Free Isn’t Free
Happy Monday. Recently I was thinking deeply about something. My colleagues refer to such a preamble as a signal to start another pot of coffee and hide the white board markers.
I am now convinced that the eReader / tablet device war is heating up too fast and the orange that is about to be squeezed is content. The market is headed toward “free” devices and it is not far off. There you go.
Bear with me for a moment… Let’s look back at the history of mobile phones in the USA, something that I lived through and know in excruciating detail, free phones changed the game – and the consumer did not benefit in the long run.
Free Devices Drove Market Penetration.
This cannot be under-emphasized. Suddenly there were 2nd phones at home and college students could afford them. These happy entrants were not previously paying to be in communication with friends and family anytime & anywhere. The inflection point can be seen in the stock prices and M&A activity from 1999 – 2004 which was the golden era of the wireless industry in the USA.
It’s Not Free – It’s a Lease.
The free phone came with a 2-year contract and minimum monthly cost (a hidden lease). For those that used fewer minutes per month –OR– wanted a more economical monthly cost, they simply chose a basic phone vs. a high-end phone. Great for the consumer… and great for wireless carriers who now enjoyed the fruits of recurring subscription revenue. Subscription also leads to addiction – in some neighborhoods we call this “crack.”
Fallout – A Price War, Then Consolidation, Then Less Competition.
The free phone bonanza triggered a price war among carries and the victim in the mix was the price per minute. Minute plans grew to well-over 1,000 minutes for $50 per month – and eventually unlimited plans arrived. The carries eventually became less profitable and started consolidating (remember Cingular, VoiceStream and Airtouch?). This week MetroPCS and T-Mobile announced a planned merger followed by Softbank buying a massive piece of troubled and debt-ridden Sprint. The number of options available to the consumer is dropping. And, if you have been paying attention, the unlimited monthly plans are going away.
There is no magic or devil here – this is how the market works and sorts out the intended and unintended consequences of competition.
Now, let’s look at the eBook space and play out a scenario.
There are a ton of new eReader and tablet devices in the market and getting them into the hands of consumers is key to driving sales of content (duh). Causing this to happen faster will assumedly drive content sales faster (double duh). Free tablets with an associated monthly fee for content, anyone?
What if I offered you a free Kindle Touch and it came with a $19.99 monthly content plan that was a slightly modified Kindle Prime deal with a cap of 5 books a month? All the elements are in place today: devices, billing plans and content revenue sharing arrangements.
Now let’s say Barnes & Noble responds with a free Nook and $19.99 per month for 10 books?
There you go – as they say, “It’s On!” and the imputed average price per piece of content will quickly be squeezed.
When the financial war gets too bloody, as it certainly did in wireless, the giants will enter into a M&A phase to gain economies of scale and slow the erosion of profit margins. There will be fewer players in the eBook space and me thinks the fallout will happen MUCH faster.
It all starts then the first free eReader hits the market along with a monthly plan to buy books.
There is a lot more to this story and that’s for another day. Stay tuned.
Play Ball! Do More Than Read on Your Kindle.
Premier Digital Publishing recently launched Premier Baseball Scorecard. The application is designed exclusively for the Amazon Kindle (eInk), so a bright sunny day at the ballpark is no problem.
The application has been created for baseball fans that love watching baseball and keeping score along the way. Baseball fans can now keep score for their favorite big league team, or track their favorite little league or softball star. Fans can start a custom season for their little league teams and track stats for each game over the entire season, or download each day’s rosters for every daily professional baseball game and be ready to go when the ump calls out “Play Ball!”
Why did we build an interactive eBook? Simple – the consumer has a wallet relationship with Amazon for multiple forms of content and all apply similar core competencies. PDP is not an eBook publisher. Our team, vision and revenue base are wider than that. Today, PDP is a leading independent digital publisher and innovator of eBooks, enhanced eBooks, print-on-demand books and interactive content. We are a team of digital media pioneers, and we now rank among the top publishers of quality eBook entertainment to the industry’s leading tablet and eReader manufacturers and eBook retailers.
That’s how we Play Ball!
Amazon: More Kindles Coming
Today the news leaks were everywhere: Amazon will soon launch a front-lit Kindle (to compete with the very successful Nook-Glow).
Lost in the shuffle were quieter but seemingly credible leaks about an Amazon phone. My money says yes. Why not? It’s just another Kindle with a communications chip inside. Thanks to Amazon, you could have a Kindle eInk, a tablet and a phone and never be away from the narrative books that you love while always starting on last page you read thanks to the wonderful and invisible Kindle sync feature.
