31 January 2010

e-books and iBooks

by Matt Rubinstein at 8:29 pm

Publishers.jpgThe day before the iPad launch, the Wall Street Journal reported some quite detailed rumours about Apple’s negotiations with publishers:

Apple is asking publishers to set two e-book price points for hardcover best sellers: $12.99 and $14.99, with fewer titles offered at $9.99. In setting their own e-book prices, publishers would avoid the threat of heavy discounting. Apple would take a 30% cut of the book price, with publishers receiving the remaining 70%.

This is quite a bit higher than the $9.99 Amazon charges for most of its mainstream Kindle titles. The WSJ’s Walt Mossberg had the chance to ask Steve Jobs directly about pricing, with interesting results:

Why should she buy a book for $14.99 on your device when she can buy one for $9.99 on Amazon on the Kindle or from Barnes & Noble on the Nook?
Well that won’t be the case…

You mean you won’t be $14.99 or they won’t be $9.99?
Uh… the prices will be the same… Publishers are actually withholding their books from Amazon because they’re not happy.

Optimistic pundits took this to mean that iBooks would sell for $9.99, even though the one featured most prominently in Steve Jobs’s demo, Ted Kennedy’s True Compass: A Memoir, seemed to be priced at $14.99, and some of the other books cost $10.99 or $12.99.

But it now seems more likely that Jobs’s first answer means what Mossberg was clearly worried it would mean: the prices will be the same because Amazon prices will be forced up.

A couple of days ago Amazon stopped directly selling the print and electronic editions of all Macmillan titles, though you can still buy the print versions through Amazon Marketplace. Macmillan CEO John Sargent explained yesterday that Amazon had dropped the titles in response to Macmillan’s new distribution deal, under which if Amazon wanted to offer electronic editions at the same time as print editions (without “extensive and deep windowing of titles”), it would need to adopt a new “agency” model of distribution:

Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set the price for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.

Traditionally, publishers have been prevented from controlling the retail price of books by the prohibition against resale price maintenance in many jurisdictions. Resale price maintenance hasn’t been per se illegal in the US since 2007’s Leegin Creative Leather Products v PSKS 511 US 877, though it will still be illegal if it imposes an unreasonable restraint, and is still per se illegal in places like Australia. But an arrangement of agency, rather than sale and resale, can avoid these restrictions and give the publisher full control of the final price to consumers.

Eagle-eyed readers will notice that Macmillan is one of the publishers featured in the Apple keynote address, and the alignment of prices and rumours terms makes it pretty clear that at least the following has happened: Macmillan found that it could get a better deal selling through Apple, and is now looking for the same deal for all of its electronic books. There’s no evidence that Apple encouraged Macmillan to increase its prices through Amazon—Macmillan wouldn’t need any encouragement—but the increase would certainly benefit Apple for the reason Walt Mossberg identified right away, and the whole thing makes Steve’s response a little prescient and creepy.

It’s a pretty screwy situation where the introduction of a new competitor has the effect of increasing prices, and as Macmillan author Cory Doctorow points out it’s a problem of concentration at the levels of both production and distribution. Books (and movies and music and so on) are economically a little weird anyway, since in some sense every book occupies its own market and has no close substitutes: if you want True Compass you’re not going to buy The Golden Compass just because it’s cheaper. Since there’s only muted price competition between books themselves, we rely on price competition for each book at the retail level.

And even though retail physical bookselling is also fairly concentrated, it’s still the most competitive part of the supply chain, and with up to 40% of the cover price going to the retailer there’s a lot of room for different business models, improvements in efficiency, and real bargains for readers who want to shop around. With electronic books it’s a slightly different story, since the cost of distribution is very low (and the marginal cost of distribution is zero), but there’s still a lot a retailer can do to differentiate itself: offer a subscription model (like Amazon offers through Audible), bundle e-books with your 3G data plan, and other things I can’t think of because I don’t have an MBA. Publishers should demand and receive a fair wholesale price, but consumers need choice and competition at the retail level. It seems to me that insisting on an agency model threatens to foreclose this competition and could stifle innovation right when the emerging industry needs it. It’s only one publisher so far, and only one territory, but it’s worth keeping an eye on.

29 January 2010

iPads and iBooks

by Matt Rubinstein at 12:56 am

gallery-software-ibooks-20100127.jpgAs usual the whole world is in roughly equal parts delighted and outraged by Apple’s latest portable gizmo, the iPad. Much has been made of the name: I personally can’t believe how many posters and commenters have used the exact phrase “sounds like a feminine hygiene product”, all apparently believing they’re the first to have thought of it. Or maybe they don’t, maybe it’s one of those jokes-made-funny-through-repetition that the Internet loves so much. I like this article where “tech writers” forlornly predict that the jokes will simmer down soon.

