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.

Writing Apps

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Are you a writer?

What software do you use to write? It’s a question I’m asked a lot.

The truth – cliched and as obvious as it is – is that there’s not one single application that is the writer’s tool. Everyone writes differently, so everyone will find different tools work better for them.

Here’s some I use:

When I’m sitting by a computer, just trying to get some ideas down, I’m a big fan of OmmWriter. It’s a distraction-free writing tool that provides a sound-scape, inspiring backgrounds and encouraging clicking sounds as you type. There’s a few options, but it’s basically a text-editor and all the tools get out of the way when you start writing.

When I have a general idea of, say a novel I want to write, I use one of a number of iPad apps to “block out” the story. One I’m currently using quite a bit is Index Card, because of it’s integration with Scrivener (which I’ll talk more about in a moment). But Scrivener is supposedly releasing an iPad app in its own right that I’m looking forward to, so that might be my go-to app for planning a story in the future.

And that’s because when it comes to putting a novel or long-form written piece together, for my money, Scrivener is currently the best app I can find. I use the Mac version, so I can’t say anything about the Windows version (which I hear has fewer features) but it’s fast and nimble. Whether you are working on an empty new document, or one with thousands of documents, images, notes, and chapters making up a 250,000-word masterpiece, Scrivener remains incredibly responsive.

It’s cheap for what it is, and is feature-rich. But the real beauty of Scrivener is that you only need to learn the features you need, and you can discard the rest, or use them when you find a use for them. Not learning everything (and there is a lot to learn) doesn’t hamper your ability to get a lot out of this remarkable and well-thought-out app.

But that’s just me, your mileage my vary.

I say try everything out you can, and you’ll find a workflow that works. This “software experimentation” requires time and patience, but it’s worth investing that time as it could save you hours (or possibly months) of time later when you find yourself knee-deep in an epic project and only then realise you’d rather work in a different way. Get it right for you from the start, and you’ll avoid lots of headaches later. And I speak as someone who has made that mistake far too many times.

If you’re really inspired, a simple notepad and a text editor will do the trick. But using some of these tools allow the difficulty and mechanics of writing to get out of the way, leaving you with your ideas and the tale you want to tell.

Happy writing and good luck!

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.

The Future of Written Journalism

I don’t know why I’ve thought about this quite a bit recently. I’m a huge fan of the blogosphere, and I’m really excited by the possibilities of the new digital journalism steps being taken by the main newspaper organisations (like the extract replica e-editions of newspapers, available to buy on a very cheap subscription basis). I also love the new contributors to the scene, who have arrived perfectly placed to take advantage of the digital sphere, like The Daily and the longer-running Daily Beast, which of course merged with Newsweek.

But there are problems. What’s the best business model for these new outlets? How many people are embracing them? Journos are losing their jobs in droves, how do we stop this decline? And indeed, should we be concerned with stopping this decline?

Lots of questions, issues and anxieties. People way more knowledgeable and smarter than me have weighed in on this topic, and I wouldn’t bother contributing unless I thought I had something useful to contribute myself. I’ve got a couple of ideas about the best business models the print world could adopt, and I lay them out here, knowing full-well that I’ve probably missed something out really significant, but I haven’t heard these suggestions made before, so what the hell – here it is, see what you think:

I want to reference two different types of print media: newspapers and magazines. I’m defining magazines are anything that comes out periodically, but not daily. So a monthly, fortnightly or weekly release. Newspapers are (obviously) defined as anything that comes out daily. Clear? Great.

Okay, magazines first. Mags make money partially from advertising revenue, but given the lack of frequency of release (once a week, or once a month), and the lower circulation figures, advertising revenue doesn’t pay a magazines way. Magazines, by and large, make their money from the actual sale of the magazine.

So if you’ve got a magazine that costs £5 say, then about 50p goes on the printing costs (it’s obviously more expensive than a newspaper, all that glossy goodness), about 20p on the distribution, and I’ll guess a £1.30 commission for the newsagent. That means that the average £5 magazine makes about £3 for the publisher, and another 30p per magazine in advertising revenue.

