The changing world of digital books
The evolution of digital technologies is provoking lots of change in the book industry with a revolution in the fundamental forms of the product and the way that they are distributed. Every part of the old value chain is being affected, offering huge challenges to existing businesses as well as great opportunities for current and new players. The impact of these changes and debate about the digital future preoccupy every industry conference, blog, tweet and conversation. I was inspired this week by listening to one of the industry’s most prominent pundits at a society dinner to record my own summary of the most important and interesting areas of change that the book world faces.
What’s changing in the book world?:
The most prominent symbol of change in the world of books is undoubtedly the Kindle. Not only is it practically synonomous with ebooks and ereading, it has also consolidated and extended Amazon’s dominance of book retailing, much to the concern of book publishers and the peril of traditional booksellers. The shift to ebooks and ereading has accelerated remarkably in the past year, passing a tipping point where a serious proportion of the market is now reading certain types of book in this form. And the resulting revolution in the supply chain has been led by the branded devices.
Not only can the download of ebooks bypass traditional distribution channels for printed books, but branded reading devices can establish a default ecosystem for supply of ebooks via their own store, and even in their own formats. So the leading ebook resellers are those who make it easiest to buy and read on their device: Amazon/Kindle, Barnes & Noble/The Nook, Apple, and Kobo.
Although the tablet technologies are now evolving rapidly and offer in theory more open web-based platforms on which other brands and resellers can compete, in practice the dedicated reading device brands have captured a sizeable early advantage in market share, and with the deep pockets of their respective investors will continue to develop added reasons to buy and read with them. One of the strategies that is unfolding with the major media retailers is their aggregation of digital content across all types of entertainment content, offering customers a one-stop online shop for film, music, magazines, and books that can be delivered on any platform, including tablets, phones, and smart TV.
The main device brands have also certainly out-paced the existing book retailers who have been obliged to partner with them – witness WH Smith and Independent booksellers with Kobo, Waterstones with Kindle, and Blackwells et al with Nook – thus allowing these digital brands to own the customer directly and to become even more dominant with consumers.
There is much doom and gloom in the world of traditional bookselling. While there are a number of excellent individual independent bookshops in niche locations who continue to provide wonderfully curated shops and the best of hands-on, local service, there is an inexorable pressure on the volume of print books they will be able to sell as digital reading continues to grow and the ebook sales are routed through new direct channels. The larger bookselling chains with their substantial and inflexible overheads have already lost significant ground, and it is clear from their troubles that bookselling will no longer support the amount of retail space previoulsy devoted to it.
I’m sure that we certainly all enjoy the experience of browsing in bookshops and appreciate the value they provide in discovering new books, but unfortunately in the age of the internet the bookshop has increasingly been the place where we may discover a title only to order it online or download it to our device, sometimes even while we’re still standing in the shop! The recent attempts by bricks and mortar bookshops to grab some share of the digital pie by partnering with an ebook reseller may seem to make some strategic sense – better to earn something from the digital transaction than nothing – but sadly I can’t help but think it will prove too little too late. It is simply not viable to bear the high costs of retail stockholding and property only to be a showroom for products that you aren’t actually selling and for which your share of the margin is so low.
I also believe that the world of books will be a hybrid one for some time to come, by which I mean that as consumers we will continue to read in both print and digital forms. There are distinct pleasures and advantages to be had from the printed product, and from shopping for it, so this will continue. But there will be less of it, so those shops that offer only that will have to diversify to offer their cultured customers other valuable products and experiences. The best independents are already doing so. Good luck to them.
One of the challenges that most exercises the book trade with the decline of the traditional bookshop is how people can first discover the books that they want to read or buy. It has always been obvious that browsing lists of titles online does not offer the same inspiration as idling around a bookshop or speaking to a bookseller. Even the mechanically powerful recommendation engines of Amazon do not replace the serendipity of book discovery from bookshops, friends, reviews etc.. The most prominent solution offered in the digital bookworld is the social network for books as devised by companies such as Goodreads and Anobii, where people can rate, review and recommend books to the whole world and to their circle of “friends”. On these sites readers can sort books into categories of interest that may resonate with specific interests, and they can provide a forum for authors and publishers to engage with readers who have declared an interest in their work by virtue of their reading history. The basic principle is word-of-mouth writ large.
The next stage of social discovery of books is the integration of the community network within the reading experience itself, whereby people can communicate and share with others during the act of reading. The functionalities within ereaders are becoming increasingly sophisticated so that not only can individuals share their reading notes and views in real time, but additional relevant content can be linked to the specific reading experience. The ability to aggregrate intelligence based on real reading patterns and offer readers additional avenues to explore is potentially a very powerful tool that eretailers can share with readers, authors and publishers. A whole new world of discovery opens up.
