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"Brave New World 2"

This paper was written to coincide with the presentation to the Seoul International Book
Fair, Seoul, South Korea, May 2010
Introduction

The Brave New World report was published less than four years ago, in November 2006. It took a hard look at the market, consumer trends and drivers, publisher strategies, the existing market and players, the publishing value chain and the lessons to be learnt from other media sectors. Its aim was to identify the opportunities and challenges for booksellers in this new emerging digital market.

We got some things wrong, such as the early adoption of digital audiobooks. We thought they were a ‘quick win’, but instead found that they were inhibited by DRM (digital rights management). By the time some market sanity had returned and the audio world had started to follow the music world and go DRM free with MP3 files, the opportunity had all but gone. Audiobooks now find themselves in danger of falling behind ebooks and in being killed by digital text on one hand and the emerging digital imagery on the other. Audible, who dominated the market, got swallowed up by Amazon and was effectively all but sidelined in Amazon’s pursuit of bigger opportunities.

Fortunately we did not write the report and walk away. We undertook the task of updating it through the Brave New World blog.

This constant demand to review and comment on the changes affecting publishing and the digital world, has resulted in nearly 1500 individual articles being posted on the Brave New World website. These have often been cited, read in different counties and have help us understand better some of the challenges and opportunities.

When we look back at the last three and a half years we see significant change. We have witnessed innovation at a pace that has taken many by surprise and which has also often left many confused. We have seen bright new entrants come, stutter and disappear. We have also witnessed a significant rise in social and consumer awareness in all things digital. Importantly we have seen the digital book become a topic of great debate and media attention.

This short paper doesn’t attempt to rewrite the original report or even update it in its original structure. It recognises that the report was a ‘stake in the digital ground’, but that the world has since moved on.

Much of what we said back in 2006 still stands. We now need to build on it and to review what has happened and look forward to what is going to happen in the next five, ten and twenty years.

Winston Churchill, speaking to the Royal College of Physicians in 1942, wisely observed that, “The longer you can look back, the further you can look forward.” It is clear that the last three and half years is a long time in digital history.

This paper starts with looking at some of the 1500 articles we have written which we can summarise under five major areas of change:

1. Technology Convergence
2. Gorilla Wars
3. Content and eBooks
4. Authorship
5. The Social Phenomenon

We then look at the challenges we will face tomorrow.
We also look further into the future at how social and technological change could potentially further revolutionise publishing, publishers and the book world that we know today.

1. Three and a Half Years is a Long Time in Digital World

When we look at some of the announcements, launches and big issues that have occurred over the short three and a half years we can start to grasp the speed and extent of change experienced in the digital world.

Below are just some of these many events and that we wrote about. Some were significant, others just passing noise. Some generated many articles, some just the one. Some were missed at first and caught later.

2006 (November)
• Ingram acquires Coutts and launch Ingram Digital Ventures
• Facebook opens its doors to all

2007
• Guardian Unlimited and Bebo.com join forces to launch a new literary competition based on "nanotales", (less than 1,000 words).
• BBC Trust is to pull its £150m online educational service BBC Jam from March
• Gardners announce new digital warehouse
• Amazon to provide single copy POD service
• Amazon acquires Brilliance Audio in May
• MySpace has 79% of social networking traffic in May.
• The cassette in 1963 is to die following its withdraw by major UK retailers (it peaked in 1989 with 83 million sales of pre recorded tapes)
• Amazon announce DRM free MP3 music
• Apple launches the first iPhone in June
• The Espresso Book Machine has been installed in the New York Public Library
• The BBC launches a beta version of its on-demand TV service iPlayer in July
• Barbie is launched on a memory stick with, pages and games, virtual shops and online chatting functions
• 8 months after a reverse takeover of Houghton Mifflin, Riverdeep pays $3.7bn in cash for Reed’s remaining educational business
• Prince releases a new album free with the Mail on Sunday
• Bookrenter.com launch a new US textbook rental service
• AA Smart Travel Guide for London comes on memory card that can be played on a mobile phone
• Keitai novels in Japan now generate $82 million
• HarperCollins launch web based toolset AuthorAssistant with 40 Avon authors
• Shanghai-based Bookgg launches free book model with sponsor placement printed on your book.
• Apple sells its millionth iPhone in less than three months after its debut.
• HarperCollins and Penwizard are to launch printed personalised children’s "books on demand"
• Margret Atwood launches the LongPen which enables authors to appear virtually at book signings over the internet
• Radiohead offer new album ‘In Rainbows’ via an honesty box download (you pay what you think it’s worth).
• BBC Worldwide purchases travel Publisher Lonely Planet.
• Rupert Murdoch said that he was planning to drop subscription fees for the digital version of the Wall Street Journal.
• Amazon launched the fist generation of the Kindle reader in November
• After 13 years Netscape Navigator, the first commercial Web browser, will no longer be developed and die in 2008
• Deloitte & Touche new-media US survey (October) into consumer habits finds:
o 38% are watching TV shows online
o 20% viewing video content on their mobile daily
o Across all ages, 36% use their mobiles as entertainment devices (an 8 month increase of 50%) and between 13 and 24 its 62% between 25 and 41 47% (up from 46% and 29% respectively).
o 45% are creating online content like Web sites, music, videos and blogs
o 32% considering themselves to be "broadcasters" of their own media.
o 54% socialize and 45% maintain a profile on a social networking sites.
• Sony to stop making rear-projection televisions and focus on liquid crystal display (LCD) and organic light-emitting diode (OLED) technology in the flat-TV market.
• Warner signs a deal to allow Amazon to sell MP3 format without DRM music downloads
• Palm is to lay off around 10% of its staff and expected to post a second-quarter loss with revenue $20million below expectations.
• LinkedIn, was the fastest-growing social network in October, attracting over 17 million registered users
• Nokia plans to offer unlimited music downloads.

2008
Mr Apple, Steve Jobs, says on the Kindle "It doesn't matter how good or bad the product is, the fact is that people don't read anymore... The whole conception is flawed at the top because people don't read anymore."

