The last two days, Amazon has made a couple of announcements regarding the Kindle. The first is that they have raised the royalty that will be received by publishers to 70% and the second is that they will be making an SDK available. The spin on the street is that they are doing so because they are concerned about Apple horning in on their ebook market with their rumored (yes, it is still a rumor) tablet device. To be honest, I don’t think that is necessarily the case.
Amazon is squarely focused on using content to sell the Kindle. They have tremendous power in the book market and a ton of power in influencing traditional publishers. They also have access to largest library of ebooks. Throw in their self-publishing arm and clout with those consumers and authors and they are in a position to build the single library with every book ever written that we have been being promised for a good twenty years now. The problem is that there remain hold-outs. Publishers who for a variety of reasons don’t want to put their books on the Kindle. Many of these publishers are big, influential and publish the best sellers that in themselves could drive the consumer decision whether to purchase a Kindle or not.
The Objections
Among the objections to publishing on the Kindle are as follows.
- Financial Reasons – the publishing companies just can’t make enough on an ebook compared to a print book.
- Technical Reason – you just can’t execute the experience that you want on the Kindle.
- Plain Old Stubbornness – publishers have made their money for centuries on a dead tree model and abandoning that while it is still viable and making money (although not as much as it used to) for a nascent technology that is selling a fraction of the numbers just doesn’t make sense. If you’re a member of the old guard and still cranking out best-sellers you’d likely rather stay entrenched.
Let’s look at each of these in more detail
The Stately Book Publisher
The last item on this list is unlikely to change anytime soon, so let’s tackle it first. The resistance to ebooks because they are, well, electronic books is largely a matter of changing a way of life and a belief system that has long dictated how the stately publishing industry makes their money.
Somewhere along the way, publishers got themselves confused with printers and typesetters. That is easy to understand because beyond maybe an editor or two and the author (who isn’t really an employee), most of the personnel at a publisher is concerned with taking words and putting them on paper, getting that paper to a store (be it by sales, marketing, warehousing, and shipping) and then getting people to buy that paper. The gap between people who care about the words on those pages – the author and reader) is populated with hundreds if not thousands of members of what is largely an assembly line. Those layout-techs, sales people, marketers, warehousers and shippers are unlikely to have even read any given book that is in their care. Publishers spend a lot of time and attention to streamlining this physical book creation process to squeeze out every last dime. Telling them that they should scrap all of that to deliver what is effectively a Word document rocks their world.
There is, however, sufficient momentum driving ebooks into the mainstream and publishers will eventually come around. It is just a matter of time. We have seen this process repeated in the music industry, the movie industry and now the newspaper industry (unfortunately, too late for many companies and employees who have lost their jobs in the process) and like it or not, it will happen to the book publishing industry. The best thing Amazon can do to drive this change is to sell more kindles and to get more ebooks into the marketplace. From that perspective, an Apple tablet and a B&N Nook are good things. It validates the ebook market both to the publisher and the consumer. Furthermore, if you think that a publisher is going to forsake the Kindle, to go exclusive on an the Apple tablet, you’re kidding yourself. How many record companies have made exclusive deals with Apple? How many companies would tell Wal-Mart to take a hike for the sake of selling through a boutique? Not many. More ebook devices only helps get more publishers involved and helps move Kindles and Amazon has a distinct advantage when it comes to selling books.
Publishers Make Less Money on eBooks
The standard argument that people make when talking about ebooks and price is that without the cost of paper, printing, warehousing and shipping, ebooks should be substantially cheaper for Publishers to produce and therefore should cost less for the consumer.
Presumably, the savings is passed on to the consumer rather than the publisher or reseller because the consumer is accepting an inferior product. As this market progresses, there will likely be room for debate (I personally prefer reading book son a kindle).
This argument is valid in theory and in a vaccuum. The truth of the matter is that the assembly line approach to book production involves a lot more moving pieces than these four elements and as long as you are creating a single book, the line runs anyway. Those items that you are eliminating by producing an ebook are all items of scale. You save money on printing and paper with every additional book that you produce. The truck runs whether you print 1000 books or 20,000. You don’t tear down the warehouse if it isn’t filled to the gills. Until you are creating exclusively ebooks and foregoing paper altogether, the difference in price just isn’t that straightforward.
At the end of the day, the ebook market is just too nascent and publishers don’t really know what the economic impact and opportunity cost of selling an ebook at a fraction of the cost of the printed book.
Based on back of the envelop calculations, for mass market paperback publishers, it is likely a no-brainer, the standard $9.99 Kindle book price is only a few bucks off the cost of their product an they likely do see a boost on not having to ship to every single store on the planet. The Kindle purchase model is largely an impulse model (cheap and easy) and that aligns well with what their current sales model.
