Brexit Negotiations and 2017

EU FlagA chorus of commentators are telling us that it’ll be impossible for the UK to negotiate a free trade agreement with the EU in two years (once we’ve triggered Article 50), which means we’ll have to revert to WTO rules, and the subsequent tariffs will plunge us into an immediate, long-term recession. Not just a recession, but an out-right depression.

Are these commentators on to something? Is this likely? Before getting in to that, it might be worth noting that these are often the same people who told us that voting leave on June 23rd would result in an immediate recession. Remember that? Even if you do, they’ve forgotten.

The goalposts have moved. It’s now “economic Armageddon is still coming because of Brexit. But it hasn’t happened yet because Article 50 hasn’t been triggered.” Once Article 50 is triggered? It’ll be: “Okay, well, economic meltdown hasn’t taken place yet because we haven’t left.” Once we leave? Well, there will be more excuses.

At some point, given the ridiculous monetary policy of most western governments right now, there will also certainly be a global financial contraction. Maybe a big one. Maybe bigger than 2008. And when it happens – though Brexit is unlikely to be the culprit – you’ll be sure those same commentators will blame our decision on June 23rd this year.

Because of all of this, when I hear warnings of economic disaster due to us trading with the EU on WTO terms, I get sceptical. It’s the more of those same unqualified pronouncements that for some reason must be respected by virtue of the fact that they’ve been made. That makes no sense to me.

Right now, the chances of us getting a free trade deal sorted between March 31st 2017 and April 1st 2019 is about 50/50. If we had to do a deal from a standing start, I’d say we only have a 5% chance, given the EU’s awful history of this. But our terms are already active and in place. That should make it 99% certain that we’d secure a deal. But, the dead hand of the EU Commission and the other EU high-ups make it much harder than it should be. Though to be honest, don’t their petty hostilities right now justify our decision to leave?

And even if we do revert to WTO rules, will it really result in instant economic collapse? We pay £9.7 billion net into the EU a year. The tariffs (at current trading levels) are likely to be less than £3 billion a year for us. Much higher for the EU (we do have a massive trade deficit with the other 27 member states after all), but that’s just a good incentive for the 27 to strike a free trade deal with us.

But let’s end on a good note. The reason I think we’ve got at least a 50% chance of getting a deal in two years is the disconnect between the directly democratically-elected governments of the nation-states and the high-command in charge of the EU executives.

The EU guys talk tough because they don’t have to face a ballot box. But even the most sycophantically pro-EU governments in the 27 member-states are accountable. And if they push for rulings that make it harder and more expensive for, say, BMWs or French wine to be sold in the UK, their chances of re-election are, at least slightly more difficult.

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Paying for Journalism Online

wpid-Photo-4-Jan-2013-0940-PM.jpgIt’s been some time now since the fall of Andrew Sullivan’s blog. Sully himself has moved back to a mainstream publication (this time the New York Magazine), and the world has moved on.

Andrew had an interesting idea. Continuing his blog as he had done on places like the Atlantic before, but on his own, allowing people to see a certain number of full-posts through a (leaky) paywall, but giving people full access for a single low yearly fee.

Alas, even Andrew Sullivan, with his huge blog following, couldn’t quite keep it going. For his own health, as much as anything else, he finally called it a day.

Does that mean his experiment failed? Does it mean that paying for online journalism just won’t work? I hope that’s not what people take out of his venture.

First of all, I’m just not sure people will pay to read a blog, that was mostly an aggregate of content from other sites. There might – and only might – be a viable platform for paying to read content, where there’s that direct link between the author and the reader.

The only truly viable platform that exclusively works like that right now is the humble book. Be it a “dead tree” version or an ebook. People, it seems, are still more than willing to pay to consume that written content.

You can say that people are still paying for newspapers and magazines too. Yes they are (though circulations are falling), but think about it, the cost of selling those publications almost never pays for the content. They all have adverts running in them. Today here in the UK, free papers like The Metro are actually (in an income/expenditure sense) among the most successful models right now. They make a lot of money, and don’t charge their consumers for that content.