• Amazon acquire audiobook market leader Audible in January
• www.myspace.com/harperteen enables kids to write prose and share it with friends on MySpace.
• Oprah Winfrey announces a free downloadable PDF version of Suze Orman's bestselling book WOMEN & MONEY was to be available at Oprah.com for 48 hours
• Mills & Boon have some 2000 titles digitally available in North America and every new title now part of the digital programme
• Amazon announce that they will only sell print-on-demand books printed by its own BookSurge services
• Microsoft Live Book Search pulls out of the market in May
• Social hybrid BookRabbit is launched in UK
• Hachette Livre acquires French digital book distributor Numilog
• Joshi Gakuen school in Japan deploy Nintendo devices to improve student learning
• Nokia acquire UK-based mobile phone operating system owner Symbian

'Publishing has only two indispensable participants: authors and readers. As with music, any technology that brings these two groups closer makes the whole industry more efficient—but hurts those who benefit from the distance between them.' Economist 5th June, 2008

• Apple launch the iPhone3G in July
• Overdrive launch it’s Digital Bus tour across the US to promote digital adoption in public libraries. Google launch a social site , ‘Lively’ to rival the virtual world of Linden Lab's Second Life.
• American Airlines flight from JFK to Los Angeles tests high-speed, in-flight Internet access
• This week OCLC, the library service to 60,000 libraries in 112 countries, announced that it is piloting a new service, The WorldCat Copyright Evidence Registry that will enable librarians to discover and share information about the copyright status of books.
• Amazon acquire ABEBooks and Shelfari in August
• Wal-Mart informs customers it will be shutting down its DRM music servers in October
• Adobe launch Adept and ACS4 DRM services to support Adobe eBooks and epub downloads
• Google launch 1st Android phone
• New iRex Digital Reader has 10.2-inch eInk screen
• Esquire magazine’s October 75th Anniversary issue is published as an experimental limited-edition, with an eInk front cover.
• September 7th Google is 10 years old
• HarperCollins launch BookArmy social site
• Google Book Settlement is announced in October
• Oprah Winfrey and Jeff Bezos cosy up to sell Kindles at discount on her show
• Magcloud launch self publishing for magazines
• Sony announce the PRS-700 (their third version / model in a year)
• Google's ‘Lively’ closes less than 6 months after launch.
• ZiffDavis to cease physical print production of PC Magazine and focus fully on growing its online network of related sites.
• Peter Clifton and Mike Shatzkin create www.author.filedby.com. to promote authors
• HarperCollins announce its adoption of the Nintendo DS ebook application to sell a cartridge of some 100 classics
• Penguin Personalized to enable readers to insert personal dedications into select Penguin titles
2009
• The Washington Post’s ‘Book World’ will stop as a stand alone printed entity on 15th February
• Almost every Japanese adult 31.3% of elementary school students and 57.6% of middle school students have mobiles. Net Asia says that as many as 22.3% self-identify as mobile phone addicts. A Mainichi Shinbum newspaper survey found 86% of high school, 75% of middle school and 23% of grade school girls read cell phone novels.
• Microsoft launch MSN Mobile Music Service and a return to music DRM!
• US educational giant Follett launch their Follett Digital Reader in February which is Flash based online and runs on PCs and Macs
• If Facebook were a country it would be the 8th largest on the planet bigger than Japan, Russia, the UK and most of the developed world. Its 54.5m unique users a day is the equivalent of everyone in the UK logging on every day
• Sony post first loss in 14 years
• Overdrive give Fictionwise, one of the largest ebook retailers notice they would cease serving files to Fictionwise customers as of January 31, 2009.
• Chris Anderson, publishes his new book 'Free: The Future of a Radical Price'.
• Amazon launch the Kindle 2nd Generation in February
• Palm announce Palm Pre and new WebOS operating system
• Amazon fall out with Authors Guild over text to speech
• MSN Encarta closes
• Spotify adds downloads to offer
• Hollywood studios estimates that daily 4 million users in North America and Europe use Bit Torrent
• Amazon launch Kindle for iPhone in March
• Nokia launch OVI app store
• French Pass 3 Strike Law

Nicholas D. Kristof in the New York Times: “The decline of traditional news media will accelerate the rise of The Daily Me, and we'll be irritated less by what we read and find our wisdom confirmed more often. The danger is that this self-selected 'news' acts as a narcotic, lulling us into a self-confident stupor through which we will perceive in blacks and whites a world that typically unfolds in grays.”

• Barnes and Noble launch iPhone store
• Amazon remove users own copies of ‘1984’ remotely without consent
• Amazon forces to set up ‘entity isolation’ companies to avoid US sales tax
• Pirate Bay found guilty in Swedish court in April
• Apple launches iPhone 3GS in June

"That settlement needs to be revisited, and is being revisited....It doesn't seem right that you can get a prize for violating a large set of copyrights." Jeff Bezos on the Google Book Settlement

• Jamie Thomas-Rasset found guilty of File sharing in case with RIAA
• Indigo to launch ebook reader
• Twitter becomes fastest growing website
• Amazon launches Kindle DX in June
• California Governor Arnold Schwarzenegger launches a program widely to get schools to go to digital textbooks
• Craigslist is forecast to exceed $100 million revenues
• American Booksellers Association adopt Adobe's Content Server 4 (ACS4) digital rights management server for Booksense
• Sony to close down BBEB format
• HarperCollins hold back on ebook release of Sarah Palin
• US Department of Justices declares Google Settlement needs to be revisited
• Apple apps top 100,000 and growing
• Amazon Kindle on the PC
• Google announce Google Editions at Frankfurt in October
• Amazon launch Kindle International in October
• Simon and Schuster launch Vook
• YouTube claim 1 billion views a day
• BLIO ebook format is launched
• Ordnance Survey Maps to be Free
• Google Settlement to be reviewed and represented
• Barnes and Noble launch Nook in November
• LeGuin Resign from Authors Guild over Google Settlement
• Google scanning declared illegal in French court in December
• Teletext withdrawn
• Random House claim all digital rights

2010
• Google launch Nexus One mobile
• California pass Senate Bill 48. Any body selling textbooks to the University of California, California State University or private colleges must make them available electronically by 2020.
• Google clash with Chinese Government on censorship
• Macmillan demands Amazon adopt agency pricing
• Apple launch iPad
• 6500 authors, agents and publishers opt out of Google settlement
• UK government publishes paper on Public Library Futures
• Google settlement revision heard by Judge
• UK passes Digital Economy Bill
• HarperCollins closes HarperStudio
• In April the US Visual Arts groups enter into case action against Google Book programme
• Ether Books launch digital short stories

The above summary of our 1500 articles shows us the pace of digital change, that it has impacted all aspects of publishing and has also changed our business marketplace.

