The Fall of Book Publishing: The Rise of New E-Book Business Models

The Fall of Book Publishing: The Rise of New E-Book Business Models

 

Experimenting Our Way to Success - Reinventing Publishing Models

Amazon revolutionized book reading in 2007 when it introduced its Kindle book reader. Within the past three years, the explosive sale of book readers has caused a massive surge in the sale of e-books, already outpacing the sale of hardcover books, with a prediction by Amazon CEO Jeff Bezos that they will outsell paperbacks within the next year.

We are witnessing a major transformation of this industry. Within five years, the vast majority of all books sold will be e-books. Big box retailers like Barnes & Nobel and Borders will have shuttered most of their storefronts. The printing press industry, along with the craftsmen of ages past who have made a fine art of applying ink to paper, will be mothballing their machines. And the media, almost in unison, will begin writing the eulogy for this 500-year old industry.

But before we focus too much on what we’ve lost, we need to pay close attention to the other side of the equation. Digital book publishing will be an exciting new industry with truly amazing potential for growth.

Digital publishing does not mean fewer books or fewer readers. Rather, it paves the way for lower cost publishing, new forms of “books,” more authors, more titles, and a host of new opportunities. Most importantly, it will set the stage for experimentation as inventive young minds help redefine the form and nature of books.

In January, Deb and I attended the Consumer Electronics Show in Las Vegas where we saw no fewer than 20 new e-book readers being introduced into the marketplace. In addition to these, the number of other mobile devices such as tablets, laptops, and game consoles, with e-book reading capabilities, were something like 10-20 times as many.

These readers, along with the breakneck million-a-month pace being set by Apple’s iPad, are driving the ubiquity of digital reader access for every possible piece of written material that becomes available.

Competition will be fierce. So fierce, in fact, that the cost of book readers will begin to plummet. Within 5 years, some will reach prices as low as $20, maybe less. They will become as commonplace as calculators and virtually everyone will have one.

Two-Way Flow of Information

People today tend to resent the one-way flow of information. For most of history our technology has only allowed information to flow in one direction, and businesses have capitalized on this limitation.

For centuries people have used one-way information flows to establish themselves as the undisputed expert on a topic simply because there were so few options for voicing a dissenting opinion.

Today the rules are different. Information flows quickly and in many different directions. Anyone voicing their ideas can expect to have either direct or indirect feedback on it.

Most forums have comment sections. People now expect to be able to interact with the author. Their comments fuel other comments, and if some article does not have a comment section, opinions are stated on social media sites, with or without the author being aware of what’s going on.

Interested people want to immerse themselves with ideas, and they will to do this through comments, author interaction, wiki forums, and other forms of topical conversations.

Books have traditionally been the epitome of one-way information, but digital books are changing all that. Not only do they accommodate good interaction, some go out of their way to promote it.

Readers who become engaged with the information in an e-book will become evangelists for it. They will not only tell others, they will broadcast it to the world.

Emerging New Business Models

Interactive book forums are setting the stages for publishers to experiment with entirely new business models.

Rather than focusing on selling large numbers of books to become profitable, eBooks may very well become loss leaders, setting the stage for a series of other pricier products and services surrounding the author’s area of expertise.

Keeping in mind the time scarcity that most authors have, the cost of the services will increase along with the amount of time the author has to commit.

These types of services will vary greatly depending on the type of books, personality of the authors, and the timeliness of the topics.

In much the same way the music industry has shifted to selling concerts rather than records, the publishing industry will look for new ways to monetize the performances of its talent base.

Yes, people will still pay to purchase books, but they may be willing to pay far more for a variety of other ways to engage on the topic. Hosted mastermind sessions, subscription newsletters, interactive telepresence calls, one-on-one consulting, and paid appearances and speaking gigs are all options that next-gen publishers will consider as they calculate the value of a new unpublished work.

Much of this already goes on today, but continued experimentation will pave the way into virgin territory.

Some books will include ads, both in-text and display ads to help the bottom line. A few will experiment with product placement strategies, affiliate marketing, and other ideas for cross-promoting products.

