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"E-Readers #2"


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  • 1. Silicon Valley Insider ebooks-than-physical-books-on-xmas-2009-12 Kindle Milestone: Amazon Sold More Kindle Books Than Physical Books On Xmas Henry Blodget | Dec. 26, 2009, 2:26 PM | 7,738 | 16 AMZN Dec 29 2009, 05:20 PM EST Change % Change 139.41 +0.10 +0.07% Amazon's Kindle hit an important and startling milestone yesterday: On Christmas, the company sold more Kindle books than physical books. Yes, this is obviously the result of everyone who got a Kindle for Christmas (lots of folks) firing it up and ordering a bunch of eBooks on a day in which most physical-book readers weren't shopping. But it's still important and impressive. The Kindle's economics are still lousy for Amazon: The company loses money on new releases and makes only a modest amount on older titles, thus losing an estimated $1 per Kindle book. That said, Amazon's strategy is clearly to drive "ubiquity," and based on stats like those above, it is succeeding. The more Kindle books Amazon sells, the more leverage it will have over publishers when it tries to force them to cut wholesale prices. If Amazon's
  • 2. Kindle momentum continues, the day publishers have to capitulate will come sooner rather than later. And, despite publishers' cries, this is not necessarily bad for publishers: If publishers cut wholesale prices, Amazon will be able to cut retail prices. If the retail prices are cut to nominal levels--$2.99 or $3.99 per copy--sales velocity should soar. Publishers and writers will make less per unit, but the increased volume should make up a lot of the difference. TBI Research Amazon's Latest eBook Deal Is A Watershed, Will Increase Pressure On Publishers covey-deal-2009-12 By Rory Maher, CFA | Dec. 15, 2009, 6:10 PM | This is a report from our premium subscription research service The Internet Analyst. To subscribe or sign up, please visit Amazon signed an exclusive deal for the eBook rights to two bestsellers by Stephen R. Covey. This is a watershed deal. The economics are not unusual for Amazon, but--for once--they are good for the author. By giving writers a way to make more money by dealing directly with Amazon, the deal could begin to put pressure on other publishers to change the way they view eBooks. Specifically, the deal could shift difficult discussions currently being held between Amazon and book publishers in Amazon's favor since it: • Sets a precedent for authors owning the digital rights for back titles, which could lead to writers cutting out the middleman and distributing direct to Amazon. • Pays 50% royalties to the author, setting the stage for a very public case in which an author could make more money selling e-books currently than print books. WHOLESALE PRICE TO AMAZON IS SIMILAR TO OTHER E-BOOK DEALS We spoke with someone close to the deal who said that it closely resembles a typical e- book deal, except for the larger royalty to the author.
  • 3. Specifically, the wholesale price paid by Amazon to Rosetta Stone books (the publisher) is likely close to those paid for other comparable older e-book titles. On older books, we estimate that Amazon nets between $0 to $1 in profit per Kindle copy sold. (Amazon loses money on new books). Rosetta, meanwhile, is giving half of the overall revenue to the author, but it should make a profit since there are minimal production and marketing costs involved. LEGAL PRECEDENT GIVES SOME AUTHORS ABILITY TO DEAL DIRECTLY WITH AMAZON There is an important legal precedent here, one that could give Amazon a huge advantage in dealing with authors and publishers who published books more than a decade ago. (In those days, print publishers did not explicitly buy rights to electronic books, whereas they now do.) Rosetta Stone went through a lengthy legal battle with Random House back in 2001 in which it won the rights to sell e-books on its titles. This precedent will make it difficult for publishers to successfully sue authors and digital publishing shops for the digital rights to back titles. The precedent should give authors the ability to "go direct" and cut better deals with Amazon. This, in turn, may allow Amazon to acquire the rights to books for less than they would if a traditional publisher were involved. Publishers who do sue for electronic rights risk losing leverage in discussions because they will likely be seen as "the bad guy" suing authors in order to squeeze more money out of them. A better alternative may be to simply try to negotiate the best deal possible with authors, assuming many of them don't cut direct deals with e-book distributors. In addition, there is a competitive issue at play as well. If a large battle for e-book rights ensues in which publishers team up in court to agressively go after digital rights, the case will likely be led by a single publishing house with the others playing lesser roles in the legal process. This makes the lead plaintiff look potentially worse to authors than its competitors which could make it easier for its competitors to sign new authors. So, publishers could have a difficult time coming together to team up on an issue like this in court. AMAZON HAS NOW DEMONSTRATED IT CAN GO IT ALONE Amazon is the largest e-commerce site in the world and already has a large installed base of readers buying the print and audio editions of the e-books it sells. If Amazon is able to succesfully use its massive reach to drive a material amount of book sales off of these exclusive Covey releases it will have demonstrated to authors that it can sell e-books
  • 4. directly with Amazon. This will provide more motivation for authors to cut out the middleman and go direct to Amazon. BOTTOM LINE: None of this will make any difference to the near-term Kindle reality: Amazon loses money on most books it sells. In order for the Kindle to become the big money-maker that most analysts expect, traditional publishers will have to cut the wholesale prices at which they are selling eBooks to Amazon. We have seen no evidence yet that this is happening. TBI Research nowhere-2009-11 Amazon Making No Headway In Talks With Publishers About Cutting Kindle Book Prices By Rory Maher, CFA and Henry Blodget | Nov. 30, 2009, 8:52 AM | 2 Print This is a report from our premium subscription research service The Internet Analyst. The Internet Analyst is currently in beta, with a formal launch coming towards the end of 2009. To sign up for a free beta trial, please submit your name and email address here. Kindle sales and profit forecasts are running wild. Key to the bullish assumptions is the idea that publishers will soon cut wholesale prices on e-books, allowing Amazon to start making money on them. In the meantime, Amazon is losing its shirt, selling e-books for about $1-$1.50 less than the wholesale price it pays. The negotiations between book publishers and e-reader distributors like Amazon will determine how large and profitable the e-reader market will become. So we called a number of book publishers to see how these discussions are progressing. Here are the key points: Publishers are showing no willingness to cut wholesale prices for e-books. Thus, neither wholesale nor retail prices on e-books are changing anytime soon, which means Amazon will continue to lose money on e-books for the foreseeable future. Amazon is probably making a small gross profit from older titles like paperbacks - likely about $0.50 to $1 per book. This is because the wholesale price for these titles is
  • 5. lower than it is for new books. So the near-term picture for Amazon is slightly less dreary than we originally thought. But older books (paperbacks, etc.) only account for about 50% of sales, so Amazon's average loss per book is likely $1-$1.50. FOR NOW, NEITHER SIDE IS BUDGING Industry sources indicate that neither book publishers nor e-book retailers like Amazon are currently willing to compromise their positions. Amazon is refusing to raise retail ebook prices, and publishers are refusing to cut wholesale prices. Unless/until this changes, e-books will be a money-losing business for Amazon. The book publishers can suggest a retail price, but there is very little point-by-point negotiations occurring to work out deals that are profitable for both parties. A group of literary agents recently visited Amazon to convince the company to raise their retail prices. The argument they made was that prolonged discounts in pricing will hurt sales for both parties over time because high quality authors will stop writing as much since their incomes will have been considerably damaged (we go into more detail below). The meetings went nowhere and both sides left having not agreed on anything.
  • 6. Most publishers we spoke with believe that Amazon will eventually have to increase its retail price if the publishers hold their ground. For now, Amazon hasn’t gained enough leverage through sales of the Kindle to make publishers change their mind in that regard. PUBLISHERS ARGUE THAT BOOK QUALITY WILL DECREASE, HURTING OVERALL BOOK SALES FOR PUBLISHERS AND DISTRIBUTORS To some degree publishers have their hands tied since they need to compensate authors enough to keep them writing. Enabling a further decrease in book prices only hurts their ability to do this since author royalties are paid off of retail sales. If e-book prices remain low, publishers argue that: • Royalties to authors will decrease and won’t be able to support books that take several years to research and write. • Authors will stop writing quality books since they won’t be able to support themselves given the amount of time and resources invested in researching and preparing the books. • This would lead to fewer people buying books, which would hurt revenue growth for both publishers and e-readers. Companies like Amazon are content to wait and see if publishers finally cave and cut prices. THERE ARE ONLY A FEW WAYS THIS CAN END Publishers offered a variety of different ways the pricing battle could play out, including: • Books are sold for less and are commoditized, leading to fewer quality books being released. • E-books are sold at a discount, but are sold after hardcopies are released, similar to the way paperbacks are currently released. • Some kind of model is developed where e-books are sold as part of a hard copy purchase (not a lot of specifics here). A more likely result is that Amazon wins and books are sold at lower prices. This would likely lead to consumers buying more books. In theory, this could lead to essentially the same amount of overall revenue for publishers, e-readers, and authors. In theory. But secular trends of declining book readership are continuing, and we don’t see this trend easing anytime soon. The book, unfortunately, is an outdated format and technology.
  • 7. VERY FAINT SIGNS E-BOOKS MAY DRIVE INCREMENTAL SALES The one thing companies like Amazon and book publishers appear to agree on is that they both hope e-book sales will prove to be incremental, not substitiutional. Unfortunately, most publishers we spoke with thought e-books would largely be substitutional, which does not bode well for those hoping publishers will lower their wholesale e-book prices anytime soon. We caution that data is limited, but we did hear of a few examples of authors claiming e- books sales boosted their overall book sales through incremental purchases. These ranged from modest bumps to a 50% increase. These were isolated examples and did not include blockbuster authors, but if this trend continues it would support the case that e-books could drive incremental book sales or that lowering prices on books across the board could lead to a greater volume of sales. APPLE HAS HELD PRELIMINARY DISCUSSIONS, BUT NOTHING SUBSTANTIAL Right now competition does not impact wholesale pricing much – each e-book distributor must pay the same price and most e-book prices are currently similar across the board. Apple has held preliminary discussions with the trade book publishers, but little contact has been made the past six months. We believe this is likely because Apple’s tablet release is not imminent, the company is negotiating with other content providers first, or
  • 8. that the company is waiting until the last minute to cut content deals in order to avoid any leaks about the tablet. Spring Design Strikes Deal With Google To Bring More Books To Its Alex eReader by Robin Wauters on January 5, 2010 Spring Design , developer of the dual-screen Alex eReader , has struck a deal with Google that gives users of the device access to more than one million Google Books online or downloaded using Alex’s touch-screen browser and search apps. Spring Design is set to debut its Alex eReader at the Consumer Electronics Show in Vegas later this week. The device will feature a Google Android-based platform with full Web browsing capabilities, Wi-Fi connectivity, audio and video playback and image viewing in a variety of formats. The Alex eReader will also be able to run a number of Android apps. The Alex eReader boasts a 6” EPD (Electronic Paper Display) screen which allows users to browse the Web in full color while simultaneously searching for and reading digital books. Users can thus click on hyperlinks within online books that lead to relevant information or multimedia content found online in order to enrich their reading experience. EPUB digital books can be searched and downloaded using Google API applications provided by Alex’s eReader. Spring Design made headlines late last year when it sued Barnes & Nobles for alleged infringement by stealing trade secrets and copying features from the Alex eReader for its Nook product. Google, meanwhile, is still caught up in litigation with authors and publishers over its Book Search product, although preliminary approval of a settlement was reached on November 19, 2009.
  • 9. Story Future Is Here: More E-Reading Apps Debut at CES Erik Sass, Jan 06, 2010 05:40 PM New e-reader apps and devices are hitting the market at a furious pace, and this year's Consumer Electronics Show in Las Vegas is a favorite venue for unveiling new entries. The profusion of free downloadable software apps, in particular, promises some kind of social and technical shakeout in the years to come. The most recent software app announced at CES, Blio, comes from knfb Reading Technology, a company founded by futurist Ray Kurzweil, the inventor of voice-recognition, and the Federation of the Blind. Originating as an app to help people with impaired vision read digital content more easily, knfb is marketing Blio to mainstream consumers. Blio aims to preserve the visual format of books and magazines, including layout, type, images and colors, while also enabling an array of digital media, like online video and interactive Web. Compatible with desktop and tablet PCs, netbooks, iPhones, iPods and other mobile devices, the free app allows users to make "notes" by saving additional images, video and voice content alongside digital content. It also compiles lists of relevant Web references. Blio offers users access to 1.2 million titles through a partnership with book distributor Baker & Taylor, Kurzweil said. Like other e-reader services, Blio stores digital editions purchased by the user in a virtual library, but unlike some other services, the user can access this virtual library by various means, including mobile devices, desktop and tablets, allowing them to "transfer" the reading experience between devices. Kurzweil also touted its color capabilities as a significant improvement over competing services, which are for the most part limited to monochromatic reproductions of print content, noting the importance of color to reader experience for content like cookbooks, travel guides, how-to books, textbooks and children's stories. On the device front, the Consumer Electronics Association predicts e-reader sales will double this
  • 10. year, compared to 2009, then again by 2012. Earlier this week, Skiff, LLC previewed its new Skiff reader at CES. The reader, created at the behest of magazine and newspaper publisher Hearst, has its own Skiff e-reader app, which should be compatible with content from other publishers. Advertsing Age Latest E-Readers Come From Samsung, Lacking a Little Content Comes to Market With Google Books, but Promises More Soon By Michael Learmonth Published: January 07, 2010 Samsung execs believe that if they make the reader, the content will come. LAS VEGAS ( -- Does the world need another e-reader? Samsung thinks so. In addition to the flashy 3-D TVs and Blu-ray players that Samsung rolled out at the Consumer Electronics Show in Las Vegas, the company has also jumped into the e-reader fray with two models sporting features such as a stylus pen for writing and the ability to share content wirelessly. Both the E6 and bigger E101 ($400 and $700, respectively) will go on sale early this year, but one key component is missing: content. Initially, Samsung's e-readers will only have access to Google Books, mostly comprising out-of-print titles and books in the public domain.
  • 11. Why put an expensive reader in the market without content? Samsung execs believe that if they make the reader, the content will come. Samsung spokesman Jason Redmond said that with Amazon's Kindle, Barnes & Noble's Nook and Sony's e-readers in the market, Samsung would be able to reach deals with publishers. And consumer demand for devices and e-books alike seems to be growing. A new Parks Associates report says 7% of those with broadband connections at home are considering buying an e-reader in the next 12 months. Amazon, which has been touting the success of the Kindle but providing no solid numbers, said that on Christmas Day its digital book sales exceeded physical book sales -- a first. Samsung has also launched its own app store, "Samsung Apps," which now sells applications for TVs and Blu-ray players but will be adapted to Samsung's e-readers as well, allowing the company to sell books and deliver them wirelessly. Mr. Redmond kept mum, however, on the economics; Amazon keeps as much as 70% of newspaper sales revenue, and publishers are eager to license competitors on better terms. Last month Plastic Logic and Sony were already spotted cozying up to publishers by offering better cuts of revenue and more information on consumers. The Business Insider Apple Tablet Better Positioned Than Kindle To Go After Newspaper/Magazine Market Rory Maher, CFA: January 4, 2010.
  • 12. Apple's forthcoming tablet is emerging as a much-anticipated competitor to Amazon’s Kindle. The tablet will likely have two competitive advantages over the Kindle when it comes to selling digital versions of newspapers and magazines: • Lower content delivery costs, which should enable Apple to cut deals with newspapers and magazines that are more favorable for the publishers than Kindle deals. • Better graphical features LOWER WIRELESS DELIVERY COSTS WILL ENABLE APPLE TO CUT BETTER CONTENT DEALS Newspapers and magazine e-reader files are typically a lot larger than book files since they host more graphics and illustrations (most books are simple text). Therefore, it costs Amazon a significant amount of money to deliver newspapers and magazines to its Kindle device since Amazon picks up the wireless bill for content delivery, not the consumer. An executive from an e-reader company estimates the delivery cost of a single newspaper or magazine subscription on a wireless device like the Kindle could be as high as $3 per month. That’s a lot when you’re only selling subscriptions for upwards of $10 a month. Here is how the executive arrives at this estimate: • Low-single-digit cost per MB data delivery fee • 4 GB average file size (could be bigger depending on the publication). • 25 deliveries per month, or 100 GB total data usage per month. Apple, on the other hand, partners with carriers for its portable devices (like the iPhone/ATT relationship) and passes the delivery costs to the consumer through unlimited data plans. The lower overhead enables Apple to cut better content deals with magazines and newspaper publishers, which we’ve heard Apple has been doing. We should note that sophisticated computing functionality could consume a greater amount of bandwidth, which could make it difficult for Apple to pass these costs to consumers. Industry contacts indicate Apple is offering splits of anywhere from 50/50 to 30/70 in favor of the publisher and not asking for exclusivity. These terms are much better than Amazon’s, which typically gives less than half the revenue to publishers. APPLE TABLET BETTER REPLICATES EXPERIENCE OF READING PRINT MAGAZINES AND NEWSPAPERS Apple has released no details about its tablet. But, there has been plenty of speculation surrounding its
  • 13. general features, which we believe are more suited to reading graphical and image-rich newspapers and magazines than the Kindle is. • A display size 7” to 10.” • Full color display with illustrations and graphics. • Touch-screen technology. Reflections of a Newsosaur Musings (and occasional urgent warnings) of a veteran media executive, who fears our news-gathering companies are stumbling to extinction Friday, January 08, 2010 Holy Moses! Media need to gear up for tablets Most media companies are better equipped to deal with the tablets Moses hauled down Mount Sinai than the dazzling new gizmos coming from Apple, Microsoft and a host of other technovators. This has to change fast. As my friend Mark Potts ably noted here, tablets have the capability of revolutionizing newspapers, magazines, book publishing, television, movies, communications, applications and gaming. They also will further stress the tattered advertising and subscription models on which the change-averse legacy media continue to rely. Tablets will the rock media as much, if not more, than the Internet, because they will powerfully combine ubiquitous connectivity, elegant displays, powerful computing and extreme portability. As the future Swiss Army knife of media platforms, they have the potential to obsolete not just print, broadcast television and Filofaxs but also desktops, laptops and smart phones.
