Aug 30, 2010

Is Amazon Still Man’s Best Friend?

Posted by Joseph Esposito under Authors, Books, Business Models, Commerce, Technology | Tags: , , , , |
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This is a short post simply to call attention to another post by Peter Brantley. Brantley has a bone to pick with Amazon, and after reading his post a couple of times, I think he’s right.

What’s at issue is whether a few large organizations that have entered the publishing world (the accused are, obviously, Amazon, Google, and Apple) have too much influence in the industry.  Sometimes bigger is better, sometimes it isn’t. I for one feel uncomfortable when any aspect of human expression falls under the inordinate influence of a large commercial enterprise. I don’t feel that way about, say, coffee shops or straight razors, though perhaps I should.

Brantley notes that Amazon’s “gift” to authors — the promise of a 70% royalty — comes with unacceptable strings attached.  Under the Amazon plan, the publisher or author sets the price of an ebook and gets a royalty of 70%.  Sounds good so far. But if another vendor is selling the same book at a lower price, Amazon has the right to match it, without further consultation with the author.  If the author prices the book at $9.95 and a competitor begins to sell it for $5.95, Amazon immediately lowers the price, and thus the royalty paid to the author.

What’s increasingly clear is that authors and publishers are struggling to maintain control of the marketing and pricing of their products. Part of this is because of the ongoing platform wars, in which technology companies devalue content in order to create support for their own technological solution; part of this, at least in the U.S., is the legal prohibition against having manufacturers set prices when products are sold through intermidiaries.

Is it any wonder that more and more publishers are beginning to experiment with direct sales, bypassing the traditional supply chain altogether?

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Jul 19, 2010

Regulating Google to Help the New York Times

Posted by Joseph Esposito under Commerce, Controversial Topics, Newspapers, Research, Technology | Tags: , , , , , |
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You have to hand it to the New York Times: when they get something wrong, they surpass all expectations.  This is the case of the extraordinary editorial that appeared last week, which proposes that the government regulate Google’s ranking algorithm.  The reason?  Google is now such a powerful force on the Internet that it is essential that it maintain editorial objectivity; otherwise, it could steer users to online properties that Google has an interest in rather than to third-party properties that objectively are more relevant to a user’s search.  Thus a third-party video of an adorable mewing kitten may get a lower page rank than a similar video that appears on YouTube, which, of course, Google acquired some years back.

The Times piece is not without nuance (it acknowledges that regulators must be very, very careful), but it clearly insists on seeing the world in its own terms, and only in its own terms.  Google must be objective and impartial; Google must operate as a public trust; Google must behave very much like the way the Times itself purports to behave.  Even an unabashed admirer of the Times like myself must acknowledge that the world would be a dimmer place without rascals and fools, full-throated and often ill-informed opinions, and self-dealing organizations.  In the world imagined by the Times, there would be no need for novels or movies because there would be no drama.

This is so pompous, it makes you want to pee in the punch.

The Times has triggered a vitriolic response to its editorial all over the Web, but none so entertaining as the Swiftian satire by Danny Sullivan, who is something of a celebrity in the tech world, where he has chronicled the evolution of search engines for many years.  As Sullivan points out ironically, the Times would never stand for the kind of regulation that it proposes for Google even though the Times is in so many important respects a more dominant cultural force.  One man’s monopoly is another man’s personal property.

What the Times fails to mention (besides being tone-deaf to spoofs on the order of Sullivan’s) is its own corporate interest in Google’s search algorithms.  Whether Google is the #1 or the #2 source of traffic to the Times‘ own Web site (a large number of people go to the site directly or by following links from sites other than Google Web Search), the fact is that if Google decided not to play fair–to present biased search results in the news category–it would cost the already rickety Times Company a bundle.  The Times‘ editorial, in other words, is in part a plea to protect its own business.  So much for impartiality.

More fundamentally, though, the Times misses the essential point — Google has no obligation to be objective, no obligation to be an impartial arbiter of Web searches.  Provided that Google does not mislead anyone, Google is free to point users wherever it wants.  The fact that it does not do so (as far as I can determine) has to do with the company’s extraordinary business discipline, which puts brand management above everything else.  People use Google because they trust it — and with all the personal information Google is collecting on all of us, by golly it better be trustworthy.

So, yes, let’s regulate Google — as we should all large companies — but not about this.  Let’s be watchful about the company’s acquisitions in the search area, which could lead to diminished competition; let’s keep an eye on its cavalier attitude toward intellectual property (except for the IP it itself controls); but let’s not insist that the role of government is to make the world safe for the New York Times.

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Jun 23, 2010

Stage Five Book Publishing — How to Go Beyond “Sustainability” and Into “Viability”

Posted by Joseph Esposito under Books, Business Models, Commerce, Controversial Topics, Marketing, World of Tomorrow | Tags: , , , |
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I was invited to talk at the Association of American University Presses (AAUP) annual conference this year.  The general topic was (hold onto your seats) “Sustainability and the Future of Scholarly Communications.”  Presumably after solving this one, we were to go off and plug the floor of the Gulf of Mexico and settle the conflict in the Middle East once and for all.

