced discipline of listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies until it is too late. (Clayton Christensen – The Innovator’s Dilemma)

Unlike most disruptive innovations, ebooks were very quickly adopted by the publishing industry’s most profitable customers, people who buy the most, spend the most, and talk the most about books.

Disruptive innovations start out by addressing the needs of a small unprofitable market. They address a customer base that non-disruptive products do not. Those who buy a disruptive product at the outset are customers who are less likely buy the disrupted predecessor. Disruptive innovations are usually a viable but small business from the outset, create new markets, small at first, and then they grow them. The makers of disruptive innovations then iterate and scale into the incumbent market. That is, it’s only once the disruptive innovation begins to mature that it begins to target the customers of the disrupted product, and it goes for the segment with lowest profitability first.

Ebooks, on the other hand, when they first became an even remotely viable business by most standards (i.e. when the Kindle was launched) they directly addressed the industry’s most valuable audience. Their customers were heavy readers who bought mainstream books. This audience is the core of the industry’s profitability.

. . . .

Ebooks are to books not what tablets are to PCs but what laptops are to desktops. For a long long time laptops were a sideline in the PC business, but iteratively they improved until PC manufacturers began to make laptops that were viable as desktop replacements while retaining their portability. Laptops now dominate the market and are generally made by the same firms as those that made desktops. Much in the same way, ebooks have existed alongside the publishing industry for more than a decade (version 1.0 of EPUB’s predecessor, the Open eBook format, was released in 1999).

Amazon’s release of the Kindle was like the iteration of the Thinkpad or the Powerbook that first made them viable as desktop replacements, not a disruptive innovation but a discontinuous sustaining one.

. . . .

The tech-oriented online retail side of the publishing industry didn’t get a lead on publishers in ebooks because ebooks are disruptive. As I’ve written above, they aren’t. Publishers failed because the skills and expertise at format transitions they had built up during the various paperback/hardcover/trade paperback format revolutions weren’t applicable in the digital context.

. . . .

Ebook retailers, Amazon and B&N, were the primary retailers in print books. Kobo was launched by Canada’s biggest book retailer and bought by Japan’s biggest online retailer.

Kobo, Amazon and B&N are all classic examples of publishing industry incumbents, not disruptive new entrants.

. . . .

What absolutely is a disruptive innovation, however, is the self-publishing programme Amazon pioneered. A self-serve self-publishing service for ebooks is a disruptive innovation where ebooks as a platform aren’t. It’s also the one part of the Kindle platform that hasn’t received any update to speak of in the platform’s history.

. . . .

If ebooks, which aren’t a disruptive innovation as defined by Clayton Christensen, are disrupting incumbent businesses then we’ve either discovered a completely new type of disruptive innovation (unlikely) or these companies weren’t well-run, well-capitalised, or healthy before ebooks came onto the scene.

Given the state that booksellers were in before ebooks arrived, I think there’s a strong case to be made that they were very unhealthy businesses.

The timeline of bookseller crises worldwide doesn’t fit the thesis that the crises are caused by ebooks. They may well be exacerbated by ebooks, but ebooks are more playing the role of the pneumonia virus killing an AIDS patient than they are a lethal pathogen on their own.

For example, throughout the 2000s, booksellers (in fact, the entire offline retail sector) have been facing problems in many countries. Borders UK collapsed in 2009 but Amazon didn’t launch the Kindle UK store until mid–2010. Ebooks simply didn’t have enough of a presence in the UK for them to be the cause of the crises Borders, Blackwell, and Waterstone’s had been facing prior to the 2010 launch.

Healthy businesses quite simply aren’t rumbled this quickly by a change in the market. Even disruptive innovations take time. Ergo, booksellers were a dying business even before ebooks entered the market.

Link to the rest at Baldur Bjarnason also at another post by Baldur and thanks to William for the tip.

PG enjoys Baldur’s analysis and thinks he makes some good points, particularly that Amazon’s self-publishing platform is a classic disruptive technology.

PG suggests a couple of additional thoughts.

First, he believes the combination of ebooks and ecommerce and self-publishing are a disruptive technology because they disrupt the roles of publishers, book distributors and physical bookstores and the expensive technology which accompanies that legacy system.

Despite occasional lip service, publishers have never treated readers as real customers. The customers were always physical bookstores. Product decisions in traditional publishing were focused on what Barnes & Noble wanted. Publishers’ sales reps called on buyers for bookstores. A publisher’s sales department could and did kill any book it didn’t like.

Publishers worried about what bookstores wanted. Barnes & Noble and Borders worried about what readers wanted. Hence the lack of consumer marketing skills among traditional publishers.

Additionally, access to the physical bookstore sales channel (and the book distribution system that services that channel) was the key gatekeeper advantage of publishers, one that allowed them to charge exorbitant fees to authors (in the form of low royalties) for access to physical bookstores. It was simply not possible for an author, even a bestselling author, to effectively access retail bookstores in an economically reasonable way.

The import of ebooks to the disruption of the physical book creation and distribution system is that ebooks are ideal goods for ecommerce (as are digital files of musical performances and motion pictures). Once the infrastructure for ecommerce is in place (not a trivial task), each incremental ebook sale is essentially costless for an etailer. This allows etailers to pay the authors of ebooks much, much higher royalties than publishers do.

One of the reasons that Amazon spent so much money developing its own low-priced ereader in the days before widespread adoption of tablets together with an ebook publishing and distribution system to feed products to its ereader was to encourage the adoption of ebooks by readers and, thus, to become the premier destination for readers to purchase ebooks.