Through the miracle of PhotoShop, the Digital Reader Blog dubbed the phone the “Amazon Blaze.” The point is not whether Amazon is or is not about to introduce a phone…. or a front lit Kindle eInk… or a color Kindle eInk device (way cool) soon after that.
No, the point is this: the avalanche of devices is enabling consumers to become consumers of digital content for which the devices are best equipped: eBooks in multiple formats and interactive content. That’s good news for consumers. Consumers are also reading MORE and that’s good news for content creators. Today, everybody starts the day with good news. 
Target Pulls Kindle
Hmmm… not sure I agree with this one.
So Target, being upset about the tension (read: competition) in traditional retail, pulls a product in a growing segment off the shelf? What the heck? What does Target expect to gain here? Particularly when Baker & Taylor is rumored to be working with Target to power an eBook store / Print on Demand offer to augment Targets online print book sales. If that is true, then clearly Target sees the value of expanding their capabilities in the segment.
Sure, Target may be fuming that people shop at Target but buy online at Amazon.com. The rub is this: if they can buy online, pay for shipping (per order or pay the Prime fee for a year – either way consumers pay for shipping) – then Target is losing the fight to demonstrate the value and convenience of purchasing at Target. Has everyone forgot about the time-tested Norstrom case study? Service and a selection of quality merchandise is worth a bit more price – not 2X, but a bit more – and consumers are largely willing to pay it. But, in fairness, those are not Target shoppers. Still, the point holds to some meaningful degree even at Target.
Strategically, I think Target is looking in the wrong direction. BestBuy is having issues and there may be an opportunity to win some market share in the small electronics category. eReaders is a product line in that category: no detailed technical explanation required, low price point and easy consumer decision. Bingo – a fit for Target.
The question for target is “How do I play” – not – “How do i get all hissy and stomp my feet.” Target’s reaction to Amazon and online purchase of goods is exactly the type of fatally-flawed, denial-fueled decision making that leads nowhere. The record labels fought digital and piracy with lawyers, guns and money – and most lost. Traditional publishers are headed the same direction, regardless what they say to your face (Ahem, resumes and Linked-In requests sent to people such as me at midnight tell a much different tale).
Target should get over it and find a way to compete and offer selection to their customers in this important growing segment – eBooks and eReaders.
Microsoft and Nook Do A Deal
I live in Los Angeles. I get up early – usually by 5:30 AM. Still, that’s 8:30 AM on the East coast and before I was awake my inbox was already brimming with news and questions about Microsoft and Barnes & Noble forming “NewCo” and stocking it with Nook, College Textbooks, access to Windows 8 and, oh yeah, $300 Million.
What’s up? Whaddayya think? What’s your take?
OK, rather than send 100 emails, I figured it was easier to just make a post…
My response is fairly straightforward: Barnes & Noble have made no secret about plans to spin out Nook. This makes sense and we’ve seen this play before: Kobo split from Borders in the aftermath of the unfortunate collapse of the retail division. Kobo was summarily acquired last November (2011) by a Rakuten, a Japanese e-commerce company, and they are now growing, particularly in international markets.
What we didn’t see coming was Microsoft. Why not? First, the Nook technology team is located in the SF Bay Area not far from Google HQ and Nook, as we all know, is now essentially an Android Tablet. Second, Google is making a play (ha, ha) in all forms digital content dubbed Google Play. So, the logic goes, when Barnes & Noble opens the window and lowers Nook to the ground, Google would be there as prince charming (and, for dramatic effect, holding one of those oversize checks that golfers get for winning a tournament.).
That could still happen… maybe… or not.
Microsoft owns 17.6% of th new enterprise which has an implied valuation of approximately $1.7 Billion. Now, Google could buy the remainder with less than 3% of it’s current cash. One would assume, however, that Microsoft has a placeholder option in the form of a right of refusal to buy the rest of “NewCo” if another bidder comes along. Either way, Nook is in good shape to keep driving and be a formidable force in the digital publishing space.
So, for now the story is this: Barnes and Noble receives a welcome capital infusion to the tune of $300M, and Microsoft receives a Windows 8 partner – and it badly needs such partners.
Time for coffee.
Good News: Pew Research Says eReaders Lead to Reading More (Duh)
I have always believed that in digital media accessibility is a key driver of consumption. Through that lens, I am not at all surprised to read that the Pew Research Center has found that there is a correlation between accessibility to quality eReader devices, available eBooks and increased overall consumption (reading more books).