As I noted in my presentation, I am not a big fan of the concept of sustainability.  It implies stasis, as though what we have is what we want to have.  For most of the university presses that participated in the conference, it’s hard to believe that the current situation is very attractive, with ongoing reductions in library purchases of monographs and increased pressure by university administrators on press subsidies.

Is this what we want to sustain?  I think not.

For this reason, I posited five stages to book publishing and proposed that the way to become “sustainable” (by which, presumably, we mean “economically viable”) was to innovate ourselves into a more attractive position.  Thus, from Stage One — the world of legacy print publishing — we move over time to Stage Five, when we begin to publish books on a subscription basis directly to consumers (ebooks, of course) and reap the considerable financial benefits of the subscription business model.

The AAUP has posted the slides for the presentation at SlideShare:

The text of the presentation is at the AAUP Web site.

Perhaps my greatest surprise was the response to one of my remarks, which, to be blunt, seems to me to be incontestable:  that 5 years from now, the share of library purchases of scholarly materials would be less than it is today.  Whether library purchases will decline in absolute numbers is another matter, but as a matter of market share, the diminishing role of libraries seems to me to be a hard thing to take exception to (at least, that is what librarians keep telling us — that they are out of money and don’t have the support of university administrators).

I will be revising “Stage Five Book Publishing” for formal publication in the fall and hope to incorporate readers’ comments.

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Jun 15, 2010

The POD Booby Trap and the Lure of Open Access Books

Posted by Joseph Esposito under Advertising, Authors, Books, Business Models, Controversial Topics, Marketing, Reading | Tags: , , , , , , , |
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POD — print on demand — has broadened the reach of publishers, putting specialized titles into the hands of readers who may not have been able to get them before. Because of POD, books may never go out of print, as the simple act of storing a digital file makes it possible to keep books “in print” forever. POD has improved profits for publishers, increased access for readers, and given authors a window opening onto a larger and enduring audience; and all this while reducing costs and eliminating the complicated logistics of inventory management.

What’s not to like?

Alas, when we fall in love with a new technology, we do so head first, with both feet, head over heels, or with any other gymnastic metaphor you care to provide. POD solves some important problems, but it does not solve all problems. Nor is it necessarily or inevitably the only solution to some problems. For example, there is no good thing to say about POD that cannot be said as well about e-books except that everyone knows how to read a printed book, whether POD or printed by traditional means, but e-books are still the domain of a relatively small number of people.  Wider acceptance of e-books, however, which seems like the safest bet around, will make even that single advantage of POD disappear.  POD is thus a great but limited technological solution whose days are numbered by the digital advances of Amazon, Apple, Google, and myriad others.

Today, we come to praise POD. Tomorrow, we come to bury it.

One problem that POD does not solve is how to finance open access publication of a work.  Some people disagree with this, believing that there is a real opportunity in making books available online for free and then selling POD versions of the same book.  This is a very seductive idea, provided that your sense of the horizon is but 6″ from the end of your nose.  But it seems to work, so the seduction is understandable.

Try it.

Put the full text of a work online.  Allow search engines to index it.  Have readers come to the site and read some part of the text (all of it is available).  Then watch as a certain number of browsers and readers decide to purchase the POD edition.

They do this for a variety of reasons — charitable support of the publisher, a preference for reading a printed book, the ease of annotating a print copy, and the “furniture effect” (it will look great on the bookshelf).

Open access in this example seems to work, as it serves to promote the sale of hardcopy books. Plus, there is the added cultural benefit of access in and of itself, as it makes the digital text of a work available even to the most impecunious student at no charge.

This in turn raises the question of why we want books to be open access in the first place.  Is the goal broader dissemination? Or is the goal to promote the sale of print books?  If the former, then the question is, What happens when e-books become a large chunk of the market?  Will readers still opt for POD when they can read a (free) digital text in a handheld reader of some kind?  If the latter, the question is, Is this the best promotion we could come up with?  How do we compare this promotion (free digital access) with the entire arsenal of marketing techniques available to the contemporary publisher?

This is not an argument against open access of anything.  Open access is fine; like everything else, it requires a business model.  One way to finance open access of digital books is to have authors or their institutions underwite the cost of publication.  Assuming that underwriting is forthcoming, once again the rhetorical question is, What’s not to like?

On the other hand, in the absence of that underwriting, the financial support for open access books becomes tougher. Sell advertising next to the book’s text?  This has been tried by many (including Google), but no one should be surprised that the revenue from such ventures is tiny.

This is why the POD booby trap has been set — to capture those who believe that POD will help to finance open access.

A booby trap is meaningless unless there are boobies.

As a promotional tool, open access is effective in the short term.  I am not aware of any book publisher whose print sales have not increased when the full digital text of a work was exposed on the Internet.  But must it be the full text?