When we started the blog there was no Kindle, no iPhone, no apps; Google were a threat but there was no Book Settlement; libraries were still full of books with not an ebook in sight and digital ebook format wars still prevailed. We now find ourselves with; a colour tablet, a new ecosystem ‘Appleworld’, a growing digital market, a new pricing model, Amazon present in all areas of publishing, no Microsoft Live Book Search, Google in litigation, epub, Adobe controlling DRM and much more.

We continue to see much experimentation and a high volume of hype, which would indicate that there are many more changes to come and that the market is far from stable in terms of business model, channels to market, devices, consumer usage, rights etc.

2. Six common threads that have prevailed.
2.1 Technology Convergence

In 2006 we had mobile phones, which were just mobile phones. We did have smartphones but they were far from ‘smart’. Their old and tired operating systems were built for the previous era and had constrained their user interfaces and the user’s ability to browse the web. The Blackberry was continuing to attract the corporate user and connect him to the office, but it too was trying to shrink the PC and the keyboard into a handheld device. The inhibitor was the user interface, or interfaces.

The laptop was still the portable device of choice. It was getting smaller, lighter and had a longer battery life, but still needed cables, a regular top up of juice and a large strong bag. The PC desktop furniture of yesterday had all but gone from the office and everyone now had nice flat screens and a smaller PC or laptop but now everyone wanted to be mobile.

Just as the Sony Walkman had done before it, the iPod had revolutionised the playing of music. Its design was iconic, it was soon being copied and adapted by all, but consumers wanted more than a set of white earplugs and a control wheel. The iPod Touch went half way but the obvious phone was still missing. The car manufacturers were starting to fit iPod connections into the rental cars and in doing so were finally killing off the cassette and portable CD player and introducing MP3 on the move.

Gaming machines still lived in their own world, on dedicated games devices and with their own devoted fan bases.

Portable DVD players were there for those who had to be able to watch a movie whilst commuting, but like the DVD itself, were a transient technology. The TV had grown to be a big screen but was still a ‘box’ that was just about to get a lot thinner. However the TV content was still delivered down cables or via satellite dishes, the TV was not mobile and the content still programmed.

We Went Backwards to Come Forward

In a highly visual and coloured world, who would have expected a ‘black and white’ device to break new ground? The eInk technology offered the ability to read in bright sunshine, had a long battery life and a tablet type device that was the size of a book but lighter. It could store thousands of titles and enable you to carry your whole library around with you. It was dull, chunky and reminded you of those early and non-portable laptops or the early mobile ‘brick’ phones. Despite its obvious failings, eInk clearly still ticked many boxes.

Publishers, retailers and the press were seduced and it became the trade’s darling. Importantly, it kick-started the digital book movement that had been on hold since the debacle of the CDRom days. It was initially endorsed by Amazon and so was bound to win. Amazon was quickly followed by Sony and then by every technology company you could mention. Large book retailers branded their own devices and some entered into exclusive distribution deals. It seemed that not a week went by without an announcement of a new eInk reader. They all started to look the same or similar with just different boxes and badges.

The eInk reader was heralded as the next consumer ‘must have’ and the tool to promote a return to mass reading.

However, many started to see eInk as a transient technology, the devices as only supporting a single function in a converging world, a black and white TV in a colour TV world. Some even went as far as to create devices with two screens, one eInk for reading and one LCD from browsing. It was inevitable that something had to change.

Despite its failings, short life expectancy, high ticket price and the lack of real depth of digital content, it still achieved some significant steps. It dramatically reduced the ebook formats to basically two open ones– Adobe eBook and epub, plus Amazon’s proprietary Kindle format. It achieved wide adoption of a single DRM service – Adobe’s ACS4 and in doing so opened up inter-operability between devices. It introduced the wireless connection and download. Importantly, the eInk reader gave the market confidence to move forward with ebooks.

The SmartPhone Just Got Smarter

The impact that Apple’s iPhone had on the market can’t be underestimated. Overnight the mobile phone was redefined. First the ‘look and feel’ changed from trying to accommodate keys and screen, to touch screen. Second the device became multi media offering video, audio and colour. Third it continued to exploit the inbuilt camera. Fourth it was wirelessly connected 24x7 to the internet. Finally it introduced, promoted and generated a new form of application – the app with its own app store. The majority of the apps were even free and the more apps created, the greater the demand for them and the iPhone. They had created their unique selling point (USP).

The iPhone may be about to enter its fourth rendition but it has changed mobiles and created a new smart device that now includes a phone. The iPhone has had a significant cultural impact and introduced new technology which has been enthusiastically accepted by young and old. It is the invention of the first decade of the 21st century.

Others followed but were still hamstrung by poor operating systems and user interface and even browsers. The likes of LG and Samsung had the technology but lacked the rest. Nokia bought Symbian, which may have appeared to be a smart move at the time, but was like buying the last cart horse at the advent of the car. All the big manufacturers believed they could address their issues and compete; the truth was different.

The potential rival came from the most unexpected quarter - the search engine and advertising giant, Google. They also took an unexpected strategy to provide an open solution to all the vendors. The Android was capable of multi tasking and also had an open app store. Today, along with Blackberry, it’s become an iPhone competitor. Many of the mobile manufacturers have adopted Android. Many still fail to see the challenge is not the technology but the development and adoption of an app store. Microsoft, as usual, came late and ill prepared to the party.

The Multi Media Player

Just when you thought is was safe to come out, Apple moved not only the goalposts but also playing field!