  • 14. Tablets demand a fresh approach to content and advertising that leverages the capabilities of this new medium in the same way TV required pictures and action, instead of stiff announcers recycling radio fare. The first, feeble shot of the tablet revolution was fired on Wednesday when Steve Ballmer, the chief executive of Microsoft, showed off (video) a trio of pending products at the Consumer Electronics Show. Ballmer did little to take the edge off the fevered expectation that Apple will debut a tablet of its own on Jan. 27. By most accounts, the upcoming iSlate, if that indeed is the name of the new Apple offspring, will look a lot like an iPhone fitted with a 9.5-inch diagonal screen vs. the 3.5-inch display on the original, ground-breaking smart phone. With the first tablet computers headed to the marketplace, it’s already late for the slow-poke media companies to begin thinking about how to leverage this new medium. But starting late is better than not starting at all. They have a limited amount of time to get it together, because widespread tablet adoption probably will have to wait until iPhone fanciers can work off the two-year indentures imposed by AT&T. To their credit, a few media companies (be sure to see this must-watch video from Sports Illustrated) have put serious cycles into thinking about tablets. But even the best of the early efforts appear to have fallen short, because the legacy media guys are focused – as they were when the web debuted – on repurposing their existing offerings.
  • 15. With tablets about to up the ante for the interactive publishing, here are the key things media companies must do to adapt: :: Enrich. Equipped with bigger and better screens, faster processors and, one can only hope, improved network connectivity, tablets will provide dramatic, multimedia presentation for both news and advertising. While video to date has been an afterthought, if not to say an unwelcome intrusion, for print media, it will be de rigueur in the tablet environment. Deeper and easily searchable video offerings will be necessary for media outlets of every kind. Because tablet readers will be assimilating information at unprecedented rates, graphics and other forms of visualization will be essential to inform and engage audiences. :: Alert. Because tablets will be highly portable, always on and the focal point for all manner of professional and personal communication, nearly all media offerings will have to include real-time content delivery like never before. As you can see by sampling such early experiments in insta-journalism as the beta versions of Nozzl News or Thoora.Com, this is easier said than done. However, publishers who cannot efficiently produce continuously captivating news products will suffer diminished relevance. :: Personalize. Apart from a few users who attempt to protect their private activities, almost everything people do on tablets will be tracked: web searches, sites visited, articles read, videos viewed, phone calls, purchases, restaurants reviewed, calendar entries and financial information. Owing to global-positioning systems embedded in every unit, the devices not only will know your precise whereabouts but also which direction you are headed. Based on where you are standing, smart-phone applications like Urban Spoon can suggest a place to dine. Thanks to Loopt, the GPS-enabled social network, you can figure out where to meet friends or avoid your ex. :: Assist. The download of more than 2 billion of the 100,000 available iPhone applications is a powerful demonstration of the potential utility consumers will find in their tablets. Apps do everything from dictating emails and providing driving directions to counting calories and organizing expense accounts. There’s even a Genius app to help you find more apps. While many media companies have created more-or-less elegant apps to port their legacy content to the iPhone, precious few have had the good sense to charge for them. Meantime, Mom and Pop developers around the globe have built six- and seven-figure businesses by selling games, virtual drum sets, alarm clocks and cocktail recipes for as little as 99 cents a download. :: Target. By harnessing the above capabilities, publishers can create highly individualized news and entertainment products that represent highly targetable advertising opportunities. Putting the right pitch in front of the right person at the right time is the Holy Grail of advertising. Marketers will reward publishers handsomely for doing it and will forsake the ones who can’t.
  • 16. Given the more than 15 years we have been waiting for most legacy media companies to develop Internet-literate products, there is reason to fear they will not segue smoothly into tablet computing. Because tablets represent the last, best do-over for media companies, however, here’s hoping the continuing erosion of their traditional businesses will impel them to act before it’s too late. content/print/ How The New York Times Should Charge For Content A storm has been brewing at The New York Times for a while now. Ever since TimesSelect—the paid digital version of the Times—was canceled back in 2007, the “content wants to be free” crowd has danced around its proverbial grave, singing the equivalent of “ding, dong, paid media is dead.” Now, is reportedly considering erecting a new pay wall—one presumes a shiner, prettier one than the last wall, but a pay wall nonetheless. Not to put too fine a point on it, but this is a bad idea whose time has unfortunately come. First, let’s look at what risks by shutting off the free flow of its particular mix of cultural elitism. For argument’s sake, let’s accept’s view of at about 15 million visitors per month, compared to the‘s smaller 11-plus million. It’s safe to assume that traffic will go down, even providing that some brand-critical content will remain free (please don’t cut off my David Brooks drip, please). The question is whether the traffic will get cut by 80 percent, as our survey would indicate, or whether it will end up somewhere less damaged, cut, say, by 30 percent—though with far fewer page views per viewer because the only way to keep site visits high is to give select content away for free, but that free content has to have a meter on it that expires after some number of pages, typically five. As much as I like to pick on media companies when they’re short-sighted, I don’t think such a complaint applies in this case. In the spirit of helping to rebuild this particular media company in the digital era, I want to offer a few pieces of advice to the folks finalizing the details of this shift: 1. Give the highest-profile content away for free. A critical decision will be to determine just how much content you can give away for free without undercutting subscription revenue. Look at your sources of traffic—anything that draws dramatic traffic from abroad is something that builds your international reputation. Give that away. Any traffic that preserves the egos (and the skilled contribution) of specific personalities we will avoid naming, should also be free. And, of course, the front page should be sample-able for free. 2. Make free content sell the value of paid content. But even in these free pages, find a way to let free readers know there’s more to be had, not just elsewhere, but even on those free pages. For example, at, comments can be organized to show only those by
  • 17. paid subscribers, thus eliminating a lot of the idiots who post annoyingly partisan comments or intentionally confrontational stuff. Some people would pay to become a commenter whose comments aren’t automatically marginalized. Others would pay to read only those who are willing to pay that price. Too elitist for you? Um. You’re The New York Times. 3. Brace for impact. Even if you get the balance between free and paid right, traffic will fall. has about two-thirds of your traffic, even though it has 600,000 more paid daily subscribers to its print edition than the Times does. That’s a good metric to shoot for: a quarter as many paid subscribers as print subs, or about 250,000 in your case, with traffic somewhere around 9 million uniques a month (using’s metrics here, adjust accordingly). That’s after you rebound from the initial confusion. Of course, advertisers will still panic. Ironically, the drop in traffic will constrict supply, driving ad rates up, but over a smaller reader base. The result will be a reduction in ad revenue of at least 50 percent. Plan for it, send the message internally that there’s no way around this iceberg but to try to plow right through it. 4. Don’t bet on Apple’s tablet to save you. We all know you’re timing this to coincide with Apple’s forthcoming announcement about a media-heavy tablet. While it won’t ride in and save the industry, it can help. Make sure Apple (NSDQ: AAPL) has a way to enable offline access to your online content so that tablet readers on the subway don’t suffer from low bars. And whatever you do, make sure your subscription is multi-platform—don’t ask readers to pay extra to get the pretty tablet version. Make that a carrot rather than a stick; even the movie industry is learning that it’s not nice to double-dip your customer. Content you buy once should be available everywhere, end of story. Notice that this advice is directed to and nobody else. Because there is no other newspaper that we believe can pull this off at this time, even though a majority of newspaper editors are considering it. In fact, other papers like the Washington Post and the LA Times should go on the offensive and try to satisfy as many ad-funded readers as possible, since they’ll have a shot at boasting as many monthly uniques as Rebuilding the media isn’t pretty. You can’t satisfy everyone. But you can satisfy customers with convenient access to good content across multiple platforms. That’s what people are paying for more and more—in video, in music, in books, and, increasingly, in news. James McQuivey is an analyst at Forrester Research, where he serves, and contributes to the Forrester blog for Consumer Product Strategy professionals. Related Stories • New York Times Leaning Toward ‘FT’ Metered Model; Announcement Finally On Way? • How Berlin In 1989 Is Like The Media Business In 2009
  • 18. • • JANUARY 21, 2010, 10:49 P.M. ET Apple Sees New Money in Old Media Steve Jobs's Tablet Device Looks to Repackage TV, Magazines, Just as iPod Changed Music Sales By YUKARI IWATANI KANE And ETHAN SMITH With the new tablet device that is debuting next week, Apple Inc. Chief Executive Steve Jobs is betting he can reshape businesses like textbooks, newspapers and television much the way his iPod revamped the music industry—and expand Apple's influence and revenue as a content middleman. In developing the device, Apple focused on the role the gadget could play in homes and in classrooms, say people familiar with the situation. The company envisions that the tablet can be shared by multiple family members to read news and check email in homes, these people say. Despite its digital legacy, Apple is betting that its Tablet can revitalize television, magazines and newspapers in the way iTunes changed music. Ethan Smith joins the News Hub panel to discuss. Related Video • News Hub: Apple Looks to Reshape Media • Apple Tablet on Tap • Apple's Tablet, as Imagined by Publishers For classrooms, Apple has been exploring electronic-textbook technology. Apple also has been looking at how content from newspapers and magazines can be presented differently on the tablet, according to the people familiar with the situation. Other people briefed on the device say the tablet will come with a virtual keyboard. Apple has recently been in discussions with book, magazine and newspaper publishers about how they can work together. The company has talked with New York Times Co., Condé Nast Publications Inc. and HarperCollins Publishers and its owner News Corp., which also owns The Wall Street Journal, over content for the tablet, say people familiar with the talks. New York Times Chairman Arthur Sulzberger declined to comment in an interview Wednesday on its involvement in the new device except to say, "stay tuned." Apple is also negotiating with television networks such as CBS Corp. and Walt Disney Co., which owns ABC, for a monthly TV subscription service, the Journal has reported. Apple is also working with videogame publisher Electronic Arts Inc. to show off the tablet's game capabilities, according to one person familiar with the matter. Journal Community • Vote: What price would you pay for Apple's new tablet device? • Discuss: What features would you want to see it have? • Vote: Touch, voice - How would you prefer to interact with technology? • Vote: What do you most want to buy as your next computer? Apple's strategy contrasts with how other technology companies are approaching media. Notably, Google Inc. offers content to consumers largely free on properties like its video-sharing site YouTube, making relatively little distinction between clips from users and those of professional media companies, although YouTube this week said it plans to experiment with movie rentals. Web sites like Twitter and Facebook also provide outlets for user-generated content.
  • 19. Mr. Jobs has a longstanding strategy of devising new ways to access and pay for quality content, instead of reinventing the content. Apple's iTunes Store, for instance, became the world's largest music retailer partly by making it easy for people to buy music, most of it from major record labels, by the song instead of by the album. Its digital-media receiver Apple TV was also designed so people can buy and rent movies and television shows. Mr. Jobs is "supportive of the old guard, and [he] looks to help them by giving them new forms of distribution," says a person who has worked with the CEO. "What drives all of these changes is technology, and Apple has an ability to influence that." Apple's divide with Google over how it views media content also drives the wedge deeper between the two companies. Apple's iPhone, for example, currently closely integrates Google's mapping and search technology, but a person familiar with the matter said Apple was in serious discussions with Microsoft Corp. to incorporate its Bing search engine into the iPhone as the default search and map technologies. Microsoft declined to comment. The talks were reported earlier by BusinessWeek. Details of how Apple charges for the content on its tablet couldn't be learned, but people familiar with the company's thinking say Apple could change conventional payment structures. One person familiar with the matter said the company was discussing with the New York Times how it could charge for news through iTunes. It is unclear how people will access content wirelessly off the tablet. An Apple spokesman said the company "doesn't comment on rumors and speculation." Mr. Jobs didn't respond to a request for comment. Mr. Jobs' effort to repackage and resell more media content isn't without obstacles. He already has faced resistance from television companies and cable-network providers over Apple's desire to license just their best content rather than all of it. Many music executives complain that it has become a powerful gatekeeper between the labels and customers. What's more, the iTunes Store's music downloads haven't grown fast enough to offset the decline in CD sales for music companies. On Monday, Apple sent out an invitation to a media event on Jan. 27 "to see our latest creation." The tablet, which Apple currently plans to ship in March, will have about a 10- to 11-inch touch screen, say people familiar with the situation.
  • 20. Getty Images Apple CEO Steve Jobs spoke during an event in September 2009. Apple's tablet foray faces several obstacles. Analysts say demand will depend on its price, which some believe will be about $1,000. Apple must also convince consumers the product is worth buying in addition to an iPhone and a laptop computer. And Apple faces competition from cheaper netbooks and other devices such as Inc.'s Kindle e-book reader. The tablet's success will depend "on how this product can fit into the user's daily life... and whether you have enough content to make it important enough to use it," said Henry Lu, senior vice president of Taiwanese computer company Micro-Star International Co., which failed at selling a tablet computer a few years ago. In the academic arena, Apple could face hurdles wooing universities if the tablet doesn't meet their needs or isn't compatible with other computing devices that students are using. Amazon had been hoping to target the market with its 9.7-inch screen Kindle DX e-book reader, for example, but schools said the device wasn't sufficiently interactive and lacked basics such as page numbers and color graphics. One person familiar with the matter said Apple has put significant resources into designing and programming the device so that it is intuitive to share. This person said Apple has experimented with the ability to leave virtual sticky notes on the device and for the gadget to automatically recognize individuals via a built-in camera. It is unclear whether these features will be included at launch. Apple's content-related efforts heated up in the fall. In October, Apple sent representatives to the Frankfurt Book Fair, the industry's largest trade fair, according to one person familiar with the matter. At the same time, Apple pitched media companies on a "best of TV" subscription service to television networks under which customers would pay a monthly fee for on-demand access to programs from a bundle of participating TV networks, giving consumers another way to readily access television content. At a meeting in New York with one network in October, an Apple executive said the company was specifically looking to access four to six shows per channel, said one person familiar with the meeting. Apple also has been planning a revamp of its iTunes music service by creating a Web-based version of it that could launch as soon as June, say people familiar with the matter. Tentatively called, the service would allow customers to buy music without going through the specialized iTunes program on computers and iPhones. People familiar with Apple's plans say a central part of the new strategy is to populate as many Web sites as possible with "buy" buttons, integrating iTunes transactions into activities like listening to Internet radio and surfing review Web sites. In November, Apple hired Tracy Augustine, a former executive at textbook publishers Cengage Learning Inc. and Pearson Education Inc., as the director of world-wide education. Ms. Augustine is responsible for "driving global strategy and revenue for the education online store for students," according to her LinkedIn description. Ms. Augustine didn't respond to a request for comment. — Geoffrey A. Fowler and Russell Adams contributed to this article.
  • 21. January 20, 2010 Amazon Unveils New Kindle Royalty Option; Incentive To Keep E-Book Prices Down As word spreads of book publishers talking to Apple (NSDQ: AAPL) about a possible deal for its anticipated tablet device, Amazon (NSDQ: AMZN) is taking a preemptive strike by offering a plan that gives content owners a greater share of the royalties for e- books sold through the Kindle. The new option completely reverses Amazon’s standard 70 percent take of the revenue split from Kindle e-books. This new pricing plan will become available at the end of June. Amazon is clear that this new pricing plan will be in addition to the standard revenue deal the company offers to authors and publishers and is not a replacement for it. The e-tailer also points out that e-book publishers who choose the new option will receive 70 percent of list price, net of delivery costs. In order to take advantage of the special revenue plan, authors and publishers will have to adhere to a strict set of requirements on pricing and features. First of all, the new option covers only those books that are priced between $2.99 and $9.99. Also, the e-book’s list price must be at least 20 percent below the lowest physical list price for the physical book. Titles in this plan have to be available for sale in all geographies where the author or publisher has rights. Most importantly, Amazon will not allow books that are sold for less in other stores—both physical and electronic—to participate in the new plan. Despite these restrictions, the additional royalty option is meant to soften some of the complaints from publishers who have felt that Amazon’s existing revenue share model is tilted to far in favor of the e-tailer. In its announcement, Amazon points out that authors often receive royalties in the range of 7- to 15 percent of the list price that publishers set for their physical books, or 25 percent of the net that publishers receive from retailers for their digital books. It’s hard to say what impact Amazon’s plan will have on existing challenges from Sony (NYSE: SNE) and Barnes & Noble (NYSE: BKS). But it does show that whatever potential threat is coming from Apple, Amazon is already putting its defense in place. Release The New York Times January 21, 2010
  • 22. Apple Courts Publishers, While Kindle Adds Apps By BRAD STONE and MOTOKO RICH SAN FRANCISCO — It’s a formidable high-tech face-off: versus Apple for the hearts and minds of book publishers, authors and readers. Amazon’s Kindle devices and electronic bookstore now dominate a nascent but booming market, accounting for more than 70 percent of electronic reader sales and 80 percent of e-book purchases, according to some analysts. And on Thursday it will take a page from Apple and announce that it is opening up the Kindle to outside software developers. Apple’s much-anticipated tablet computer, which is widely expected to be announced next Wednesday and go on sale this spring, will be a far more versatile (and expensive) device that will offer access to books, newspapers and other reading material through Apple’s popular App Store on iTunes. Book publishers, who rail against the dominance of Amazon and its insistence on discounting new releases to $9.99, are now playing the tech titans against each other. In the process, they may be rushing from the clutches of one tenacious chief executive, Jeffrey P. Bezos, into the arms of another, Steven P. Jobs, whose obstinacy over pricing has given the music industry similar paroxysms of anxiety. “Will Kindle pricing trump Apple sex appeal? Isn’t that the question, really?” said Richard Charkin, executive director of Bloomsbury Publishing in London, who has been watching developments in e-book sales with keen interest. “I haven’t the faintest idea. All I would say is, great. The more people that are out there marketing books in digital or any other format, the better.” There are now almost daily tactical moves by various parties in the business, with no end in sight. In its announcement Thursday, Amazon will say that it is letting programmers create what it calls active content — similar to applications — for the Kindle and keep 70 percent of the revenue from each sale after paying for wireless delivery costs. Amazon will release a set of programming guidelines that other companies — including publishers of books and periodicals — can use to create and sell applications for the Kindle. Until Amazon introduces more advanced models of the Kindle, developers will be limited by its slow-to-refresh black-and-white screen. Ian Freed, vice president for the Kindle at Amazon, said he expected developers would devise a wide range of programs, including utilities like calculators, stock tickers and casual video games. He also predicts publishers will begin selling a new breed of e-
  • 23. books, like searchable travel books and restaurant guides that can be tailored to the Kindle owner’s location; textbooks with interactive quizzes; and novels that combine text and audio. “We knew from the earliest days of the Kindle that invention was not all going to take place within the walls of Amazon,” Mr. Freed said. “We wanted to open this up to a wide range of creative people, from developers to publishers to authors, to build whatever they like.” The move may also represent a shift in Amazon’s relationship with newspapers and magazines that make digital editions for the Kindle. Many executives at those organizations have expressed dissatisfaction with their 30 percent cut of subscription fees on the Kindle and lack of a direct relationship with those subscribers. With a Kindle app store, those media companies will be able to sell more profitable Kindle applications, and present news that is updated throughout the day. Amazon may be rushing to change the rules of its Kindle platform with an eye toward the fanfare that will no doubt greet Apple’s long-awaited tablet. The devices, to be sure, are fundamentally different: Amazon has positioned the Kindle as the ultimate reading device, easy on the eyes and slow to deplete its battery. Analysts say that to buyers of an Apple tablet, playing video or video games may be more important than reading. But for book publishers, Apple’s introduction provides a potentially golden opportunity: the chance to counter Amazon’s control over the e-book market and regain some leverage over sensitive matters like pricing. Apple representatives have been in New York this week talking to the largest trade publishers, according to industry executives. They said Apple had proposed an arrangement under which publishers would get to set the price of their books, with Apple taking a 30 percent commission and the publishers keeping the rest. Steve Dowling, an Apple spokesman, declined to comment on what he called “rumors and speculation.” Depending on whether Apple sets an upper limit on pricing, its model could be much more appealing to publishers, who resent how Amazon has aggressively discounted their books. Typically, Amazon charges $9.99 for new releases and best sellers, a price that other e-book vendors, including Sony and Barnes & Noble, have effectively been forced to follow. While Amazon pays publishers a wholesale price typically equivalent to half the list price of a print book — meaning that Amazon generally sells new e-books at a loss — publishers fear that Amazon has accustomed buyers to unreasonably low prices. They say that if Kindle were to maintain its dominant position, it could force publishers to lower their wholesale prices.