Pushing Costs Back Onto the Authors

At the same time, as we move into an era of uncertainty, book publishers will invariably begin to shift many of the costs back onto the authors. The cost of reviewing manuscripts, content strategy sessions, layouts, and editing may be charged up front before any sale takes place. Along with shouldering more of the upfront costs, authors may also be presented with a cafeteria-style menu of promotional packages for every form of media to help improve awareness and increase the chances of landing a next-generation best-seller.

To compensate, publishers may opt for a smaller piece of sales initially. These pay-to-play models will virtually eliminate the industry’s upfront costs, so the big profits will come when “freemium” and premium services get added into the mix.

Rest assured, publishers will retain their role as the credentialing authority, to maintain the quality in their brand and control the exclusivity of their talent. In doing so, they will also command a premium price for their premium services.

Digital E-Book Readers are Only Phase One

When our only systems for creating books involves applying ink to paper, we are very limited in our capabilities. Adding color has been difficult and expensive. Images and photos have required special processes. Inserting a video has been impossible as were animations and any other form of movement.

Pages on a printed book are static. They don’t move. The progression of events has to be linear – one page after another – with no chance for hyperlinks, mouse-overs, informational pop-ups, or any other non-linear decision trees.

E-books, however, are opening the door to all that and much more.

Once we get past the notion that books have to be framed around a device that makes them look and feel like a traditional book, we can begin to experiment with some truly novel story-telling systems. Here are a few of the many possibilities:

  • Non-Linear Thinking – Storytelling will no longer have to be sequential or even logical. Some stories may involve such things as treasure hunts, game interludes, or even intelligent systems that write the story on the fly.
  • Movement – Rather than static characters and images on a page, a digital book may include animations, video clips, movable charts and graphs, touchable interactions, voice clips, note-taking modules and much more.
  • Augmented Reality – In its current state, augmented reality can easily add three-dimensionality to any page, image, or idea through the use of a head-mounted or spatial display. We’ve only begun to scratch the surface on this type of technology.
  • Holography – Stepping beyond augmented reality are other forms of holography, a science that so far has not lived up to its full potential. But new and better holographic systems will undoubtedly come, and they will unleash more than a little creativity into the storytelling process.

Books that tell a story will have an entirely new palette of options for bringing their masterpiece to life.

Some Final Thoughts

Much like transitioning from LPs to cassettes to CDs in the music industry, moving from printed books to digital books will alter the publishing industry and change the way money is made.

The key to this emerging business world will be agile minds and nimble leadership. Stiff competition will come from small players and consumers will undoubtedly become bewildered by all the options.

Attention spans will become an increasingly precious commodity.

As a rule of thumb, the decay rate for old content is increasing nearly as fast as the creation rate for new content. Since there are physical limits to how much the human brain can absorb in a day, the pool of active content can only grow as long as we develop faster absorption rates and grow the number of Internet users.

Eventually we will see old content stagnating as fast new content is being created. (Probably within the next 10 years.) For this reason, the economic lifecycle of books and information products will continue to shorten along with the ease of new content creation systems.

Yes, we will hear lots of grumbling from the publishing world and even see some bizarre legal and legislative attempts to slow the transition.

But this is an exciting time for both authors and readers alike, as storytelling and information products shift into an entirely different gear.

By Thomas Frey

7 Responses

  1. The Power of Books
    With the recent announcement that Amazon’s eBook sales a la Kindle exceeded the print book sales that we authors and publishers love so well, the “book sky is falling” dooms-dayers came out of the woodwork.

    Stop it! Printed books—pBooks—are not going to disappear. There’s a significant body of evidence growing that not only are pBooks here to stay, they do some downright wonderful things for readers.

    Books have power … in all forms!

    The University of Tennessee has been exploring students’ test scores for the past three years. Research led by Richard Allington has found that students who brought “real” books home had significantly higher reading scores than those who didn’t. It seems that those who toted books home avoided the “summer slide” that data has shown to impact so many students during the summer hiatus. For lower income kids, the decline is even greater.