Just as the iPhone had done some three years ago, the iPad starts to re-defined the mobile and media User interface. Forget the fact it is a tablet device. After all, tablets have been tried before and failed to catch on. Forget that it doesn’t have a camera, is not multi tasking, doesn’t have some simple and widely used connections, doesn’t support Flash. These can be and will be fixed. It is about redefining the user interface, applications and portability.

The smartphone will always be too small for many and the laptop increasingly too cumbersome an alternative. The question is whether the laptop shrinks to a netbook, or transforms to an iPad tablet. What is clear is that you will not want to carry around a smartphone, tablet and a laptop/netbook. For many a single device will do but for others especially those who need an office on the move or a media player they can share, three devices is one too many.

The question now is not about the applications we have used in the past but those we will use in the future. Will we store and use applications and files as before or adopt a ‘thinner’ approach, accessing applications from the Internet and running and storing files via cloud computing?

The convergence we all predicted has happened and continues at a pace. We are clearly seeing computing go mobile 24 x 7 x 365 and this now has significant cultural, economic and service challenges. The one thing we can now say with certainty is that few single application devices will survive and those that do will have to build a compelling value case and probably be very cheap consumables.
 

2.2 Gorilla Wars
Scan and be Dammed

Previously we had identified what we called the ‘omnivores’ from outside publishing that were entering the market. Google were scanning firstly and asking questions later. They were hoovering up all library works and creating a sizable repository of digital content. Their long term objectives were still under covers and their talk was about rebuilding the library of Alexandria. Their main competitor was Microsoft with their Live Book Search book scanning programme. Microsoft were scanning the libraries’ books, but were clearly focused at getting the in-copyright works from publishers. There objective was to make the content available to buy, but their grasp of the market and issues was somewhat adrift of reality. They appeared to some to be more interested in chasing Google than leading the market.

In May 2007 Microsoft declared that they were pulling out of the race. Did they know something that we didn’t about the negotiations taking place between Google and the US APA (American Publishers Association) and Guild of Authors? Did Microsoft realise that they didn’t have the money or the will to continue? Did they just get cold feet? We don’t know the answer as to why they suddenly pulled out of their programme but their departure was swift. The sight of Microsoft’s enclosed Stand at BEA 2007 and publishers being shuffled in through the closed door one by one, to be quietly let down in confidence, must go down as the most embarrassing public market exits.

Google was now free to put its foot down and scan on regardless.

The next surprise came in October 2008 when the Google Book Settlement was unveiled. We have written numerous articles on what we see as this ill conceived and audacious ‘land grab’ for little money and exclusive gain of orphan works. Our articles chart the events from day one when we declared it ‘The Great Book Bank Robbery’ to today when we await US Judge Chin’s decision on the revised settlement. The industry took a long time to understand the implications and had to be informed by many from outside, including the US Justice Department, before the tide started to turn and people started to understand the challenges posed by the Settlement.

Whatever the outcome, it heralded a new era where new entrants seemingly went after the prizes, litigation became an issue and a new way of life and copyright in the digital age came to the fore.

Google however failed to slow down and could now see blue skies. They announced what was the worst kept secret – they were to sell digital books and compete head to head with booksellers through Google Editions. They managed to pull in the English language publishing world through the revised settlement and they continued to scan.

However, Google had not had plain sailing and faced significant opposition in Europe to the Settlement, had their scanning successfully challenged in France and now face a second class action from illustrators and image rights bodies.

They highlighted to an industry that was built on the trading of rights that it didn’t even have a rights registry, nor the collective will to address one without being funded by others.
Technology Sees Money

We have seen established technology companies such as Sony, Adobe, Apple and ecommerce giants such as Amazon pump money into publishing market ventures. These have been mainly focused at capturing the digital consumer market via channels or devices.

We have already quoted the infamous statement of Steve Jobs on reading and have recently witnessed his apparent 360 degree turn with his latest iPad offer. The truth is that you have to look at what drives a company to understand what they want out of any market segment. Apple is about Appleworld, a xenophobic and insular control approach to moving device and service sales. Books only interest them if they sell devices or generate further Apple ‘stickiness’ in the market. We predict that their iBookstore will never be the largest repository nor wants to be, but many ebooks will be rendered on the iPad.

Sony came in with a flurry and targeted the ebook market going head to head with Amazon. They had created the Walkman and surely could create the ebook Walkman. They went after the international market tying up deals with Waterstones in the UK and pushing publishers to adopt epub and initially the new Adobe Adept service. They did provide the epub push and forced Adobe to spawn the ACS4 DRM service. However they still wanted to keep their ill conceived BBEB format and thought their bookstore would be a magnet for all. They created four devices in less than two years and although they sold reasonable numbers of units, some would suggest they lost their way and have missed the boat. This is a sad case of an organisation with too many fingers in all the media pies.

Is the Trick Closer to Home?

Adobe has been the silent bystander who has not got into the device market but who sits firmly in the software and service industry. They are firmly embedded within the publishing production process with PDF, InDesign and Flash, so have a vested interest in protecting this position whilst exploiting it downstream to consumers.

Their support of epub was a brilliant move in not only capturing the high ground but also in tying it to their ACS4 DRM service. The move negated a major problem they had with ACS3 which effectively they had lost control of. It also enabled them to lock themselves into many of the new eInk devices coming on stream. They quickly addressed the weakness of the ADEPT service, which was clearly driven by Overdrive and an unacceptable model to many key aggregators and channel providers and delivered ACS4. However, the model of driving downloads through Adobe Digital Editions and the PC was a weakness architecturally and turned off users.

The major trick that Adobe played was to ensure that their solution not only supported epub, but also Adobe eBook which was based on the ubiquitous PDF format. PDF still prevails in many sectors and is the file format all publishers support as part of their existing workflow.

Amazon Continues Unchecked

Amazon now covers all the bases from the author to reader. They support authors direct, are a publisher, own the audiobooks market, have the largest physical global bookstore, own a sizeable chunk of the ebook market and have a global brand synonymous with value and service.

Their most significant move has been to drive down the cost of ebooks. Initially publishers didn’t know where to pitch the RRP and aligned the ebook with the lucrative ‘born again’ hardback. The publishers feared that the ebook sales may cannibalise the hardback sales. Amazon took the bold step to sell ebooks at a loss in an attempt to set a $9.99 price point. The resultant flak and posturing is well documented and we now have the new agency model. However when we step back, we find that the ebook price is still a lot lower than originally envisaged by many and Amazon’s revenues are now protected irrespective of the price paid. Some may say this is not a wise move by publishers and one that also presents new potential issues.