  • 24. The probable entry of Apple and its tablet into the e-book market gives publishers hope that they might gain some leverage in negotiations with Amazon. They could, for example, delay the release of e-books in the Kindle store while selling more expensive versions for the Apple tablet. “There’s a battle going on for what is the value of a digital book,” said a publishing executive who did not want to be quoted by name because of the delicacy of discussions with Apple. “In that battle, Apple has put an offer together that helps publishers and, by extension, authors.” Some publishers warn that Apple’s terms can be restrictive in other ways, and that a model that looks good in theory may not be as attractive in practice. And Amazon has moved to counter Apple’s appeals as well. On Wednesday it announced it would improve the royalty terms for authors or publishers who publish e-books directly onto the Kindle — essentially beckoning authors and their agents to split off e-book rights and sell them directly to Amazon. Under the new terms, Amazon says it will offer authors and publishers who set e-book prices below $9.99 a royalty rate of 70 percent of the digital list price (after delivery costs, typically about 6 cents a book) — an obvious echo of Apple’s offering. But publishers can anticipate another high-tech heavyweight entering the business: Google, which has pushed its own plans to begin selling e-books. “The more companies that control consumer transactions, the more important the publishers’ role will be,” said Mike Shatzkin, chief executive of Idealog, which helps publishers develop digital strategies. “If Apple enters this market, and in three months Google follows, we may be looking at a completely different e-book world in the next year.” Business Insider Silicon Alley Insider 'Canvas' A 'Perfect Name' For Apple Tablet, Says Apple God John Gruber Dan Frommer | Jan. 22, 2010, 3:40 PM | 3,294 | 18 Print Tags: Gadgets, Apple, Big Tech, John Gruber, Apple Tablet
  • 25. AAPL Jan 25 2010, 05:20 PM EST Change % Change 203.07 +5.33 +2.69% What is Apple going to name its tablet computer? iSlate? iPad? Slate? iBook? MacBook touch? iPod touch HD? How about Canvas? (Or iCanvas?) That's one of the potential names emerging from the Apple nerd camp, via Daring Fireball blogger John Gruber. Why? Because the invitation Apple sent to reporters -- splashed with paint blotches -- looks like it could be the canvas for a kid's preschool art project. Gruber writes today, "Even without considering the invitation design, I love this name. It looks good, it sounds good, and it evokes the right feelings and ideas: thin, light, clean, crisp, blank, the thing great artwork is made upon. It’s a perfect name." We agree. Click here to see 20 Apple tablet design concepts → January 28, 2010 With Its Tablet, Apple Blurs Line Between Devices By BRAD STONE
  • 26. SAN FRANCISCO — After months of feverish speculation, Steven P. Jobs introduced Wednesday what Apple hopes will be the coolest device on the planet: a slender tablet computer called the iPad. For all the hoopla surrounding it, however, the question is whether the iPad can achieve anything close to the success of the iPhone, which transformed the cellphone and forced the industry to race to catch up. Apple is positioning the device, some versions of which will be available in March, as a pioneer in a new genre of computing, somewhere between a laptop and a smartphone. “The bar is pretty high,” Mr. Jobs acknowledged. “It has to be far better at doing some key things.” Half an inch thick and weighing 1 1/2 pounds, the device will vividly display books, newspapers, Web sites and videos on a 9.7-inch glass touch screen. Giving media companies another way to sell content, it may herald a new era for publishing. But the iPad, costing $499 to $829, also lacks some features common in laptops and phones, as technology enthusiasts were quick to point out. To its instant critics, it was little more than an oversize iPod Touch. A camera is notably absent, and Flash, the ubiquitous software that handles video and animation on the Web, does not work on the device. Another thing missing is an alternative to the AT&T data network, which is already buckling under the strain of traffic to and from iPhones. Some versions of the iPad can, for a monthly fee, use a 3G data connection like cellphones, but the only carrier mentioned was AT&T. The event, in typical Apple style, was tightly scripted and heavy on theatrics and hyperbole. But the success of the iPhone, and the hive of rumors and leaks surrounding the iPad, raised expectations and made this perhaps Mr. Jobs’s most highly anticipated product unveiling yet. It was one that he clearly cared deeply about. Mr. Jobs, a consummate showman, presented the iPad to an enthusiastic crowd of around 800 employees, business partners and journalists, some of whom shoved their way in when the doors opened to grab the best seats. It was only his second public appearance since a leave of absence for health reasons last year. Mr. Jobs posited that the iPad was the best device for certain kinds of computing, like browsing the Web, reading e-books and playing video. The iPad “is so much more intimate than a laptop, and it’s so much more capable than a smartphone with its gorgeous screen,” he said in presenting the device to a crowd of journalists and Apple employees here. “It’s phenomenal to hold the Internet in your hands.”
  • 27. One question Apple faces is whether there is enough room for another device in the cluttered lives of consumers. “I think this will appeal to the Apple acolytes, but this is essentially just a really big iPod Touch,” said Charles Golvin, an analyst at Forrester Research, adding that he expected the iPad to mostly cannibalize the sales of other Apple products. Mr. Golvin said book lovers would continue to opt for lighter, cheaper e-readers like the Amazon Kindle, while people looking for a small Web-ready computer would gravitate toward the budget laptops known as netbooks. But other analysts say they have heard similar criticism before — once aimed at the iPhone, which has now been bought by more than 42 million people around the world. These believers say Apple’s judgment on the market is nearly infallible. “The target audience is everyone,” said Michael Gartenberg, vice president for strategy and analysis at Interpret, a market research firm. “Apple does not build products for just the enthusiasts. It doesn’t build for the tens of thousands; it builds for the tens of millions.” Apple says the iPad will run the 140,000 applications developed for the iPhone and the iPod Touch, but the company expects a new wave of programs tailored to the iPad. One of the most significant applications for the iPad may be Apple’s own creation, called iBooks, an e-reading program that will connect to Apple’s new online e-bookstore. Mr. Jobs said Apple so far had relationships with five major publishers — Hachette, Penguin, HarperCollins, Simon & Schuster and Macmillan — and was eager to make deals with others. Publishers will be able to charge $12.99 to $14.99 for most general fiction and nonfiction books. Apple’s announcement that it was diving into the growing e-book business put the company on a collision course with Amazon. Mr. Jobs credited Amazon with pioneering e-readers with the Kindle but said “we are going to stand on their shoulders and go a little bit farther.” John Doerr, a Silicon Valley venture capitalist who serves on Amazon’s board and is also an adviser to Apple, said there could be room for both companies, noting that Amazon sells many books to iPhone owners who use its Kindle application, which will also work on the iPad. “I don’t think Jeff Bezos is going to leave the e-book business,” he said, referring to Amazon’s chief executive, “and I don’t think it will be confined to the Kindle.” Three models of the iPad, $499 to $699, will connect to the Internet only via a local Wi- Fi connection. Three other versions will include 3G wireless access and will be available
  • 28. later in the spring, costing an additional $130 and requiring a data plan from AT&T. Owners of the iPhone who already pay at least $70 a month to AT&T will not be getting any breaks. Other companies have sold tablet computers for years, but they never caught on with consumers. In 2001, Bill Gates predicted at an industry trade show that tablets would be the most popular form of PC sold in America within five years. “The fact that he and Microsoft didn’t deliver is surprising,” said Tim Bajarin, a longtime industry analyst. “It has taken Apple to bring this to consumers and make it work.” Apple has been working on a tablet computer for more than a decade, according to several former employees. Improved technology has helped the company to finally bring a model to market, as has the ubiquity of wireless networks. The success of the iPhone and its cousin, the iPod Touch, have shown a path for tablets. People have been willing to pay to customize those devices with applications, turning them into video game machines, compasses, city guides and e-book readers. The iPad will be a big opportunity for software developers, said Raven Zachary, president of Small Society, an iPhone development company based in Portland, Ore. “Although I think some of us were a bit surprised we only have 60 days until it launches to develop for it.” Jenna Wortham contributed reporting from New York. Advertising Age Does Apple's IPad Take a Bite Out of Web Advertising? Media Will Work Great on the the Device, but Your Ads May Not By Ian Schafer January 27, 2010
  • 29. Ian Schafer We've known for quite some time about the iPhone's inability to render Flash content within the mobile Safari browser, and based upon Apple's announcement of the iPad today, it looks like that device isn't going to do it, either. Touted as a savior for the publishing business, this device will potentially revolutionize the delivery and commercialization of content. But most publishers are publishing their content to the web. Via websites. And for those that don't yet have paywalls, they support their websites with advertising. Those ads are almost 100% rendered in Adobe's Flash. So when people use the iPad's web browser to visit their favorite newspaper (as Steve Jobs did in his keynote; see photo at right, courtesy of Engadget), they won't see the ads at all. That either means advertisers will need to stop building ads in Flash (no chance) or publishers will need to build app versions of their publications upon the iPad SDK (software development kit), resulting in a lot more work, a lot more time, a lot more resources. Now, creating a parallel platform to the web may be the right thing to do if a $499 tablet becomes as ubiquitous as the iPod, but this is another classic example of Apple making development and distribution on their platforms more proprietary. It also makes publishers more reliant upon, in all likelihood, Apple's own ad-serving platform which was created through the acquisition of Quattro Wireless. Whereas the iPhone created a marketplace for new content (apps), the iPad seeks to revolutionize existing ones (content publishing). If the company that owns the platform also owns the ad network, the ad format, and the ad tracking, is that too much control? Now, this is all speculation at this point. I'm sure this will all play itself out as we get deeper in the SDK, and into the device itself, but this is definitely something to be discussed at your next ad sales meeting if you're a publisher. Media planners are going to have to get up to speed with a whole new platform. And creatives are going to have to learn to build in formats that take advantage of multitouch gesturing, video and a whole slew of other new possibilities without using Flash. And maybe HTML 5 just got a whole lot more important.
  • 30. Poynter Online E-Media Tidbits Home > Online & Technology > E-Media Tidbits Tools: Text Size or , Print , RSS , Subscribe via e-mail Watching Kindle, iPad and e-Readers? Openness is Key Posted by Dorian Benkoil at 11:27 AM on Jan. 28, 2010 Dorian Benkoil Even before the launch of the Apple iPad, pundits were declaring it the Kindle killer, and hours after its unveiling others were adding their A group voices. But I smelled trouble for Amazon's e-reader weeks earlier. weblog about the intersection Though I own a Kindle and have also read its books on my iPod Touch, of news & the last three or four e-books I've bought were from Barnes & Noble and technology O'Reilly publishing. The reason? It's not that I own B&N's Nook or some other e-reader (yet); rather, those e-books come in formats that enable me to consume them on many devices, share them with friends and even grab portions to send to the world. The lessons, I think, are instructive for publishers and others who make their content available on digital devices. I predict we'll start to see market share of non-Kindle e-readers increasing, and not only because those manufacturers are working to cut deals with publishers that are more favorable than the what one analyst calls Amazon's "wolfish" shares of revenues and restrictive terms. As consumers discover the flexibility they have to consume e-books on a PC, a Mac, a BlackBerry, and an iPhone, iPod Touch or iPad, as well as other devices that can read PDF, .mobi, Android or ePub files, I predict they'll gravitate toward the more open formats. Because the open formats also allow cutting and pasting with ease, e- books published that way also have a better chance of catching on via in social media and blogs. And links in books, magazines, newspapers or other media can easily take users to relevant Web pages. Even when the function does work on the Kindle, the Web surfing experience is less than optimal. Some open publishing formats allow the purchaser to share a book with one or more people at a time. Some allow customization of colors, background, fonts and other visual elements that a) allow a consumer to
  • 31. read the way her or she likes rather than one that's imposed or b) appreciate the e-book's artwork, coloring and typeface. This morning, publishers are saying they look forward to getting their art books on the iPad. Reading on a Kindle can be absorbing, but it can also be a flat, gray, text- laden experience that makes it hard to consume graphics and charts. For a final pièce de résistance, open formats let users mark up the text and use speech synthesis applications to have a book read aloud by a computer -- something I've done many a time while cooking, doing laundry or washing the dishes. Again, I'm not saying that publishers should eschew the Kindle. I negotiated a deal to get a blog network on the device because there was no exclusive arrangement, and any additional revenue from subscribers was essentially free, with no additional work required once we created an appropriate feed. Plus, the Kindle now has a large embedded base, and publishers who want as large a readership as possible should publish their works in the Kindle format for years to come. Kindles have also proven a decent way to promote unheralded authors. Looking at it from Amazon's side, I can understand the business model to milk its first-mover advantage after building the first device that seamlessly integrated a readable screen, portability, long battery life, easy navigation and, perhaps most important, a big library of books (and other material) purchased easily and accessed wirelessly. Amazon was able to create a closed device, and a constrictive business model, because it provided so much that others hadn't matched. But, as I've written before, there are a lot of other features the Kindle doesn't have: the RELATED ability to look at the books on multiple screens (it was manna from heaven when "iPad includes iBooks its e-books were made available on the app, may be Kindle iPhone/iPod), share and blog, and more. killer," by Damon (OK, the uber-geeks in the room might Kiesow, Mobile Media raise their hands and say you can do most or all of these things with a Kindle. Indeed, I have unscrewed the back of the device, installed an SD card, transferred material to the card, plugged it into a reader, manually converted the text into a manipulable format, and then sent it along. But how many people will go through that workaround?) We'll see if the iPad takes hold and how much it is able to cut into the Kindle's base. The device can reportedly use the iPhone/iPod app that
  • 32. enables users to read Kindle books, and if it can also display other formats, it may instantly make all the other e-readers obsolete. The iPad also can play video and music, which gives it and publishers a powerful competitive weapon. Apple has a store that can compete with Amazon's, too. If users can also cut and paste, blog and otherwise manipulate their media, the iPad will have yet more ways of knocking pure e-readers to second-tier status. Whatever happens with the iPad, though, publishers need to pay attention and provide material on any popular digital platform, and customize that content when possible to make the experience on each platform as positive as it can be. Amazon is apparently courting developers to help it stave off the iPad threat, and I wouldn't be surprised to see others follow suit. All of that will benefit consumers, and perhaps publishers. Note how much better smartphones have gotten as makers rush to seize momentum created by the iPhone. As I wrote in another recent column, digital media is not and never will be a one-platform or one-device game for long. Openness to multiple platforms will ultimately win the game. Silicon Valley Insider Steve Jobs Says Book Publishers Hate Amazon's Kindle Jay Yarow | Jan. 29, 2010, 8:49 AM | 9,026 | 38 Steve Jobs told Walt Mossberg that Amazon's e-book prices are likely going higher than $9.99. After Steve presented the iPad, Walt Mossberg managed to talk with him briefly while people were testing the iPad. Kara Swisher filmed them. Walt asks Steve, "Why should she buy a book for $14.99 on your device when she can buy one for $9.99 from Amazon or Barnes & Noble?" Steve responds somewhat knowingly, "That won't be the case." Walt says, "You won't be $14.99 or they won't be $9.99?" Steve says knowingly, "The prices will be the same."
