Book publishers: please learn from the mistakes of the music industry - my thoughts on what to do

I just received my new Kindle - the so-called International Edition - and as a result I have started to investigate the most recent electronic book developments. Apart from the Kindle (which I like but whose economic proposition is quite mad, frankly), I also own various Sony Readers and am a heavy Instapaper app user on the iPhone; I use it to read 100s of book-marked web-pages offline, saving 1000s of pages that I used to print.

Looking at what some large book publishers are starting to say about their digital strategies I have been getting a bit worried about a potential repeat of what happened in the music industry, i.e. of trying to keep or even expand 'control over distribution' while attempting a fruitful switch to a digital distribution model. In other words, many publishers seem intent upon using the advent of digital distribution as a way of fixing the 'flaws' of physical media (such as the CD or the book which can easily be traded, shared or lend to someone else).  Well, the reality is that in this new digital ecosystem, attaining total control is an impossible mission - and this flawed world view, I think, is main reason behind the global demise of the recorded music industry.

So here, below, is a summary of what I think non-fiction book publishers could learn from the digital music disaster that has been playing out in front of our eyes (and ears) for the past 10 years. Please note that in my opinion, the distinction between fiction and non-fiction publishing is crucial, because we must take socio-cultural contexts, existing user-habits and consumers UI (user-interface) preferences into account.

For one thing, I think that readers of business books are much more likely to adopt eBooks because they are often reading several books at the same time, annotate and bookmark heavily, skip chapters or like to search inside a book - all of which is becoming quite easy to do with the new generation of eBook readers. And many of them like gadgets, too, so that's a good fit. However, people who read novels or other fiction are, in my view, less likely to quickly adopt eBooks on a large scale since the good old interface of printed books still represents a much better emotional i.e. 'touch-feel-smell' value to them.

Let me also point out that while I think book publishers can learn plenty from what happened in digital music, the two businesses are really quite different, and whatever we may discover from the music debacle cannot just be transferred to the eBooks space.

Taking this into account, here are my top 5 tips for book publishers:

1. Don't (just) sell the copy of the content - sell everything around it. In fact, consider making the mere 'copies of words' (i.e. the raw data, the file) a lot cheaper to obtain from authorized sources but also start creating and offering those added values that are only possible in this coming digital ecosystem. Start building - as Kevin Kelly says - those 'new generatives' that will, over time, probably make up 75% of your total revenues. What do I mean with that? Unique, non-copyable values such as context (e.g. being able to look up a definition of a word or phrase via Wikipedia, or find a precise topic from the book you are reading in other, related books), curation and packaging (e.g. being able to read 'the best' chapters of the top 25 business books in a single, new 'compilation', or having a book edited down to 20 pages or 3 hours of audio so that I can save time and read  / hear only the essential stuff), immediacy (e.g. getting the book delivered at the very moment that the last word has been written or edited), and social relevance (e.g. see what my peers are saying about this book, and what comments they may have shared). The exciting thing is that eBooks don't have to be linear any longer - now, they can be linked, amended and interwoven; and guess what: no-one but the author and the publisher can provide these kinds of values. Read my lips i.e. tweets:  Unique experiences by unique creators cannot be pirated. Imagine 10s of 1000s of people buying the basic eBook for a very low price but then 30% of them opting to pay an additional 'fan & follower' subscription fee to get all the updates, comments, links, videos and audio versions as well. My advise: look at the initial sale of 'the copy' only as the mere starting point rather than the only way to monetize, look beyond the mere copy. With eBooks, the copy is just the tip of the iceberg. 
2. Don't focus on protection: focus on engagement, on attraction, on enabling followers not pushing enforcement. Realize that the more you empower the user the more money (s)he will give you. Yes, that's the Google way. As trite as it may sound to some of you: in digital content, friction really is fiction: if you keep the price too high, if you don't offer a standardized and open platform, or if you impose burdensome technical restrictions then you simply will be pointing to, or shall we say, sending your customers to those countless illegitimate places where they can just download the free files without any of these hassles. You don't compete with free - you compete with better service, trust and added values!
3. Don't try to sell what's abundant - sell what is scarce. The 0s and 1s that make up a book's content are and will always be abundantly available to those savvy digital natives, and will be captured by those 'people formerly known as consumers', no matter what you may do to prevent it. No matter how much you hate the idea: copies of digital files are abundant, meaning... close to 'free' - and that's that. What can be sold - based on a powerful, legitimate, low-priced or bundled, ubiquitous, unrestricted and super-attractive access model - is the stuff that's actually scarce which includes my own time (a great example is how the 'Wired' guru and Longtail prophet Chris Anderson sells the edited audio version of his new book "Free" for $7.49 while the basic, long-form MP3 is free), powerful creation, extra services such as special audio and video versions, and so on.
4. Technical copy protection or so-called digital rights management measures (DRM/TPM) are guaranteed not to work unless they are 100% invisible and actually add value to the user experience - in which case they become more like CRM.  Most of the time, DRM is an insult to the legitimate buyers, and utterly useless in terms of actual protection simply because it is trying to solve a business problem with technological measures. It prevents (and insults) customer happiness and greatly deters future purchasing. It reduces sales and punishes those that actually do buy and pay real money for the content. Book publishers, repeat after me: DRM will cost you serious money to implement and it will do nothing to 'protect' your content. Remember: after a decade of stone-walling and criminalizing what consumers have always asked for, the big record labels have finally allowed most digital music retailers to remove the DRM and sell unprotected MP3s - and guess what: the retail of those MP3s has had zero impact on the issue of how many people 'file-share' music without permission. So, read my lips i.e. my RSS: the only protection you have is in the business model. Think bundles and flat-rates based on very personal, unlikely-to-share log-ins, the potential embedding of user-IDs and even some personal profile information into the purchase process as well as, possibly, into the file-metadata itself, and above all a powerful 'great price + service' policy that will make all those bad UI, lousy experience but free sharing sites obsolete. I also recommend to look at the concept of Social DRM.
5. There can only be one standard file format, and it needs to work on all devices. ePub looks good but DRM'ed ePub is a bad idea. As I said in my presentation at the eComm conference in Amsterdam, just yesterday: "the fastest way to economic suicide is to put walls around your content". Just like in digital music, where MP3 is what everyone has been using for the past 15 years, you need to go with an open, ubiquitous file format and not start a format war that will leave the consumers baffled and ill-served. The Kindle is nice, yes, but just like iTunes which is only now becoming DRM free it's a tightly walled garden that forces you to stay inside and enjoy yourself only within the existing confines. Now, for me, personally, if the pricing was drastically different maybe I wouldn't complain about the fact that I can't share these books, at all - maybe if I felt like I had some kind of real power as the consumer to influence how these economics works, maybe that would be OK. But the Kindle's paradigm is based on a 'take it or leave it' rule: expensive devices, delivery fees for each book that's purchased outside of the U.S., and eBook prices that are only slightly lower than the printed book...? This is certainly not going to get those digital natives excited about becoming a 'legal' user of eBooks.

The bottom line: don't worry so much about preventing sharing or copying. Offer more, cheaper, better and more connected services, get significantly more users at a much lower prices and re-invent your business model.

Related: Lending...2.0?

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Comments

[Shachar Oren]

1.

Great article Gerd, thanks for this thoughtful summary!

[Bill Rosenblatt]

2.

Gerd,

I'm sorry. Spending a few days with a Kindle does not make you an expert on book publishing. Nor does regurgitating the so-called wisdom of Cory Doctorow and Kevin Kelly.

First of all, your references to Kevin Kelly's "true fans" model apply (if at all) to authors, not publishers. Publishers do not have equivalents of the "360 deal" that the music labels are pursuing. In the vast majority of cases, they have no rights to any of that ancillary content and expect authors to do it all themselves. Any author that really wants to go the Kevin Kelly True Fans route will most likely be bypassing publishers entirely.

Whereas the music industry can still make "B2B" money through publishing rights and collecting society levies even if recordings don't sell, again there is no analogue to this in book publishing. Authors own the copyrights; publishers usually don't. In short, publishers could not do anything about your advice even if they wanted to, except maybe lower prices and lose more money.

Secondly, you show the same lack of understanding of DRM in book publishing that Cory Doctorow did when he gave a keynote at the O'Reilly TOC conference last year. It is true that publishers insist on DRM, but it's really all about Amazon and its lock-in, just as it was for Apple. What you and Cory do not understand is the very fundamental fact that publishers do not pay a cent for DRM. Instead the device makers and service providers (Amazon is both, just as Apple is) are the ones that pay for it. So, they figure out ways to turn it to their advantage. I agree that the result is suboptimal.