2.3 Content and eBooks

The majority of digitisation programmes have merely taken the physical book and poured it unaltered into the ebook. It wasn’t the cheapest strategy, but it was the safest given the immaturity of the market and the past experiences with CDRoms. In essence the editorial and production process continued unchanged and the finished book was then ‘converted’ to an ebook, merely replacing the physical jacket with a digital one. The publishers had learnt to manage their assets and therefore the starting file was increasingly PDF based, with scanning only reserved for older titles.

As epub gathered momentum many looked at XML workflow and managing digital content on XML from the manuscript. However the differences between the various sectors then highlighted many production opportunities and also many challenges. Trade fiction could move into XML relatively easily, as the construct was simple and the level of tagging minimal. Reference works and monographs became more of a challenge with more fragments, illustrations and references to be often indexed. Today the pre press process mainly remains much as it was.

We wrote a number of articles on the Japanese revolution with the Keitai novels and digital Manga comics. However we saw little movement in the West away from the ‘book straight jacket’ of 250 to 300 pages. We did see limited experimentation with the construct of the book and opportunity to add media extras and saw Simon and Schuster introduce the Vook and Ether Books start a short story publishing programme.

Elsewhere marketing, bibliographic and metadata started to go digital and introduce new and exciting opportunities. First we had the widget, or many different widgets. Then came the digital review or galley and now we have the digital inspection copy and ecatalogues. Many have also created epromotions that give away ebooks or sample chapters.

The digital content itself is fast becoming, as we predicted many years ago, the digital context and has real value in its own right.

2.4 Authorship

The author has now been given the opportunity to go direct. Previously print on demand (POD) offered a limited channel to market but was cost prohibitive and demanded relatively high unit price to the market. POD also suffered in that the channel was often restricted to specialist aggregators, or the title simply got lost in the long tail on the likes of Amazon. Some authors made it work but the effort required to promote and market the book was not matched by the receipts.

Initially publishers stated that they would pay the author a higher royalty rate on digital, but that has now slipped considerably along with advances and in a discount world, unit royalties have also continued to slide towards net receipts. As the focus continues to be on the big and new, the midlist and back list has often been overlooked.

On the basis that an ebook is ‘just another book format’, publishers such as Random House continue, irrespective of contract, to claim digital rights. Others would like to see rights reversals not applied to digital and POD to effectively keep books in print. As demonstrated by the Google Book Settlement , the new vocation of trawling the out of print lists shows that there is money to be made in those orphans which is only just begining to be realised today.

Scribd, Wattpad and Lulu.com started to offer authors a digital self-publishing opportunity and channel. They also made ebooks a cheaper and less risky option than POD.

In a weird twist, the new agency model could be the biggest boost to authors going digital by themselves. The price and the revenue share are the key factors with authors enjoying a substantial lift in revenue share and the ability to price low and at a point where the consumer is likely to see the purchase as low risk.

US author J.A. Konrath claims that he can sell more ebooks at lower prices than a publisher and earn more to boot. He prices his ebooks $1.99 and $2.99 and has even moved one up to $4.99. Under the 70/30 split things suddenly get a whole lot better! He thinks the $2.99 could become the new bargain rate for authors such as himself and one that which will look very attractive against the ‘safe’ publisher pricing.

2.5 The Social Phenomenon

Social Networking has exploded into the social culture. It started with closed community or interest groups and then expanded to encompass all. Some early leaders have now fallen by the wayside, but others have witnessed stellar growth. Today, Facebook is getting more hits than Google search and has become the new feature rich directory for people around the world. Twitter has also exploded onto the scene and become the ‘must do’ public diary for many. Ivy Bean showed that you are never too old to learn and at the age of 103 started to Twitter. Now 104, she has some 55,000 followers.

Today we have a democratisation of expression, where anybody can say what the feel at any time, reveal and express their thoughts and be heard. Facebook and Twitter have made celebrities out of people who many would not have even heard of. They have, together with the likes of YouTube, revolutionised journalism, even woken up politicians to new ways of communication and reconnected people who where disconnected in the old world.

In many ways Facebook, Twitter and YouTube are the new Gorillas in the back yard of publishing and pose as much opportunity, challenge and threat as any to tomorrow’s digital book market.

Many in publishing have tried to build social networks to exploit this new culture. Publishers have created social clubs around genre, authors, age groupings or their brand. Some have enjoyed success but many have quietly slipped away. Authors themselves have used the opportunity to build their brand, extend their reach and sell their works. Others have tried to create social reading or interest groups, but here there has been only minimal success.

The old saying that ‘everyone has got a book inside them’ now needs to be rewritten to ‘everyone has something to express or comment on and network to everyone who will listen’.

3. The Digital Market

The digital market is growing significantly year on year and at a pace which is hard to predict either growth or longer term potential. The US market is clearly leading the way, as are sectors such as academic publishing.

The IDPF report claims that sales over the last quarter from 2007 have risen markedly. In 2007 the quarter sales were $7 million, these doubled year on year to $16 million in 2008 and shot up to $55 million this last year. This may still represent single digit market share of the combined physical and digital market but one that is growing at a significant pace.

The UK Publishers Association figures claim a 27% increase in digital sales over the two years to 2009, with some £150m in revenue last year, up from 2008, when they were at £75-80m. The £150m figure represents 4-5% of the combined physical and digital sales of UK publishers. The majority of the UK revenues, some £130m, came from the academic and professional sector.

Some of the questions we now have to ask are:
• Which factors will drive future growth?
• What growth will the individual sectors experience?
• Will the US growth pattern be matched by the UK and Europe?
• What is the market share level at which different sectors will start to slow down?
• What will be the impact on physical sales, channel and market

We are confident that digital sales will rise to some 15% of the market in both the US and UK over the next 3 years. The issue is whether the overall market will remain flat and digital sales will cannibalise physical market as expected or the total market can see supplemental growth?