For higher-end reference publishers it is a different story altogether. Take computer books (I could write another equally lengthy post on the topic, but will try and be brief here.). Here you have a product that is perfect for the Kindle…in theory. The core computer book audience these days is technical and generally populated with early adopters (they buy devices like Kindles). They are information hungry and used to spending a good deal of money on attaining knowledge as it can directly influence their income. The content is generally used in chunks and search can be absolutely critical. The idea of a small portable device populated with authoritative information on every relevant topic that can be rapidly accessed in a non-linear fashion is the stuff of wet dreams. Unfortunately, these books don’t sell at the same scale as mass market paperbacks. They sell primarily through a handful of resellers, and face much less uplift from the economy of scale. They also must be produced quickly in order to be relevant to the market as it stands today. For those reasons, they cost $40 – $80. For a computer book publisher, you have to sell a whole lot more Kindle books at $9.99 to make up for the potential loss of printed book sales. Try and sell a Kindle book at $40 and you lose that impulse purchase benefit that makes the device really shine.
Additionally, most computer book publishers saw demand for ebooks early and began work on their own solutions. Virtually all computer book publishers are part of Safari Online (a subscription based ebook service accessed via the web), so not only do they risk cannibalizing their paperback sales, but they erode at the sales of another channel from which they get to keep a much larger part of the profits.
So if you’re Amazon how do you make the Kindle more appealing to these publishers and in turn and better yet these consumers? Give the publisher a bigger piece of the pie. Give the publisher an extra $2.00 per book and maybe, just maybe the Kindle looks more attractive and less like a threat. It may not be the answer, but it is quick enticement whose lasting impact may outweigh the loss in revenue for Amazon.
The Kindle Doesn’t Do What I Want
For publishers at the other end of the spectrum of the assembly line inclined, the Kindle may be a little too close to the printed book. Amazon has done an admirable job of creating a product that matches very nicely what it is like to read fiction on paper. The problem is that it falls way short of what an always connected interactive reading device can and should do. Yes, it has note taking and highlighting capabilities, but, they are a bear to use and you can’t really do anything with the notes and highlights once you’ve made them other than revisit them on your computer. It seems like a device like the kindle has the potential to do much more.
- What if I could print a recipe from a cookbook?
- What if I could copy a line of code from a computer book and send it to my PC?
- What if I could take a highlighted section and send it to a friend?
- What if a college professor could see what parts of a text students found salient?
There is a lot of power that can extend the reading process and make it much more of an interactive activity. Something that a paper book could just never do. For reference and text book publishers, this can be really impactful stuff and can make a really compelling experience for the customer.
Amazon has already shown a desire to get into the textbook market with the introduction of the Kindle DX. By creating an SDK, they make it possible to extend books from simple reading material to an interface to the classroom. It also allows the professor to integrate texts even further into the curriculum by getting a better understanding of how students use the text. It also allows for greater flexibility with the device and for changes to be made on the fly (right now they do an occasional firmware upgrade, but that’s it). With an SDK, they can push new features and even outsource them to third parties to provide. That means the push back that they have gotten from the academic market based on accessibility for the visually impaired can be addressed with software and not new hardware and may be addressed by third-parties or the schools themselves.
Thanks to the Apple app store everyone assumes that apps on the kindle will be games and tip-calculators, but electronic reading devices ultimately are going to be transformative to the reading experience and it will be apps along those lines that will really make these things shine. Sure there will be gimmicks and add-ons, but for publishers who really care about the reader experience and how they can extend that experience beyond the page, the Kindle SDK is the first step to what is going to amount to a revolution.
The prospect of the Apple tablet is very exciting (heck, I’d buy one now sight unseen), but it – like the iPhone and PCs – is likely to be a multi-tasking device on which reading may be one activity. To assert that Amazon would be basing their Kindle strategy on a rumored technology product when there are already comparable multi-tasking devices in the market seems somewhat short-sighted. If they really were viewing this as competition, why wouldn’t they start adding other features of PCs? It is because Amazon’s goal is to create a great reading experience and to get as many books available on the Kindle as possible (just as the goal of iTunes is to get every song possible available for download to an iPod). It eliminates barriers to entry for consumers. To do this, Amazon is going to have to hone their strategy, and the functionality on the Kindle to appease publishers. I don’t think either of these announcements were entirely unexpected in the big scheme of things. Just as if Amazon were to announce the introduction of a color screen, it would not be a reaction to the Apple tablet, but again, a step towards creating a better experience for the customer and the publisher.
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