However, that simple model isn’t working in the online world. Rewind a number of years back. Newspapers started getting websites. Journalists, keen to have their work  be seen by as many people as possible, convinced their bemused editors to let them post all their articles online. That content was available for free. But the value of the advertising (especially considering how clever those media-rich ads could be) was never really understood by the sales teams and editorial teams. Very quickly Google dominated that game, allowing advertisers pay pennies for ads whose equivalent in print would cost many pounds. Google was happy with this because they are working to scale. They can get tens of millions of customers and be quite happy. A modestly popular site that gets, say, 50,000 visitors a week will make a fraction of the revenue from advertising that a weekly magazine with a circulation of 50,000 would make from its ads.

So those appear to be the two main models that people concentrate on. However, I think there’s another model we dismiss at our peril.

Journalists (particularly older ones, like, say, Andrew Sullivan), really dislike “native ads”, sometimes called “sponsored content” or “advertorials”. These are articles usually made by the in-house editorial team, but used to promote a message by an advertiser. Some associate it with Buzzfeed (which does very well, btw), and the like. I don’t see why the concept, with a different tone, couldn’t work in other forms. I’m personally totally okay with that content, as are many of my fellow millennials.

I spoke to a load of people my age (and younger) about this. The response was fascinating. We often seem to be okay with advertorials, as long as they’re called “sponsor content” and is clearly labelled as such. We’re just as likely to read it (if it sounds interesting) as we are the rest of the content. We don’t like being deceived into thinking that an article is purely editorial rather than “sponsored content”, but apart from that, I think we’re okay with it. It’s just more content in the mix.

Unlike the Googlefication of banner ads, etc., sponsored content needs to be high-quality. It needs to be readable. For the consumer, it shouldn’t be in-your-face and offensive (like awful intrusive ads that block the content unless you find the ‘X’ to close it for example). And for the advertiser, it appears to actually have much higher conversion rates than an ad.

It’s scalable, but can’t be automated. A computer can’t automatically write a beautiful, artistic, engaging, clever article for a client. That takes good journalists and copywriters. Therefore, it can’t be made for a few cents. You need to spend real money, and get it out there.

I think that this kind of content can help pay for the other stuff, the content that’s unshackled from the burden of commercial pressures, while making it free to the consumer. It might be online journalism’s best hope for growth.

So I remain optimistic for the future of written journalism and content creation, and I see sponsor content – be it on blogs, news sites, Medium, etc. – as being one of the most interesting and practical ways of getting us there.

Imagine your favourite sites, clean, ad-free, fully-acessable and gratis, with sponsored content among the rest of the work. But paid for and sustainable.

So what do you think? Can sponsored content (done in the right way), be the digital shot-in-the-arm this business needs?

The Rise, Fall and Eventual Rise Again of eBooks

ebookIt was only about five years ago that the world – and me – decided that print books were going the way of vinyl records. In the mid 2000s, the technology that make e-ink screens possible was finally viable for mass production.

Soon after, Amazon released the Kindle, and ebooks went mainstream. Between 2008 and 2011, ebook sales rose 1,260 percent in the US alone. Game over. Independent bookshops, chains and printers stood in fear, waiting for the final death call.

But it never came. It was a close-run thing. Sales were skyrocketing, and in the US, the collapse of bookstore Borders (which filed for bankruptcy in 2011) seemed to signal the very end.

Then the numbers went the other way. Since then, paper-based books have slowly moved back into the mainstream. By this year – 2015 – people like me said ebooks would overtake sales of print. But it didn’t happen. There was something of a plot twist to this story, that I never saw coming. Book stores – including those independent chains – are stronger and more vibrant today than any time before 2010. The American Booksellers Association says they’ve got 1,712 members stores today, compared to 1,660 in 2010. Today, ebooks occupy about 20 percent of the market. That’s about the same market share in 2012. What happened?

I’ve heard a lot of publishers (and authors who have bought this line too) say it’s simply because readers prefer “real” books. And so digital is at 20 percent, and will stay at 20 percent. The market has spoken. I don’t quite buy this. I think there were two reasons why ebooks sales have slumped: one short(er)-term reason to do with a temporary technology disruption from another market, and a longer-term reason to do with corporatism on behalf of the big traditional book-publishing industry.