We expect to see a continued rise in academic, educational and professional sectors where many of the sales will be substitution sales. The trade market is a lot less predictable and is dependent on new services such as Apple, the ability to service the existing channel and the globalisation of the market by brand services such as Amazon, Kobo etc.

We would predict that by 2015 the digital market share to be some 20%. Although digital sales will continue to grow this will slow down in terms of revenues but will continue to grow in terms market share.

We also predict that by 2015 some sectors will be ‘digital’.

The Future

4.1 Short Term

At the end of 2009 we made ten predictions and feel it only appropriate to revisit these today. We have italicised what we said in December 2009. It makes interesting reading.

4.1.1. Google Will Change All

Whichever way the court decides, the final outcome will influence publishing for many years.

If the settlement is pushed through, overnight we will see the emergence of the biggest digital bookseller, library and aggregator. The covers will certainly come off the scanners and anything that moves will become fair game. Others will follow and it will be interesting to see the reaction of the BRR (Books Rights Registry), APA and Authors Guild and whether they turn to litigation or just switch on the meter? What is certain is that there will be much litigation. If the BRR have attempted due diligence to trace the rights owner then some will say it safe for others to also adopt orphans. Will publishers assume rights or do their own diligence and check those old contracts?

If the settlement is rejected many will see it as a huge digital step backwards. We would see the rejection as a step forward and a call for all to engage in the process of redefining copyright in the 21st century as opposed to sleepwalking backwards to afraid to stand up to the behemoth. Maybe the rejection will allow those such as the UK, Canada, Australia, who were dragged naively into supporting it the opportunity to walk away from the pressure from their bigger brothers.
Comment: We await Judge Chin’s decision on the Settlement. Elsewhere a separate class action has now been initiated against Google by the US visual artists and illustrator bodies.

4.1.2. Libraryworld

The library is under threat from all quarters as it faces the digital age and tries to seek its own mission within it. We have written much about the real conflict between the High Street and the Library on the conflicting business models, culture and management but the UK now face the greatest threat of all in the naive ramblings and ideology of a Minister who is clearly ill advised and not fit for office. Margaret Hodge has thrown down her vision of the library like a drunk spewing up excess liquor after a night on the tiles. She wants 24 x 7 library services and sees them competing with Amazon. We think she has paid too much to get ill advice and hope that she gets her comeuppance at the forthcoming election.

However, the libraries do need to be given some clarity of digital direction that aligns to the resources they have. You can no longer make a librarian into a bookseller than a publisher into one. You may hit the odd success but will fail in the main as the skill set is different and there application very incomparable.

We see lots of soul searching in UK libraryworld in 2010 and many standing on the side ready to dump digital content and services into the mix.
Comment: The government published its paper with much being as predicted. The issue is still about the clear conflict between digital purchases via the reseller channel versus free to loan from the libraries. The lack of debate is still very evident and we appear to be sleepwalking into a potential major conflict between business models and social service.

4.1.3. Promoting, Marketing and Book Information

The use of the digital content to support, market and sell all books is going to grown significantly.

Direct marketing of review and inspection copies will gain ground not only in those sectors who have adoption processes but across all. Sharing annotations and reviews offers significant value and adds a digital opportunity to the process.

Catalogues today are often inefficient but a necessary evil. The carry a high cost and little intelligent feedback but these can now be addressed by ecalaogues. The question is whether the ecatalogue is a mere replication of the physical glossy or a dynamic piece of direct marketing whose usage can be fully monitored and analysed. As a result Marketing spends will increasingly become more focus and direct.

Finally we are approaching a step change in bibliographic data similar to that we experienced in the late 90s when jackets first exploded onto the market. The change is not so much about defining the information but about how it is communicated between trading entities and packaged.
Comment: Change is happening but not yet at an industry level.

4.1.4. Sales Information

We have as an industry focused our standards efforts on ONIX to the front end and in describing bibliographic and metadata, but have spent little effort looking at the rear end and sales information and reconciliation in a digital environment.

We see the standards bodies finally waking up to this omission and recognising the efforts needed to reconcile digital sales in this new digital age.
Comment: No Change. Needs higher profile and discussion.
4.1.5. Digital Platforms, Channels and Consumers

This year will start to redefine ownership and see the entry of the streamed ‘read on demand’ model similar to what we have been raving about with the likes of Spotify. It will take the music model to open up consumers to its potential and the challenge will be the publishers and their obsession in supporting existing models that they understand and their reluctance to think outside the box on rights and royalties.

Bookstores need to be included into the digital channel. It is over 3 years since we wrote the watershed white paper ‘Brave New World’ and yet publishers still want to bypass digitally retail and retail are is still not being enabled at the speed needed. Without this movement we are liable to see increasing friction and channel wars. Some will write off the physical channel but for many this will continue to dominate sales and be important. If we want to avoid the commoditisation of books like music we need to engage booksellers and Libraries and enable not disable them. This year will offer a significant opportunity and risk.

The Mobile technology will free the ereader from its tethered PC. ebook readers as we know them are highly unlikely survive past 2012 and the download model is highly suspect in a world where unlike games, music and films, a book is quite often only read once.

Price will continue to be a major issue. In a price war there is only one winner – the consumer. There is a need to separate digital from physical pricing and until some sanity is achieved the market will be unstable.
Comment: The iPad has landed but the model is still based on downloads.

4.1.6. Authors In Control

Big name authors are already starting to realise the opportunities that digitization offers. Some say that they must have a publisher in order to achieve reach and promotion, others realise that maybe this model is not as strong as it was in the physical world. On one hand publishers will demand comprehensive rights, on the othe,r authors will want to hold back and retain digital rights or separate them. Some will say it is impossible to work under a split mode,l others will simply act and say nothing is impossible. Meanwhile others will slowly pick up digital publishing as the print on demand services picked up the long tail in the noughties.

The aspiring authors will increasingly look to digital and see potential that even print on demand didn’t offer. The Scribd, Amazon and Wattpad services will grow and we still have others such as Google to enter the market.

Back list and out of print has only one way to go – digital. The question is who will take them there; authors, agents, publishers, retailers or the consumer?
Comment: The agency model now gives even greater opportunities for authors to go solo in digital publishing.