Suppose we have a book of 320 pages.  How many print copies will we sell if we expose all 320 pages on the Internet?  How many will we sell if we expose 319?  We can keep ratcheting the number down or changing the configuration (expose only the table of contents plus the first chapter; expose the first paragraph of each chapter; expose, as Google does, the passages where search terms appear; etc.) until we find the optimal amount of sampling to drive print sales.  It would be very surprising if after testing this for some time we were to find that only by exposing the entire text will we get a sharp uptick in sales.  Full open access, in other words, is not an exceptionally interesting means to sell books.  Marketers have to be more clever than that.

The unfortunate, unstated premise of those who fall into the POD booby trap is that they really don’t and can’t believe in the emerging primacy of digital text.  The trap is set for anyone who thinks that print is superior for enough readers to make print a long-term viable option.  This is highly doubtful.  E-books have already reached the tipping point.  In just a couple months, Apple has sold millions of e-books from its online bookstore, millions that come on top of the tens of millions sold by Amazon for its Kindle and Stanza brands.  And Google Editions haven’t even launched yet.

No more make-believe.  If we want the cultural advantages of broad dissemination of scholarly texts through open access, then let’s step up and pay for it.  Authors, department heads, university provosts, granting agencies — all of these have a stake, or claim to, in the distribution of academic material.  Let the stakeholders fund the stake.

On the other hand, readers have a stake, too.  Perhaps an innovative entrepreneur will find a way for readers to pay for their own stake.

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Apr 12, 2010

Why Publishers’ Brands Matter

Posted by Joseph Esposito under Advertising, Books, Commerce, Marketing, Technology | Tags: , , , , , , , |
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Publishers’ brands are under attack from all sides. We hear, for example, about the “article economy” and the strongly held view that publishers add no value to the process of editorial development and the dissemination of materials.  In the book world, the argument is that no one buys a book because of the name of a publisher; it’s the author’s name that counts.  These arguments have implications. If publishers’ brands have little or no value, then publishers can be disintermediated.  An author can deposit an article into an open access repository and then let Google do the marketing; a book author can work directly with Amazon and collect royalties of 70% on revenue, potentially dwarfing the income of the highly educated fools who write books for such firms as Random House or Springer.

All this talk puts publishers into the humiliating position of having to jump up and down, shouting, “I matter! I matter!”  There is so much glee on the part of those who believe that publishers and their brands do not matter that it almost seems uncompassionate to tell them that they are wrong.

Brands matter because authors think they do.  The best brands attract the best authors — a virtuous circle, in which good authors strengthen brands and brands confer their aura on authors.  I suppose there are some authors who do not want to get published by Oxford University Press, just as there are some parents that don’t want to send their kids to Harvard.  (Presumably these are the same parents who tell their kids that they really do not need an iPhone; the Samsung will do.)  But I have never met any of them.  In the world of journals, authors know very well what it means to get an article accepted in Science or Lancet.  Part of the reason that institutional repositories have yet to make much headway vis-a-vis traditional publications is that most repositories trail the better journals in the strength of their brands.

Brands also matter to readers (consumers or end-users) in direct and indirect ways.  Subscribers to journals acknowledge this when they pay for their subscription.  For books, publishers’ brands matter in a direct manner to a greater or lesser degree depending on the circumstances.  So, for example, the brand of Random House is thought not to matter at all to a consumer.   (The sophisticated irony of the name “Random House,” with its mock self-deprecation, may be lost on the genericists, who might believe that “Random” in this context means “accidental” rather than “highly discriminating.”)  But Random House controls other brands that absolutely matter to consumers:  Fodor’s, Living Language, House of Collectibles, and so on.  And I find it hard to believe that readers of literary fiction do not look for the Knopf imprimatur (another RH brand).  Nor do I imagine that the prospective consumer does not experience a sense of respect upon viewing the orange spines of Penguin fiction or the names of the university presses of Princeton, Yale, or Chicago.  Of course, some authors’ names or personal brands may matter more (Grisham, King, Mantel), but that does not mean that publishers’ brands matter not at all.

It is the indirect importance of brands that has the most influence on the individuals who purchase books.  Most books are sold indirectly through channel partners such as bookshops, whether online or off, and the wholesalers that service them.  Whether John Consumer knows anything about Duke University Press or HarperCollins is one thing, but the store where he shops certainly does.  Shelf space is crowded; publishers fight hard to get access to retail venues.  Professional buyers and wholesalers know which publishers have had the most success in the past and stock inventory accordingly.  The distribution channels, that is, are not “dumb pipes” but a series of value-added filters whose aim it is to place the books with the greatest possibility for sale before the consumer.   The publisher’s brand serves as a key way to identify the best books.

But surely in the online world this cannot possibly be true?  Surely Amazon and the growing number of powerful Web retailers (now including Apple, with Google on its way) take advantage of the limitless real estate of the virtual world and stock each book impartially?