- Consumers equipped with mobile phones with better user interfaces TXT more
- Consumers equipped with early dial-up Internet service read more about things they enjoy
- Consumers equipped with High Speed DSL or Cable Modems consumer more online video
It should not be such a newsflash that consumers equipped with easy to use, economically priced, connected eReader devices would, (OH MY!) read more books. The report is summarized in the today’s news:
More Americans are reading e-books than ever before, on more kinds of devices, a new reportfrom the Pew Research Center has found. That news won’t come as a shock, given the rapid spread of e-readers and tablet computers and the rise of e-content. What might be a surprise, though: The report contains good news for print lovers, too. Readers of e-books like to read in all formats, they favor print books for sharing and to read to children, and on average they read more books over all than print-only readers do.
“They’re heavier readers. They’re more frequent readers,” said Lee Rainie, director of the Pew Internet & American Life Project, the group behind the report. “These devices have allowed them to scratch that itch.”
The report, “The Rise of eReading,” analyzes findings from a survey of almost 3,000 people nationwide in November and December 2011, along with data from follow-up surveys of about 2,000 people in January and February 2012. Twenty-one percent of respondents reported, as of February 2012, that they had read an e-book in the past year. That figure was up from 17 percent in December 2011, before the holiday surge in purchases of e-readers and tablets. The average e-book reader said he or she had read 24 books (electronic and print) in the past 12 months. Those who didn’t read e-books averaged 15 books over the same time period.
This should surprise no one and excite everyone in the digital publishing space (such as me).
How do you Read?
I was scanning this morning’s news when a summary by Frédéric Filloux, a Guardian-UK reporter / blogger (is there a difference anymore?) caught my eye:
In the past 12 months, I’ve never bought fewer printed books – and I’ve never read so many books. I have switched to ebooks. My personal library is with me at all times, in my iPad and my iPhone (and in the cloud), allowing me to switch reading devices as conditions dictate. I also own a Kindle, I use it mostly during summer, to read in broad daylight: an iPad won’t work on a sunny cafe terrace.
There you have it. A “fully enabled” 3 device eBook aficionado who is probably does not realize the automatic sync-to-location feature has single-handedly changed his left.
Are you a 3 device junkie?
I am now.
Best of 2012 – The Future of Publishing
On March 28th of this year I posted a response to the question “What do you think Barry Eisler’s decision means for the publishing industry?” That post is here and also pasted below for easy reference.
Apparently that post hit the nail on the head – I was just told that my post was “One of the leading digital publishing thoughts of 2011.” While I was just being blunt and honest – and don’t see what the fuss is about for doing so – many thanks for the recognition!
Here is that post again:
“First, what do I think it (Eisler’s decision) means for the industry:
The simple truth is the publishing industry is undergoing the same digital evolution as seen in music, with the same disruptive, cataclysmic effects upon the incumbent gate-keepers. The proxy in music occurred in 2007 as EMI, one of the big-4 music labels, saw Radiohead go direct.
If it seems similar to the Eisler decision, well, it should. In my opinion, guided by experience in two previous digital shifts, the “tipping point” comments are correct. It has happened. For better and for worse you (the authors) and the publishers, respectively, are now on the other side of the tip. The rate of change that is being referenced in the comments is in fact “mainstream market momentum.” This momentum is not being driven by the ability to self-publish to digital. Technically, that has been here for over 10 years. It is being driven by device penetration (consumer purchase of Kindles, Nooks, iPads and Android tablets) and access to a large library of CONTENT created by YOU the AUTHORS. The same market momentum was seen with color phones in 2002 as mobile games and ringtones became a $2B+ industry almost overnight as a large content library was made available. It was also seen in the DVD market when DVD player prices hit sub $99 (December 2003) and the massive library of old movies on DVDs became available at $14.99 and $19.99 vs. $29.99? Goodbye tipping point, hello mainstream market.
Today, musicians and writers have been empowered. Yes, the door is open to self-publish and many are walking though it (Eisler, Konrath, Radiohead, Nine Inch Nails, etc). While many artists can self-edit, convert digital files, and submit to digital stores such as iTunes and Kindle, many artists simply desire to create their art in word or song. Some are capable or staffed to self-publish, while others are seeking partners to help with the process.
Second, what does it mean to me?
