Disruptive Innovation

Silicon Valley And Legacy Payment Companies Are Locked In A Battle To Control The Store Register

18 August 2014

It’s not just publishing that’s experiencing disruptive innovation.

From Business Insider:

Silicon Valley is gunning for the market controlled by traditional payment terminals, the clunky countertop systems still in use at retailers everywhere.

Startups and tech companies like Amazon and PayPal are creating a new crop of solutions, including mobile payment hardware, credit card readers that attach to smartphones and tablets, as well as merchant-side payment apps.

. . . .

Low or negative countertop terminal shipments growth in Europe and the U.S. are an early sign of payments industry disruption from mobile-based solutions.

. . . .

The greatest disintermediation threat to the overall terminal business, including mobile terminals, is not from mobile terminals themselves, but from apps. Software-based tools like OpenTable that now allow users to conduct physical world transactions entirely within their phones, without the need for scanning at a terminal.

Link to the rest at Business Insider

Reading Disruption

14 August 2014

From Inside Higher Ed:

A technological visionary created a little stir in the late ‘00s by declaring that the era of the paper-and-ink book as dominant cultural form was winding down rapidly as the ebook took its place. As I recall, the switch-off was supposed to be complete by the year 2015 — though not by a particular date, making it impossible to mark your day planner accordingly.

Cultural dominance is hard to measure. And while we do have sales figures, even they leave room for interpretation. In the June issue of Information Research, the peer-reviewed journal’s founder T.D. Wilson takes a look at variations in the numbers across national borders and language differences in a paper called “The E-Book Phenomenon: A Disruptive Technology.”

. . . .

He notes that the Book Industry Study Group, a publishing-industry research and policy organization, reported last year that ebook sales in the United States grew by 45 percent between 2011 and 2012 – although the total of 457 million ebooks that readers purchased in 2012 still lagged 100 million copies behind the number of hardbacks sold the same year. And while sales in Britain also surged by 89 percent over the same period, the rate of growth for non-Anglophone ebooks has been far more modest.

. . . .

Some 200 million people around the world use French as a primary or secondary language. But the pace of Francophone ebook publishing has been, pardon the expression, snail-like — growing just 3 percent per year, with “66 percent of French people saying that they had never read an ebook and did not intend to do so,” according to a study Wilson cites. And Japanese readers, too, seem to have retained their loyalty to the printed word: “there are more bookshops in Japan (almost 15,000 in 2012) than there are in the entire U.S.A. (just over 12,000 in 2012).”

. . . .

Disruption, in Christiansen’s usage, refers, as his website explains it, to “a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.” An example he gives in an article for Foreign Affairs is, not surprisingly, the personal computer, which was initially sold to hobbyists — something far less powerful as a device, and far less profitable as a commodity, than “real” computers of the day.

. . . .

How closely the ebook may resemble the disruptive-technology model is something Wilson doesn’t assess in his paper. And in some ways, I think, it’s a bad fit. The author himself points out that when the first commercial e-readers went on the market in 1998, it was with the backing of major publishing companies (empires, really) such as Random House and Barnes & Noble. And it’s not even as if the ebook and codex formats were destined to reach different, much less mutually exclusive, audiences. The number of ebook readers who have abandoned print entirely is quite small – in the US, about five percent.
But Wilson does identify a number of developments that could prove disruptive, in Christiansen’s sense. Self-published authors can and do reach large readerships through online retailers. The software needed to convert a manuscript into various ebook formats has become more readily available, and people dedicated to developing the skills could well bring out better-designed ebooks than well-established publishers do now. (Alas! for the bar is not high.)

Link to the rest at Inside Higher Ed and thanks to Nirmala for the tip.

Amazon Book Battle Is Yesterday’s War

12 August 2014

From Bloomberg View:

The pitched battle being fought by Amazon.com Inc., authors and publishers over the price of books is sad to watch. What they fail to recognize is that in the world of digital literature, book ownership will soon be an anachronism.

. . . .

Readers are getting a raw deal from everyone. Amazon’s tactics are interfering with book availability: Foraging elsewhere for the title you want can be a chore if you use a Kindle or are accustomed to buying from Amazon. Also, it’s true that prices are unjustifiably high given the cost of producing e-books. In Russia, for example, where book piracy is much more of a threat than in the U.S., electronic bookseller Litres.ru manages to sell nonpirated e-books for half of what Amazon charges.

. . . .

[T]he book market is following the music market’s technological development path. It progressed from hardcover and paperback books — analogous to vinyl LPs and CDs — to Amazon’s Kindle, which could be used to purchase books from Amazon the way Apple Inc. sold songs to iPod users through its iTunes store. Now even the Kindle model is obsolete: People read e-books on smartphones and tablets and download them on ever-present data connections. So Amazon and other companies such as Oyster and Scribd are offering a subscription model in which customers pay a flat fee for access to a large quantity of books.