This they do not do.  Online retailers, like their bricks-and-mortar cousins, make much of their money by favoring some books and publishers over others.   While every book may make an appearance in an online catalog, the presentation of that book (that is, the book’s metadata) can vary considerably, and that presentation influences what we buy.  Indeed, Amazon sometimes punishes publishers by removing the “buy” buttons to their books, frustrating consumers who find the book in the catalog but cannot immediately purchase it.   Even when an online bookseller or intermediary claims impartiality, as Google apparently plans to do with its forthcoming Google Editions (and in my view, if Google is not impartial, it’s not for lack of trying), the publisher’s brand is “weighted” insofar as it has accumulated a network of connections and cross-connections that influence the way computer algorithms assess it and assign it a relative position.

Web bookselling is still in its infancy, but already sophisticated, robotic analyses of usage and metadata are influencing what consumers ultimately get to see when they make an online purchase.  Only Amazon knows what Amazon does, but it takes little imagination to conjure an army of spiders crawling the Web, looking for books and their publishers, assessing pricing strategies in real time, making determinations as to which prices must be matched, which beaten, and which can be safely ignored.  Publishers identify themselves in the metadata (typically ONIX feeds) they disseminate to the supply chain, and that identity comes to figure in the price a book is offered at, how it appears in search results, and the outcomes of collaborative filtering (“Readers who liked this book [by a certain publisher] also liked this other one”).

To say that brands don’t matter is to say that information comes to us unmediated.  This is naive.  No one reads a news item in an authoritative source without exercising at least mild and appropriate skepticism:  Who says?  Who has an interest in this item?  Why is it coming to light now?  (Viewers of Fox News and MSNBC may be exceptions to this.)  But as consumers, we like to imagine that we can fortify ourselves against manipulation and influence, the chastity of our intellects more than enough to withstand the sly seductions of marketers.  Brands matter because the modern networked world, like the world in the film “The Matrix,” is highly processed, and only a fundamentalist like Neo — Mr. Anderson — could hope it to be otherwise.

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Mar 29, 2010

The Next E-book Device Is Already Here

Posted by Joseph Esposito under Books, Business Models, Commerce, Reading, Research, Technology, Usability | Tags: , , , , , , , , |
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For anyone following the e-book device world, the plethora of announcements is overwhelming.  In addition to the Kindle and Barnes & Noble’s Nook,  we have the Apple iPad coming soon, new developments from Sony, and countless offerings from established companies and start-ups.

On top of these are the multipupose smartphones, led by the Apple iPhone,  which display text rather well.  I am myself surprised by the quality of experience on my iPod Touch, which, though it is unlikely to supplant print or larger reading devices for me, has opened up my reading experience during all those times when I am just waiting around to do something else.

Now, how much time do we Americans spend waiting in line, waiting for children and spouses, waiting at the Division of Motor Vehicles — not to mention when put on hold by Verizon, AT&T, and Comcast?  Your call is very important to us; why don’t you read a book while you wait?

It was thus with great interest that I learned that the Kindle and Stanza are either ready (Kindle) or being readied (Stanza) for reading on a computer.  Yes, a software version of the Kindle (which is already running on the iPhone) is available for PC users, and Stanza, which burst into prominence with its iPhone application, is in beta for the Mac.  There will be other such applications:  software book readers, with some e-commerce capability attached.  No potential venue for the sale and consumption of text is being left to its, er, own devices.

So the next big e-book device is the laptop.  A laptop, of course, is a computer, and every new piece of software written for it is in fact a virtual machine.  Thus a laptop with Stanza running on it is no longer merely a laptop:  it is now an e-book device and bookstore.

This brings us back to the old saw that no one wants to read a book (or a “long-form text,” at any rate) on a computer screen.  This makes me wonder what it is that I do with my time.  Like millions of people around the world today, I spend the vast majority of my waking hours reading text off a screen:  desktop, laptop, smartphone, and iPod Touch.  When I travel for business, I see people reading long documents on their laptops and have noted that some of them are books (whether authorized copies or not is another matter).   Soon I will have Stanza on my laptop and perhaps other readers (waiting for Eucalyptus!).  People do read on a screen, though not necessarily everybody.  But it’s not everybody that is the target for Amazon and others:  the target is simply enough people to make the investment in this particular sales venue economically viable.

What laptops have mostly lacked thus far are good software for the viewing of books, a large selection of titles to choose from, and a means to sell books efficiently to laptop users.  (Let me pause to say that there has long been a large selection of public domain texts for computer screens from Project Gutenberg, Michael Hart’s truly visionary project.)  These problems are now solved.  We will see more and more laptops as reading devices in the months ahead.

This is not without other implications.  If you are a business traveler and must carry a laptop or, at a minimum, a netbook, how likely a candidate are you for a dedicated e-reading device or even a portable media device like the forthcoming Apple iPad?  As a business traveler, you already carry a smartphone of necessity, which is another publishing venue.  It’s unlikely that already burdened travelers will put a Kindle or Nook in their carry-ons; the laptop has been given a new lease.