I agree with you that EPUB is not valuable if it is surrounded by proprietary DRMs, except insofar as it saves publishers modest amounts in production costs. The IDPF (formerly OeBF) punted on including DRM in its standardization efforts, which is a shame. But this happened because OeBF/IDPF is dominated by technology vendors, not publishers, and DRM interoperability represents an expense and a competitive disadvantage for (most of) them. Publishers would have preferred interoperability, to the extent that they cared at all.

I also suspect that publishers will end up doing away with DRM in 1-2 years. But for reasons that have nothing to do with antipiracy or with costs. They will have to do - if things play out as I suspect - with Amazon determining that its real revenue stream is on book sales and not device sales. Then Amazon will have no use for DRM anymore. Amazon doesn't have the clout in e-books that Apple does in music; not only does it not have as much market share, but publishers are also holding back certain frontlist licenses as a point of negotiating leverage.

I do agree that so-called social DRM is the future. This term was invented by Bill McCoy at Adobe, Amazon's real competitor among e-book platforms, which is advising publishers to do away with DRM. The funny thing is that Microsoft offered social DRM for e-books back in 2002...

Best,

- bill.

[Gerd Leonhard]

3.

Dear Bill, I know you work in the DRM field so your comments are seen in that light, but thanks for your input. My response 1) I am not an expert in book publishing, and never claimed to be one; the Kindle merey egged me on to comment on this topic 2) My ref to Kevin Kelly did not refer to his 1000 fans post but his post on 'new generatives' which is at http://www.kk.org/thetechnium/archives/2008/01/better_than_fre.php and which is, imho, a perfect fit for the future that book publishers are facing. Come to think of it, a 360 approach for authors and their publishers strikes me as a possible idea, as well, with book publishers becoming more like Agents and providing other services to the authors, as well, but no longer getting 90% of the cake to produce the book and ship it (ok... maybe a bit more than that).

3) Publishers can't do anything about my advice? I don't see your point here. Publishers are the ones that set the price for the book, they sign contracts with the authors (see above) and they are the ones that are asking the eBook retailers for DRM -- just like the record labels did. I fail to see your point here; in my view the publishers could do all of those points I mentioned above.

4) I know that publishers don't pay for DRM - the CONSUMERS do, via apple, amazon etc. Which is precisely what I don't like about it. The likes of Apple and Amazon and Rhapsody etc use / used DRM because the content owners forced them to; and that needs to stop. What is your point here?

Cheers Gerd

[Tomasz]

4.

In addition in so-called social DRM:
DRM is not popular jet but maybe it will be in the future?
To be more popular it should offer MORE than only to prohibit access or identifies the end user, right? . What does MORE mean? Let's see at YouTube:
http://www.youtube.com/watch?v=Jv1LpAKXIO4
Regards,

[Bill Rosenblatt]

5.

Gerd,

I'll stick to one thing for now: my point about publishers not being able to act on most of your advice is not about DRM. It is about the fact that they do not control anything about authors' content other than a very limited set of rights that are put into a contract. The author owns everything else. This is different from the world you are used to with music.

It is easy to say "publishers should do 360 deals," but they don't, they were never set up that way, it is hard to imagine them starting to do this, and basically I don't think it's ever going to happen. The "new generatives" stuff is going to come directly from authors. Let me refer you to this piece that appeared in a recent issue of The New Yorker magazine - which is a funny parody but not far off the truth - and you will get an idea of how this industry works: http://www.newyorker.com/humor/2009/10/19/091019sh_shouts_weiner

One more thing: if you "know that publishers don't pay for DRM", then why did you say, "Book publishers, repeat after me: DRM will cost you serious money to implement..."

- bill.

[Eoin Purcell]

6.

It strikes me that you have missed a trick there Bill.

Currently publishers only control a limited set of rights. There is no reason for that to always be the case and no reason why PUBLISHERS cannot become a 360 type operation.

Sure it will require fundamental change, but the alternative is less attractive.

Eoin

[Eoin Purcell]

7.

On a more general point I think it worth saying that in many ways some fiction genres have accepted ebooks and digital content much more readily than quality narrative non-fiction (a very different beast to business books). Romance for instance.

I don't think broad strokes will work in the industry that is publishing because it is so diverse. The impact of digitzation will certainly shift the industry but niche by niche that impact will differ significantly.

Still, solid thought worth taking under consideration. Some of which, many publishers have already started acting on.