  • 33. Then the video cuts, then Steve says, "Publishers are actually withholding their books from Amazon because they're not happy."* Steve also tells Walt the iPad does 140 hours of continuous music playback, and battery life will not be an issue on the iPad. Says Steve, "Ten hours is a long time, you're not going to read for 10 hours." It's cool to watch the video to see Steve Jobs interact with Walt, he's much taller, as he rocks back and forth nervously. The action starts around 1:45 in the clip below. *We originally heard Steve say "pull their books" from Amazon when we listened to it the first four times with headphones, but the fifth time we listened on speakers and heard it as "withholding." January 31, 2010, 11:37 pm Why the iPad Web Demo Was Full of Holes By NICK BILTON A still from a video demo of the iPad on Apple’s site. Note the missing Flash element in the middle of the Web page. Adobe’s Flash will probably not come to the iPhone, iPod Touch or iPad, but for many people with these iProducts, this may prove to be a nonissue, as I report in Monday’s Times. While Apple may not make an official statement on the topic of its lack of interest in supporting Flash, its actions speak louder than words. Think back to the Apple keynote last week. Here’s Steven P. Jobs, master of ceremonies, the wizard in front of the curtain, sitting on a stage before hundreds of technology reporters, and he quite happily pops around the Web on the iPad, showing Swiss-cheese holes in pages where the Flash player can’t be displayed. Apple’s iPad demo was coordinated down to the second. Teams of Apple perfectionists practiced every aspect of this, meticulously organizing everything down to the color and angle of the armchair on stage. Mr. Jobs knew what we would all see as he navigated to a blank square instead of a Flash video player. Apple could have picked any Web site without Flash, but instead it practically sent out a press release stating its stance on the topic: Flash will not work on the iPad.
  • 34. To help push this point further, as PC World reported on Saturday, all of the demos on Apple’s site for the iPad now show missing holes where Flash player videos would appear in a normal browsing experience. The Web-page mockups in earlier versions of the demos showed images of Flash content. It’s been over three years since Mr. Jobs stepped on stage and demonstrated the first iPhone, and since then there have been upgrades to the iPhone’s memory, processing speeds, software developer kits and everything in between, but no mention of Flash support. With over 60 million iPhones and iPod Touches in the marketplace, content providers have been given two choices: either stand with Adobe and stick with Flash or make the switch to non-Flash technologies and reach this huge audience, most of whom don’t really care about a format war — they just want to get the content. Numerous developers and executives that I interviewed for my article said there was a trend toward offering users an alternative to Flash video, the predominant video standard online, in the form of HTML5, an open standard. Senior-level managers from many of the top video sites online, including YouTube, Vimeo, and Flickr, all agreed that video online is starting to splinter, and as some test out HTML5 for video distribution, many will begin offering both formats as the iPad makes its way onto the market. Andrew Pile, vice president of product and development for Vimeo, said, “Some people rightly or wrongly blame Flash for poor video performance on the Web, and although HTML5 has its limitations, too, we will most likely create a version of the site using HTML5 for the iPad.” Douglas Alexander, general manager of Flickr, said he planned to start experimenting with HTML5 video in the coming months. And Justin Day of said he had an HTML5 player in the works that the company plans to introduce soon. As John Gruber of the Mac blog Daring Fireball aptly explained on Saturday, developers and the Web will go where the users are. Mr. Gruber writes: What’s Hulu going to do? Sit there and wait? Whine about the blue boxes? Or do the practical thing and write software that delivers video to iPhone OS? The answer is obvious…. Hulu isn’t a Flash site, it’s a video site. So what can Adobe do? One option would be to completely open-source Flash, but based on my talks with Adobe employees, this is highly unlikely. Or, if it wants to continue selling software for building Flash Web sites, it can continue to innovate along its current path, allowing developers to output their work in both Flash and non-Flash formats.
  • 35. In a recent blog post, Lee Brimelow, an Adobe “platform evangelist,” said his company was not “against” HTML5. “On the contrary, we see it as an exciting development for the Web,” he said, adding that Adobe planned to introduce tools to help people use it. Sounds like a wise move on Adobe’s part, given that things don’t seem to be moving in Flash’s direction. January 29, 2010 Steve Jobs and the Economics of Elitism By STEVE LOHR The more, the better. That’s the fashionable recipe for nurturing new ideas these days. It emphasizes a kind of Internet-era egalitarianism that celebrates the “wisdom of the crowd” and “open innovation.” Assemble all the contributions in the digital suggestion box, we’re told in books and academic research, and the result will be collective intelligence. Yet Apple, a creativity factory meticulously built by Steven P. Jobs since he returned to the company in 1997, suggests another innovation formula — one more elitist and individual. This approach is reflected in the company’s latest potentially game-changing gadget, the iPad tablet, unveiled last week. It may succeed or stumble but it clearly carries the taste and perspective of Mr. Jobs and seems stamped by the company’s earlier marketing motto: Think Different. Apple represents the “auteur model of innovation,” observes John Kao, a consultant to corporations and governments on innovation. In the auteur model, he said, there is a tight connection between the personality of the project leader and what is created. Movies created by powerful directors, he says, are clear examples, from Alfred Hitchcock’s “Vertigo” to James Cameron’s “Avatar.” At Apple, there is a similar link between the ultimate design-team leader, Mr. Jobs, and the products. From computers to smartphones, Apple products are known for being stylish, powerful and pleasing to use. They are edited products that cut through complexity, by consciously leaving things out — not cramming every feature that came into an engineer’s head, an affliction known as “featuritis” that burdens so many technology products. “A defining quality of Apple has been design restraint,” says Paul Saffo, a technology forecaster and consultant in Silicon Valley.
  • 36. That restraint is evident in Mr. Jobs’s personal taste. His black turtleneck, beltless blue jeans and running shoes are a signature look. In his Palo Alto home years ago, he said that he preferred uncluttered, spare interiors and then explained the elegant craftsmanship of the simple wooden chairs in his living room, made by George Nakashima, the 20th- century furniture designer and father of the American craft movement. Great products, according to Mr. Jobs, are triumphs of “taste.” And taste, he explains, is a byproduct of study, observation and being steeped in the culture of the past and present, of “trying to expose yourself to the best things humans have done and then bring those things into what you are doing.” His is not a product-design philosophy steered by committee or determined by market research. The Jobs formula, say colleagues, relies heavily on tenacity, patience, belief and instinct. He gets deeply involved in hardware and software design choices, which await his personal nod or veto. Mr. Jobs, of course, is one member of a large team at Apple, even if he is the leader. Indeed, he has often described his role as a team leader. In choosing key members of his team, he looks for the multiplier factor of excellence. Truly outstanding designers, engineers and managers, he says, are not just 10 percent, 20 percent or 30 percent better than merely very good ones, but 10 times better. Their contributions, he adds, are the raw material of “aha” products, which make users rethink their notions of, say, a music player or cellphone. “Real innovation in technology involves a leap ahead, anticipating needs that no one really knew they had and then delivering capabilities that redefine product categories,” said David B. Yoffie, a professor at the Harvard Business School. “That’s what Steve Jobs has done.” Timing is essential to make such big steps ahead. Carver Mead, a leading computer scientist at the California Institute of Technology, once said, “Listen to the technology; find out what it’s telling you.” Mr. Jobs is undeniably a gifted marketer and showman, but he is also a skilled listener to the technology. He calls this “tracking vectors in technology over time,” to judge when an intriguing innovation is ready for the marketplace. Technical progress, affordable pricing and consumer demand all must jell to produce a blockbuster product. Indeed, Apple designers and engineers have been working on the iPad for years, presenting Mr. Jobs with prototypes periodically. None passed muster, until recently. The iPad bet could prove a loser for Apple. Some skeptics see it occupying an uncertain ground between an iPod and a notebook computer, and a pricey gadget as well, at $499 to $829. Do recall, though, that when the iPod was introduced in 2001, critics joked that the name was an acronym for “idiots price our devices.” And we know who had the last laugh that time.
  • 37. February 1, 2010 Publisher Wins Fight With Amazon Over E-Books By MOTOKO RICH and BRAD STONE After a weekend of brinksmanship, on Sunday surrendered to a publisher and agreed to raise prices on some electronic books. Amazon shocked the publishing world late last week by removing direct access to the Kindle editions as well as printed books from Macmillan, one of the country’s six largest publishers, which had said it planned to begin setting higher consumer prices for e-books. Until now, Amazon has set e-book prices itself, with $9.99 as the default for new releases and best sellers. But in a statement Sunday afternoon, Amazon said it would accept Macmillan’s decision. On Friday, Amazon removed “buy” buttons from thousands of titles published by Macmillan, including recent best sellers like “Wolf Hall” by Hilary Mantel and “The Gathering Storm,” by Robert Jordan and Brandon Sanderson. Customers who wanted to buy print editions could do so only from third-party sellers. Digital editions made for Amazon’s Kindle device disappeared. In a strongly worded message on its Web site on Sunday, Amazon said that while it disagreed with Macmillan’s stance, it would bow to the publisher’s plan. “We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles,” Amazon said. “We want you to know that ultimately, however, we will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books.” The face-off had set the already anxious publishing industry on edge. “I think everyone thought they were witnessing a knife fight,” said Sloan Harris, co-director of the literary department at International Creative Management. “And it looks like we’ve gone to the nukes.” As of Sunday evening, the “buy” buttons had not yet been restored to Macmillan titles on Amazon. In a statement to Publishers Marketplace, an online industry newsletter, John Sargent, chief executive of Macmillan, said: “We are in discussions with Amazon on how best to resolve our differences. They are now, have been, and I suspect always will be one of our most valued customers.”
  • 38. Under Macmillan’s new terms, which take effect at the beginning of March, the publisher will set the consumer price of each book and the online retailer will serve as an agent and take a 30 percent commission. E-book editions of most newly released adult general fiction and nonfiction will cost $12.99 to $14.99. Those terms mirror conditions that five of the six largest publishers — Hachette Book Group, HarperCollins Publishers, Macmillan, Penguin Group and Simon & Schuster — agreed to with Apple last week for e-books sold via the iBookstore for the iPad. For more than a year, publishers have been fretting about the price of digital books, which Amazon, as the dominant player in the fast-growing market, had effectively been able to set. Last Thursday, Mr. Sargent flew to Seattle to explain the pricing and new sales model to Amazon. He said Amazon could continue to buy e-books on the same terms it does now — allowing the retailer to set consumer prices — but that the publisher would delay the release of all digital editions by several months after the hardcover publication. Amazon buys and resells e-books in the same way it handles printed books, by paying publishers a wholesale price that is generally equivalent to half the list price of a print edition. Because Amazon has discounted the price of most new and popular e-books on its Kindle e-reader to $9.99, it loses money on most of those sales. Amazon’s goal has been strategic: it aims to establish a low price for e-books that will have the ancillary benefit of helping it sell more Kindle devices. Amazon’s decision is also a victory for Apple’s chief executive, Steven P. Jobs, who first pitched the idea of selling e-books under the agency model to book publishers earlier this year. Now Apple, whose iPad tablet is due in March, can compete on fairly equal footing with Amazon. Book publishers, meanwhile, are volunteering to limit their digital profits. In the model that Amazon prefers, publishers typically collect $12.50 to $17.50 for new e-books. Under the new agency model, publishers will typically make $9 to $10.50 on new digital editions. Apple’s stance in allowing publishers to set their own e-book prices (albeit within a limited range) is also a bit of a reversal. That is precisely the kind of arrangement it declined to offer TV networks and music labels, which have long railed against the 99- cent price of songs in iTunes. Analysts say Amazon, which accounts for 15 to 20 percent of domestic book sales, probably realized it could not compete with Apple if it wasn’t offering the same range of content. “Amazon figured out pretty quickly that this was a battle they could not win,” said Mike Shatzkin, the chief of the Idea Logical Company, a consultant to publishers.
  • 39. Amazon may still hope to play one asset to its advantage. Loyal Kindle users routinely give low ratings to books they perceive as too costly, or whose digital editions are delayed past the publication of the hardcover edition. These consumers could ostensibly reject costlier e-books. February 1, 2010 IPad Can’t Play Flash Video, but It May Not Matter By NICK BILTON Where was the Flash? Web designers — and a fair number of Web users — noticed something missing from Steven P. Jobs’s demonstration of the Apple iPad Wednesday. On some of the Web sites he displayed on the tablet computer’s screen, blank squares appeared where video or animated content would normally be displayed. The holes, observers correctly assumed, meant that the iPad would not display videos, animations or any other features created using Flash, a type of multimedia software made by Adobe. Flash is one of the world’s most ubiquitous applications, appearing on 98 percent of all computers. YouTube videos run on it. It is what animates millions of graphics and advertisements on Web sites around the world. Adobe says the technology supports nearly 75 percent of video on the Web and 70 percent of online gaming sites. But Apple’s support for Flash has been flagging. While Flash is present on nearly every Apple desktop and laptop computer, the company decided that Flash would not be used on the iPhone. Apple has argued that the Flash technology is too slow and unduly taxes laptops and netbooks. The company also has concerns over Flash’s vulnerability to viruses and other malware, as well as the way Flash-based content can voraciously consume battery life. Adobe, unsurprisingly, disagrees — and has its own theory about why Apple remains hostile to Flash. Adrian Ludwig, group manager for the Flash platform product at Adobe, said he believed Apple’s opposition was a way for the company to control its iTunes system. “I think it’s pretty clear that Apple wants to regain control of the content consumers see online and the content Apple offers for their devices,” Mr. Ludwig said. But concerns over the lack of Flash in the iPad and iPhone may be short-lived. Many online video sites have been experimenting with a new Web language that can support video, called HTML5. Unlike Flash, which is a downloaded piece of software that can interact with a computer’s operating system, HTML5 works directly in a Web browser. And although this new video format does not work in all browsers, it will allow iPhone and iPad users to enjoy more Web-based video content.
  • 40. YouTube announced this year that it was testing the new format for select videos. In the past, YouTube videos were encoded in Flash, but were re-encoded for the iPhone. The popular video-sharing site is also experimenting with new platforms, based on comments from its online community. “We received a tremendous amount of feedback from our users saying that they wanted to have HTML5 as an option for their videos,” said Andrew Pile, vice president for product and development at Vimeo, an online video service. Mr. Pile does not see this new format replacing Vimeo’s Flash- video inventory, but will instead offer it as an option for its viewers. Other video sites, including and, Yahoo’s photo and video-sharing Web site, also hope to start experimenting with alternatives to the Flash video platform in the coming year. But migrating the entire Web to the new format will not be fast, or easy. Flash has all the advantages any entrenched technology enjoys and remains the standard multimedia language for a vast majority of developers and programmers. And while HTML5 may help standardize Web video, it does not necessarily address the needs of other types of online content created in Flash, including animated advertisements and online gaming. Andrew Frank, research vice president at Gartner, believes it is impossible for Apple to maintain a walled garden around the content and advertising people consume on the iPad. Mr. Frank said, “I think we’re a long way from the iPad having enough influence on the advertising market to affect the decisions and process around online display advertising.” But even if the standoff between Apple and Adobe continues, these advances in Web- based video mean that iPhone and iPad users will start to see fewer blank squares online. This article has been revised to reflect the following correction: Correction: February 3, 2010 An article on Monday about the absence of the multimedia software Flash in Apple’s new iPad tablet computer referred incorrectly to the Web language HTML5. While HTML5 can support video, it is not itself a video format. The article also misstated the ownership of HTML5 patents. HTML5, like other versions of Hypertext Markup Language, is open source; it is not owned by a group of companies, including Apple. (Many Web sites that are starting to use HTML5 are using a particular video encoding program called H.264, which has shared patent pool, of which Apple is a part.) February 1, 2010 The Media Equation To Deliver, iPad Needs Media Deals By DAVID CARR
  • 41. Short of landing in a flying saucer and having a tablet teleported into his hands, there was no way that Steve Jobs could have lived up to the hype before last Wednesday’s iPad announcement. But he came pretty close. By the time the bells, whooshes and clicks died down, I couldn’t say the future had arrived, but I’m pretty sure we can see it from here. “It was like someone came back from five years into the future and handed this to us,” said John Gruber of Daring Fireball, a respected tech blog. The iPad’s promise was hinted at before Mr. Jobs hit the stage. The set was dominated by a large, comfy chair. Since the birth of the personal computer, we have been hunched over, squinting at screens — great big terminals, laptop displays, tiny screens on PDAs. With the iPad, the screen has come to us as we lean back in ease. Critics who suggested that Apple unveiled little more than an iPhone that won’t fit in your pocket don’t seem to understand that by scaling the iPhone experience, the iPad becomes a different species. Media companies now have a new platform that presents content in an intimate way. “Looking at it through the lens of whether or not it has new features and applications misses the point,” said Craig Moffett, an analyst at Bernstein Research. “It is nine times larger than an iPhone, and that is fundamentally a new application.” That application isn’t work, not without a keyboard (touch-typing with all fingers on a virtual keyboard is miserable) or a camera. This is a device for consuming media, not creating it. So are the media providers ready to deliver? Yes and, sadly, no. The iPad’s glories as a media consumption device open up a whole new frontier for developers and publishers. But they also raise large questions about the business models that will drive that content to the screen. For gaming, the iPad manages to be both a remarkable display device and a large, engaging controller, and the App Store from the iPhone should accommodate a new generation of games played on a bigger field. But when it comes to other dynamic media like television and movies, the iPad is running into the familiar trouble. Apple has limited agreements with movie studios, so movies received very little play last Wednesday. The movie “Up,” a fancy piece of software produced by Pixar, looked great during the presentation, but most studios have yet to come to terms with how their work will be monetized and displayed on the iPad. The iPad won’t play Flash, the Adobe software which powers a great deal of animation and interactivity on the Web, so for the time being, iPad’s utility as a surfing device is significantly compromised. You can’t, for example, watch Hulu, the popular site that offers a free buffet of network TV shows.