For people interested in scholarly publishing, there is a surprising implication, namely, that the old gray mare, the PDF, may have a couple more laps around the track left in her yet.  The PDF remains today the primary means by which scholarly material is presented to readers, but it does not migrate easily to the small screen of mobile devices.  But a PDF bookstore, designed with laptop reading in mind, is now very much a commercial oppportunity.  Such a laptop with reading software would have to display more formats than PDF, but the pressure for academic publishers to invest in converting their slow-selling PDFs may diminish a bit.

There is a moral to this tale, and that is that the digital revolution does not lead in a straight line or in a single direction. It moves forward, back, forward, back, and often to the side.  What is fashionable may not survive; what already exists may prove heartier than the best new idea.  For publishers, it’s important to realize there is no such thing as a macrostrategy — and don’t let the tech companies tell you otherwise.  Each strategy must be tailored for the specific circumstances of a particular organization.

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Mar 23, 2010

From Me to You: Selling Books on a Direct Basis

Posted by Joseph Esposito under Authority, Books, Business Models, Commerce, Marketing | Tags: , , , , , , , , |
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While we continue to debate “p” vs. “e,” we should note a bigger shift in the publishing landscape:  from indirect or “channel” marketing to direct sales (from the publisher directly to the consumer).  Historically, “p” has been connected to indirect channel sales, but it’s increasingly clear that “e” is likely to be direct-marketed.

Let’s spend a moment on the recent evolution of the book business.  In what is sometimes referred to nostalgically as “the print era,” most books were sold through various intermediaries, usually bookshops or wholesalers that serviced stores and libraries. Of course, there were always (and continue to be) exceptions to this. For example, most university presses create catalogs that are mailed directly to prospects, and there are few academic publishers even today that do not count among its largest customers such companies as Baker & Taylor and Ingram and large bricks-and-mortar retailers such as Barnes & Noble.

But with the Internet came Amazon, which has altered the landscape forever.  Most academic publishers report that their sales volume through online booksellers, when measured in dollars, is 2-3 times the comparable sales volume for trade publishers.  For university presses, for example, Amazon typically comprises 25% or more of total distribution, about the same amount as, or even more than, sales to libraries. And no academic publisher has to be told that online sales are growing, while library sales continue to be a struggle, or that overall sales have not grown much at all over the past 10 years and in many instances have even declined.  In 10 years, online bookselling, principally through Amazon, has gone from zero to 25% of total volume for most academic presses, and this on flat sales.

Curiously, in many respects online bookselling closely resembles bricks-and-mortar bookselling.  Amazon is as much an intermediary as Barnes & Noble, its chief rival in the United States, and whether online or off, most intermediaries primarily sell print.  As the Internet continues its disruption of the traditional book business, we should expect to see:  more print books sold online; more digital versions of books, which will disproportionately be sold online; and the growth of sales made on a direct basis.

For all the success — the inexorable success — of online bookselling, it’s useful to bear in mind that offline bookselling has a few advantages over the online variety, and one of these is that the physical book itself conveys a great deal of information about the book’s content.  A print book is a book wrapped in its own metadata:  the author’s name, the title, a blurb about the contents; and by flipping through the pages, a prospective customer sees the table of contents, an index, and even some sample text. (Nor should we discount the author’s photo on the dust jacket or the excerpts from favorable reviews.)

For online bookselling to be effective, all of these messages of the physical bookselling channel have to be re-created.  And this is one of the key differences between channel selling and direct selling:  with direct selling, much more attention must be paid to the creation and presentation of bibliographical information.  It is not enough to put some books on a Web site.  The site must be designed to thrive in “the Google ecosystem” — that is, it must be accommodating to search-engine algorithms.

There are several reasons that more books will be sold on a direct basis online. The first is simply that the facts speak for themselves: publishers are in some instances already selling books directly to individuals from their Web sites. In no instance that I am aware of are those sales anywhere close to the sales volume netted by third-party online booksellers, but few presses with direct sales would wish that they would disappear.

A second reason more books will be sold online is the effect of search engines and Google in particular. Search engines tend to “atomize” Web portals. So-called “atomic discovery” refers to the bypassing of the home page of a Web site and going directly to a page found somewhere within a Web site.  An illustration of atomization is easily found by Googling on items in the news.  Do a Google search on “how many people died in the earthquake in Haiti” or any news item of your choice and you will get a list of Web sites, including newspaper Web sites. Click, for example, on the link to the New York Times, and you will be brought not to the Times‘ home page, but to an article buried deep within the Times‘ site.  Google finds the most relevant atom, not the entryway to the Times as a whole.

A description of a book – -author’s name, title, ISBN, table of contents, brief summary, etc. — is, to a search engine, very much like that article on Haiti in the Times.  A publisher can post high-quality book descriptions (metadata) on its own Web site and invite search-engine traffic to find it.  In effect, Google enables publishers to compete with Amazon in a modest way.

