Last month I subscribed to the New Yorker on my Kindle for a 14-day trial period. I wanted to gauge if I indeed preferred it to the physical magazine, whose subscription I had failed to renew for almost a year. Within 2 days, I found the magazine back in my mail box - there in all its flesh and blood. What went wrong? I hadn't ordered to subscribe to it, then why had it arrived in my mail? Amusingly, I continued to receive the magazine in my mail for many weeks in a row. Clearly, something had gone awry with their systems. Until it dawned on me that the publishers had decided to promote the magazine for free over the digital version offered by Amazon on Kindle. To confirm the assumption, I checked up with Amazon on its kindle store where it declared that "We will share the name, billing address, and order information associated with your newspaper or magazine purchase with the publisher, who is under obligation to keep that information confidential. We will not share your credit card information or e-mail address. Publishers may use this information for market analysis and for other purposes".
The battle between the publishing world and the digital world has been ongoing for a while, but has never been as obvious and transparent as it is today. The Internet has made everything cheaper. The pain of this transition has been felt across the media landscape, with everyone from newspaper and magazine publishers to music companies and film producers struggling with the power of the web.[1] First, the digital revolution took the music out of our radios to CDs and then to MP3 players and alternatively to the iTunes store. The video industry saw a similar overhaul. Now we use Netflix or download movies. One could start to compare today's bookstores to what video stores were more than a decade ago. And even though books and in fact publishers have managed to survive the onslaught of the digital revolution, or at least keep it at bay for some part, it seems now more than ever that the party might indeed be over for them. In the words of David Weir "As the age of print approaches its final years, its most treasured form — the book — stands much like Custer at the Battle of the Little Bighorn, surrounded, doomed, and all too soon to be slaughtered unmercifully."
From Ken Auletta in the New Yorker: "In 2007 Amazon released the Kindle, as a simulacrum of printed paper that could be downloaded wirelessly in less than 60 seconds. For Amazon, the realization of the Kindle had been more of a natural evolution than a radical marketing bash. With the success of Amazon books, Jeff Bezos had been thinking of easier and efficient ways of buying books. With the advent of electronic books, the main barrier to entry seemed the lack of ways to read them - laptops were not as portable and easy to carry, cellphones too small. Arthur Klebanoff, the co-founder and C.E.O. of the e-books publisher RosettaBooks, said that, once the Kindle became available, “It took Amazon only ninety days from launch to generate more revenue from my hundred-book backlist than I was getting from all my other distribution platforms combined.”"
Amazon's foray into the electronics books innovation marketplace may well seem a culmination of its strategy of being the biggest and most formidable online retailing giant for books. But with Apple's introduction of the iPad, the revelation of a serious competitor in the space points out to the dizzying changes in the publishing landscape and a future for e-books that seems to be up for grabs. Having taken the music market by storm with its iPod and iTunes combination, Apple seems bent on repeating the trick with its new iPad and iBookstore. In order to gain market share from Amazon, Apple ironically put forth the price of its e-books at at the $12.99 and $14.99 - a few notches higher than the standard $9.99 at Kindle. This was mainly done in agreement with publishers to gain their confidence, which had been waning with Amazon's recent spates with publishers demanding that it stop discounting its titles to its significantly lower prices. According to this article, on being asked if he thought why readers would buy more expensive books on the iPad while Amazon sold them for cheap, Steve Jobs reacted by saying Amazon won't be able to sustain the low price of e-books with the Kindle. Why would Amazon increase prices, when consumers were buying so many books?, he was asked by some. “Publishers may withhold their books from Amazon,” Jobs said. “They’re unhappy.”