We have built Premier Digital Publishing, PDP, to help established authors successfully navigate the digital waters and garner their fair share of the pie. Our opinion and the mission of PDP is for the creators of IP (Intellectual Property, not Internet Protocol, ha, ha) to be deservedly rewarded for producing the art forms THEY created. Sure, the ebook storefronts (new retailers) do deserve a share of the pie, but the old publishing model and its revenue splits is fatally encumbered by the weight of legacy systems, overhead, bloated staffs and prevarications a.k.a. royalty reports (wicked wink).
As the story goes, I can go to Lowes and buy $500 worth of equipment to mow my lawn each weekend, but why not pay a “group of guys” to do it for a reasonable cost? (If you live in California – don’t translate “group of guys” into its politically incorrect term). You get the point.
“Readers need writers” – true that. Writers also need self-publishing expertise and weapons to wage war in the new era of digital distribution and reach their readers. This is not limited to clicking a mouse and converting a file. PDP is here to help those who want assistance in merchandising, marketing, etc. and don’t want to “mow their own lawn.”
Welcome to the other side of the tipping point. Radiohead and Eisler are now perpetually famous.
Or is it Infamous?
I guess the post hit the nail on the head… several times. As 2012 rolls into town, PDP will be there to help authors make their own “Eisler Sanction.”
Our Take: eReaders this Holiday Season
Well, seemingly everyone is publishing a shopping list for Holiday shopping… OK, we’ll dive in and join the fray. For fairness, like college football, eReaders need to be divided into divisions.
Division I: Tablets Big and Small
iPad 2
Enough said. The gold standard. Best of all, the Nook / Kobo / Kindle apps for iOS ensure options as well as Apple’s iBook store. Nirvana.
Nook Tablet
The 7″ touch-screen Nook Color on steroids. The Nook Tablet benefits from being essentially a second generation unit. Battery life, email and Flash…
Kindle Fire
We LOVE the Kindle fire but the teething pains are causing angst. The device WILL get better with software upgrades – so if you have bought one, not to worry. The tight integration with the Amazon storefront is not to be overlooked. This combination is perhaps the easiest way to buy content – not just books.
Division II: eInk Dedicated 6″ eReaders
Nook Simple Touch $99
For $99 you get A 6″ touch-screen eInk reader (with Wi-Fi) with what they say is better battery life (up to two months). The Android / Barnes & Noble marriage seems to be working.
Kindle Touch $99
Amazon’s 6″ eInk touch-screen eReader (with Wi-Fi) is also at the top of any $99 eReader list. It does have ad-supported screensavers, which some find intrusive but we don’t think is a big deal.
Kobo Touch $129
Kobo’s 6″ touch-screen entry (with Wi-Fi) is solid but overall its somewhat below the Kindle and Nook 6″ touch models. The Reading Life social network feature is very cool and innovative. While it is $30 more than the Nook or Kindle 6″touch-screen models, if you purchase from Kobo they include a $20 Kobo giftcard.
Kindle Keyboard $119
If ya’ gotta have a keybord, this remains the choice in the 6″ dedicated eReader division. Like the Kindle touch, is is an 6″ eInk touch-screen eReader (with Wi-Fi) – the $119 price is for the keyboard, obviously.
SONY Reader WiFi
We almost didn’t include this one. SONY seems to have overlooked that everything from mobile phones to iPads are now touch screen. Why the buttons? It has a 6-inch greyscale screen (with WiFi). At least it was recently marked down from $129 to $99. The next iteration from SONY needs the well-known SONY consumer electronics magic…
Regarding the growing array of Android tablets… Depending on your wireless carrier and price sensitivity – you can get a nice tablet of varying sizes. Best of all, Nook / Kobo / Kindle / Google Books apps mean you don’t need to make a storefront choice when you buy a device.
If money is no object, size doesn’t matter and you want ridiculous versatility, the iPad 2 wins hands-down (but you knew that). If you want a color Tablet / eReader for less than half the $600 price of a basic iPad 2, the Nook Color, a 7″ touchscreen device, gives you a ton of functionality (note: as we indicated, the Kindle Fire will QUICKLY get better with software upgrades – it is a GREAT device right out of the box). Lastly, if it’s a 6″ dedicated device, then Nook Touch / Kindle Touch are both fantastic for $99.
Thanks to competitive pressures, the consumer has a number of truly wonderful device choices and will most likely be satisfied with whatever they unwrap.
Happy Holidays!
It Has Come To This... is the personal blog of Thomas N. Ellsworth. "The Career Coach," - Digital Publishing / Mobile CEO, Entrepreneur and Author