  • 42. Apple and many others have problems with Adobe’s Flash because they don’t control it, but it also means that people who want to see those shows on their iPad will have to pay for them on iTunes rather than watch them free on Hulu. (And according to The Financial Times, just before Apple introduced the iPad, the company pressed television studios to cut the iTunes prices for their programs in half.) Of all media, books had the most real estate in the presentation — with good reason. The reading interface on the iPad is almost as sexy as the gaming, with no waiting for e-ink or pages to load. Readers can literally page through books in an interface that replicates the tactile romance of reading. And the forthcoming iBooks marketplace means that Amazon no longer has absolute authority on the price of electronic books (an authority Amazon tried to impose on Friday by refusing to sell books from Macmillan after the publisher insisted on pricing similar to the iPad; Amazon backed down Sunday night, saying it would “capitulate and accept Macmillan’s terms.”) But the book industry seems ill-prepared to take advantage of many of the new worlds the iPad opens up. Although five of the top six publishers signed on, there was little indication that they would use some of the muscle the device displays. Readers on the iPad should certainly expect that when they buy a cookbook, building in cooking demos would be a no-brainer, but it may be a long while before the industry has the ability to produce books that incorporate multimedia. Newspapers and magazines will have far less trouble changing the wheels on the car as it goes flying down new roads. Martin A. Nisenholtz, senior vice president for digital operations at The New York Times, took a turn on the Apple stage with a demonstration that displayed the new flexibility and range of the iPad. But many people could not help but notice that no magazine companies were involved in Wednesday’s presentation. “I saw iBooks today, but no iMagazine,” said Sara Ohrvall of Sweden’s Bonnier Corporation, which owns a number of American magazines. And many magazine companies have been working on prototype applications for a device that would seem to be a dream come true. Writing on the Pentagram blog, the designer Luke Hayman said the iPad will “revolutionize the way we read magazines.” (Tell that to Condé Nast, which just put the finishing touches on a prototype of a gorgeous digital magazine — in Flash.) But there’s a sticking point here, too. The consumer side of both newspapers and magazines is in the database business, trying to expand their base of credit cards and information about consumers. In a world of applications, a share of the revenue will go to publishers, but the information about customers mostly belongs to Apple. The big question for publishers is, will Apple allow them to develop their own relationship with the consumer?
  • 43. Despite that doubt, Terry McDonell, editor of Sports Illustrated, liked what he saw, in part because the product that was unveiled fit nicely with a prototype that the magazine has developed. “I saw the Mac demo’ed by Steve Jobs in 1984 in the offices of Newsweek, and I knew at the moment it was going to change everything because of its capabilities for desktop publishing,” he said. “I felt the same way watching this presentation. There are huge potential gains for us here.” Even as business models have yet to evolve, the iPad is clearly a next-generation media consumption device. The iPad is less gadget than pure frame on content. During the hands-on demo, I was so intent on what was on the screen that I all but forgot I was holding a piece of technology. A lot of things are clearer in this gorgeous new environment, except that part about turning the iPad into a cash register for media companies. Comparing E-Readers | January 2010 How Do E-Readers Stack Up With iPad In The Mix? Use Our Chart As A Guide Barnes Sony Amazon Amazon Plastic Logic Apple iPad & Noble Daily Kindle 2 Kindle DX Que proReader Nook Edition Reader Link iPad Kindle 2 Kindle DX Nook Daily Que Edition March (WiFi only) Available Now Now Now Now Mid-April April (WiFi/3G) WiFi: WiFi/4GB: $649 $499-699 Price $259 $489 $259 $399 WiFi/3G/8GB: 3G/WiFi: $799 $629-829 8 x 5.3 x 7.7 x 4.9 8.13 x 4 .5 inches 10.4 x 7.2 x 8.5 x 11x .33 Size 0.36 x 0.5 x 19/32 thick 0.38 inches inches inches inches inches Weight 1.5 lbs. 10.2 oz. 18.9 oz. 12.1 oz. 12.75 oz. 17 oz.
  • 44. 7.1 Screen Size 9.7 inches 6 inches 9.7 inches 6 inches 10.5 inches inches Grayscal Backlit IPS Grayscal Display Grayscale Grayscale e reading, Grayscale Color e color nav Touchscreen/R No/Manu Yes/Yes No/Yes Yes/No Yes/Yes Yes otate al 7 days 7 days with 7 days with wireless with Battery Life 11 hours wireless 10 days N/A Whispersync wireless Whispers on on ync on 1.6GB/Y 16GB; 2GB/Yes es Storage/Expan 32GB; 2GB/No 4GB/No (microSD(Memory 4GB; 8GB/No dable 64GB/No ) Stick Duo/SD) Touchscree n/Soft Stylus/vir keyboard Virtual Touchscreen/Vir Input Keyboard Keyboard tual (wireless keyboard tual Keyboard keyboard keyboard available) Units sold 3G through through AT&T/WiF Oct. 22, i3G plans: Sprint 3G; up to 3G 3G 3G 3G Wireless/Bluet Now 250MB, (Whispernet/ (AT&T)/ (AT&T)/ (AT&T)/WiFi/B ooth 3G/roami $15; Sprint) WiFi WiFi luetooth ng unlimited through $30. No AT&T/N contract. O No deals 3G 3G Roaming International yet; 3G Roaming No No N/A (AT&T) unlocked (AT&T) Native EPUB; Kindle Kindle EPUB, EPUB, Native PDF, Formats Audible; (AZW), (AZW), eReader, PDF, GIF, JPEG, Kindle TXT, Native PDF, PDFs, JPEG, PNG, BMP, (through Audible TXT, MP3s, BBeB, ePub, and TXT; app); (formats Audible JPEG, TXT, Will work with iTunes;addi 4, Audible (formats 4, GIF, RTF, Office, HTML tional Enhanced Audible PNG and JPEG, via Que software formats NA (AAX), Enhanced BMP. PNG, MP3, (AAX), MP3, GIF, unprotecte unprotected BMP ,
  • 45. d MOBI, PRC; MP3, MOBI, PRC Native AAC PDF Closed now but SDK has Closed now Closed to been but SDK has developer released been released s; open in Open to for for upcoming terms of approved upcoming Platform beta and Closed multi- Closed third-party beta and store with format, developers store with approved non- approved third-party DRM third- developers use. party developer s Yes in U.S., Browser Safari Japan. NA Yes No No No in most countries. 400,000- 350,000 plus books for books, 400,000-plus sale, Includes more than books, more public public Number of 130 than 130 domain; domain, iBookstore newspape newspapers about 30 access to 350,000 books Available titles N/A; rs & & magazines, newspape public for sale, public Content Kindle magazines 8,000 blogs rs, libraries domain Store; , 8,000 (Numbers magazine through iPhone appsblogs vary s. Google OverDriv (Numbers internationall Books e vary y) brings internatio titles to 1 nally) million Bookstore iBookstore The The Kindle Barnes Sony Kindle Store and eBook (powered by Store Noble Store Barnes & eBooksto (converti Noble); re, ng to periodicals from Google EPUB Dow Jones, Books this others. year), Google
  • 46. Books Between devices, Between 14 days Book Sharing N/A Kindle devices on on many No No apps on same acct. titles same acct. Microphone/S Yes/Yes No/Yes No/Yes No/Yes No/Yes No/No peakers Barnes & Archive Apple Amazon Amazon Sony Plastic Logic Noble This chart was first published Jan. 29 and was last updated at 10:30 p.m. ET Jan. 31. // Edited by Staci D. Kramer. Based on manufacturer information, additional reporting. The Business Insider its-e-book-stronghold-at-risk-2010-2 Amazon's Big Kindle Cave Could Threaten Its eBook Monopoly By Rory Maher, CFA | Feb. 1, 2010, 9:26 AM Amazon has caved to Macmillan's demands that it raise the prices it charges for Kindle books to as much as $15. What does this mean for Amazon? In the short-term, it is actually positive: The move will increase the profitability of the Macmillan books Amazon sells for the Kindle. Amazon had previously been losing an average of about $1.50 per $9.99 e-book it sold so it should make a modest profit if it sells Macmillan titles for anywhere from $2 to $5 more than it had been. However, the move also sets a precedent that puts Amazon's current stranglehold on the e-books business at risk. If other publishers follow in Macmillan's footsteps (and why won't they?), Amazon will lose the pricing advantage it enjoys over other ebook sellers. This could lead to it losing market share in ebooks and slower sales of Kindle books overall. Currently, Amazon sells 90% of all e-books sold. This is in part the result of the Kindle's early lead in the market and in part the result of Amazon's being willing to sell Kindle books at a loss.
  • 47. This dominance in turn has strengthened Amazon's leverage in negotiating the best terms with publishers who have been loathe to sell e-books at much lower prices than hard copies. Publishers are desperate to reduce this leverage and maintain high per-unit profits on book sales, which is why Macmillan insisted that Amazon raise prices. Now that Amazon has caved in this instance, other publishers will likely demand that Amazon raise ebook prices. This will reduce the value of Amazon's Kindle platform (the books will cost the same on all e-readers) and reduce the value proposition of e-readers in general. The idea that e-book prices should be the same as hardcover physical book prices (with associated printing and shipping costs) is ludicrous, and we expect that publishers will eventually be forced to acknowledge this reality. In the near term, however, Macmillan's demand will mean higher prices for consumers and a smaller opportunity for Amazon. It may also provide an opportunity for other e- readers, such as Apple's iPad, to make a dent in Kindle's monopoly market share. The move is therefore a potentially big negative for Amazon. February 3, 2010 Some News Outlets Ready to Try Charging Online Readers By RICHARD PÉREZ-PEÑA Extracting payment from online readers has been called everything from the next great folly of print journalism to its salvation, but to get a glimpse of how it really looks, head to Lancaster, Pa. Specifically, head to the offices of The Intelligencer Journal-Lancaster New Era, one of the first handful of news outlets to acknowledge in interviews that it intends, in the next few months, to start using a software system developed by the entrepreneurs Steven Brill, L. Gordon Crovitz and their partners, which they are calling Press+. Others interested include The Fayetteville Observer in North Carolina and GlobalPost, a news site based in Boston. A very small number of news organizations, including The Wall Street Journal, The Financial Times and Newsday, already charge online readers, each with a system developed largely in-house, and The New York Times announced recently that it planned to do the same. But with advertising plummeting, many other publishers eager for a new source of revenue are considering making the switch, despite the risk of losing audience and advertising.
  • 48. Last year, Mr. Brill and company seized on that interest, founding their operation, Journalism Online, with the aim of developing a highly flexible system that would become the industry standard, and keeping 20 percent of their client’s online revenue as their fee. They say they have worked with potential clients from around the world, most of whom they will not name, who operate more than 1,300 news sites. The News Corporation, owner of The Wall Street Journal, is also marketing an online pay system to publishers, but industry executives say that it has made little headway. So if it turns out that Lancaster is in the vanguard of a mass movement — and there are plenty of skeptics who say that charging could be a short-lived experiment — then Press+, if it works well, could be the movement’s chief organizer. But in their first extended interview in months, Mr. Crovitz and Mr. Brill, while offering a look at how the system works, also cautioned against high expectations and said they had urged their clients to take small steps. It will take years before charging Internet users significantly changes the economics of a deeply troubled industry, they said. As newsprint becomes a smaller part of the business, “you want to establish the notion that it’s worth something online,” Mr. Brill said. “What we have convinced people of is they don’t have to make a drastic decision. You can experiment.” For those who have signed on, such lowered expectations are part of the appeal. “We’re starting small, so if this really turns people off, we’re not playing with a huge chunk of our readership,” said Ernest J. Schreiber, editor of the Lancaster paper’s Web site, The site has been using and adapting the Press+ software for a while. He said it would go into effect in a month or two. At the outset, the paper, owned by a local company, Steinman Enterprises, will charge only readers outside its immediate area and only for reading obituaries, with a little green Press+ logo next to each headline covered by the system. It will allow a reader to see a certain number of obituaries free before a box pops onto the screen demanding a flat fee to keep reading, but the paper has not yet decided what that number will be, or how much it will charge. “We have news that no one else has, like these obituaries,” Mr. Schreiber said. “We would eventually take other sections of our online content into the system. I’m thinking local sports, perhaps.” The system may generate only a few hundred thousand dollars a year in revenue, he said, but “that’s enough to pay for a few reporters.” Philip S. Balboni, president and chief executive of GlobalPost, a year-old site that focuses on international news, said it would take a different approach to using Press+. Frequent
  • 49. users will see messages urging them to join and pay, but it will be voluntary; there will be levels of membership with different prices, and those who do pay will be able to suggest topics for articles and have access to premium content. Those who do not join will still have access to most of the site. “We anticipate rolling it out by the end of March,” and hope to have tens of thousands of paying readers by year’s end, he said. “By Year 2, it would become a very significant contributor to our total funding, but advertising I anticipate would still be No. 1.” Mr. Crovitz is a former publisher of The Wall Street Journal, where he oversaw its online pay system, and began to develop a new version of that system. Mr. Brill has a long record of starting ventures in untested waters, some more successful than others. He founded The American Lawyer magazine and the Court TV channel, which succeeded, and Brill’s Content, a magazine about media, which did not. He also founded Verified Identity Pass, whose system, called Clear, allowed frequent travelers to speed through airport security, but he severed ties with the company before it ceased operation last year. Their partners in Journalism Online include Leo Hindery Jr., a former top executive at Tele-Communications Inc. and the YES Network, and Ken Ficara, who helped develop and run The Journal’s Web site. “We are quite a ways from widespread adoption of paid content, so it’s too soon to tell how successful they’ll be,” said Rick Edmonds, a media business analyst at the Poynter Institute in St. Petersburg, Fla. But most publishers will not want to develop their own software systems, he said, and assuming Press+ works well, its chances of catching on “look pretty good.” “The way they have set it up, letting the publishers mix and match and design their own system, I think that’s a good fit because we’re in a period where newspapers are going to begin to experiment with all sorts of approaches,” Mr. Edmonds said. A move to charge for content means not a single decision, but dozens. Sites can let nonpaying readers see the top of an article, while only paying readers see the whole thing; they can allow unlimited reading of certain articles, while charging for others; they can charge by the month or by the click; they can limit free reading to a certain number of articles a month; they can treat readers differently depending on their location; they can charge a single price or have a tiered system; they can give print subscribers free access or charge them, too. Press+ is meant to accommodate all approaches, collect data on how they work and share the results with clients. As with e-commerce systems like PayPal, a consumer who already has a Press+ account will be able to use it to gain access to additional sites without re-entering a credit card number.
  • 50. “One of the things they’re paying for is convenience and certainty,” Mr. Crovitz said. Mr. Schreiber said he and his colleagues in Lancaster have no fear of playing guinea pig. If charging online turns out to be a mistake, the paper will just move on to the next experiment. Given the industry’s troubles, “doing nothing is not an option,” he said. “The sooner we can do it, the sooner we can find something that works.” February 2, 2010, 7:44 pm Rosensweig Lands At Textbook Renter By MIGUEL HELFT Veteran Silicon Valley executive Dan Rosensweig is leaving his job as president and chief executive of Activision Blizzard’s Guitar Hero franchise to take the same title at, a well-financed start-up that is applying the online rental model pioneered by Netflix to college textbooks. Previously, Mr. Rosensweig served as chief operating officer of Yahoo under its then-chief executive, Terry Semel. Mr. Rosensweig spent just 10 months leading Guitar Hero, the top gaming franchise, during a difficult year for the entire industry. Mr. Rosensweig is taking over a fast-growing company. I wrote about, the leading player in the fledgling online textbook market, last summer. Since then, the company has raised an additional $112 million in debt, credit and equity financing, bringing its total to nearly $150 million. It counts marquee Silicon Valley firms like Kleiner Perkins Caufield & Byers among its investors. “Textbook rental is a great concept,” Mr. Rosensweig said in an interview. “It is just a great business model.” Mr. Rosensweig declined to discuss Chegg’s sales, but said that the company grew about sevenfold in the last year. He said it did as much business in January 2010 as in all of 2009. Chegg has rented more than 2 million books to students on 6,400 campuses. Mr. Rosensweig said that Chegg will use much of the money it has raised to buy books, not to finance its operations. “The faster we grow, the more capital we need to acquire books,” he said.
  • 51. But has also had some hiccups. Its former chief executive, Jim Safka, who had joined after a stint as chief executive of, left in September after just four months on the job. He handed the reins on an interim basis to Osman Rashid, the co- founder and chairman. “We are thrilled that Dan is joining us as our president and C.E.O.,” Mr. Rashid said in a statement. “We know he is the right person to lead through the next phase of its growth.” Activision said that David Haddad, the chief operating officer of Guitar Hero, will assume operational responsibility for the unit. Amazon's In Luck: Some Major Publishers Not Sold On Kindle "Agency" Model, So Amazon Can Still Undercut Apple On Price By Rory Maher, CFA | Feb. 9, 2010 Amazon is currently in talks with book publishers Macmillan and Hachette about selling e-books via an "agency" model, in which the publisher sets the price and Amazon takes a 30% commission. Analysts are worried that if the whole publishing industry goes this way, Amazon's ebook dominance (and revenue) will suffer, because publishers will keep ebook prices high to protect physical book sales. However, one major book publisher we spoke with sees no reason to shift to that model right now or anytime in the near future. The reason is that book publishers make less money from the agency model than they do from the traditional wholesale model (in which Amazon buys a book license at the full wholesale price, and then sells each copy for whatever it wants, often losing money on the sale). The agency model, therefore, also leaves publishers less money to pay authors and agents. According to one executive we spoke with, it's also still unclear if Amazon will continue to command its dominant 90% share of the e-book market, so there isn't much reason to set a precedent by adopting a model that makes everyone less money per book. The skepticism about the agency model is bad news for Apple since it means for the time being Apple won't have every major publisher on board with high ebook prices and a
  • 52. 70%/30% revenue split for its iPad e-reader bookstore. This could allow Amazon to undercut Apple significantly on price and, thereby, limit Apple's sales. For Amazon, meanwhile, the publisher's position is helpful in that the whole publishing industry isn't likely to quickly shift to the agency model. Thus, Amazon can continue to sell some e-books at a lower price than competitors, which should help it maintain strong market share. However, since Amazon is already caving to two major publishers, the agency model precedent will have been set to some degree and it will lose its pricing power for some of its books. See Also: Amazon's Big Kindle Cave Could Threaten Its eBook Monopoly Here's Why Amazon Will Win The eBook War: Kindle Already Has 90% eBook Market Share Kindle Fantasies Are Running Wild -- But, For Now, Amazon Is Losing Its Shirt Taking Note A Century Foundation Group Blog February 09, 2010 With Thanks to John Sargent by Peter Osnos John Sargent is the CEO of Macmillan, the U.S. companies of the Georg von Holtzbrinck Publishing Group, a venerable enterprise based in Stuttgart, Germany. The American imprints include Farrar, Strauss and Giroux, Henry Holt, and St. Martin’s Press, among others. Sargent is what in another age might be called a scion of a publishing family. His father ran Doubleday and Company in the 1960s and 1970s, its glory days. What makes Sargent notable now is that he has taken a firm position on behalf of Macmillan with Amazon about who would control the price of e-books, and the Internet behemoth acknowledged that “ultimately” it would have to “capitulate.” To the consumer, that a big publisher wants to charge more for its books may not immediately seem like a big breakthrough for the world of letters, but it almost certainly is that (about which, more in a moment).