    Kids are important … they are our future. In The Shallows, author Nicholas Carr’s thesis is that the expansion and use of the Internet is a major contributor to a short-attention-span culture.

    Those who tout the Internet as the “end all to be all” got some bummer news when Jacob Vigdor and Helen Ladd of Duke’s Sanford School of Public Policy examined 500,000 fifth- through eighth-graders’ computer usage. The results: the greater the use of home computers and high-speed Internet, the greater the DECLINE in math and reading scores.

    Research in over two dozen countries has also shown that kids who grow up in homes that have hundreds of books stay in school longer and do better academically. When you see the modeling factor, it becomes part of your life.

    What’s interesting about these studies is the timing. Facebook and Twitter belong to this decade. So do the kids in these studies. Is there a direct correlation between the increased use of the Internet, Facebook, and Twitter and the increased school drop-out rate and decline in math and reading scores and comprehension? Could the increased use of all things Internet be harmful to a kid’s academic performance … and eventually career?

    If you are a parent, pay attention! If you are someone who requires comprehension or the use of math in your work, pay attention! You just might be in deep doo-doo if you decide that the electronic format is the only way to fly … read … do everything.

    We live in the Internet vs. paper book era. In my opinion, neither will go away. The Internet is a Godsend for quick research, tracking things down, spreading the word—whatever the “word” is. It’s also an amazing rumor mill, burping up misinformation right and left in a format where gossip thrives.

    Books require a bit more vetting and investment. With the exception of a “crash book”—one that is rushed into publication within a few weeks (usually tied to something sensational)—the great majority of printed books are grown and nurtured into a package—one that you can savor and enjoy as you unwrap each page and chapter.

    Tap into book power. Accumulate and keep books in your house. (Your kids will thank you.) Learn how the Internet can support book and brand. And don’t toss one out for the other.

    One last thing: put away your buggy-whip scenario.

  2. admin

    Judith,

    Thanks for your comments here. You bring up some great points. Just for the record, I don’t consider myself a dooms-dayer because I see the opportunities continuing to improve.

    The vehicle we use as a conduit to port information into our brains is far less important than the fact that it gets there. In any case, we have some interesting years ahead.

    Tom

  3. Thomas,

    I agree with Judith. eBooks, or the “fast food” of reading, will take the place of “information gathering,” but will not take the place of “real thinking” when you read a pBook. Writers will now have to see that the change that is coming is that they are more than writers, they’re becoming businesses surrounding their craft. There are around 80,000 “publishers” in the US, with digital publishing that number can up to hundreds of thousands of publishers, each writer becoming their own publishing empire.

    Digital publishing will allow cheaper books to be made, including “trial books” to test the market and improve. But it also means that if I like a cheaper book and I want to keep it “for my library” means I’ll buy a better quality book for my shelves.

    Because the cost of publishing is going down, inner city or rural kids now have a better chance at reading a real book and learning how to write, like watching the movie “Freedom Writers.”

    Also, quality content will ALWAYS be around as cream rises to the top, and content in book form will never go away.

    Change is happening, but opportunities abound.

    Kevin

  4. Greg

    I can’t help noticing there are no videos, voice clips, or treasure hunts in this article. Maybe because they’re difficult and expensive to produce. Maybe because they would serve no purpose. Books don’t often even use the multimedia available to them. For instance, I have read many books, fiction and non-fiction, that don’t have a single picture, much less color pictures, transparency over-lays, pop-ups, sliding things, or scratch’n’sniffs. The “Choose Your Own Adventure” series were fun little novelties, and a device that any author could use, but most choose not to.

    Stories ARE linear, at least to the extent that the author presents events, whether present or flashback or foreshadowing, in a particular order for a reason. E.g. you find out whodunnit at the END of the story. DVDs are very capable of presenting alternate endings, but how many do so? Non-fiction IS linear– history or mathematics or other scholarly subjects need to be presented in a way so that information builds and an argument is developed. Books in any format serve a different purpose than a video game, a marketing web site, or Monty Python’s Complete Waste of Time.