So it’s not about “p” vs. “e.”  It’s about how one change ripples through the value chain, privileging some links in the chain and denigrating others.  Ebooks are a product strategy, but direct-marketing is a business strategy.

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Mar 15, 2010

Let’s Make Open Access Work

Posted by Joseph Esposito under Authors, Business Models, Commerce, Controversial Topics, Experimentation, Research | Tags: , , , , , , , , , , |
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This is a blog post that will please no one. That is not the intention; I am not writing it to pick fights. But the topic is open access (OA), and on this topic, fights inevitably erupt; it is scholarly communications’ equivalent of the Culture Wars.  For my part, I stand with Voltaire:  The perfect is the enemy of the good.  Already in the background I can hear advocates of perfection beginning to sharpen their swords.

So, without reference to the many arguments on all sides of the matter, How can we make OA work?

For starters, we need a software platform. Initially this need not be complex, but it must scale to handle large amounts of material, and that material cannot be restricted to text or PDF files.  The platform might be a huge repository.  Or it may be several repositories, all of which are indexed by various means, including the most important one today, Google Web Search.  Qualified researchers may upload their work (which we still call “papers”) to this repository.  We have models for such repositories now at many universities, but the scale suggests another model, the huge “cloud computing” services of companies such as Google, Scribd, and Amazon, among others.  It is the miracle of Moore’s Law that makes these data centers possible at little or no cost to the user.  Consider for a moment that Google now permits a user to upload any document for online storage to the Google Docs application — for free.  That’s the kind of platform we require.

Second, unless we are willing to have the repository filled with junk, spam, and reckless outpourings, we need some way to filter papers that are uploaded.  In traditional publishing, the answer to this is simple:  have editors, including peer reviewers, assess papers prior to publication.  But this is costly and time-consuming; indeed, one of the reasons arXiv came into existence was to speed up the process.  Whatever the many merits of peer review, such review prior to publication may slow down the dissemination of ideas, and speed should be one of the goals of any OA service.

Thus, how to determine what can be posted and what cannot?  The answer is to formalize some of the policies that are now in place at many major universities, policies that I call “provostial publishing.”   Unlike traditional publishing, where editors review each paper for publication, provostial publishing is a means to determine which authors can post to the repository.  The requirement:  the author must be affiliated with or sponsored by an established institution.  Thus both Harvard and MIT have mandated that faculty deposit their papers into an OA repository.  No one is reviewing those papers beforehand; it’s enough that the authors have achieved a position on the faculty. Whereas editors select papers, provosts select authors.

Provostial publishing is a means to assert a baseline level of quality control for what would otherwise be open to massive abuse and “data dumping.”  We want OA to be open, but we don’t want it to be foolish.  So, for example, I have experience in the world of publishing and digital media and may be permitted to deposit papers in a repository in those areas.  (This, by the way, is precisely how Scholarly Kitchen operates.)  But suppose I were to hanker, say, to present my grand theory of cognitive science.  I have no credentials in the field, no doctorate, no research record.  My paradigm-busting paper on cognitive science would not have the blessing of a provost or other sponsor and would thus not be entitled to a place on the repository’s servers.  Similarly, a cognitive scientist with no experience in publishing, who has not gone through the years of apprenticeship, would not have access to deposit documents in a repository dedicated to publishing matters.  This is not a free speech issue.  The Web abounds in venues, but we needn’t open all services to anyone who comes along.

A large collection of papers openly available to anyone to read creates its own set of problems:  Which papers are worth paying attention to?  After all, not all of the provost’s picks get it right 100% of the time.  Our OA service needs a form of post-publication peer review.  And here we are quite fortunate, as the current crop of Web 2.0 services presents plentiful models for online commentary.  Professor Jones, who is a member of the faculty of Ultimate U., deposits her paper, “Specific Qualities of the Generic,” in an OA repository.  Indexed by Google and other services, the paper quickly comes to the attention of people working in the field, who post their critiques alongside Jones’s document.  The software enables comments and comments on comments; the paper lives with its commentary all around it — in one virtual place, for the convenience of all researchers.

It will be noted that some papers will attract a great deal of commentary and other papers none at all.  This is as it should be.  Papers with important information will be cited repeatedly, which in turn will give them higher search engine ranking and bring other readers to them (a process known as “the law of increasing returns“).

Our OA service has thus put an end to one of the most inefficient aspects of traditional publishing:  whether a paper is good or bad, it costs the same amount of money to put it through the editorial review process.  Post-publication peer review aligns effort and cost with the quality of the material.

This leads us to the economics of our new OA service.  By switching from pre-publication peer review to post-publication peer review — and placing a big bet on the utility of search engines — we have shifted the large, ongoing costs of managing a publishing operation to a one-time investment in the software platform, which enables the deposit and review of papers. Some current OA services charge large fees to authors, but this is because they are clinging to the editorial model of traditional publishing.  The combination of Provostial Publishing, cloud repositories, and post-publication peer review drives the cost of scholarly communications down and down. Recall that you can upload anything to Google Docs.  If the platform is properly designed, the marginal cost of adding new papers and commentary approximates zero.