  • 53. Moreover, this is not the first time that Sargent has taken a leadership role on behalf of publishers grappling with the complexities and enormous potential of the digital age. As chairman of the Association of American Publishers, Sargent joined other publishers and the Authors Guild in a lawsuit to forestall Google’s intention to digitize millions of books without regard to copyright. The suit was settled in 2008 and Google agreed to pay $125 million to establish a system for registering digital use and to pay royalties to authors and pub lishers going forward. Predictably, that agreement has its critics as well as its admirers. The concept of giving Google so much of a head start in the creation of a vast digital library still makes many in the book universe, including potential competitors and the Justice Department, unhappy. Another hearing on the Google accord is scheduled for February 18. But the main point about the Google settlement and Macmillan’s confrontation with Amazon is that the publishers, significantly, again with the support of the Authors Guild, are stepping into the fray to represent their interests despite the popular and commercial dominance of these great Internet-based companies and the momentum they have in setting new terms for distribution of information and entertainment. What Sargent did on behalf of Macmillan—there is no evidence that he was acting in consultation or collaboration with other publishers—is challenge Amazon’s policy of offering e-book bestsellers at $9.99. Based on the publishers’ list price, these were loss leaders designed to boost the sales of the company’s proprietary reading device, the Kindle, which retails for $259. The publishers’ concern was that Amazon was preparing to declare that it would no longer accept a loss on each sale and would insist that books be made available to it at lower cost. The result would be a precipitous drop in revenues for everyone— except Amazon. What Sargent told Amazon, he said in a statement addressed to “authors/ illustrators and the literary agent community,” is that, in early March, Macmillan would begin selling to Amazon at prices it set and would pay the retailer a 30 percent commission on what is known as the “agency” model. The seller is, in effect, paid a fee for its services. Amazon immediately retaliated by deactivating direct sales of Macmillan books on its site, even withdrawing sample chapters that had already been sent to consumers. But after forty- eight hours, Amazon relented, accusing Macmillan of punishing consumers with higher prices (a few dollars), yet acknowledging that eventually it would have to go along or lose the sales altogether. Negotiations on these new conditions continued through the week, and the final terms have not been disclosed. Amazon plainly was influenced by the fact that Apple is preparing to accept the agency model for book sales on its new iPad and that Google, also preparing to launch a book retailing site later this year, has now said publishers will set the prices. The Kindle’s overwhelming share of the digital book market is no longer assured. To be clear: the price of most books on Amazon and on the Kindle will not be affected by this dust-up. On EarlyWord, a blog for librarians, Nora Rawlinson wrote that of “the nine
  • 54. titles with full reviews in the current New York Times Book Review, only one is available in a $9.99 Kindle edition. Three are not available at all and the rest were just $1.13 to $2.83 less than the hardcover price.” The underlying issue is that Amazon’s strategy of driving prices down (while reaping the lucrative reward of selling Kindles) meant that publishers and authors would find it increasingly difficult to generate the revenues necessary to sustain their businesses as the percentage of e-book sales rose compared with higher-priced print books. Despite the apparent outcome of the Macmillan case, that tug-of-war is certain to continue with other publishers, perhaps, or over other conditions. And the same goes for the Google settlement. Whatever the judge decides will almost certainly lead to challenges by one party or another. So John Sargent’s demarche with Amazon and his role in the Google accord by no means assure the future of publishing. What they do mean is that, in the frenetic pace of change for book distribution, publishers are taking a stand and even holding their own. For that, John Sargent deserves thanks. All Things Digital Media Memo expensive-music-equals-slower-sales/ Book Publishers Beware! At iTunes, Expensive Music Equals Slower Sales. by Peter Kafka Posted on February 9 After years of complaints, last year the music labels finally got what they wanted from Apple–the ability to raise prices on their songs. Last April, iTunes introduced a “variable pricing” scheme, which gave the labels the ability to move prices from 99 cents a song to $1.29 (and for some tracks, down to 69 cents). The result? Music sales are slowing. Warner Music Group (WMG) said this morning that it has seen unit sales growth at Apple’s (AAPL) iTunes decelerate since the price increase: Industrywide, year-over-year “digital track equivalent album unit growth” was at five percent in the December quarter, down sequentially from 10 percent in the September quarter and 11 percent in the June quarter. And since iTunes sales make up the majority of Warner’s digital revenue, growth is contracting there, too. In the last quarter, digital revenue at the label was up eight percent compared with a year earlier, when that number was 20 percent.
  • 55. The positive spin here is that music downloads are a “mature” business anyway. So by raising prices, the labels are simply extracting whatever value they can. And indeed, Warner CEO Edgar Bronfman Jr. argued that the pricing change has been a “net positive” for Warner. But he also suggested that in hindsight, perhaps it wasn’t a great idea to raise prices 30 percent during a recession. So here’s the question for the book industry, which has been working very hard to boost the price for its digital goods: Which lesson do you learn from this? My gut is that the industry will see this parable the way Bronfman apparently does: If you can move prices up early in the digital adoption cycle, you’re much better off. During the earnings call, Bronfman sounded a bit wistful as he noted the book industry’s apparent success, with the help of Apple, at raising prices above the $9.99 floor Amazon (AMZN) had set. “It’s interesting that the book publishing industry, on the iPad, has much more flexibility than the music industry had,” he noted. The counter here is the one that seems obvious to everyone else: Lower prices and you can sell more stuff. Looks like we’ll be getting another real-world test of this economics lesson soon. TBI Research by-25-2010-2? utm_source=Triggermail&utm_medium=email&utm_campaign=The+Internet+Analyst+- +Feb+10+2010 Facebook's New Payments System Is Increasing Virtual Goods Sales By An Impressive 25% By Rory Maher, CFA | Feb. 9, 2010 The CEO of one of the larger gaming companies on Facebook says that Facebook's recently-released payment platform is increasing sales of virtual goods in games by 20% to 25%. This sales lift is enough to make up for the higher commissions paid to Facebook for the service (Facebook takes 30% of a sale, versus less than 10% for most of the competing payment services). According to the game company CEO, there are two factors likely driving the platform's success:
  • 56. • Facebook is a known, trusted brand so gamers feel more comfortable using it to make purchases versus independent companies. • Facebook has accumulated a massive amount of credit card info through its gift store, so many users can buy goods in games without having to enter any personal info. The early results are obviously excellent for Facebook, which should drive more high- margin revenue from its payment business. They are also encouraging for gaming companies using social networks to drive virtual goods revenue. The higher fees will pinch profit margins, but if the increased activity continues, game publishers could make more money due to the greater volume. In addition, continuing to grow its database of consumer information like credit cards will help Facebook in its efforts to expand its payment system beyond Facebook and across third-party sites. At this point, of course, PayPal has a huge lead, and Facebook is likely a few years from meaningfully pushing its broader payment initiative anyway. eMarketer Why You Need a Strategy for Social Media FEBRUARY 10, 2010 Planning and organization no longer optional Social media has matured to the point where marketers are no longer asking whether it should be part of their marketing mix but how and where they should participate. A clear strategy for the channel is now necessary. “The low cost of social media can lull marketers into improvising solutions,” said Paul Verna, eMarketer senior analyst and author of the Insight Brief “Five Reasons Why Marketers Need to Have a Social Media Strategy.” “But taking account of the time spent debating, formulating, managing and executing social media campaigns—not to mention creating content—makes it clear that money is at stake and a well-thought-out plan is needed,” Mr. Verna said. “Instead of researching the best ways to engage, many businesses create accounts across multiple social networks and publish content without a plan or purpose. However, businesses that conduct research will find a rewarding array of options and opportunities.” —Brian Solis, founder and principal, FutureWorks, in a blog post on Mashable, January 11, 2010
  • 57. A strategy is also critical because social media users will expect companies to be savvy in the social space. That includes making sure social marketing initiatives are in line with other brand marketing strategies. “As increasing numbers of companies immerse themselves in social marketing, the sophistication level rises for all,” said Mr. Verna. “That creates an environment in which only the most organized can compete.” A critical part of marketers’ planning is determining how to integrate social media into their companies. In the Insight Brief “Where Does Social Media Fit Within an Organization?” Mr. Verna analyzed how marketers are weaving social media into the larger corporate fabric. Most companies find social media useful as a marketing and communications tool, but many companies also use social channels for sales, customer service, IT and more. Although companies may use social media for several discrete business purposes, they should work toward integrating social media expertise into functional teams. Silos of expertise should be avoided. “A Facebook promotion is only as good as the information that it feeds back to the sales, CRM, marketing or senior management executives who can turn it into a business gain,” said Mr. Verna.
  • 58. “Five Reasons Why Marketers Need to Have a Social Media Strategy” and “Where Does Social Media Fit Within an Organization?” are part of a series of eMarketer Insight Briefs focused on social media marketing. Available exclusively to Total Access subscribers, the seven briefs, along with a PowerPoint slideshow, answer the most common and most pressing questions that businesses have about social media marketing. Wednesday, February 10, 2010 Wednesday, February 10, 2010 Digital Shift in Marketing Budgets According to a recent Econsultancy survey, conducted in association with ExactTarget of more than 1,000 marketers, the shift of marketing budgets from traditional channels to digital channels will continue to rise in 2010. 46% of companies plan to increase their marketing budgets in 2010, says the study, and 66% will increase their investments in digital marketing channels. A crosstab analysis on the changes in overall budgets compared to changes in digital budgets shows that 28% of marketers are shifting at least some of their overall marketing budgets from traditional to digital channels, says the report. Plan To Increase Marketing Budgets In 2010 Overall Budget Digital Budget Increase budget 46% 66% Keep the same 42% 30% Decrease budget 13% 4% Source: Marketing Budgets 2010: Effectiveness, Measurements and Allocation Report, ExactTarget, February 2010 Highlights from the marketing budgets 2010 study, as shown in the study report: 1. 28% of marketers are shifting at least some of their overall marketing budgets from traditional to digital channels:
  • 59. • At least part of the reason for the shift to digital marketing is that marketers find it easier to track the impact these channels have on hard financial metrics. Marketers tend to take a more "scientific" approach to their allocation of digital marketing budgets than they do when allocating traditional marketing budgets. 34% of marketers said digital marketing budgets are allocated based on "more science than art" compared to only 20% who allocate traditional marketing budgets based on "more science than art." 2. Marketers who focus on "brand reputation" as a measure of marketing effectiveness are the most likely to be shifting budgets from traditional to digital channels: • Marketers who focus on this metric are more likely to be increasing their investments in social media such as Facebook and Twitter. They're also more likely to be increasing investments in online display and mobile marketing, and less likely to be increasing investments in Search Engine Optimization (SEO), affiliate marketing, and acquisition-based email (i.e. email to rented lists). These increased investments in retention-based email marketing (i.e. email to registered customers) is on par with other marketers. 3. Marketers have the most difficulty measuring ROI in social media and mobile marketing: • Ironically, says the report, these channels are most likely to get budget increases in 2010, despite marketers' inability to measure the effectiveness of this emerging media. The study found that the ability to measure ROI is not the primary factor in budget increases across digital channels. But while 34% of marketers plan to increase paid search budgets in 2010, 13% will decrease spending in this area. 4. 64% of marketers plan to increase SEO budgets while 54% will increase retention email marketing budgets. Only 3% of marketers plan to decrease budgets in each of these areas: • The majority of marketers are able to effectively measure these established digital marketing channels. When it comes to digital marketing budgets, marketers feel confident increasing their investments when efforts can be linked directly to their bottom line. 5. In addition to examining how marketers plan to allocate their marketing dollars in 2010, this study also highlights some of the challenges that exist in digital marketing: • While company respondents cite restricted budgets (40%) as the biggest barrier to additional digital marketing investments, agency respondents cite lack of understanding about digital marketing (48%) as the biggest impediment to growth.
  • 60. 6. Lack of staff to make the most of any digital investment was cited by 35% of both company and agency respondents as an additional barrier: • While marketers are increasingly optimistic about the opportunities digital channels provide, lack of training may limit an organization's ability to take full advantage of these opportunities. One respondent report that, "with the last year being tough financially, training and investment have been cut." Additional budgeting highlights: • 70% of responding companies plan to increase their budgets for off-site social media (i.e. Facebook, Twitter) • Only 17% of respondents are increasing their print media budgets, compared to 41% who are decreasing spending. 15% of companies are increasing their radio budgets, but 36% are spending less • More than half of companies plan to increase their budgets for mobile marketing (56%), email marketing (54%), and paid search (51%) Please visit Econsultancy here for additional information and access to the complete report. Wall Street Journal mod=WSJ_Tech_LEFTTopNews Apple Is in TV-Pricing Talks February 11, 2010 By YUKARI IWATANI KANE And SAM SCHECHNER Apple Inc. is in discussions with television networks to lower the price of downloaded TV shows when the company begins selling its new iPad tablet computer, people familiar with the talks said. One of these people said Apple has already been testing a price of 99 cents—half the price of standard-definition TV episodes—for certain shows on its iTunes service and wants to finalize a deal to offer that price more broadly along with the iPad, which is expected to go on sale in late March. A search on iTunes showed, for example, that episodes of MTV Networks' comedy show "Wonder Showzen," Viacom's "Celebrity Paranormal Project" and Warner Bros. Entertainment Inc.'s "Children's Hospital" drama series are currently on sale for 99 cents.
  • 61. Some episodes of selected television shows have also been available for free. The people familiar with the talks said the new pricing has not been finalized yet. A spokesman for Apple declined to comment. News Hub: Apple Tests 99-Cent Movie Sales 1:53 Apple is testing a price of 99 cents for downloaded TV shows when the company begins selling its new iPad tablet computer. WSJ's Sam Schechner has the details in the News Hub. The Financial Times reported on Wednesday that Apple could begin offering 99-cent pricing for TV shows along with the iPad. The discussions are part of Apple's broader strategy to overhaul its iTunes service. The Cupertino, Calif., company acquired music-streaming service La La Media Inc. late last year as part of a plan to offer consumers more ways to access and manage their music purchases. On the video side, it has been in serious discussions with television networks since last fall to come up with more compelling pricing packages for consumers. Apple currently offers TV shows for $1.99 for standard-definition episodes and $2.99 for high-definition episodes. For an entire season, consumers might pay $49.99 in high- definition for a popular television series. Several executives at media companies have acknowledged in recent months that Apple's prices for video on iTunes are extremely high, but it's also one of the reasons why media companies and cable operators have not felt threatened by the offerings. As The Wall Street Journal previously reported, Apple's initial discussions with the networks centered on a monthly subscription plan for a selection of TV shows. People familiar said those talks appear to have stalled, though one of those people said that Apple hasn't given up on that idea as an additional offering. Beefing up its content offerings is crucial for the success of the iPad, which Apple Chief Executive Steve Jobs has touted as the pre-eminent media and entertainment device. One person familiar with the talks said that Apple met with at least one network as recently as last week to discuss the pricing. This person said the company was trying to
  • 62. "ignite the video part of iTunes," which has been a small contributor to the service's revenues so far. In its quarter ended Dec. 26, Apple reported $1.16 billion in iTunes Store sales, iPod services and accessories. Tech Crunch Pollice Verso: Google Buys Awesome iPhone Email App; Kills It by MG Siegler on Feb 17, 2010 As you might have heard earlier today, Google made another acquisition — the email search startup reMail . While its topical description may make it seem like an obvious buy, there’s another layer that makes this really interesting. reMail isn’t just any email search startup, it’s a startup working to perfect email search on the iPhone. Or rather, it was. Here’s the key part of reMail founder Gabor Cselle’s post about the acquisition today: “Google and reMail have decided to discontinue reMail’s iPhone application, and we have removed it from the App Store.” Yep, it looks like this may be another battle in the Apple-Google mobile war. While you might assume this was a pure talent acquisition, there’s something odd: Cselle has already worked for Google in the past. On Gmail. While I’m sure Google is happy to have him back, I’m betting they’re just as happy to kill off what is hands down one of the best email applications on the iPhone — much better than the iPhone’s native email app. As an advisor for this year’s Microsoft BizSpark Accelerator startup competition at SXSW this year, I had a chance to take a good look at reMail recently. Not surprisingly, it was chosen as one of the finalists (though I’m sure that will change now). It’s sad that other iPhone users won’t get a chance to check out this app now that Google is killing it. But all’s fair in love and war, I suppose. And make no mistake, this is war.