Let’s look at the first of those. The first mainstream ebook reader in the US, the Amazon Kindle, cost hundreds of dollars when it was first released in the American market. But it sold well. As is pretty much always the case with technology, the prices quickly went down and the features improved. But it’s just an e-ink screen right? So the improvements were incremental. The real push is to lower the cost. Today in the UK, the basic Kindle, (which is much better than the first generation model ever was), will set you back just £59. Adjusted for inflation, that’s a heck of a drop compared to the first model released in 2008. Most ebooks were usually cheaper than their hardback versions, and paperback editions too. Makes sense really. I mean, there’s not a lot of cost involved in the mass-distrubtion of a file that’s typically only a couple of megabytes big, compared to the printing and distribution of a paper-based product. Amazon made big gains with its cheap $9.99 price guarantee for bestsellers (which, because publishers didn’t have the big costs associated with mass printing and distribution, meant that they also actually made more money from the sales of the cheaper ebook versions).

Then a bit of marketplace disruption occurred. In 2010, Steve Jobs revealed Apple’s iPad. “The Kindle’s been great,” he told the enthralled audience at the keynote speech, revealing the tablet to the world for the first time, “but now we’re gonna take it further.” Stephen Fry upon recording his first impressions of the iPad, couldn’t help but write “…poor Kindle.” Tablets had been around for decades, but the iPad was the first tablet computer that captured the imagination of the mainstream. It was a big success, and dozens of rival manufactures brought out their own tablets (including Amazon, with their Kindle Fire range).

Suddenly, in 2010, millions of customers faced a choice. Buy a Kindle (or other e-reader) for, say, $250, or an iPad for $399. Yeah, the iPad is more expensive, but it can do a lot more an a e-reader, which is after all, a uni-tasking device. And the iPad can read books too. Jobs gave a demo of iBooks, and even Amazon produced a Kindle app, so you could read your purchases on the device. Most people, at the time, weren’t going to buy both devices given the prices, so they bought one. And that was the iPad they bought. Or, other, often cheaper Android/Microsoft-based rivals.

But there’s a problem. Reading a book on a bright computer screen – like an iPad – is not the same as reading it on an e-ink screen. The e-ink screen looks like, well, a page. Just printed text on paper. A regular screen is like staring at your laptop. After a while, holding a bigger, heavier, glaring screen to read a text-based book (like a novel or biography) just put people off. So they stopped buying ebooks, and, rather than buying an ebook reader, moved back to paper-based medium. Once bitten, twice shy.

I think this is a short-term issue. But, judging by how slowly the book industry moves, short-term might be 15-25 years. Based on current pricing, I think that the business model of the Kindle could end up being that Amazon will release it for free (“get a free e-ink Kindle for every 5 ebooks you buy!”). So people can have loads of them, all over the house. If you drop one or leave it on the bus, no matter. You can get another for next-to-nothing, and remote-wipe the one you’ve lost/damaged. This ‘free’ ubiquitous attitude will slowly bring people back to ebooks. The rise of people – some of which are very talented – self-publishing on the Kindle Digital Platform, through Barnes & Noble’s platform, Google, or iBooks through iTunes Producer, can also play a part as we see more and more cheap and readily available work. Think about it, the beauty of this, is even if you’re a first-time self-published author, the fact that you’re able to sell as many books (with no upfront risk or cost) as John Grisham is a really exciting and revolutionary thing. Getting it noticed by the public, especially with lots of people releasing utter garbage remains a challenge.

The second problem I see is a trickier one, that could stop things moving forward for a century or more. This is corporatism on the part of the major book publishers. Once the ebook reader arrived, they could see that with nimble, smart, savvy new writers (think E.L. James et al), soon, publishing a book just by yourself could become the “done” thing, even for well-established writers. If Stephen King publishes a book as a hardcover for $19.99, he could see $3 of it. If he were to publish it himself (paying for an editor, cover designer, etc. himself), he could sell it for, say $5, and still make the same $3 off every sale, regardless of how many copies sell, with no risk of doing an overly-ambitious print-run. And at that price, he’d shift many more books.

