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!)

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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.

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.

Cash For Influence. Don’t Reduce the Cash. Reduce the Influence.

So the revelations keep coming.

Politicians, (namely Labour politicians, namely Stephen Byers et. al) have been selling their influence for a fee. The Tories shouldn’t be too self-righteous about it, they’ve done things like this, and worse. However, this is really a stunning story, and surely it’d normally be the death-knell for a government. For some reason, that hasn’t happened.

The Times has reported the scandal, (see the link above) but no one seems to be running that heavily on it. I wonder why?

Alas, I fear that it’s because we’re all in a daze after the never ending expenses scandal. I think that pushed the boat out for us. However, the expenses scandal is chickenfeed compared to the idea that Byers can describe himself as “a taxi for hire.” This is corporatism/socialism of its nastiest, most cynical form.

Oh, and this actually brings us to the US health care mess. Yes, they are related.

President Obama has won. The US will now have a massive expansion in the state involvement in health care. The mainstream media in the UK is treating this like it’s a wonderful thing. But it’s another disaster. As I mention in the LBJ chapter of my book about the American Presidents, President Johnson’s plans to create two new massive bureaucracies in the form of Medicare and Medicaid cost a fortune, made health care more expensive, and reduced the amount of quality care available for everyone.

If the government in the US regulated the grocery business as much as it did the health business, then people would literally be starving in the streets. Remember those haunting images of people queuing for hours in communist Russia for a loaf of bread? But because there’s a total free market in the food-shopping biz, competition keeps quality high and prices low. You pay for your food. If you don’t like the price/quality, shop elsewhere. That’s why most grocers don’t poison their customers. They want them to come back. The good businesses thrive, and the bad businesses die out.

As I’ll explain in detail in my forthcoming book (Treason and Other Good Ideas), the health care industry in the US was the best in the world not too many years ago. In terms of quality of care and innovation it still is. But it went from number 1 in the world to number 37 in a very short time. Why? Because politicians took it over. And the special interests swooped. The politicians, in a cynical power grab, stole huge amounts of influence in what would have otherwise been the private buying decisions of millions of individuals.

When American health care was the best in the world, (and people purchased health insurance like they purchase car insurance, or home insurance), America was number one. Now it’s a 50/50 split between government owned/private health insurance (with government over-regulating the private half too), the US has fallen through the league table. That’s a bit fat failure. A modern tragedy.

And, in a nutshell, here’s my problem with President Obama’s plan: if health care was comparatively great when it was 100% private (with both private charity and the doctors Hippocratic Oath helping the poorest people), and then it started to seriously suck once the government got involved from the late sixties until now, (with the relationship between doctor and patient being forever severed, because the health insurance company is now the customer), how can more of what made it suck save it?

I sincerely worry about the quality of care available to the poorest and middle-class Americans in the coming years. And I worry even more about the horrific unfunded liability that this giant mess will leave for future generations. Look at the figures of this ‘cost-neutral’ plan. None of it adds up. The president hasn’t consulted an economist of any intellegence. He’s consulted a witchdoctor.

Now let’s look at why this story relates to Byers and the ‘cash for influence’ scandal. Basically, the socialized health care system that will now infect the American people was the result of exactly the same forms of ‘cash for influence’.

In this health care debate, the one group that was totally on Obama’s side was the private health insurance lobbyists. Notice how very few in the media have mentioned this? Let me say it again, the large private health insurance corporations funded the propaganda that helped get Obama’s health plan passed.

Think about it, why would the health insurance corporations be the main group behind this? Isn’t it obvious? They’ve bought something with their money – billions in extra revenue without having to innovate their services and lower prices, as they would have had to have done if the president merely chose to deregulate the industry. They bought the huge influence and power that Obama now wields. And how the hell did they manage to push this through with the Democrats using “deem & pass”rulings? That’s about as anti-democratic as you can get isn’t it?

So in both of these unfortunate stories, undue influence has been paid for. The anti-capitalists will shriek and wail (though less at the health care tragedy because they love the ‘attack’ that appears to have been inflicted on the free market), but as always, they miss the point. The failure here is nothing to do with capitalism. It has nothing to do with the money that has changed hands to purchase influence. It’s to do with the fact that this influence EXISTS to begin with.

The political class simply have way way WAY too much power over our lives. End of.

If you want to see reason, logic and truth win the battle for ideas, then you MUST severely limited what government is allowed to do. In a ‘cash for influence’ scandal, don’t reduce the cash. You can’t. Just reduce the influence that cash can buy. It’s time to neuter government.

Andy Jones TV: Force The Royal Mail to Compete

My Take:

I had a number of people asking me to comment on the behavior of the unions with regards to the Royal Mail, but I’ve got a different argument to make: The Royal Mail is incompetent. The only reason that it stagnates so badly as a business is because it’s starved of the one thing that breeds competence for so many other businesses: competition.

Some say that having other people delivering the mail for profit is not economically viable. But they said that about couriers and were proved wrong. It’s almost impossible to my reckoning that those same nay-sayers will be right this time, but so what if they are? Let’s keep the Royal Mail as it is for a while, but at the same time, remove the anti-competition laws. Let’s see how good the Royal Mail actually is compared to these other businesses! I’m is sure that the prices will go down, and the quality of service will go up. And based on the track record of the REAL free market, it’d be pretty foolish to bet against that.

You only think that the Royal Mail should be the sole delivery of letters, etc., only because you’ve never really objectively thought of other people doing it.

Movies, movies!

I’ve got a couple of flicks to tell you about that are rolling around in my head at the moment:

There’s a fictional short film comp coming up in March, so the first film I want to make over the next couple of weeks has a working title of Cyberspace. It’s about an MIT scientist who develops a small ship that he hopes to beam into the world wide web and destroy a dangerous virus that’s been crippling the internet.

I’m not one for sci-fi usually, but it gives me the great excuse to make another movie with fast ships, action and explosions. Some filmmaking friends of mine have heard the details of what I want to do, and said they were concerned that I might not be able to pull it off. They may well be very right, but that just encourges me to do it even more.

The other isn’t as timely, but certainly something I’d love to do. I want to make a film about Milton Friedman, the late great Nobel prize-winning economist. Details are sketchy at present, but I’ll let you know more as and when!

And as always, drop me an email if you have any cool ideas or comments!

A Birthday Grand

Well, I did say more great giveaways to come, and that’s exactly what happened! Today was Reading 107’s 6th Birthday. Can’t believe we’ve been going that long. Anyway, to celebrate, we played the Birthday Balls game that Fia Tarrant plays every day on breakfast, except we did it all day. If you’ve never played before, it’s dead simple – I pick a ball out of the 365 that we have in our bucket, and if the ball I pick matches your birthday, you win £1,000! A grand, just for having a birthday!!

Amazingly, and against the odds, we had a winner! At 5.20pm today on my drivetime show, Jo’s winning birthday-date of June 29th came out — a grand to Jo!!

Again, more great giveaways to come…