    There will be stuff like that, but it won’t be the 400 page history of Islam. The next equivalent of “Harry Potter” isn’t going to have videos and sound any more than Rowling’s books were filled with color pictures or photographs of actors. Publication of a history of the Carolingian Empire isn’t going to be put on hold while re-enactments are filmed. A physics book might gain from a video of a wave crashing into a barrier rather than a half-dozen snap-shots, and there will be works specifically intended to experiment with multimedia capabilities. And the equivalent of a hyperlink to explain a word is the glossary, or maybe the index– if there are no page numbers that might be the best way. But for the most part I don’t expect the format of future ebooks, whether scholarly or novels, to be that much different from print books. That’s not a matter of capability. For that much extra work it would have to add enough value to justify it.

  5. admin

    Greg,

    Thanks for your thoughtful comments. But I am still convinced otherwise.

    The 2009 Report on American Consumers concluded that the average American has 100,500 words flowing into their heads on a daily basis. The source of these words has been changing over time. In 1960, 26% of our words came from print media. Today that number is only 9% and dropping. Instead, the vast majority of words today come from televisions and computers. You can read the full report here – http://hmi.ucsd.edu/pdf/HMI_2009_ConsumerReport_Dec9_2009.pdf

    Yes, it’s easier to write a book than to produce a TV show. At least it is today. That may not be true a few years from now. Just as building websites has gotten progressively easier, so has YouTube content and podcasts and other forms of digital media.

    Digital media gives people far more tools and it will take an entire generation of people being raised with this new media before we will know what all we can do with it. All I know is that traditional ink-on-paper publishing is in decline, and it may be fatal.

    E-books today constitute 9% of all consumer book sales. That’s up 193% from last year. A recent Harris Poll showed that a full 20% of the population either owns or plan to buy a digital book reader within the next 6 months.

    In 2007 the early Kindle cost $399 to buy. Today, in 2010 a far superior model of the Kindle only costs $139.

    Another recent poll showed that 57% of all kids are interested in reading e-books, and 33% are far more likely to read “more books for fun” on e-books.

    The numbers tell me a different story. I may be wrong, but we are headed for an era of intense experimentation. Not because we have to, but because we can. And that is where the true adventure lies.

    Tom

  6. I’d have to ask why eBooks are the “fast food” of books? Isn’t the content of an electronic version of, say, Great Expectations the same as the content of a paper-based version?

    I’ve been an eBook reader since the Kindle came out and I can say that I now prefer reading eBooks over print. The reader is smaller than most books, lighter, and allows me to do things that I can’t do with paper books (like instantly look up words in context). In addition, the Kindle’s integrated bookstore means that I can (more or less) instantly get the book I want for a lower cost than a printed book.

    The downsides? eBook publishers and hardware providers need to work out a better model for sharing books. It’s absurd that if I buy an eBook and my wife decides that she wants to read it, I have to either lend her my reader or she has to purchase another copy. Dumb, but not surprising considering the “lessons” that the eBook industry thinks it’s learned from the music industry. Random access of eBooks is tough, too: you can’t just flip to any page easily (unless you’ve bookmarked it or know the page number). Finally, while e-ink is superior to LCD displays for reading, I’m still waiting for good color displays based on e-ink before I ditch paper all together. In some books (see Pickover’s Math Book) images aren’t a nice “extra” but are integral to the experience.

  7. Duncan Cumming

    When one reads a book without pictures the brain provides the “images” – a movie of the text plays in one’s head, especially if the “story” is fictional. The reader is confronted with the evidence for this when viewing a movie tie-in or illustrated edition after reading the plain text edition. Often, the newly supplied vision of the narrative is disappointing.

    However you read – digital or print – beware giving up unillustrated fiction reading altogether as a wonderful part of your brain may atrophy. Of course, if you have never read an old-fashioned book it may already be too late for you. Only one way to find out :)

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