Eoin

[Bill Rosenblatt]

8.

Eoin,

Thanks - very interesting comments.

- I totally agree with you about different segments dealing with e-books differently. The segment that is most interested in "protection" is higher ed textbook publishing. This also goes to one of the points that Gerd raised (and yet another thing that IMHO he got wrong): trade fiction is doing better than nonfiction, despite the fact that business road warriors tend to read it. Try reading an e-book with lots of charts and graphs on a standard Kindle. Ugh. It's almost analogous to paying $0.10 for a low-fi mono version of a music track vs. $1.00 for the full stereo 320kbps MP3 or AAC. The economics, production values, and concerns in different publishing segments are going to result in those segments' e-book strategies taking off very differently. Note that Plastic Logic has just announced an e-reader oriented towards the business audience. This has yet to play out.

- Publishers can't become agents any more than hollywood studios can become agents. They are just not set up for it; they don't have the infrastructure or expertise. All they essentially know how to do (at least in trade publishing) is produce books at the lowest cost possible. Instead, I think agents will become (remain) agents, and they will take the action in the industry, much along the lines that Gerd (by way of Kelly) suggests. This is happening now with companies like Live Nation and The Network.

[Jon Davis]

9.

Gerd

Thanks for you post and opinion. Its an interesting read and one I will go back to in detail, book mark and annotate. I'm not going to comment on individual items within your post as I would be here all night. However, having spent 10 years plus in the digital music business and the last 18 months in the digital book business I feel compelled to post some thoughts.

Although perhaps an un-popular view in certain publisher circles, my sense is that DRM is in large red herring. What I've seen in DRM so far for music, films, books hasn't worked. It frustrates and confuses consumers, does a poor job of protecting content and in some cases hinders purchase in the first instance. It is a technology that has been talked about for years its still not working. I have to admit I am no expert in social DRM and will go seek out more, but would question whether social-drm will work where un-social drm has failed before it.

In my view, perhaps more important than DRM, is figuring out the business models, products and services of the future. Lets focus our energies on positively improving stuff rather than DRM. That in my view will reap greater rewards. Both fiction and non fiction publishers could use the advantages of digital books to make reading books easier and better. Will that be enough to maintain their profits and revenues? Maybe or maybe not. Moving up, down, sideways, forwards and backwards in the value chain may also be essential.

In most cases, record labels sat still in the value chain whilst digital changed the game for far too long. They failed to move when they still had size and the muscle to do so.

Will book publishers take the book value chain by the horns? Are they doing it fast enough? Will their cultures allow for it? Next year, I have one project in the pipeline that I'll be able to share that illustrates some movement. Value chain movement is good.

As Seth Godin's great post on lessons from the music industry stated "past performance is no guarentee of future success". http://sethgodin.typepad.com/seths_blog/2008/01/music-lessons.html

We are in year 1 or maybe 2 of another fascinating evolvement of perhaps our longest serving medium. Here's to where we are in five years from now...

Hope all is well.

Jon Davis

[Alex Powell]

10.

Gerd,

Having spent the last 4 years under the thumb of the media industry, I've had enough of being part of the majors' (books as well as music) slow-moving responses to the fast-moving world they operate in and so am setting up my own online music platform. Based in London, the business - Music Balloon - will grow with the ideals of the fans and artists at its heart. Much of your work has helped my identify what those fans and artists want and I'm indebted to you for that. Thank you.

That pre-amble is important; I've got several point that I need (yup, need) to make both in reference to your post and the comments below and context is key ;- ))

I believe your post makes 5 clear points that, if the book publishers and retailers were to listen to right now, would save them much pain and make them money in the future. Here's why - you're challenging them to CHANGE and RESPECT THEIR AUDIENCE... not easy, especially for big corporates.

Jon - I am amazed at how hungry you seem to be for change given your 11 or so years in the industry. Your point about the bigger issue that lurks behind DRM feels right... social DRM is a philosophy not a bunch of rules written in some computer language.

Bill - you REALLY missed the point. Publishers and authors need to work together in the future if they are going to make eBooks work. Content is king, context is KONG. Build a platform where authors can provide context. If it's not in their contracts now then build it in for the future. If you guys don't then someone else will. (Actually, we're already working on that but no need to worry... I'm sure DRM will save you.)
And lastly, your point about Hollywood studios... just watch as high speed internet becomes the norm across the globe. Hollywood is probably next.

Kind regards,

Alex