There are some pretty interesting things about the iPad for readers and writers. There’s no coloured electronic ink or active-matrix organic LED display, just a 9.7″ LCD with in-plane switching for a reasonably wide viewing angle. The video geeks are up in arms (though occasionally confused) that the display is 1024 by 768 pixels in a 1.33:1 aspect ratio, the same as the big old TV sets we all used to have, so that the old episodes of Star Trek will fill the screen nicely but the new episodes (at 1.78:1) will have big black bars and the movies (at 2.35:1) will have even bigger black bars. This is even chubbier than the iPhone, which at 1.5:1 will leave either horizontal or vertical black bars for almost any video, but it seems reasonably well suited to reading books and magazines. It sits between the US Letter (1.29:1) and A-series (1.41:1) paper sizes and is just a bit squarer than your common B-format (1.52:1) paperback. All of this makes the iPad look slightly more like a thing for reading words than for watching videos, though it should also play videos pretty well despite the black bars.

Of course, films and videos have fixed dimensions and can’t be reformatted without making everybody fat or skinny. An electronic book can also be presented in a fixed format, like a PDF, or else in a “reflowable” format where the text is formatted to fill whatever space you have, with whatever font and pitch you choose. A fixed format is good where you have a lot of images, and also takes care of the rags, widows and orphans that typesetters and editors are so keen to control; but a reflowable format can be shared more easily across a variety of devices with different shapes and sizes, and is probably more useful for everyone but purists.

Apple has chosen not to invent its own format (as Amazon did for its Kindle) but to adopt the EPUB format developed by the International Digital Publishing Forum. EPUB is a collection of open standards that Apple may or may not combine with its own proprietary digital rights management system. At the moment, music from the iTunes Store are DRM-free but movies and TV shows are DRM-laden, as are applications from the App Store. There’s no word yet on whether iBooks from the iBook Store will be restricted, but on past performance there’s a good chance. It’s not yet clear that iBooks will sync back to your computer so you can read them there, or on iPhone or iPod Touch, let alone on another non-Apple device, but I’m thinking they’ll give us that at least. And the fact that the iPad uses EPUB is a positive step as it should mean that you can read a wide variety of e-books from other sources, including the public domain, in a decent format.

EPUB is a reflowable format, which means that iBooks won’t be properly typeset like real books but will more or less fill a screen that has more or less the same dimensions as a real book. From the screenshots there’s a bit of trompe l’oeil thrown in to make it look a bit like you’ve got a stack of pages curving away from a gutter, and when you turn the page it looks a bit like you’re really turning a page. I’m not sure that I care about this at all, or that I like the mock bookshelf that holds your purchases. I love book covers but would be happy to see them just sitting there like movie posters or album covers already do. I think that typeface and layout are very important and can be adequately translated to the digital realm, but physical pages and bookshelves can’t really be reproduced on a screen and it might be better to come up with a new metaphor. However, this might be a useful intermediate step for people who are still uneasy about reading books on a screen. And it might in fact make some important psychological difference that Apple has spent way more time and money researching than I ever would.

While the Kindle comes with an international 3G wireless connection effectively built into the price of the books, the iPad comes in two series: one that only has Wi-Fi and will be available internationally at the end of March, and one with a 3G radio that will be available in the US at the end of April and elsewhere from June or July. Apple has organised an “unlimited” data plan with AT&T for $30 a month, which is a lot less of a bargain than Steve Jobs seems to think but is at least pre-paid with no contract. Steve did say that the device is unlocked so theoretically you could get a separate data plan, or even swap out the SIM card from your existing handset—apparently the iPad only accepts the “new” microSIM format, but there may be clever adapters available if the electronics are the same, which it looks like they are.

The best solution is to allow tethering between the iPad and your existing mobile device, such as an iPhone. AT&T still doesn’t offer iPhone tethering, partly because they offer “unlimited” data plans and tethering would wreck the pricing models. But many carriers in other parts of the world sell tiered or limited data plans and have chosen to offer iPhone tethering for free or for a (mostly) reasonable price, and it works seamlessly over USB or Bluetooth. The iPad has Bluetooth and could certainly be made to use the iPhone’s data connection where tethering was offered. Of course, a jailbroken iPhone can be tethered over Wi-Fi, which the iPad would treat like any other Wi-Fi network. I’d say Apple would be doing the non-AT&T carriers a favour by encouraging us to pay the extra for official tethering, rather than forcing us to jailbreak and get it for free.