PG suggests that, in the absence of Amazon or someone like Amazon, traditional publishing and physical bookstores would never have created meaningful ebook ecosystem. The same can be said for Apple and the traditional music business.

Apple, Amazon and the uncertain future of the book startup

13 May 2014

From Gigaom:

Over the past few years, I’ve encountered countless startups that claim they are going to disrupt or revolutionize book publishing.

I once thought we might see one of those take off. Today, I’m not so sure. Book-related startups face a particularly tough path forward. Here are a few reasons why.

. . . .

 Any company that comes along trying to reinvent book publishing is competing not only with traditional book publishers but also with Amazon, which is almost 20 years old but keeps finding new ways to shake things up. Print book buying continues to move online and Amazon, which is now delivering on Sundays and offering same-day delivery in a growing number of cities, has a lock on that business. Kindle, launched in 2007, is the dominant ebook reading platform and Amazon is continually rolling out improvements to the Kindle e-reader and Kindle apps — sharing, search and so on — that rival what many startups have tried to do.

. . . .

 Unlike newspaper publishers, the large traditional book publishers are doing pretty well, thanks in part to increased profits from ebooks. This week, for instance, we saw profits rise at Simon & Schuster and HarperCollins. Titles from traditional book publishers dominate bestseller lists. A lot of self-published authors are doing well, too, but quite a bit of their success is tied to Kindle and it’s unclear that startups can do much to assist. It’s going be tough for them to draw authors away from either traditional publishers or Amazon. That’s why I’m skeptical of companies that aim to crowdsource publishing.

. . . .

 Startups that focus on delivering original ebook content or on helping readers find new books begin from the premise that readers have trouble finding enough things to read. This notion seems absurd: Anybody on the internet these days is overwhelmed with an infinite list of free things to read and a zillion services trying to curate reading material for them. There is not room here for a new recommendation service that is focused specifically on books: Readers don’t have time for it. They have too much other stuff they’ve been meaning to read already, whether it’s a book or a blog post.

Link to the rest at Gigaom and thanks to Matthew for the tip.

PG says a lot of the ebook startups aren’t terribly original or innovative. For one thing, he hasn’t seen any that demonstrated any serious technical chops (although he might have missed some).

He thinks Goodreads would have been an excellent target for disruption because of its crude infrastructure, but nobody seemed to be able to do much about it before Amazon acquired GR. He suspects Goodreads crudity is on its way out.

The Secret to Following Someone

6 May 2014

From Hugh Howey:

One of my favorite movies of all-time is The Zero Effect. If you haven’t seen it, you really should. Absolutely brilliant. One of the best scenes has Daryl Zero (played by Bill Pullman) explaining the trick to following someone without getting caught. It’s simple, he says. You just get where they’re going before they do. The obvious joke here is that it’s impossible to know where they’re going, which is why they need to be followed. But Pullman’s character in the film is a Sherlock-Holmes-sort-of-genius, and he expects that everyone ought to know where everyone else is going at all times. Just as a matter of course.

But we’re not all Daryl Zero. We can only guess at the future. We are resigned to follow.

A few years ago, I put forth a zany idea about where we in the book industry were heading: I thought there might come a day when agents and publishers would scour bestselling self-published books to wrangle in new talent. Doing so would allow them to mitigate risk; it would offload the arduous task of managing the slushpile by crowdsourcing it; and it would allow market research and experimentation to take place on someone else’s dime and time (the self-published authors’ and the readers’).

. . . .

Authors didn’t have a stage for their own gigs until e-books gained wide adoption. Once that happened, the rest was inevitable. Everything that musicians, photographers, comedians, fine artists and the like had been doing for generations was now open to writers. We could see where literature was heading because of the well-trodden path laid out before them.

By being at the forefront of this transition, Amazon has reaped most of the benefit. And not just monetarily, though that’s worth mentioning before we get to the meat of this rambling blog post. Amazon enjoys higher margins on self-published e-books. Before costs, they make 30% – 65% on every sale of a self-published work. For major publishers, their margin on e-books are likely less than 10%.

. . . .

Where Amazon really wins is with the data they collect. When Amazon purchased Goodreads, it seemed to me that they were mostly purchasing the reviewing, buying, and reading habits of its users. Data like that is worth a lot of money. And its value is only going to go up in the future. This data makes it possible to recommend more items that customers will want to purchase. This is the most important trick in retail. It was my job as a bookseller. Keep this in mind, as I’ll get back to it when I posit how someone can win the next revolution in retail.But first, I’d like to digress and point out what might be an equally powerful advantage Amazon wins from their data: Not only are they seeing what customers buy, they’re seeing how authors sell. They see the next big thing before agents and publishers can. In fact, they can often see an author’s career trajectory take an upward turn before the author is even aware of it.

. . . .

Employing hindsight (that clever genius), pundits have pointed out that Random House or a collection of publishers should have gotten into the e-reader device and direct e-book sales game early on. Rather than wait on a competitor to disrupt their business, they should have taken a page from Apple’s playbook and been the ones to disrupt. I’ll go one step further and use the power of hindsight to suggest something even more audacious: Publishers should have been the ones creating FREE self-publishing platforms. They should have created WattPad or their own version of Kindle Direct Publishing. Both offer ways to discover and profit from rising talent. Both offer ways to collect sales data from customers rather than relying on the infrequent and imprecise dribs and drabs of data that they get from retailers.

Link to the rest at Hugh Howey and thanks to David and several others for the tip.

« Previous PageNext Page »