The big book publishers saw this as a scary future, one to be avoided if possible. Amazon’s $9.99 Kindle bestsellers deal in the US is over, and the publishers are in charge again now. And they’re charging much more for their ebooks than they were a few years ago, (making them less competitive and attractive to readers) while also doing all they can to lower the price of print-book production through innovations and economies of scale. Hachette boosted their Indiana warehouse by 218,000 square feet last year. Penguin Random House have coughed up $100 million to expand and update its wearhorse operations, with 365,000 square feet added in 2014 to its (already huge) warehouse in Crawfordsville Indiana, doubling its size. The boys and girls at Simon & Schuster are set to do the same to their distribution facility in New Jersey: it’s going to be 200,000 square feet larger.

Why the big investment? Because they can put a stranglehold on this business. At the moment, if people mostly buy print books, then big publishers will remain in charge as the gatekeepers, getting their percentage for every copy sold. Because of these expansions and distribution improvements, it’s now often cheaper to buy a paperback version of a book than the ebook version.

I hope this doesn’t last, but I’m not optimistic. I really like publishers, especially the one’s I’ve mentioned above. But I don’t like what they’re doing here. I envisaged a future for big publishers as representing new talent (and established talent), using their incredible editorial, marketing and promotional skills to be champions of quality. Just because “anyone” can self-publish wouldn’t mean they should. There would be a big market – a demand – for publishers who burrow and forage, looking for the best talent out there, and bringing it to our attention. Yes, the margins could be lower for publishers on a per-book basis, but not having to guess what sort of a print-run etc. they have to do would mean the risk is lower too. And they could invest more time not in building ever-bigger factories, but in nurturing more and more talent.

They’d be so important in this brave future. But I fear (and hope I’m wrong) that they could keep things the way they are for the next century and more, before the number of talented self-published writers tilt the playing-field.

 

But don’t forget, you can buy all of my books – both in print and digitally – here! (Sorry, couldn’t resist the chance to cheapen this article with a plug!)

The Future of Android and iOS

iOS vs AndroidRight now, Android has an 80% share in the world smartphone market, compared to iOS’ 15%. However, if only one of those were to still be around (in some form) in ten years, I’d bet on iOS. Here’s why:

There’s no doubt that Android is winning the market share war at the moment. But Apple has never really been a company that cares about market share, and that seems to have served them pretty well over the years.

But the real war to win – for sustainability if nothing else – is the financial one, and here, Android is failing in a way that might eventually seal its doom.

The great thing about the free market: around half the Fortune 500 companies that were in that top list when I was born around 30 years ago are not there now. Either they vanished into oblivion, or no longer find their names there because they’re owned by other larger companies. Also about half of the Fortune 500 companies today didn’t even exist thirty years ago. As Bob Dylan once told us in The Time’s They Are A-Changin’, “The first one now will be later the last.”

It’s with the context of this fluid market dynamic that I look at Android today.

The market share of Google’s mobile OS, is very similar to the share the Symbian platform held in the mid noughties, before a certain Californian fruit company unveiled the iPhone and changed everything.

Symbian, not unlike Android, could be used on all sorts of phones. It became the most widely-licensed mobile platform in history. Nokia (the ones really pushing it), Motorola, Ericsson, Samsung and most of the rest all used it. It went from the number one smartphone OS in 2005 to as dead as Dillinger in 2009.

Android, as even the name suggests, was the child of Symbian. Developed by Google, it was originally designed to be the “new, improved” successor to the world’s most popular OS. But once iOS (or iPhone OS was it was initially known) was shown to the world, Google went back to the drawing-board, making Android a touch-screen experience only.

Desperate to find an OS that could rival Apple’s offering, dozens of manufacturers dived into Android, including Korean giant Samsung. In 2009, 80% of Samsung’s smartphones were using Windows Mobile. 20% Symbian. They announced around a third of their phones in 2010 would be Android. With Google’s open-source OS, they could add a “makeover” (in their case, Touchwiz) and differentiate themselves in the market. In short, as we’ve seen, Samsung’s plan was to be another Apple. They wanted their OS, apps, and phones to replicate that “feel” that Apple have, without the R&D. Just cram in some extra features, and take market share away from the new upstart, iOS.