Outside of the US most of us spend a lot of time out of Wi-Fi range, so cellular wireless is pretty important for a device aimed not only at books but at magazines, regularly-updated news sources and general browsing—especially when, as I suggested earlier, having a live Internet connection could be a big part of what makes electronic books competitive with paper books. But it seems stupid to have multiple data plans when you could easily share the one. We’ll have to wait and see what the international carriers are offering, but I dearly hope they see the sense in tethering. If I do buy an iPad I don’t think it’ll be a 3G-enabled one; and if tethering is supported then I think I’ll buy one.

22 January 2010

Beat up Martin

by Matt Rubinstein at 11:02 pm

Newton.jpgApparently Apple is about to announce some kind of new gadget in the next week or so, and it’s going to revolutionise everything all over again. Although nobody thinks that the new device is going to be a mere e-book reader, it looks like it’s going to be at least an e-book reader, with Apple rumoured to be in talks with Hachette, HarperCollins and others to secure electronic distribution of their titles. The idea would be a sort of iTunes store for books as well as journals and the existing music, movies and TV shows.

I never thought I would have considered a tablet computer or e-book reader, but now I think there’s a good chance I’ll buy the Apple one. What happened to me? Honestly: it was the iPhone. Another rumour has it that the iPhone was born out of something called the “Safari Pad”, a touchscreen tablet-style device intended for web browsing that Steve Jobs finessed into the smartphone we all know and mostly love. That decision now seems to have been an inspired one, about developing the market as much as the technology.

I bought an iPhone because I already had an iPod, I listened to a lot of music and podcasts and could never get them to work seamlessly enough with whatever smartphone I hoped would solve it all for me. I just wanted to carry fewer gadgets and have more free pockets, and the iPhone fit the bill. I hadn’t ever thought of reading books on it, because that wasn’t remotely possible on either previous phones or iPods. The closest thing I’d done on either kind of device was listening to audiobooks, which I do like a lot, though I’ve always found there’s something unwieldy about them: you can’t read at your own pace, it’s hard to flip back and forward to find things you may have missed or misunderstood, you can’t copy out bits that you like.

But I got a couple of free books for the iPhone and started reading them, just because they were there and I didn’t have anything else to read on the bus or waiting in the pub. I downloaded the Shakespeare application, like most people do. I got the Kindle application and bought a book or two. I was sent a first draft of a new novel by e-mail and instead of printing it out I read it on the iPhone. It wasn’t ideal, the screen was too small, it wasn’t particularly comfortable to hold, but instead of thinking it was all rubbish and I’d go back to paperbacks, I started thinking: what if the screen were bigger? If the contrast were better? And then: what if I could easily search through the book, make notes to myself, copy and paste passages? What if, any time I didn’t know a word or a historical reference, I could just tap on it for its definition or Wikipedia entry? By being almost good enough, the iPhone suggested what would come after it, and began to persuade me that I needed something I’d never thought about before.

And then I started thinking: what if, having bought a paperback for reading around the house and making the bookshelves look good, I could pay an extra buck or two to download the electronic version? And what if the audiobook were just a couple of bucks more? (The Kindle has a text-to-speech function available for some titles, but it’s no substitute for a proper reader, who does need to be paid: I don’t know how much of the price of an audiobook goes towards its production, how much is for the underlying work.) What if I could switch between the text version and the spoken version when I had to walk somewhere, and switch back when I sat down again, or when I wanted to make a note or a quote or look something up—and it always knew where I was up to? I still think I’d favour the paper version, and use the others when circumstances demanded, but I’m not sure about that. I can imagine the convenience and versatility of the electronic versions might trump even the pleasure of paper.

At the moment I’m reading my wife’s paperback copy of Cormac McCarthy’s brutal Blood Meridian together with the audiobook version narrated by Richard Poe that I bought a while ago, and looking up many of McCarthy’s old-west names and places from my iPhone. I feel like there may be a reading experience even richer than the one we’re used to around the corner. As always, the challenge will be to make sure all the rights are dealt with effectively and realistically, to make sure creators are rewarded without stifling innovation or alienating readers. If we don’t get in our own way too much we could offer a new generation of readers something that we’ve never had before. And to have the latest McCarthy bloodfest up there on the same page, in the same search results as the latest Dexter episode or High School Musical instalment or Jay-Z protégé, just as accessible and nearly as flashy and cool—that’s got to be a good thing for the written word.

Paddy Power now has a market on what Apple will call the new product, with “iPad” almost unbackable at 1:5. I always thought it would be cute to call it the iSaac, a synthesis of the overused i-prefix with the original and much-loved Newton MessagePad that let Dolph down so badly in the picture above. But I acknowledge that that would be an extremely nerdy and unlikely name, and Paddy Power prefers even the “EtchaSketch” (at 500:1).