This year, instead of another STM meeting on the Tuesday before the Frankfurt Book Fair, I decided to attend a more future-oriented meeting. And while the O’Reilly Tools of Change meeting in Frankfurt had some weak moments, it was far superior to the traditional industry meeting I’ve sat through numerous times over the past half-decade.

Sara Lloyd from Pan-Macmillan led off the keynotes at the O’Reilly Tools of Change for Publishing Conference in Frankfurt. She talked about her 6,000-word manifesto entitled, “A Book Publishers Manifesto for the 21^st Century,” giving her views of the network, how it affects publishing, and how the shift from a linear model to a circular model will impact everyone in the value chain as digital defines everyone’s life.

She talked about her experience as an author – rather, a digital author – and her realization that we are connected in an amazing way these days, with her post garnering thousands of views, some voluntary translations, and hundreds of comments. While it may seem odd to have a publisher realize this, I can understand how sheltered publishers can be if they aren’t writing, publishing directly, and dealing with feedback. That step of remove from the audience can be a gaping void.

One of her best messages was essentially that we should stop contemplating what the future might look like, realize it’s here, and begin doing major things in it. Lloyd believes (and I agree) that the revolution is here, it’s well along, it’s very sophisticated, it’s very commercial – billions of dollars are spent on digital access, digital books, digital music, and digital movies.

Some highlights from her presentation:

• In the UK alone, 10% of the population bought digital music; 10 million digital albums were sold in 2008 in the UK; digital singles account for 95% of all single-tracks sales in the UK. Many are using LastFM. Vodafone is the largest digital music retailer in the UK (that’s a phone company, by the way).
• Today’s digital natives have integrated technology into their lives and workflows, and expanded their surface of engagement with content. Their comfort with wireless, connected, and interactive devices is going to change things.
• Mobile is vitally important, with penetration and convenience both rating high as disruptive influences.
• Changes are hitting the bricks portion of “bricks and mortar,” with bricks booksellers seeing a 10% decline in sales in 2008, and a 4-6% decrease in the price of the sales they made, while digital sales grew at a higher rate than that decline, and the prices gotten per item were higher.
• On Day One of the publication of “The Lost Symbol” by Dan Brown, the Kindle edition outsold the paperback edition, causing a lot of excitement. However, after a week, the digital version had sold only 100K copies compared to 2M hardcover copies, or about 5%, in line with usual marginal sales. However, it should be noted that all these facts are true – immediacy trumped format, and a novel sold 100,000 digital copies in a week.
• As Michael Bhaskar noted, “This is the Industrial Revolution, not the Russian Revolution.” That is, it’s a revolution that will transpire over many years and with less violent disruptions, yet it remains a revolution nonetheless. Monopolies will have to be dealt with, early innovators will have an advantage, and change that seems threatening should be embraced or you risk being left behind.
• The current supply chain for books is linear and vulnerable. It stresses distribution as its strength, with the publisher controlling the nozzle. However, publisher qualifications to control the nozzle is being challenged by new players, while the digital supply chain is emerging with nascent strengths and players with different value equations, from devices to platforms to business models.
• Three big players – Amazon, Apple, and Google – are setting the tone in the digital world currently. Amazon emphasizes breadth, reach, and commoditization. Google emphasizes search, access to content, and advertising – they don’t distribute content, they gatekeep it. The upcoming Google Edition isn’t interested in download or DRM, but in a new way to serve content. Apple is interested in big media (film, music), and if they pursue an ebook reader, it will be part of a larger media player initiative instead of a dedicated device. Apple also finds the driver for its business after it launches a device.
• Ultimately, digital books will be driven by platforms that harness the supply chain and device distribution the most efficiently. That’s where the competition will be. New partners for the future are all digital companies, technology companies, which have no interest in preserving the status quo. And Lloyd feels this is worth contemplating for a long time.

Lloyd believes publishers need to start transforming their businesses right now, according to three guiding principles: 1) add value – create experiences, add value in obvious ways, and get digital about value; 2) become expert digital marketers, which means to get to the bare bones of publishing (“which is reading, and talking about it”) and using the tools to accomplish these things digitally and authentically (“context is king”); and 3) provide great service to authors and readers, but these services will change – it’s about those things that are hard to do or unpleasant to do, and these things are different in the digital realm (metadata, piracy protection, merchandising, contract negotiations, revenue disbursements).