  • 63. February 8, 2010, 12:34 pm Job Postings Hint at Amazon’s Plans for the Kindle By NICK BILTON It looks as if color screens and Wi-Fi might be the next additions to Amazon’s Kindle. Emmanuel Dunand/Getty Images Jeff Bezos holding a Kindle DX. Last week, Brad Stone and I reported that Amazon had acquired the New York based multitouch screen company Touchco to integrate into Lab126, the Kindle hardware division. This move sends one clear message: Amazon is not going to back down from a fight with Apple and its iPad. But it does leave open a plethora of new questions, one in particular: Will the next Kindle be solely an e-reader or a full-fledged computer? Robert Brunner, founder of the design company Ammunition, worked with Barnes & Noble to create the Nook e-reader and says he believes that the Kindle will actually become two Kindles. “I think they are going to have to split their line. They can’t abandon E Ink screens, but they will need to create a color device too,” said Mr. Brunner. “Where it gets interesting is, do they just do a device that’s a color Kindle or is it a full computer?” One thing is certain, the company is looking at color for its device. You can take a look at the over 50 job listings on Amazon’s Lab126 career board and see a range of new positions that suggest more about the next Kindle. One job opening in particular, for a Hardware Display Manager, tells the applicant that “you will know the LCD business and key players in the market.” The key point here is
  • 64. the word “LCD,” which means the Kindle is possibly exploring color (unless they are hiring an LCD manager to simply gain an understanding of the color-display market). Other job openings include Wi-Fi specialists (the current Kindle has only a 3G wireless connection), and openings for someone to “lead the software development teams that develop and maintain the applications.” The applications division could signal a move to create more apps for the Kindle, or someone who will manage the latest app store developments after Amazon announced a new software development kit was released last month to independent programmers. But if this is true, and if the next generation of the Kindle will be full color, full multitouch, with Wi-Fi and apps, then what about the operating system? There the crystal ball is murkier. Brian Jepson, a senior editor at O’Reilly Media who programs extensively for Google’s Android, makes the point that building a operating system to handle multitouch and color on an LCD Kindle might not be the best use of resources and time. “It’s a question of necessary versus new,” Mr. Jepson said. Amazon could go through the difficult job of baking touch into their current OS, he said. “But is it necessary to do all that when you could just grab the Android OS and use that instead?” Using an existing platform, like Android, that already comes with thousands of applications would allow Amazon to focus on selling content and customer relationships — two areas where they clearly excel. Mr. Brunner said Amazon should be less concerned with creating something new just for the sake of it and “rather than just take a book and drop it on the Kindle, they could work with publishers to create content for their device.” Robert Fabricant, vice president for creative at Frog Design, believes Amazon could even offer a better experience than Apple when it comes to purchasing content. “Part of what Amazon could offer is a device that is a entrance into a store, into a richer experiences for you,” Mr. Fabricant said. “One way to think about it, one of things that seemed backwards about the iPad was that dorky bookshelf that was like something from the mid ’90s,” Mr. Fabricant said. Amazon doesn’t “just put products on a shelf, they create experiences around the products.” Either way, Amazon’s Kindle team have their work cut out for them as they try to stay relevant as e-readers evolve quickly. Even for a company that doesn’t specialize in hardware, it’s clearly not over yet. As Mr. Fabricant put it, “If people buy a phone from Google, why won’t they buy a media device from Amazon.” Silicon Alley Insider utm_source=Triggermail&utm_medium=email&utm_campaign=SAI_Select_021210
  • 65. iBooks App Won't Come Standard With The iPad Jay Yarow | Feb. 11, 2010 AMZN Feb 12 2010, 10:50 AM EST Change % Change 118.10 -1.99 -1.66% AAPL Feb 12 2010, 10:50 AM EST Change % Change 197.55 -1.12 -0.56% Apple will not be shipping iPads with the iBooks application as a built-in app, notes John Gruber at Daring Fireball. To get the iBooks application, iPad users will have to download it themselves. "The iBooks app is a great new way to read and buy books," Apple says on a promotional Web site. "Download the free app from the App Store and buy everything from classics to best sellers from the built-in iBookstore." Depending on how Apple promotes the iBooks app in the App Store, this is a nice opportunity for Amazon's Kindle app to pick up market share. If iPad users don't know Apple has the iBookstore, which is possible, they might search for and download the Kindle app instead. John speculates that Apple didn't include the app as a standard, because it's easier to update it if it's an independent app. The apps that are bundled with the iPhone -- Stocks, Weather, etc. -- are only updated when the iPhone OS is updated.
  • 66. Silicon Alley Insider prime-subscribers-2010-2? utm_source=Triggermail&utm_medium=email&utm_campaign=SAI_Select_02151 0 Amazon Wants To Give A Free Kindle To All Amazon Prime Subscribers TechCrunch | Feb. 12, 2010, 7:26 AM | 1,224 | 5 From TechCrunch: In January Amazon offered select customers a free Kindle of sorts – they had to pay for it, but if they didn’t like it they could get a full refund and keep the device. It turns out that was just a test run for a much more ambitious program. A reliable source tells us Amazon wants to give a free Kindle to every Amazon Prime subscriber. Just as soon as they can work out how to do it without losing money. Silicon Valley Insider CHART OF THE DAY: Yahoo Still King Of Display Advertising Dan Frommer | Feb. 15, 2010
  • 67. Yahoo is farming out its search business to Microsoft to focus on display advertising. That's probably the right idea, as Yahoo is still the largest display-ad publisher in the industry, by a considerable margin. Yahoo delivered 521 billion ad impressions in the 12-month period ending last November, according to comScore, beating out Fox Interactive (including MySpace) at 368 billion and Facebook at 330 billion. And things finally seem to be picking up: During Yahoo's Q4 earnings call, CEO Carol Bartz said display ad revenue grew 26% from Q3. That was the strongest sequential growth the company had seen since 2006. To stay on top, Yahoo will have to keep traffic to its homepage portal strong -- which could mean a major upgrade to its Mail service -- and fend off rising players like Facebook and AOL.
  • 68. platform-device/ By Staci Kramer, December 3, 2009 Hearst’s Skiff Plans To Set Sail Next Year With E- Reader Platform, Devices—And Sprint Deal Forget First Paper. The incubated startup Hearst is looking to as a digital content savior is now Skiff, LLC, although the better name might be “Swiss Army E-Reader Ink” given all that it’s trying to do. Skiff, led by Gilbert Fuchsberg and headquartered in NYC with offices in Palo Alto, promises a 2010 launch with a “complete” digital content solution that can handle it all but will specialize in magazines and newspapers via a platform that can be used across devices and its own dedicated devices to be sold at retail. It also promises a business model that respects publishers’ needs. It’s unclear where the Hearst startup fits in with the digital magazine consortium Time Inc’s John Squires is working on and that we expect to be officially announced any day. Hearst is part of that consortium along with Time Inc., Conde Nast and Meredith (NYSE: MDP). Ken Bronfin, the president of Hearst Interactive Media, told the WSJ, which first reported about Skiff’s plans late Thursday (the formal announcement is planned for Friday morning), that he hopes the consortium will work with Skiff. Hearst confirmed to the Journal that it already plans to offer some of its own publications, including the San Francisco Chronicle along with titles from unidentified other publishers. The company provided us with details; is also live. On the dedicated device side, Skiff says it has a multi-year deal with Sprint (NYSE: S) to provide 3G service for the dedicated devices—and to sell them at its 1,000-plus retail outlets and on It’s not an exclusive but Skiff says it won’t announce other deals until next year. Under its FirstPaper moniker, the company said last month it is working with chipmaker Marvell (NASDAQ: MRVL) Technology group on its integrated Armada 166E for e- readers designed to render high-res PDFs “ultra fast,” save power, extend battery life and support ePaper in thin formats and a variety of screen sizes. On the platform side, Skiff promises “visually appealing layouts, high-resolution graphics, rich typography and dynamic updates” that make it easier for publishers to migrate premium content to e-readers while allowing them to maintain their own design sensibilities. No names but Amazon’s Kindle, for instance, essentially reduces everything to the same greyscale, flattened format. The Skiff Store promises “a rich selection of newspapers, magazines, books, and blogs.” Among other aspects, the business model includes optimizing for advertising by blending the “impact” of print with digital technology. Skiff’s partners on this front include Nielsen and comScore (NSDQ: SCOR) for media planning and analytics.
  • 69. In addition to Fuchsberg, who led the interactive services division for Interpublic Group, Skiff’s execs include vets from Sony’s Digital Reader launch, Intel (NSDQ: INTC), Microsoft (NSDQ: MSFT) and Apple (NSDQ: AAPL). Hearst Previews Skiff E-reader Erik Sass, Jan 05, 2010 05:53 PM The 2010 Consumer Electronics Show at Las Vegas got a first look at Hearst's Skiff e- reader, long the subject of speculation since the magazine publisher first revealed its plans for the device early last year. The device is produced by an independent company called Skiff, LLC, in collaboration with Hearst, Time Inc., Conde Nast, Meredith and News Corp. It is intended to become an electronic platform for media and personal content, as well as advertising, specially tailored for magazine and newspaper content -- an area where other e-readers are said to fall short. The e-reader, which must compete with a host of competitors from Amazon, Sony, Plastic Logic and others, got generally positive reviews, winning praise for its large, thin "e-Paper" touchscreen and high resolution: a quarter-inch thin, 11.5-inches on the diagonal, it has a resolution of 1,200 by 1,600 pixels (for a total 1.92 million) and weighs less than one pound. The "e-Paper" materials consists of a metal foil produced by LG Display, which allows Hearst to dispense with a glass shield on the display. It also consumes a relatively small amount of power, lasting up to a week without needing to be recharged. Skiff is designed to receive a variety of content via Sprint's 3G wireless service as well as WiFi, which users can navigate via the interactive display, including magazines, newspapers and books. It can also store personal documents. According to Hearst, the device will be sold at over 1,000 Sprint retail locations and online at, among other venues. No details on the price of the device or content subscriptions had been made available so far.
  • 70. The Skiff device will run on a new Skiff e-reader service developed by Skiff, LLC and Hearst, which will also be compatible with smartphones and other mobile devices as a downloadable app. Like the device itself, the e-reader service is designed to deliver print- focused media content in a configuration that is intuitive and easy to use for readers and also conducive to advertising. It allows publishers to update content dynamically; presumably, it offers advertisers measurability comparable to other mobile devices and media apps. As of December, Skiff LLC had deals to incorporate a Skiff "chip" into Netbooks and e-readers from EnTourage Systems, Spring Design and Plastic Logic. Hearst first revealed plans to create an e-reader device in early 2009; in October it was further revealed to be cooperating with other major magazine and newspaper publishers to create a device compatible with multiple publishers' content. The project was led by Time Executive Vice President John Squires, Hearst EVP/GM John Loughlin, and Conde Nast President of Consumer Marketing Robert Sauerberg. A recent study from Mediamark Research & Intelligence found that people who own electronic book readers are better educated and more affluent than the average American adult. E-reader owners are 11% more likely to own their own home, 87% more likely to have an annual household income over $100,000 and 111% more likely to have a bachelor's or post-graduate degree. In keeping with their tech-savvy reputation, MRI also found they are more likely to be heavy Internet users. February 18, 2010 Apple’s Prices for E-Books May Be Lower Than Expected By MOTOKO RICH Maybe e-book prices won’t be rising so much after all. Since Apple announced plans to sell digital books on its forthcoming iPad, it has been cast as something of a savior of the publishing industry for allowing e-book prices to go above the $9.99 that Amazon charges for e-books on its Kindle device, a price that publishers say is too low to sustain their business. But as more details come to light of the actual negotiations between Apple and publishers, it appears that Apple left room to sell some of the most popular books at a discount. When Steven P. Jobs showed off the iPad last month, he announced agreements with five of the six largest publishers to offer their content through a new iBooks application.
  • 71. Those publishers — the Hachette Book Group, HarperCollins Publishers, Macmillan, the Penguin Group and Simon & Schuster — agreed to terms under which they would set e- book prices and Apple would serve as an agent to sell the books to consumers. Apple would take 30 percent of each sale, leaving 70 percent for publishers to split with authors. Publishers indicated that e-book editions of most newly released adult general fiction and nonfiction would sell in a range from $12.99 to $14.99, under a complicated formula that pegs e-book prices to the list prices of comparable print editions. Publishers liked Apple’s deal because it resulted in a marked increase above Amazon’s $9.99 price for most new releases. But according to at least three people with knowledge of the discussions, who spoke anonymously because of the confidentiality of the talks, Apple inserted provisions requiring publishers to discount e-book prices on best sellers — so that $12.99-to-$14.99 range was merely a ceiling; prices for some titles could be lower, even as low as Amazon’s $9.99. Essentially, Apple wants the flexibility to offer lower prices for the hottest books, those on one of the New York Times best-seller lists, which are heavily discounted in bookstores and on rival retail sites. So, for example, a book that started at $14.99 would drop to $12.99 or less once it hit the best-seller lists. Moreover, for books where publishers offer comparable hardcover editions at a price below the typical $26, Apple wanted e-book prices to reflect the cheaper hardcover prices. These books might be priced much lower than $12.99, even if they did not hit the best-seller list. Tom Neumayr, an Apple spokesman, declined comment. While e-books still represent a relatively small proportion of total book sales, they are the fastest-growing part of the industry. How they are sold and priced has become a matter of fierce debate within the publishing industry. For Amazon, the $9.99 price on new and best-selling e-books helped it market the Kindle device — which now sells for $259 — and build market share quickly. But Amazon has effectively lost money on each sale at that price because it buys and resells e-books as it purchases printed books, by paying publishers a wholesale price generally equivalent to half the list price of a print edition. That means that on a $26 hardcover book, Amazon would typically pay the publisher $13, losing just over $3 on a digital edition it sells for $9.99. Under the agreements with Apple, both the publishers and Apple should make money on each book sale.
  • 72. App for That: Magazines Forge New Vision of Digital Future Consumers May Not Pay for Content Online, but They're Happy to Purchase for Mobile By Nat Ives : February 22, 2010 NEW YORK ( -- Everybody knows digital media's arrival hasn't exactly been easy on magazines. Ad rates on the web couldn't match their levels in print, many magazines struggled to build compelling websites, new competition strove to steal readers' attention, and the web itself engendered an attention-atrophied reading style that undermined readers' very ability to settle down with a good, fat print issue. But as mobile devices added capabilities, app stores took off and the dawn of e-readers and tablet computers finally arrived, magazines have pushed aggressively to participate, experiment and hopefully make money from the new opportunities presented. And with an emerging economy of app "stores," they may have found a way to get consumers to pay once again. Despite some stragglers, it seems like nearly everyone has an app out by now, at a minimum reinforcing readers' relationships with their brands. But magazines' push into paid digital content, in the form of apps that carry price tags, is looking even more interesting.
  • 73. Condé Nast Publications, which has taken heat for focusing too much on traditional ad pages, was the first to deliver issues as apps, starting with GQ's December issue. By mid February, it had sold 6,835 copies of the December app and 15,068 copies of the February issue at $2.99 each. That's small potatoes compared with the magazine's print circulation, which averaged 193,440 single-copy sales per issue over the second half of last year. But Condé calls it a start, a play to get in position for the iPad, and probably a net positive in any case, arguing that many of the app purchases will come from people who don't buy GQ in print already. "We still be studying carefully both through research and analysis and the data we have, but we suspect it's going to be a mix," said Condé Nast Digital President Sarah Chubb. "Maybe a newsstand buyer who bought it on a newsstand sometimes but maybe someone who'd been interested in the GQ brand but for whatever reason never picked it up." Into the routine It can be labor-intensive to render issues as apps, too, but now Condé Nast is working with Adobe to not just build an app version of Wired but to fold the creation of these digital editions into the day-to-day creation of each issue. It's also planning to get Vanity Fair and other titles available as apps. Hearst's Esquire issue app followed soon after GQ. "We wanted to learn how to do it because clearly there is a multiplicity of devices that we're going to be designing for," said David Granger, editor in chief of Esquire. "The second reason is even though the revenue stream doesn't seem to be particularly significant, if I can get 50,000 or 100,000 people paying $3 a month, after a while those three dollars add up." Maxim came next, becoming the first title to offer subscriptions to its issues-as-apps. And meanwhile Zinio, which has been selling digitized magazine editions for display on computer screens, just introduced a free app that optimizes the digital editions for iPhones. About 20,000 people downloaded the new Zinio app within its first few weeks; on Feb. 12 it was the No. 1 news app, having toppled The New York Times from the top spot, and was receiving prominent promotion in the App Store. Many publishers, from Time Inc. to Martha Stewart Living Omnimedia, are selling apps that don't replicate or enhance regular issues but instead offer practical advice on nutrition, instruction on workouts or updates on celebrities. Rodale apps have been downloaded hundreds of thousands of times, about half the time at some cost to the consumer, according to the company. "And I'm not talking about 101,000 apps, either," said Sean Nolan, VP-online operations at Rodale. "We're well in the hundreds of thousands." Pricing on the Men's Health and Women's Health apps, which comprise the bulk of Rodale's app portfolio, range from free, for Women's Health Best Foods for Women, to 99 cents for a Smoothie Selector, the cheapest app, to $4.99 for Eat This, Not That, an extension of the Rodale book of the same name.