4.1.7.Booksellers

The Chains once had and enjoyed the economies of scale and size but the noughties has seen the erosion of this and them competing not with independents but bigger new entrants who have deeper pockets. This last year has seen chain booksellers disappearing and the remaining ones are the most venerable players in the market today. They find themselves torn between being too inefficient and small to compete at one end and inefficient and too big to compete at the other. Digital will not save them but will increase the pressure on them.

Amazon is no longer a bookseller. It is becoming a publisher, channel and bookseller and has learnt from history and other sectors. It is hard to see others offering the same empathy with the two people who count in the book market – authors and consumers. This position will strengthen in this next decade and will be little understood by those craving the status quo.

Independents have great opportunities but must learn that sale or return and merchandising their shelves with front list is not the answer. Bookselling is about selection, promotion, knowing customers and this can apply equally to physical and digital. Independents must specialise to survive.
Comment: The agency model impacts the opportunities for digital as it starts to close down the margin which has at present to be shared with a wholesaler/distributor. Rather than creating a level playingfield it distorts it in favour of those few with their own repository or aggregators who sell direct.

4.1.8.Publishers

We have talked about bookstore chains being vulnerable, but some would suggest that the same logic equally applies to big publishers. We have seen huge inter-publisher consolidation over the noughties, but this will change in this next decade with the potential of new entrants buying up publishers. The diversity and range of publishers was its greatest strength and protection, but as new players enter, will this remain so? Some would suggest that the likes of Amazon, Google, Apple don’t need the hassle of publishing, just the control of the margin and channel. Others would suggest that separating the copyright asset from the process and operation of publishing could be an interesting and profitable exercise. Isn’t publishing after all primarily a rights business?

The potential for small publishers to thrive has never been greater. No longer locked out from the physical or digital channel, their agility and economics are becoming increasingly attractive and it is easy to see their numbers growing. Many may be writing their exit plans before they have published their first book! Acquisition growth will continue to be strong, but the question is at what level does size become an inhibitor?

Some would suggest that authors would only want to be processed by the big house with a reputation, but these need the mega sellers to survive and that means they need to remain attractive to big authors. We have already commented that this may be changing.

This next decade may prove that publisher operational size doesn’t matter in a digital age!
Comment: No change yet.

4.1.9. Breaking the Spine

We have written many times about the opportunity that digital provides to offer more than just the same 250 pages, print layout and even content. Today we have seen a few experiments, but little real movement to create something different. As a result, we have ebook pricing being questioned by all and digital value being diluted.

How long will it take before we see the shift towards true short stories and serialised works written specifically for the digital market? Japan’s Keitai novels may appeal to a different culture, but the principle is one that could be adapted to Western taste. We forget too quickly the Charles Dickens approach to writing chapter by chapter, at a time when it could be most appropriate.

Many will continue to experiment with digital forms and material but we don’t see a major change until the market is more mature and predictable. The current transitional ebook forms and ‘lookie likie’ eInk devices are clearly inhibiting digital writing and maybe when we start to move online then we all will seen the huge potential to do things differently.
Comment: Media rich books are starting to be developed along with special apps to support them on the iPad but this is still early times and we have to cautiously remember the multi media days of the 90s. Short stories have started to appear but again it is too early to judge their success and profitability today.

4.1.10. Rights

Rights are probably the greatest challenge as we embrace the digital age. Many of the principles that supported the physical world start to be questioned in the digital age; territorial rights, rights reversal clauses, out of print, audio rights etc. It is essential that we mere don’t end up picking those we want to retain at all costs and turn a blind eye to those that need to be properly debated, reconsidered and accommodated.

Google, Rosetta, Blio and the Kindle audio feature have all shown us that tomorrow is going to be very different from today. This next decade will determine rights in the digital age. Governments have once again started to show interest, but often on a bi partisan basis and the spirit of the Berne convention appears to be struggling.

The one certainty about rights in the next decade is that it will make some lawyers very rich.

Comment: Clause 43 of the UK Digital economy Bill was dropped so avoiding a major change in copyright slipping through the net. Orphan works remain unadopted.


4.2 2020 Vision: The Leap into the Virtual

What will the third decade of the millennium look like? Technology will increasingly impact everything and the technology divide across the globe will become a big challenge.

There are many variables that may impact the probability and accuracy of any vision and the stability of our global culture, economy and society are obviously aspects we must assume remain as today.

Technology will enable us to move into a virtual world, obtain instant communication, create new communities, explore and even see what we could never imagine possible before. But what will this mean to our access to and interface to information, media and storytelling?

To make us think about how little we know about tomorrow, we have to first cast yourselves back 20 years to the beginning of the 1990s. Think about what we have witnessed over the last 5 years and whether it could have been predicted 10 or 15 years earlier. Think about all the technology you now take for granted that would not have even imagined that short time ago.

Now imagine the world in the future.

Expanding not Narrowing Choice

Today our views, interests and cultural awareness are restricted by what we can find and access, how we access it, what we can do with it and how we use it. Interestingly, they are shaped more by what we don’t know than by what we do know. We assume that we have many areas of interest that define us as individuals, but these are often restricted by what we know and may not be our true areas of potential interest? Media is a classic example of where the technology and cultural restriction of information and content can narrow our perspective and thereby who we are.

Someone who grew up in the 1950s did not have the capability or access to the rich variety of music that existed then. Their taste was dictated by what and who they knew and could hear. Today, we all have access to just about every conceivable genre, taste and also every manifestation of any work every produced. This opportunity has been created by technology. However, the way in which we discover, access, experience and form opinions on music is varied and often haphazard. As a result everyone’s taste is more esoteric and the music industry now has to support a rich variety of taste. Genre and sub genre are still important but people expect access to a width and depth of range of music.

Vertical streams of interest will always exist and will be enriched and grow in their depth and numbers. So does the biggest aggregator of information and media win the future by simply ‘slicing and dicing’ it into verticals?