Ken Auletta in "Publish Or Perish": Traditionally, publishers have sold books to stores, with the wholesale price for hardcovers set at fifty per cent of the cover price. Authors are paid royalties at a rate of about fifteen per cent of the cover price. This wholesale model imitates the physical world: the publisher “sells” the “book” to an intermediary (could be a retailer like Barnes and Nobles or a wholesaler like Ingram) based on the publisher’s established retail price and a discount schedule. The purchaser will then re-sell that ebook at whatever price they chose to set. Ken analyzes the pricing model. "A simplified version of a publisher’s costs might run as follows. On a new, twenty-six-dollar hardcover, the publisher typically receives thirteen dollars. Authors are paid royalties at a rate of about fifteen per cent of the cover price; this accounts for $3.90. Perhaps $1.80 goes to the costs of paper, printing, and binding, a dollar to marketing, and $1.70 to distribution. The remaining $4.60 must pay for rent, editors, a sales force, and any write-offs of unearned author advances. Bookstores return about thirty-five per cent of the hardcovers they buy, and publishers write off the cost of producing those books. Profit margins are slim".
He continues, "Though this situation is less than ideal, it has persisted, more or less unchanged, for decades. E-books called the whole system into question. If there was no physical book, what would determine the price? Most publishers agreed, with some uncertainty, to give authors a royalty of twenty-five per cent, and began a long series of negotiations with Amazon over pricing. For months, the publishers had talked about imposing an “agency model” for e-books." The “agency” model is based on the idea that the publisher is selling to the consumer and, therefore, setting the price, and any “agent” - like Amazon, that creates that sale would get a “commission” from the publisher for doing so. Since Apple’s normal share at the App Store has been 30% and discounts from publishers have normally been 50% off the established retail price, publishers can claw back margin even if they don’t get Apple to concede anything from the 30%.[1]
At the consumer end of the spectrum, book buyers want both the convenience of the Web site and the intimacy of the store. But this obliges publishers to essentially run two businesses at once: a traditional publisher that sells bound books to stores and an electronic business that sells e-books online. “I think consumers, like publishers, are living in parallel universes,” says Jonathan Burnham, senior vice-president and publisher of HarperCollins.“Consumers are educated to have a multiplicity of choices. They still like to go to a bookstore, while they also want everything available online.”[2]
As reported : "Amazon's Russ Grandinetti tries to put publisher's woes in perspective, while insisting that they are focused on the wrong stuff. “The real competition here is not, in our view, between the hardcover book and the e-book,” he says. “TV, movies, Web browsing, video games are all competing for people’s valuable time. And if the book doesn’t compete we think that over time the industry will suffer. Look at the price points of digital goods in other media. I read a newspaper this morning online, and it didn’t cost me anything. Look at the price of rental movies. Look at the price of music. In a lot of respects, teaching a customer to pay ten dollars for a digital book is a great accomplishment.” In Grandinetti’s view, book publishers—like executives in other media—are making the same mistake the railroad companies made more than a century ago: thinking they were in the train business rather than the transportation business. To thrive, he believes, publishers have to reimagine the book as multimedia entertainment. David Rosenthal, the publisher of Simon & Schuster, says that his company is racing “to embed audio and video and other value-added features in e-books. It could be an author discussing his book, or a clip from a movie that touches on the book’s topic.” The other major publishers are working on similar projects, experimenting with music, video from news clips, and animation. Publishers hope that consumers will be willing to pay more for the added features. The iPad, Rosenthal says, 'has opened up the possibility that we are no longer dealing with a static book. You have tremendous possibilities.' "[2]
Many in the e-books industry have contemplated a trend in which retailers like Amazon may eventually cut publishers out and go right to authors - a feat Amazon admits having tried out already. “An author needs a publisher for nurturing, editing, distributing, and marketing. If the publishers are cutting back on marketing, and Amazon stays at eighty per cent of the e-book market, why would you need the publisher?”