A somewhat portentous piece of jargon, but a term that identifies the flux that is occuring in the book world’s supply chain. As already noted the traditional book retailer is being bypassed by direct digital supply. So too the roles of author, agent and publisher are changing with new channels of communication now possible between content creator and reader or customer. The well publicised explosion in self-publishing heralds the change, where authors of whatever quality can create their own products and reach audiences without the investment and infrastructure previously required and provided by publishers. Publishers have traditionally earned a margin on several steps in the supply chain, leveraging their capital, skills and economies of scale in design, production, print, distribution, sales and marketing of printed books. In the digital world, where print and distribution are less important, authors and agents have been re-evaluating how much value the publisher is adding to help their content reach its audience, and more specifically how much it is worth when it comes to sharing the proceeds of sale. While authors can create their own products digitally and promote them via digital media, publishers’ skills in identfiying talent and market opportunities, in editing, creating, packaging, branding and promoting innovative content are still highly relevant. In fact with so much undifferentiated content being made available the challenge that publishers perhaps answer best is how will the best content be created and discovered?
At the same time publishers have also recognized that they no longer need to rely on intermediate retailers to sell to reading customers, they can also reach their readers direct through digital channels. In so doing they can not only keep some of the sales margin previously given to the retailer but they can also know much more about their end customers, thereby better targetting the marketing of their products as well as their new product development. There are countless opportunities for publishers to create, encourage and engage with communities of consumers around areas of common interest, including authors, subject niches, and brands.
With changing roles come changing skills. Everyone in the book value chain is learning and adding new skills as they adapt to their new opportunities. Publishers need direct consumer marketing skills, authors will be more engaged directly with their audiences via social networks, and all are having to understand the fast evolving digital technologies that enable creation and distribution of their content.
While fiction and text-based non-fiction books migrate readily to the new digital reading platforms the progress and future of illustrated publishing is so far much less certain. Of course this has to some degree been dependent on the evolution of the reading devices,with the black & white ereaders that led the way not able to properly display illustrated books, so that the first illustrated digital “book” products were created within the Apple’s iBooks or Apps platforms. There have been some high profile successes in the creation of “enhanced ebooks” and book apps, which have effectively utilized the multi-media capabilities of the tablet medium to produce inspiring new forms of product. However there have been relativley few of these, and even fewer I suspect that have earned a profit. At this early stage, creation costs have been high, distribution is limited, and discovery is very challenging.
What is more, at this stage it is not entirely clear what platform publishers should be aiming at, what form the products should take, or even whether consumers will engage with these forms of publishing. Questions that pubishers are wrestling with include: do they simply produce “fixed format” versions of their illustrated print titles that preserve the original page layouts in a relatively static form, or do they invest in more dynamic product formats that offer more multi-media and interactive elements that make the most of the digital capabilities of the screens? Should an illustrated “book” be structured as an immersive, linear reading experience, with visual enhancements placed sequentially at relevant points in the text, or as multi-layered content with multiple access and navigational options? What difference does it make to the product’s distribution, discovery and sales if it is an “ebook” or an “app”? How can I produce these new digital products more efficiently and cost-effectively, as part of my in-house creative and production systems, while at the same time exploiting the creative opportunities the new technologies offer?
I don’t pretend to have the answers! I do believe that there is a fantastically exciting future for cross-platform, multi-media digital publishing that will provide wonderfully creative, new dynamic product forms, and that there are therefore opportunities for those who have creative skills in this area and for new applications that enable publishers to create and share these new products.
One of the most complex issues bedevilling the book industry is the question of the proper price for ebooks, and more particularly who determines the price of a book. It would take a whole book to recount the full history of book pricing around the world, but the gist of the most recent challenge has been a struggle for control to set prices between the largest global publishers and the largest global retailer, Amazon. In the English speaking book markets the industry has allowed retailers to sell books at whatever price they chose; however Amazon’s land grab for market share in the emerging ebook market included selling ebooks below cost, thereby lowering the prices consumers would expect to pay for ebooks in the longer term and threatening the survival of any retail competitors. Several of the biggest publishers sought to halt Amazon’s predatory pricing practices by setting a single fixed price for their product and insisting that all retailers sell it for that same price (legally acting as Agents of the publisher, hence “Agency pricing”). The publishers’ power play was recently torpedoed by the Department of Justice in the US who accused them of price collusion and most of the publishers were forced into a retreat. The result will be further price discounting by all ebook retailers fighting for market share. And with the multitude of self-published books being sold at 0.99 the price bar for ebooks is falling lower and lower. In such a free-for-all (pardon the pun!) can the industry preserve any proper value for the content they produce?
Of course consumers expect ebooks to be priced lower than their print equivalents, rightly identifying that some of the production costs are saved in making digital books. This expectation is somewhat undermined for the industry by the fact that higher levels of Sales tax generally apply on digital books than on print around the world. The other influence is that consumers are now used to accessing music and film for little or no charge via rental, subscription or of course piracy. Will the book world embrace new commercial models such as subscription for access to digital books? So far there has been little appetite on the part of publishers to allow their content to be part of such consumer models, fearing the further erosion of their margins. The challenge is to exploit such models to encourage increased consumption, through ease of sampling and cost effective access to back catalogues, while preserving the value of the premium content. In the end the industry should not resist innovation if it offers consumers what they expect and prefer; otherwise as has been seen in other sectors, someone else certainly will.