Here lies the problem. Because Android is free to add to any smartphone, (even apple could build Android phones if they were so inclined, you don’t even need to ask Google’s permission), lots of cheap phones are made with a version of it running. Many of these cheap smartphones – particularly the ones in the Far East – aren’t even used as smartphones. People just make calls, and send-and-recieve texts.

The only really premium smartphone company running Android on their phones is still Samsung, and it’s only there that Google makes any serious money. Google gets paid when Android users utilise their search and other Google products. This revenue, like most of Google’s, is from primarily advertising. Their other revenue source is from their 30% commission from the Google Play store, just like Apple.

The best estimate is that 80% of Google’s search/app revenue comes from Samsung smartphone users, and 90% of all Google Play sales come from them too. They may have many companies using their OS, but most of those users don’t even use them as smartphones, just like with Android’s father Symbian. Despite Android coming out later than iOS, it actually represents the continuation of the Symbian (and Java Mobile) status quo. iOS was – and in many respects remains – the plucky little upstart. It just so happens to be the upstart that also makes most of the money. Even Google make more money from iOS users than they do those using Android phones.

And it gets worse for Google. This year, Samsung are releasing smartphones that will have the Tizen operating system. Another open system, not massively different to Android, but one that Samsung pretty much controls. The version they’ve got running in beta is so similar to their Touchwiz Android phones that most users won’t tell them apart. Many say that Samsung is tired of having to wait for Google to update their OS – and Samsung even has to add Knox, their own security integration, because they can’t rely on Google to provide anything secure enough.

The transition for Samsung from Android to Tizen will be slow – and potentially unsuccessful – but once it fully moves over (if customers are happy with it), then Google is left with a bunch of also-ran companies like Motorola, who don’t make them any money at all. I can see Google choosing to walk away from it then, especially if they continue to make money from their potentially game-changing Chromebooks. After all, why waste money in the sphere that’s dying, when you can spend more creative energy in the bit of the business that’s really working well?

Then Samsung can duke it out in the premium market with Apple. But they still have a big fight on their hands. In 2013, 150 million iPhones were sold, while Samsung only sold 100 million – that’s from their entire lineup of premium Galaxy S and Note phones. Plus, with Tizen slowly coming into the market during the great transition, Apple can use that time to point out their other great strength relative to the rest of the market: a lack of fragmentation, which is good for end-users and developers.

In the same time that it took iOS 7 to go from a 0% to 90% install base for devices currently in use, Android’s KitKat has gone from 0% to just under 5%. So iOS developers can build using the latest and greatest APIs, knowing full-well that the vast majority of their customers can make use of them. Plus – or maybe in part because of this – iOS users are more likely to spend money on (or in) apps. The latest figures suggest that even though iOS is 15% of the smartphone market, it’s 74% of revenue, with Android at 20% and “other” at 6%.

No one really knows what the future holds for the smartphone market. Maybe Tizen will be a failure and Samsung will stick with Android. Maybe the whole world will suddenly decide not to bother with iOS any more. Maybe Microsoft was something game-changing up its sleeve.

But, judging by the state of the market today, I’d bet on the Californian fruit company.

In the Land of the Free, Disruption is King

Robot ArmThere’s a very human fear of technology ruining our lives.

“It’ll replace us,” we say, when a new-fangled bit of technology comes along. But is there any real truth behind that anxiety?

It’s our instinctive reaction. But that doesn’t make it the right one.

When I was young, I can still recall a (serious) news report, commenting – with furrowed brows – how, shock horror, some children as young as 8 “had access to the internet.”

That was it. It wasn’t that they were doing something wrong, or even that they were unsupervised. It was the fear that they were using new technology. I posted a great video here a while ago featuring the founder of Wired Magazine, who says that in the early/mid 90s, mainstream newspapers were still writing articles about the web as “The Internet – Threat or Menace?” and, though that precise type of hysteria about the web has died down, general fear-peddling about new advances hasn’t ceased at all.

The truth this, technological change is part of an observed phenomenon I’ve written about before: “creative destruction”.

In my great-grandparents day, there used to be someone who’d ride down the road on a horse and cart, selling blocks of ice, so the local housewives throughout the city could preserve meat and other things for longer. Eventually a bunch of clever American and Japanese people came up with an electrical device called a refrigerator, which has become a feature of pretty much every house everywhere.