. . . .

For readers, a better model might be an enormous digital library in the cloud, where any book could be borrowed — made available for a time — for a smaller fee than its current purchase price at Amazon. Owning books makes about as little sense these days as owning music files, but paying the full price for lifetime availability could be an option. Any of the big cloud players — Amazon, Microsoft Corp., Google Inc., Oracle Corp. — or an ambitious startup renting cloud capacity from them could make such a service available. In this model, publishers would work mainly as promotion agencies, or authors could do their own marketing.

This model can’t become a reality, however, while industry players are still arguing about the economics of the previous iteration. By the time they’re done, the concept of book ownership may become as alien to most consumers as music ownership already is.

Link to the rest at Bloomberg View and thanks to Marc for the tip.

Movie Film, at Death’s Door, Gets a Reprieve

31 July 2014

From The Wall Street Journal: :

Faced with the possible extinction of the material that made Hollywood famous, a coalition of studios is close to a deal to keep Eastman Kodak Co. in the business of producing movie film.

The negotiations—secret until now—are expected to result in an arrangement where studios promise to buy a set quantity of film for the next several years, even though most movies and television shows these days are shot on digital video.

Kodak’s new chief executive, Jeff Clarke, said the pact will allow his company to forestall the closure of its Rochester, N.Y., film manufacturing plant, a move that had been under serious consideration. Kodak’s motion-picture film sales have plummeted 96% since 2006, from 12.4 billion linear feet to an estimated 449 million this year. With the exit of competitor Fujifilm Corp. last year, Kodak is the only major company left producing motion-picture film.

. . . .

In the agreements being finalized with Kodak, studios are committing to purchase a certain amount of film without knowing how many, if any, of their movies will be shot on the medium over the next few years.

. . . .

Film and digital video both “are valid choices, but it would be a tragedy if suddenly directors didn’t have the opportunity to shoot on film,” said Mr. Apatow. director of comedies including “Knocked Up” and “The 40 Year-Old Virgin,” speaking from the New York set of his coming movie “Trainwreck,” which he is shooting on film. “There’s a magic to the grain and the color quality that you get with film.”

. . . .

Industry experts say the roughly $1 million cost of renting cameras and recording equipment on a movie is roughly the same for film and digital, but that the latter allows for faster movement through the visual effects and post-production processes.

“I’m a huge fan of film, but it’s so much more convenient digitally,” said producer Ian Bryce, whose recent “Transformers: Age of Extinction” was shot primarily on digital cameras.

. . . .

It remains to be seen whether film will find enough adherents to remain economically viable in the years to come, as few young directors still use it. Elizabeth Daley, dean of the school of cinematic arts at the University of Southern California, said only one class at her school, advanced cinematography, still trains students to use film.

Link to the rest at The Wall Street Journal (Link may expire)

One of the side effects of a technology disruption of an existing business is that the product costs of the legacy business go through the roof as customers move to the new technology

Mobile-Ad Spending Leaps, but Trails User Growth

22 July 2014

From The Wall Street Journal:

After less than a decade of existence, smartphones and tablets this year will draw more money from advertisers than the centuries-old newspaper industry or the nearly century-old radio sector, a sign of just how rapidly technology is transforming media habits.

. . . .

Research firm eMarketer estimates that spending on mobile advertising, which includes both smartphones and tablets, will soar 83% to nearly $18 billion in 2014. Newspapers will draw nearly $17 billion, while radio will bring in $15.5 billion.

“As more eyeballs are going there in larger numbers, the dollars are starting to follow,” said Cathy Boyle, an eMarketer mobile analyst.

Still, the imbalance remains stark: American adults now spend almost a quarter of their media time on mobile devices, eMarketer estimates, yet this year’s spending growth will raise mobile’s share of the ad market to only 9.8%. By contrast, American adults spend only 2% of their media time reading newspapers but ad spending for the sector hangs just under 10% of the overall market, eMarketer estimates.

. . . .

That mobile still draws a far smaller share of the ad market than of consumers’ media time reflects advertisers’ slowness to change, analysts say, as well as their unhappiness with mobile ad formats.

. . . .

As the measurement tools develop, industry experts say marketers will become increasingly comfortable with shifting more money to mobile.

“I think it’s going to take a very big bite out of all the advertising dollars,” said Yariv Ron, chief executive of mobile ad company Appwiz. “The infrastructure is not there yet. Only now is it starting to take form and shape.”

Link to the rest at The Wall Street Journal (Link may expire)

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.

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