Some will suggest that the publisher should own vertical spaces. We would suggest that we first have to define the term ‘publisher’ and second, we have to accept collaboration and cooperation is now accepted. Aggregation is not about content as we knew it yesterday, but about referential links, contextual information and about virtual aggregation. Google doesn’t hold or own every piece of information, just the indexes and links to every piece of information. Do you only need one Google? No, as Google indexes it one way, there will be others who will index and provide and present value differently.

Redefining Ownership

The technology itself starts to question the old model of media ownership. Do we all have to own our media and have individual copies, or can we now share and access all media on demand and in true real time? Why do we need banks of CDs, DVDs, and libraries of books? Do bookshelves still define who we are, or are they mere decorative features?

Cloud computing and high speed mobile bandwidth will break the old ownership paradigm. People will still collect media but more as artefacts than consumable media.

The User Interface

Our interaction with the simplest of technology was often dictated to us and not natural. With TVs, we went from no remote controls to banks of them, then to a single universal controller and now to voice controlled channel programming and hopping. We weren’t lazy, we just sought a more natural interface. If voice recognition apps work on a mobile phone today, why do I have to key in instructions to my PC?

We would urge all who have not watched Pranav Mistry on his views on our technology future, to watch it. It shows what is possible today in the MIT labs and what will be mainstream tomorrow. The technology he is developing takes pictures using fingers to form the lens, enables the naked wrist to be used as a watch, the hand to become a keypad, project interactive information over an image, play interactive games on a piece of paper, to project images onto any surface and manipulate data and control other devices, wirelessly and in real time.

Mistry redefines the user interface in ways which are compelling and that frees us from the screen, the keypad and even the touch screen. In doing so, he will enable humans to interact intuitively with technology in the future.

We already have the Bluetooth earpiece for the mobile. Why not the chip in the ear? Will we bypass the screen and read direct via imposed images on the retina of the eye?

We often think of huge leaps forward as impossible. When we see the sci fi programs such as Dr Who where he reads a printed book by flicking the pages, we think that would be impossible. However when we watch a video of the technology actually scanning a book at great speed today in a Japanese labs in the University of Tokyo we have to wonder just how long before we can do it for ourselves?

Those who believe that we are going to interface with technology in the same way as we do today are in for some surprises. In the very near future intuitive human interfaces will become mainstream. We don’t advocate that we will all become ‘Six Million Dollar’ bionic men but recognise that the technology will exist and its adaptation is inevitable.

Connecting the dots

We are now entering an era where bandwith and connectivity become ubiquitous. This may not be global today but will be soon. This removes the network as a constraint and opens up the potential to do anything, anywhere, anytime. We will connect and integrate anything in real time, which changes how we will grow business systems and applications, how we will store and access data and how we will consume media.

The greatest challenge facing us is ‘privacy’ and how we will marry knowing everything against the temptation to exploit it in ways that go too far and are not in the public interest. We will have the potential to not only what was bought but what was read, when and also what wasn’t read. Knowing every click and every detail about who and when it occurred gives us both opportunities and many social challenges.

Rights

Today we have a Rights business with no registry and we express rights as we have for many years. The problem is that technology is fundamentally changing how we interact with intellectual property (content) and we now face a period of continual re assessment of copyright and definition of fair use.

US legal professor Larry Lessig explains that the rights conflict we now face is far more fundamental than the enforcement of yesterday’s rights. He claims that we now have a user generated content culture that is being accelerated by new technology. This culture embraced by the younger generation encourages them to remix, repurpose content and represent if differently. He asks whether this fair use, or piracy.

Lessig believes that it is the democratisation of creation. He finds that the older generation ‘watched’ TV and ‘listened’ to music, the younger generation ‘makes’ or ‘remixes’ TV and music. As this generation grows older, common sense needs to prevail and common licensing needs to be adopted.

We expect this next period to be full of trials and tribulations and that ‘common sense’ will prevail and digital content will be better licensed and controlled. The impact on the media industry and digital content will be significant and may well start to redefine publishing as we know it today. It will also impact on creator royalties and reward structure.

Publishing Diversity

Will publisher size still matter in the new world and will the economies of scale and scope still dictate? Will the consolidation of the big continue, or will the market fragment? Will three publishers continue control 80% of the US educational market?

Will there be six major publishing trade houses or 600?

Technology will increasingly level the playing field. Today’s big publishers are relative trainees in the wider media and technology markets. As media merges, publishers will increasingly be measured not by the size of yesterday’s market, but by the wider and much larger market. This would automatically suggest that multi media conglomerates such as HarperCollins and Bertelsmann could succeed if they organised themselves appropriately. However, turning round a battleship in a storm may not be as easy as turning a dinghy.

We believe that the number of ‘publishers’ will explode with more authors choosing to self publish. There will be large entities but these may be looser co-operatives and affiliations rather than single mega corporations. This is a different model to the ‘federal’ one adopted by some major houses over their many imprints.

What will be the role of the publisher in the new world?

The market will always value selection, review, validation and aggregation but general trade genre such as fiction may be less interested in valuing quality and more about presentation.

Everyone can be a publisher and many will do what we know today as publishing but the skills now need to be cross media. We believe that tomorrow publishers will pool resources and skills such as technology and the size of the organisation will shrink dramatically. The publisher will become the packager, the agent, the sponsor, the producer, the ‘manager’.

Some 300 years ago, before the profession of “publisher” was invented, booksellers/printers in 18th century Britain were all large copyright owners. Robert Dodsley, a leading bookseller of the age said, “… for the real money lay in ownership of copyrights, not in the retailing… booksellers were the entrepreneurs who purchased rights from authors, and, binding to others, merchandised and finished the product through advertisement and trade distribution.”

What we envisage in the future is a move from the corporate to the passion and veracity of the past. It will be an age of the specialist, who has the taste and enthusiasm to spot and nurture talent and the conviction and belief to publish in a more ‘hands on’ and entrepreneurial manner. They will know what will work digitally and what will work physically. They will be able to see the media opportunities and have the social and technical infrastructure to support them. They will not need the support infrastructure of today. This shift will ensure we arrest the ‘dumbing down’ of literature by the corporate and technology businesses of today.

Once again we find ourselves drawn to the words of Arthur C. Clarke, ‘In the short term, we tend to overestimate technology and in the long term, we tend to underestimate technology.