We begin with Douglas Rushkoff’s talk from SXSW2010:
http://www.youtube.com/watch?v=imV3pPIUy1k
Mary Meeker, of Morgan Stanley Research, does an annual report on Internet trends. This is the 2010 edition:
http://assets.en.oreilly.com/1/event/39/Internet%20Trends%20Presentation.pdf (PDF)
Update: 2011 numbers/presentation here:
http://www.kpcb.com/internettrends2011
Apple’s play: to define personal computing
“…book business a cork bobbing on the larger digital device stream…”
Shatzkin’s essay from July 2011, “Publishing is living in a world not of its own making” documents how Apple’s iStore terms of service deny other e-vendors’ Apps from selling content outside of the iStore itself. All sales through the iStore pay a 30% cut to Apple.
Apple’s (long-anticipated) move is not seen primarily as a competitive effort to promote Apple’s iBooks app, though it may have that effect for some. Rather, the situation seems to be about Apple capitalizing on the popularity and centrality of its own distribution channel on its iOS devices (iPad, iPhone, iPod). The terms of service affect books, music, video, and apps themselves.
And yet Shatzkin points out that Apple is the main reason Amazon’s ebook monopoly isn’t even bigger than it is, because Apple offered publishers a more palatable service agreement than Amazon when Apple and the “big 5″ publishers (HarperCollins, Pearson/Penguin, Simon&Schuster, Hachette, Macmillan) started doing business under the so-called “Agency Model” in 2010. This new model created a more publisher-friendly pricing scheme than Amazon’s blanket $9.99 ebooks. It is currently being challenged in a number of lawsuits on the grounds that it is “price-fixing.”
This week: the iCloud—watch Apple match Amazon’s new e-retailing moves.
Amazon’s consolidation moves
We talked a bit about Amazon a couple of weeks ago, about its growth to be the world’s largest book retailer, and its commanding presence in the book industry, having expanded into all adjacent areas, from ebooks to used books, with acquisitions of IMDB, Alexa, Audible, BookSurge, AbeBooks, Zappos, Mobipocket, Lexcycle, and more.
Amazon has led ebook markets since 2007, when its Kindle device (and platform) was launched, the first major offering the combined an ebook reader with a major retail source. Since then, Kindle has been launched as an app on other platforms (iOS, Android, Blackberry), but has declined to participate in industry standards efforts. The Kindle book format is a proprietary format that keeps books and readers within the larger Kindle ecosystem by not allowing any interoperability with other systems. Shatzkin reports that Amazon has possibly 60% of ebook sales overall.
Since 2008 Amazon have pushed a flat $9.99 pricepoint for all ebooks, regardless of the price of the printed counterparts—or even of the price Amazon pays to the publisher for the ebooks. Indeed, Amazon has been prepared to lose money on ebook sales in order to grow its own market and market dominance. Publishers have expressed worry that a $10 retail price for books is unsustainable, given traditional industry structure. Amazon does not seem to care what the publishers think about this—instead, they are evidently intent on moving in publishers’ traditional turf.
In 2010, the large, New York-based Andrew Wylie literary agency announced the formation of an ebook publishing company called Odyssey that would work directly with Amazon, cutting traditional publishers out entirely. Amazon also reached out directly to self-publishing authors, offering a straight 70/30 cut (authors take 70%).
Building on long-standing infrastructure pieces (Amazon’s bookstore, MP3 store, social media pieces, cloud computing services, and the Kindle platform), 2011 is a major moment of consolidation. At once, they have lowered the price of basic ereaders to less than$100 and extended the upper end of their range (with the Fire device) beyond books, to music, movies, and the web itself, all channeled through a single customer-relations model.
Google’s latent strength
To get a sense of the size and complexity of Google’s database, consider the following list of data sources, which Google collects passively as you use the Internet every day:
- the content of most web pages online
- the network of links that connect all those web pages
- the popularity of different search terms (what people type in)
- the popularity of particular search results (what people click on)
- what searches result in which ads clicked on
- all of the above, indexed to individual people (as searchers)
But that’s just the beginning of Google’s empire. Add to the above dataset:
- Google Analytics, the most popular traffic statistics system for websites
- GMail, with something like 150 million users
- Google Reader, the most popular RSS reader application
- Google Maps & Earth, the post popular online mapping
- Google Docs (word processing and spreadsheets online)
- Picasa, Google’s photo-sharing system (with facial recognition technology since 2006)
- Blogger (yourblog.blogspot.com), which Google owns
- YouTube, which Google acquired in 2006
- Chrome browser
- Android…
- Books…
In 2004 Google announced that it would expand its web search program into printed books. The holdings of major research libraries in the USA would be scanned and indexed, giving them a corpus of about 15 million books. Almost immediately, the project was attacked as a violation of copyright, a dispute which is still before the courts today, even after two major out-of-court settlement agreements between Google and the American Association of Publishers (AAP) and the Authors Guild (AG). As of late 2011, most commentators seem to think the current settlement agreements will be scrapped, which could bring the legal challenge back into open litigation again. All the while, Google has continued to grow the collection.
While the legal challenge primarily has to do with the scanning of library collections, a parallel project called the “partner program” allows publishers to voluntarily add their books to Google’s index.
In winter 2010, Google launched (in the USA only) its much anticipated ebook service, called Google Editions, which made parts of the corpus available as ebooks. The program was not a major initiative on Google’s part, and met with a rather lukewarm reception. It’s hard to say what effect the Settlement’s legal status has had on Google Editions.
Whatever Google may do specifically in the marketplace, the sheer size of both their collection and their regular customer base (that is, all of us) means they are a major part of the future of books. The Settlement with the AAP and AG had much to do with defining how e-book royalty splits would work in the new world, as Peter Brantley’s “Eye to Eye” article illuminates.