Now the ice-block salesman’s job has gone. Indeed, so has the job of the people who made the ice. But seriously, are we worse off because of it? Furthermore, are they? Did those people who found themselves out of work lose out long term?

In the short term it must have been hard, but surely with their expertise in the freezing business, they were well-placed to sell and support those buying the new appliances. And today: well, those people are long gone, and their descendants are just like the rest of us – with better jobs, better (inflation-adjusted) wages, more buying power, higher standards of living, and even more leisure time than their great-grandparents could have dreamed of.

The smart and thoughtful Roger Bootle has raised some interesting points related to robots and artificial intelligence in the workforce. His article in the telegraph, though too negative for my money, is nonetheless well worth a read.

We can’t begin to imagine the hardship of living in an early hunter-gatherer society. Where the life expectancy is around 25, things were, to put it mildly, pretty hard. The agricultural revolution must have rendered thousands of hunter-gatherer “jobs” redundant. But everything got better. The industrial revolution must have rendered millions of agricultural jobs redundant. But everything got better.

This technological revolution is, well, yes, rendering many jobs redundant. But the wisest among us shouldn’t worry too much about it. I’ve been made redundant. It’s an awful feeling. But for those of us who do find themselves out of work, the stats show that it virtually always leads to better things. And the world gets more efficient, and the standard of living of the people globally continues to rise.

In the land of the free, disruption is king. Long may it last.

Who the Minimum Wage Hurts

Young People Minimum Wage UK

There's some things that just don't work, but everybody loves them. I've posted before about the NHS, and other such almost religiously-supported institutions and ideas. Those who support them are – to my mind at least – kind-hearted, decent and good people. But good intentions don't make for good policy.

A case in point on this day – budget day: The UK is set to increase its minimum wage. Minimum wage laws hurt those who cannot provide a service as valuable as the minimum-wage. If, due to your circumstances, education, ability, etc. can only provide £5 an hour of value, at say, a resurant or warehouse, then you can't get a job if an employer is forced to pay you a minimum of £6.50 an hour.

The last Labour government were very proud about dispelling the naysayers of the minimum wage: “They said it would cost jobs”, they gleefully retort, “but unemployment went down in the first decade of the minimum wage!”

Yes, unemployment went down. Quite easy to do, if you're into making a massive government, centered around a client-state, where you create a lot of 'fake' government-jobs. But the growth in private-sector jobs at the same time was practically anaemic.

Those who said that the minimum wage costs jobs weren't talking about any old jobs though. We were specifically talking about those sort of jobs that younger, poorer, underskilled people typically take.

So how have, say, younger people done under the minimum wage? Well, you can see the graph above and see for yourself. Before the minimum wage, younger people were finding more and more (real) jobs, and opportunities to get on the ladder, often of their chosen career-path. But it turned almost 180 degrees after that.

I believe that the forthcoming increase in the minimum wage will, sadly, continue this tragic trend.

 

DRM on eBooks

wbookA great post on TechDirt about an ebook publisher that hasn’t seen any significant increase in piracy since they stopped using DRM (Digital Rights Management, or copy-protection) on their titles.

If anything, the number of copies purchased increased. I always thought this would happen if you sell your digital products that are more aligned to what the market wants – i.e. a very good price and with no restrictions on where you can make use of them – you will always be better off.

If you have heavy copyright restrictions on a song, TV show, movie or ebook, the pirated version is actually better than the legit version. And you’ve just created a kind of moral hazard – there is now an almost valid reason or motivation to remove that copy-protection and once you’ve done that, why not just add it to a file sharing site or torrent? Where as if you just have it available cheaply, and copyright-free, people just buy it, use it, and – generally at least – have less motivation to share it. Just buy it yourself dude, and use it however you’d like.

Now let’s be clear, I’m a hypocrite. All of my books are available on the Nook, Kindle iPad, etc. And all of them have DRM. But that’s seldom a decision that’s made by the author. That’s a publisher/distributor issue. And I’d love to have no DRM on my books. In fact, DRM-free pdf versions of most of my books are available and as far as I’m aware, it hasn’t increased piracy on my books one jot.