To finance this service (putting aside the start-up costs), an author would pay to have his or her paper deposited in the OA repository.  We don’t know how much to charge, but we know the formula:  the number of papers multiplied by the deposit fee per paper must exceed the ongoing operating costs.  If those operating costs are, say, $1 million a year (it is simply astounding to see how little it costs to operate cloud-computing services once the underlying platform is built) and we anticipate that 1,000 papers will be deposited each year, the minimum cost to each author would be $1,000.  If we forecast 10 million papers, an author would be charged $.10.  It may be that we will find that the administrative cost to collect such small sums hardly make it worth the effort.  Perhaps upon being granted an advanced degree, a prospective author would simply write a check for $50 for lifetime deposit fees, subject always to the sponsorship of a provost or provost’s proxy.

One policy that I would strongly urge upon any OA service is to invite commercial exploitation, provided that such commerce does not require that any of the research material go behind a pay wall.  This recommendation runs counter to the common practice of stipulating that there will be no commercial use of the material.  Capital, however, makes things happen.  We cannot tell in advance what new services entrepreneurs will come up with, but we are likely to find exciting new add-on capabilities for the OA content.  It is one thing to insist that all research content be OA, quite another to banish financial incentives altogether.  The scholarly community would benefit from harnessing the profit motive to the aims of researchers.

What’s not to like about this model, which I contend could become economically sustainable in a short time?  Or I could say, What’s to like?  This model incorporates many of the innovations of services such as arXiv, PLOS One, DSpace, and BMC, but it does not deliver everything that we expect when we turn to an established journal.  The key to this model is to substitute information technology for human-mediated editorial activity and the investments in branding that go with it.  Perhaps the trade-offs are too great.  On the other hand, this kind of development may be inevitable, at least in part, for some disciplines.  Once established, such services may go through a process of continual improvement.  If they don’t satisfy the needs of the research community, they will disappear.

And then it’s time for the next experiment.

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Mar 9, 2010

An Interview with Kent Anderson at WritersCast

Posted by Joseph Esposito under Advertising, Authors, Business Models, Controversial Topics, Marketing | Tags: , , , , , |
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Our very own Kent Anderson granted a very thoughtful interview with David Wilk over at WritersCast.  It’s a wide-ranging podcast, with Kent quietly offering his comments about a multitude of Web issues, including the always stubborn problems of online business models.  David Wilk himself is a long-time industry professional, and his questions add to the piece.  Recommended for anyone interested in the business and policies of scholarly publishing.

 

Feb 23, 2010

Platform Wars Come to the Book Business

Posted by Joseph Esposito under Books, Business Models, Controversial Topics, Historical, Marketing, Technology | Tags: , , , , , , , , , |
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Microsoft Encarta
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During the Internet Boom era, some digital wag linked Bill Gates’ holdings in Microsoft to a real-time stock ticker and posted the service on a Web page.  Thus, you could see Gates’s fortune rise and fall in real time:  up $10 million, down $5 million, up $5 million, down $1 million, up $15 million — and up and up and up.  Besides the bizarre and even masochistic pleasure in watching the numbers, there was a lesson in this:  there is great economic value in owning a software platform, a suite of tools and services upon which third parties write applications.  Get enough popular applications and everybody, and that means literally everybody, has to purchase your platform.  As the Microsoft vision states, a computer in every home, a computer in every office — all of them running Microsoft software.

This lesson has not been lost on the bright fellows in Silicon Valley and its outposts around the world.  It’s a new idea for the book business, however.  Books have proprietary content (a book under copyright is a monopoly), but not proprietary platforms.  Anyone can get a book printed somewhere or build a Web site; anyone can  offer books for sale.  When the word platform is used by book people, they usually mean it metaphorically, as in “marketing platform” — the sum of all the potentially publicizeable connections surrounding a book or author that may enable a particular title to find a large, remunerative audience.

Not so today, however, where three technology giants — Amazon, Apple, and Google — are now implicating the book business in their attempt to establish a technical platform.  These are big players — and, more importantly, smart players — for whom books are the equivalent of software applications.

The idea is simple — get enough books running on your platform, and everyone will want to have access to that platform.

The risk for publishers, if not the likelihood, is that they will become collateral damage.

Amazon is primarily an e-commerce business (and not just for books), Apple primarily a hardware company, and Google primarily a media company, and the fate of books for the coming years is likely to be subordinated to the strategic impulses of e-commerce, hardware, and media.

I have been drawn in against my will to platform wars in the past, and I can tell any publisher that it ain’t no picnic.  In the 1990s, I went to work for Encyclopaedia Britannica, one of whose divisions (run by my colleague Dr. Stanley Frank), Compton’s Multimedia Publishing, had developed one of the world’s first multimedia CD-ROM encyclopedias.  In the print era, Compton’s had been Britannica’s junior brand, used to help sell the senior product (“Buy Britannica for yourselves and we will throw in Compton’s for your kids for free”).  With the advent of CD-ROM, Compton’s came into its own.  Priced at $800, half the price of the print Britannica, Compton’s multimedia product got rave reviews.  But it didn’t sell well.  So it was reduced to $600.  It still didn’t sell well.  And that’s when the platform wars broke out.