Lloyd included a telling quote from the Guardian: “Publishing is still a book business. It needs to become a reader business.”

Joe Wikert, the MC of the meeting due to Tim O’Reilly being out ill, noted that the iPod is 8 years old this year. Thinking back on how crude the first iPod was compared to the iPhone and iTouch of today, we might get a hint about how sophisticated e-readers might be in another 5-8 years.

Neelan Choksi, CEO of Lexcycle, which makes the Stanza e-reader, was next. He’s in his 13^th month in the publishing business, formerly working at Exxon, Andersen Consulting, TechTrader and the MIT Blackjack Team (story told in “Bringing Down the House”).

Choksi provided a set of eyesore slides full of dates and events to illustrate how many deals have been made in the last 18 months around digital content, e-readers, and digital content distribution. He feels that the advantage the Kindle gained early will disappear this year as devices become to have more functions in common. He noted that Asus has promised a sub-$150 e-reader by the end of 2009, and Choksi feels that this might be the magical price point the industry needs.

Some highlights from his talk:

• I learned a new word – vooks, which are video/book hybrids.
• HarperCollins has delayed the ebook release of the Palin memoir for three months, and won’t release the Kennedy memoir in e-reader format, which may represent a backlash against ebooks – either because of pricing, the lack of inclusion of ebook sales in bestseller lists, or other problems with the industry. A later speaker from Sourcebooks noted that their policy is to treat e-books as mass-market paperbacks since that’s their price point, which leads to a delayed release (this stance is about retail price points and not profitability, an interesting point to ponder).
• Forrester is predicting that 3 million dedicated ebook readers will be in the US market by the end of 2009.  This month, Amazon stated that for every 100 print books sold, they sell 48 digital books if they’re both available.
• DRM costs money – 1.5% or 5% of a price increase for DRM-protected documents. Publishers should consider this given the price points for digital.
• Stanza has 2.5 million users in 75 countries, with about 15 million books downloaded. North America accounts for more than 50% of their market, with Europe providing another 35% or so.
• People primarily use Stanza in bed (32%), on the bus or train (27%), in waiting areas (13%), at home (13%), or at work (6%). The convenience creates an ability for books to fill time in ways they couldn’t before, so Stanza receives a lot of feedback from readers saying they’re reading more books more often than before.

It’s clear to see why Choksi succeeds – he acknowledges what his company does well, what it doesn’t do well, what it can improve itself, and what it needs partners to improve. He does it frankly and without pretention.

Cory Doctorow, co-editor of BoingBoing and a frequent contibutor to Wired, was the third of the three-headed keynote. He was the only keynote with iPod earbuds dangling from around his neck as he spoke. This made him look like he was going back into a zone of his own as soon as he finished.

His talk had three parts: 1) the pirates, 2) the people of the book, 3) destroying the book, and 4) saving the book.

1. The pirates are publishers and their lawyers – they don’t respect copyright, they want to profit, they are reactionary, and they hoard. They write licenses that go beyond the law and ask readers to find the problems with their agreements. The license to buy an ebook from iTunes requires users to agree to a 26,000-word licensing agreement. Most books themselves are about 80,000 words in length, it should be noted.
2. The people of the book are lovers of books. Distributors are becoming too powerful. The people of the book suffer.
3. While publishers blithely talk about creating experiences, we overlook that the most important part of the experience of owning a book is owning a book – passing it along, shelving it, storing it, handling it, etc. This misdirection of effort and value might destroy the book.
4. To save the book, we must restore ownership to the experience. Saying that a book is tied to a device is like saying that a couch you read a book on owns the content, or that a lightbulb you use to read underneath owns the content. You own the content, you own the books.

Doctorow was brief and passionate, shaking hands with Wikert at the end, gathering his materials, and leaving in a hurry, earbuds flapping against his collarbones.

Other sessions were interesting, and audience questions ranged from good to excellent. However, the topic diversity was narrow, something I’ve seen more and more. I think this is a sign that we’re narrowing for a time in our device and format choices, which probably will mean more people will make more progress in the coming months and years. The main issue seems to be crafting a business model that works. That issue should be a focus of the future.