So to create an equivalent digital version for iPads and other tablets, is pretty simple (assuming you don’t put all your content for free online. If you do, then you’ll have to follow the newspaper business model, see below for that). Basically, if you charge about £4.25, then minus Apple’s (or whoever) 30% commission, it’s still £3 per copy purchased, and you could charge the same for the ads, thus making the same amount of money for the dead tree magazine version.

But there’s a vital difference. Typically, newspapers charge a CPM rate for online adverts (Cost Per Mille, or cost per thousand readers), that’s 2.5 times higher than the ads in a dead-tree model. That’s because the ads can be dynamic, they can be more tailored and animated to suit the audience, and crucially, when someone wants to find out more about that product or service, they can just click or tap on the ad, and they can go to a website or video or virtual shopping cart or whatever.

So you can sell ads and generate 75p for the same ads in the digital version. So if you sell the magazine that retails in a dead tree version at £5, (which gives the publisher £3 + 30p = £3.30), you can sell the digital copy that’s exactly the same for just £3.65 and make the same money. (£3.65 minus the digital distributor’s 30% commission = £2.55 + 75p for ad revenue = £3.30 per magazine bought). And you can charge even less for the magazine and sell more which increases the ad and sales revenue further and makes use of an economy of scale.

Newspapers have a totally different problem. The toothpaste is out, and you can’t get it back in the tube. Without understanding what it really meant, the editors happily let the reporters and columnists at all the local and national news outlets publish their content for free online. They had to in a way, competing with all the amateur bloggers, etc.

So now the content is free online. No going back. The ad-revenue per thousand is better than a newspaper ad, but people dive into a news site, see a few pages, and leave. That means they’re only seeing a few ads, even if it makes the news organisation more money per ad.

With a newspaper, a client has to pay upfront for the total estimated circulation to see the ad, whether that was 100,000 people or ten million. And everyone who buys the paper, probably sees all 50-70 ads that are published in the edition.

Digital app-based versions can fix this. When you buy a copy of the electionic paper, it’s a really good and delightfully accessible version, and the purchaser will see all those ads, and those ads are more ‘valuable’ (ads you can tap on them and go to the company website, etc) but…

…But why would you buy it? Sure, they can sell them way cheaper than the paper versions, but all this content is mostly free online, and if you hide it behind a paywall, your listenership will just ditch you and go to your competition.

I think that the best thing to do is dramatically increase your circulation by making the app-delivery totally free. Now that means that lots of people who download the paper each day won’t necessarily treat the paper with the same reverence, but they’ll be way more of them, and they’ll see a hell of a lot of those ads. Let’s just (probably very inaccurately) go over some example figures:

A dead-tree newspaper sells for, say, 55p. Once you buy raw materials, (paper, ink, plates, getting all that stuff delivered to the printers), get the paper printed, get it distributed, and account for the commission from the newsagent, the paper makes about 5p. Obviously, you can’t sustain a newspaper on 5p, (especially as less and less people buy them – why when you can see it all online?), so they need advertising revenue to make ends meet. The average paper generates, say 50p of ad-revue per purchased copy.

Now each ad can be charged at 2.5 times more on a digital tablet edition, and even if someone doesn’t read each ad because they just browse (as it’s available free), you still negate that by having a huge increase in circulation, which will only grow as the paper versions vanish.

So if for a typical circulation, a paper that costs 55p generates 55p of ad/sales revenue. If the current circulation is a million say, that’ll be £550,000 of revenue per day. But if the average person only sees a third of the ads in the paper on the digital version, based on a 2.5 increase in CPM price and a conservative increase in circulation from one million to two million, you’ll see revenue of 40p per download. That means over 2 million downloads would give you £800,000 per revenue per day.

There’s probably a million things wrong with this long, inarticulate badly-written rant, but I can’t help feel that creative destruction will solve the current problems that written journalism is facing. And while amateurs and Twitter will now always be the first with breaking news, professionally produced and written journalism will still provide the high-value contextualisation that we crave. There’s a need for it, and I’m sure there will be a business model that will make it work.