  • 74. Extra content There's also the interesting precedent of Rodale's workout apps that let consumers buy new workouts within the apps themselves. One in three people who bought one of those apps subsequently bought additional content from within it, according to Mr. Nolan. "This is not like the widget craze of a few years ago," he said, referring to the push to build little branded modules that might live on outsiders' sites such as Facebook or MySpace. "There's a real opportunity here." John Squires Nobody's forgetting the potential, moreover, for new advertising sales. Advertisers' requests for proposals increasingly come with the question: Do you have an app where our advertising can appear? And perhaps most strikingly, the industry is just not letting each competitor go it alone. Before Apple's iPad was more than a rumor, four big magazine publishers joined with News Corp. to create Next Issue Media, a joint venture that plans to build a storefront to offer digital editions of magazines tailored for whatever devices come along. "We really believe that it's going to be immersive, it's going to be friendly to brand-building and it's going to have incredible impact against consumers, plus some really great metrics," said John Squires, the longtime Time Inc. executive who left to lead the venture while a search for a permanent CEO got underway, in an interview as the joint venture became official last December. "We're thrilled by the opportunity to do what existing print properties do well and what the web does well together." TBI Research eTextbooks Could Finally End The Great College Bookstore Extortion Scheme By Rory Maher, CFA | Feb. 26, 2010, 9:53 AM
  • 75. The growth of e-textbooks may finally spell the end of an extortion scheme that has infuriated college students (and their parents) forever: Sky-high prices on textbooks that students are forced to buy to avoid flunking out. Widespread adoption of e-textbooks is still a ways off, because current e-reader technology leaves much to be desired when it comes to reading and studying textbooks. However, significant discounts on e-textbooks by publishers should accelerate the use of e-textbooks on college campuses even before the perfect reader is built. This should save college students money, boost profit margins for textbook publishers, and hammer Barnes & Noble and other private companies that currently make a killing in the college bookstore racket. Calls with publishers, universities, and surveys of textbooks in bookstores and e- commerce sites reveal that: • Publishers, students, and universities are fed up with large markups by private college bookstores on print textbook sales. • Publishers are especially unhappy since many students turn to used books that cannibalize profitable new edition sales. • Large discounts on e-textbooks amount to big savings for students who are increasingly strapped for cash. • Unlike trade publishers, textbook publishers can set their own e-book prices on Amazon As a result, with the exception of college bookstores, all stakeholders in the sale of e- textbooks are aligned to keep prices low - from publishers to online distributors to consumers. This should lead to accelerated adoption of e-textbooks at universities. TEXTBOOK PUBLISHERS UNHAPPY WITH BOOKSTORE PRICING - SETTING MUCH LOWER PRICES ON AMAZON Textbook publishers have long been unhappy with large markups at college bookstores that in some cases can be as high as 100%. This is a big reason Wiley & Sons negotiated hard with Amazon to set its own prices in a deal struck during Q409. Textbook publishers are equally upset that students and faculty blame them for the high prices when the stores determine the markup. The National Association of College stores estimates the average textbook profit margin at 22%, but it should be noted they represent the stores. A review on Amazon indicates that e-textbooks cost anywhere from 10% to 40% less than print textbooks. THE SHIFT TO E-TEXTBOOKS COULD ALSO LEAD TO HIGHER PROFIT MARGINS
  • 76. Unlike trade publishers, textbook publishers aren't overly concerned that lower e- book prices will cannibalize print sales and profits. This is because the used book market is cannibalizing new-textbook print sales far more severely. Used book sales account for anywhere from about 30% to 40% of overall textbook sales, according to data provided by the Book Industry Study Goup. This compares to only 5% to 10% for trade books according to research firm Ipsos. New print textbooks have become so expensive that many students would prefer to buy a used, older version versus a new updated edition in order to save money. We've even heard of students sharing textbooks because they are so expensive. Publishers do not receive money from used book sales. As a result, e-book profit margins could be higher than print profit margins for many textbook publishers since it's likely they would sell more new editions at the lower prices. MANY COLLEGE BOOKSTORES ARE PRIVATE, FOR-PROFIT COMPANIES Many wonder why colleges don't cut their students a break and set reasonable textbook prices. The answer is that many college bookstores are privately-run companies that are looking to boost profit margins. For example, Follett Corp. operates 800 college bookstores in the US, and Barnes & Noble operates 600. Combined, this is about 30% of all college bookstores in the US. There are many smaller companies that also operate college bookstores under licensing agreements. We believe when these are taken into account privately-owned college bookstore penetration is likely over 50%. Budget cuts are driving more colleges to license the management of their bookstores to private companies, which should only increase the price of textbooks further in the coming years. We've found that college-owned stores do not mark-up the prices of their textbooks as much as privately-run stores. For example, one university we spoke with with a student body of 20,000 needs to cut its budget by $15 million next year due to a pullback in state funding. The university was told that these cuts would be permanent. We believe many universities are facing similar budget cuts given the weak economy. Cuts like these are causing colleges to enter into licensing agreements with private companies that eliminate the operating risk while returning a percentage of revenue. These deals typically give the university about 5% to 10% of gross revenue with a guaranteed minimum. This illustrates why: • Colleges find privately-run bookstores a great risk-free alternative to operating their own store.
  • 77. • Bookstores feel pressure to keep prices high in order to maintain profit levels. eTEXTBOOKS PROVIDE HUGE SAVINGS FOR COLLEGE STUDENTS We surveyed Amazon and a number of college bookstores and found that e-textbooks can cost anywhere from 10% to 40% less than print textbooks. With about 18 million college students in the US spending about $300 per year on textbooks, this would represent anywhere from $30 to $150 in savings per student annually and between $500 million and $2 billion in savings across the country. ONE MAJOR OBSTACLE TO ADOPTION RATES - RIGHT NOW STUDENTS HATE E-BOOKS Students at universities we spoke with currently do not like e-books, primarily citing poor navigation features and only very basic functionality to take notes in margins and mark certain pages as you would when you fold over the corner of a print page. However, if prices are low enough the potential savings may cause students to take another look. In addition, publishers are working to enhance the interactive features of e- textbooks. The next generation of e-readers could make e-textbooks as functional as print textbooks. And that, finally, would spell the demise of one of the extortion scheme known as textbook selling. February 26, 2010, 2:09 pm When It Comes to Content, Amazon’s Kindle Won’t Be Undersold By NICK BILTON On Jan. 27, Steven P. Jobs was still standing on a stage in San Francisco, presenting Apple’s new iPad, when the phones started ringing. Senior managers from
  • 78. were calling newspaper, magazine and book publishers trying to glean any information possible about the deals Apple was offering them to supply content for its new reading device. Amazon, which pioneered the e-reader category with its Kindle devices, is determined not to be out-priced by Apple or any other rival. Since December, Amazon has been pushing publishers to sign a new round of legal agreements that would guarantee that the Kindle price for their content is always the same or lower than the price on other electronic reading devices, such as the iPad or the Sony Reader. The clause, a variation of a legal concept known as “most favored nation,” would guarantee that Amazon’s customers would always get the best price for electronic versions of magazines, newspapers and books. As an incentive, Amazon is offering some publishers a bigger cut of revenue than they currently get for content they sell on the Kindle. (Book publishers are a bit different. They are actually pushing Amazon to adopt Apple’s model, which gives them less revenue in exchange for more control over retail pricing.) The Amazon talks were described by executives and employees at several different newspapers and book publishers who requested anonymity due to confidentiality agreements and the continuing legal negotiations. Amazon declined to comment on its discussions with publishers. Many e-publishing contracts with Amazon are still in a month-to-month cycle as the publishers negotiate to try to gain more revenue or more control over their content. Amazon’s negotiations with newspapers and magazines have been more complex. Those industries have long complained about the tiny slice of revenue they get — typically about 30 percent — from Kindle content sales. In addition, the black-and-white E Ink screen on Amazon’s Kindle is less advanced than the color screen on the iPad. Apple’s device is alluring to publishers in part because it allows them to include photography, video and other rich multimedia. However, to avoid losing their current subscribers on the Kindle, some publishers are considering signing the new Amazon contract now and offering a free, limited application for their content on the iPad. At a later date, when an Amazon product can display richer types of media, publishers could release a paid product that looks and works the same across multiple devices. As one publishing executive put it to me, in the digital realm, it feels like we’re at the beginning of a multiyear war over pricing and product features.
  • 79. Silicon Alley Insider Apple Stacks The Deck Against Amazon's Kindle App Jay Yarow | Feb. 26, 2010, 11:00 AM | 5,925 | 34 AAPL Feb 26 2010, 05:20 PM EST Change % Change 204.62 +2.62 +1.30% AMZN Feb 26 2010, 05:20 PM EST Change % Change 118.40 +0.20 +0.17% When Apple's iPad goes on sale in a few weeks, its iBookstore will have a distinct user-experience advantage over e-book competitors like Amazon's Kindle App. That is, the iBookstore will let you seamlessly buy books from within the iBooks reader app, with the iTunes account it's already aware of. Meanwhile, rivals like the Kindle app and Barnes & Noble e-reader will require you to boot up their apps, then click a button to boot up the iPad's Web browser, shop for e- books in a Web store, sign in and pay with a non-iTunes account, relaunch the e-reader app, and sync up your new e-book. Not as elegant. It's not a huge difference, but it's the kind of small simplicity advantage that has helped Apple's iTunes music store maintain a lead over its rivals, including Amazon. People who use the Kindle app on their iPhones today will know that this isn't a new thing: Since the Kindle iPhone app launched last March, users have had to leave the app to buy e-books. Amazon didn't built the app this way from the beginning. We have learned that when Amazon first submitted its Kindle application for the iPhone to Apple, Amazon included its own payment system within the app, so customers could just pay for e-books and download them right in the app. When Apple spotted the payment system, it told Amazon to get rid of it, according to a source familiar with Amazon's operations. Why? It's a rule Apple smartly instituted at the App Store's beginning, forbidding third- party e-commerce of digital goods within apps. That is, it's okay to use an iPhone app to buy physical goods -- as you can in Amazon's main iPhone app, or the Fandango app, etc. And developers are welcome to use Apple's
  • 80. in-app purchasing system -- and give a 30% cut of revenue to Apple -- to sell digital goods within apps. But Amazon, Barnes & Noble, and other vendors are prohibited from using their own e- commerce systems within apps for virtual goods. Thus the trip to the Safari browser to buy books. It's obviously a rule Apple itself is allowed to break -- it's Apple's iPhone, and it can do whatever it wants, as we've seen recently with Apple's recent raids on thousands of sexy apps. But it does put competitors like Amazon on uneven footing. Obviously, Amazon is never going to want to give Apple a 30% cut of e-book sales, so it's not going to implement Apple's in-app purchasing system. So it's indefinitely stuck sending its customers into the browser to make purchases. (Meanwhile, on the new BlackBerry Kindle app, you can buy e-books directly within the app.) Assuming the iBooks app and the iBookstore have similar selection, pricing, and e-reader features, this one simple step could give Apple a substantial advantage over Amazon. March 1, 2010 Math of Publishing Meets the E-Book By MOTOKO RICH In the emerging world of e-books, many consumers assume it is only logical that publishers are saving vast amounts by not having to print or distribute paper books, leaving room to pass along those savings to their customers. Publishers largely agree, which is why in negotiations with Apple, five of the six largest publishers of trade books have said they would price most digital editions of new fiction and nonfiction books from $12.99 to $14.99 on the forthcoming iPad tablet — significantly lower than the average $26 price for a hardcover book. But publishers also say consumers exaggerate the savings and have developed unrealistic expectations about how low the prices of e-books can go. Yes, they say, printing costs may vanish, but a raft of expenses that apply to all books, like overhead, marketing and royalties, are still in effect. All of which raises the question: Just how much does it actually cost to produce a printed book versus a digital one?
  • 81. Publishers differ on how they account for various costs, but a composite, and necessarily simplified, picture might look like this, according to interviews with executives at several major houses: On a typical hardcover, the publisher sets a suggested retail price. Let’s say it is $26. The bookseller will generally pay the publisher $13. Out of that gross revenue, the publisher pays about $3.25 to print, store and ship the book, including unsold copies returned to the publisher by booksellers. For cover design, typesetting and copy-editing, the publisher pays about 80 cents. Marketing costs average around $1 but may go higher or lower depending on the title. Most of these costs will deline on a per-unit basis as a book sells more copies. Let’s not forget the author, who is generally paid a 15 percent royalty on the hardcover price, which on a $26 book works out to $3.90. For big best-selling authors — and even occasionally first-time writers whose publishers have taken a risk — the author’s advance may be so large that the author effectively gets a higher slice of the gross revenue. Publishers generally assume they will write off a portion of many authors’ advances because they are not earned back in sales. Without accounting for such write-offs, the publisher is left with $4.05, out of which it must pay overhead for editors, cover art designers, office space and electricity before taking a profit. Now let’s look at an e-book. Under the agreements with Apple, the publishers will set the consumer price and the retailer will act as an agent, earning a 30 percent commission on each sale. So on a $12.99 e-book, the publisher takes in $9.09. Out of that gross revenue, the publisher pays about 50 cents to convert the text to a digital file, typeset it in digital form and copy-edit it. Marketing is about 78 cents. The author’s royalty — a subject of fierce debate between literary agents and publishing executives — is calculated among some of the large trade publishers as 25 percent of the gross revenue, while others are calculating it off the consumer price. So on a $12.99 e- book, the royalty could be anywhere from $2.27 to $3.25. All that leaves the publisher with something ranging from $4.56 to $5.54, before paying overhead costs or writing off unearned advances. At a glance, it appears the e-book is more profitable. But publishers point out that e- books still represent a small sliver of total sales, from 3 to 5 percent. If e-book sales start to replace some hardcover sales, the publishers say, they will still have many of the fixed costs associated with print editions, like warehouse space, but they will be spread among fewer print copies. Moreover, in the current print model, publishers can recoup many of their costs, and start to make higher profits, on paperback editions. If publishers start a new e-book’s life at a
  • 82. price similar to that of a paperback book, and reduce the price later, it may be more difficult to cover costs and support new authors. Another reason publishers want to avoid lower e-book prices is that print booksellers like Barnes & Noble, Borders and independents across the country would be unable to compete. As more consumers buy electronic readers and become comfortable with reading digitally, if the e-books are priced much lower than the print editions, no one but the aficionados and collectors will want to buy paper books. “If you want bookstores to stay alive, then you want to slow down this movement to e- books,” said Mike Shatzkin, chief executive of the Idea Logical Company, a consultant to publishers. “The simplest way to slow down e-books is not to make them too cheap.” In many ways, the $12.99-$14.99 price bracket for e-books is an experiment. With it, the publishers seem to have beaten back, for the moment, the $9.99 price that Amazon has offered for Kindle versions of most new releases and best sellers, but it remains to be seen whether consumers will tolerate that. Music prices, for example, have come under significant pressure in the digital age: from 2000 to 2009, the price of audio discs, tapes and other media, which includes digitized music, fell a little more than 3 percent, according to the federal Consumer Price Index. Prices of so-called recreational books, meanwhile, have increased just over 6 percent during that same period. Certainly, publishers argue that it would be difficult to sustain a vibrant business on much lower prices. Margins would be squeezed, and it would become more difficult to nurture new authors. “Most of the time these people are probably not going to make huge sums of money the first time they publish,” said Carolyn Reidy, chief executive of Simon & Schuster. In fact, the industry is based on the understanding that as much as 70 percent of the books published will make little or no money at all for the publisher once costs are paid. Some of these books are by writers who are experimenting with form or genre, or those who just do not have recognizable names. “You’re less apt to take a chance on an important first novel if you don’t have the profit margin on the volume of the big books,” said Lindy Hess, director of the Columbia Publishing Course, a program that trains young aspirants for jobs in the publishing industry. “The truth about this business is that, with rare exceptions, nobody makes a great deal of money.” For many authors, pricing is a thicket of confusion. “None of us know what books cost. None of us know what kind of profits hardcover or paperback publishers make,” said Anne Rice, the author of “Interview With a Vampire” and the “Songs of the Seraphim” series.
  • 83. She said she did not know whether publishers had struck the right price for e-books. “For all I know, a million books at $9.99 might be great for an author,” Ms. Rice said. “The only thing I think is a mistake is people trying to hold back e-books or Kindle and trying to head off this revolution by building a dam. It’s not going to work.” E-Readers’ Price May Fall to $150 With New Chip, Freescale Says By Ian King March 1 (Bloomberg) -- Freescale Semiconductor Inc., whose products power about 90 percent of electronic book readers, said a new chip will help drive down the price of the devices to less than $150 this year. Freescale, a former division of Motorola Inc., will soon begin offering samples of a new processor that takes on the functions of other chips and thereby reduces e-reader costs, said Glen Burchers, a marketing director. Inc. and Sony Corp., both Freescale customers, dominate the market for electronic tablets, which the companies predict will eventually replace paper books. Sales in 2010 are on course to double from last year’s 4 million units, Burchers said in a phone interview from Austin, Texas, where the company is based. “There’s a big unsaturated market out there, and price is a big factor,” Burchers said. “We do see the price of e- readers coming down this year, and Freescale is trying to facilitate that. That’s a lot of what this chip is doing.” Freescale’s new chip eliminates features that aren’t used in e-readers and adds the ability to control their unique display technology, Burchers said. That alone brings a cost reduction of about $30 per unit, he said. The company also makes chips for mobile phones and cars.
  • 84. Amazon, Sony E-Readers Amazon’s Kindle readers carry retail prices of $259 and $489, while Sony’s three models range from $199.99 to $399.99. Burchers declined to comment on when his customers might begin selling devices based on the new Freescale chip. It usually takes about six months from sampling a chip to a finished product going on sale, he said. Apple Inc. plans to introduce its iPad tablet later this month. The device, which partly functions as an e-reader and will retail for $499 to $699, runs on an Apple-designed chip rather than Freescale semiconductors. Amazon’s and Sony’s readers use E Ink Corp. technology in their displays, which are designed to replicate the look of ink on paper. The displays are currently controlled by separate chips, adding extra cost and slowing down the rate at which pages can be turned. Freescale’s faster processor will reduce the lag in turning a page from more than 2 seconds currently to less than half a second, Burchers said. A group led by Blackstone Group LP, Carlyle Group, Permira Advisers LLP and the former Texas Pacific Group acquired Freescale in a $17.6 billion private-equity deal in 2006. To contact the reporter on this story: Ian King in San Francisco at