Microsoft had perceived at that time that it was strategically necessary for people to view the operation of CD-ROM-based content as an aspect of Microsoft DOS, the predecessor to Windows. Thus, it was essential to get some applications for DOS-based CD-ROMs. Hence the beginnings of Microsoft Encarta (for which I served as an advisor prior to joining EB).  Encarta, a multimedia encyclopedia, was sold directly to computer companies, a method known as OEM sales or bundling.  Now you would buy a personal computer for the kids and find that it came with an electronic encyclopedia.  Note the pricing:  a print set of Britannica averaged about $1,600, but a personal computer with a “free” digital encyclopedia thrown in went for about the same price.  Parents made the obvious choice:  buy the kids a personal computer.

Compton’s responded by getting into the OEM game itself.  I recall the first deals were for $25 per unit, sold directly to computer companies.  Then when Grolier entered the OEM market with a competing product, the price began to drop.  There were sales in the $15 range, then $10. My colleague told the company’s executive committee that he thought he could hold the line at $5 per copy, but soon the price of a CD-ROM encyclopedia had dropped to $0.50.  Not long after that, I was approached by a computer marketer who wanted to know how much I would pay him to bundle Britannica with his computers.  The benefit to Britannica?  The exposure of the brand.

I encourage all those publishers who believe that aggressive e-book pricing by Amazon is a good thing to think again. And don’t stop thinking when presented with an opportunity (I almost put quote marks around the word) to price books for Apple’s forthcoming iBookstore at $15.  If Apple could have gotten publishers to price the books lower, they would.  Indeed, how about free?  Free is a good price.  It will expose the brand, and don’t you want to participate in the future of the digital world?

Amazon’s strategy is to  lock consumers into its e-commerce platform, for which the Kindle (both the hardware and the software versions) is the net. Indeed, there is now speculation that Amazon may give the Kindle away for free to its best customers as a way to monopolize their online book purchases.  Apple, on the other hand, is in the business of selling iPod Touches and, soon, iPads.  The more books in the Apple bookstore, the better.  And if aggressive pricing means that the entire bricks-and-mortar supply chain goes up in smoke, who cares about all that old paradigm stuff?  As Mort Sahl once wisecracked,  the future lies ahead!

Book publishers have lost control over their own industry, not because consumers have won, but because they haven’t — they will be no better off with de facto platform dominance than anyone else except the company that controls that platform.

But for the next year or so, it could be a good opportunity to stock up on e-books. It will not be as good a time to publish them, however. For the immediate future, there will be such a thing as an e-book, but there is no such thing as an e-book marketplace. The marketplace is for technical platforms in which books are premiums whose role is to support the marketplace for platforms.

It’s good to look at how Google is playing this game. Google does not control a proprietary platform; rather, for Google the platform is the Web itself, a point made brilliantly by Tim O’Reilly in his “What is Web 2.0?” How can this be?  No one owns the Web.  But Google, as the index to the Web, occupies a privileged position.  As more content comes online, the need to look things up in that index grows.  This means more advertising to be sold on the many Google services. The Web is a rising tide lifting the fleet of Google’s many boats.

Google’s forthcoming Google Editions are still somewhat shrouded in secrecy, but what is known about them is that they will be displayed through a Web browser, not the proprietary formats used by Amazon and Apple. You can run a browser on virtually any computing device — though not (yet) the Kindle. Interestingly, whatever else that can be said of Apple’s forthcoming iPad, the iPad will be a great device to display Google Editions. Google is also creating incentives for others to sell Google Editions, something that we have not seen from either Amazon or Apple. It seems highly probable that Google will make a fair amount of money from the sale of Google Editions. I personally plan to switch to a Google Android phone the moment Google Editions launches, and I imagine the bulk of my e-book purchases will be for that venue.

But Google wins twice — from the sale of Google Editions and also from the sale of marketing services that publishers will invest in to drive Web traffic to the various sites, including the publishers’ own, that sell Google Editions. This is the incentive Google has in promoting the Web as a platform. Thus, the more e-books that are displayed through a Web browser, the better it is for Google. This does not mean that Google Editions are not in publishers’ interest. Indeed, I think quite the opposite.  What is not in publishers’ interest is being in a situation where there is no escape from the platform wars fought by others.

The good news about these platform wars is that no one has yet won. For publishers, the best strategy is to be present on all the competing platforms while exercising judgment as to timing and pricing.  This is also the time to explore other venues.

And perhaps it is also the time to wonder why it is that people outside the book industry developed the first major online bookstore, the first sexy e-reading device, and the premier search index to books.

With all the knowledge to be found in books, one might have hoped that publishers and not technologists would have carved out the path to the industry’s future.

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