Publishers however maintain that digital companies don’t understand the creative process of books. A major publisher said of Amazon, “They don’t know how authors think. It’s not in their DNA." Neither Amazon nor Apple has experience in recruiting, nurturing, editing, and marketing writers. Authors routinely thank editors and publishers for granting an extra year to complete a manuscript, for taking late-night phone calls, for the loan of a summer house. These kinds of gestures are unlikely to be welcomed in cultures built around engineering efficiencies."I think we, as an industry, do a lot of talking,” she said of publishers. “We expect to have open dialogue. It’s a culture of lunches. Amazon doesn’t play in that culture. It has an incredible discipline of answering questions by looking at the math, looking at the numbers, looking at the data. That’s a pretty big culture clash with the word-and-persuasion-driven lunch culture, the author-oriented culture".[2]
In retaliation to that rhetoric, there have emerged today internet communities such as Webook which act as online collaborative tools that pose a serious alternative to traditional publishing, overcoming the shortcomings associated with the technology-centric nature of the business of ebooks. Here, authors gain easy access to doors controlled erstwhile by major publishing brands - including access to expert public opinion, feedback, directional advice, marketing and distribution all within the digital paradigm.
But more often than not, older publishers have been slow to take up new technologies that might really help authors. Andrew Savikas, O’Reilly Media’s vice-president for digital initiatives, feels that publishers have done little to create digital applications for their books. “There are fifty million iPhones in the world. That’s a huge customer base. Nothing is stopping publishers from putting apps for books on iPhones.”[2]
For the time being, Apple’s entrance into the book market seems to have given publishers a reprieve, and time to go back to the drawing board. But to add to the twist, publishers may just have also found another recently converted ally: Google, which not long ago they saw as a deadly threat. The landscape will change dramatically later this year when the biggest player in the internet game launches its digital book-selling store - Google Editions. The store’s e-books, unlike those from Amazon or Apple, will be accessible to users on any device. Google Editions will likely follow the agency model and let publishers set the price of their books. This is a sharp u-turn from the company's position in 2004, when without the permission of publishers and authors, Google announced that, through its Google Books program, it would scan every book ever published, and make portions of the scans available through its search engine. The publishing community was outraged, claiming that Google was stealing authors’ work.[2] A consortium of publishers and authors filed a lawsuit, which was resolved only in the fall of 2008, when Google agreed to pay $125MM dollars to authors and publishers for the use of their copyrighted material. Now, having legally digitized twelve million books, including out-of-print titles, Google will have a far greater selection than Amazon or Apple. A spokesman for the web giant said recently: "Google's whole business is based around helping people find the information they need. A large amount of information is not on websites, it is in books, and we want to make sure that these books are not forgotten."
Google says users will be able to buy digital copies of books they discover through its book-search service. It will also allow book retailers—even independent shops—to sell Google Editions on their own sites, giving partners the bulk of the revenue[3].The search company’s entry promises to turn the e-book business into yet another battle in the ongoing war of Open vs Closed.[2] According to some, in trying to dominate the market, Amazon and Apple were taking the wrong approach to business online, and that it’s much more of an open ecosystem, where they should find a way for bricks-and-mortar stores to participate in the future digital world of books, not to exclude them from it.
It could be that in the shorter term, Apple and Google may prove to be better partners than Amazon, given things as they stand today. But in the longer run, the opposite may well hold true. Given the competition to drive costs lower, one day, they too, could complain about the cumbersome publishing process, or excessive prices.Apple has in fact agreed to the agency model for just one year, and, as publishers are acutely aware, Jobs has a history, with multi-media companies, of fighting to reduce prices. One publisher said, “Maybe Apple will want to come back in a year and bite our heads off.”[2]
It may seem today that the fate of books rests in the hands of the 3 big American technology giants, each of whom is hardening the curveball to devour the biggest share of the lucrative e-books play-field, and will end up engaging in a triangular dance of sorts with the Big Six publishers in an attempt to develop incentives to lure the maximum number of customers. How far the publishing world - hitherto steeped in lethargy and old-school distribution models - is able to sustain itself as a vital component in the supply chain remains to be seen. It would depend both on their success at adapting to new digital initiatives, and their ability to bring to market successful realization of New Book's changing avatar - embedded multimedia feeding short attention spans of a not so bookwormish generation. However, till the most immediate price battles are won in Silicon Valley and a definite trend emerges, you and I can sit back and relax in our commuter trains, and indulge in the pleasure of flipping back and forth at the timeless pages and pictures of the magazines and books we Oh so love to hold and hug.