Media24 Exco \ eReaders Presentation notes 20100315 \ Draft 01 Gavin Dudley, firstname.lastname@example.org <mailto:email@example.com> Contents Death of print, again 1 So what is it? 2 So what's the big deal now? 3 How does it work 4 Where are we now 5 Summary of the 3 components 6 iPad 8 Business models 9 Will people pay? 10 Advertising 11 The marketplace 12 South African opportunities 14 CONCLUSION 16
Death of print, again 1. Death of print 2. Data, persists 3. Don’t follow blindly You've doubtless heard news of the demise of print industry... there's so much data to support this, but also a lot of data to support the opposite. some print companies are still making money hand over fist, and even showing growth in these troubled times. There’s no smoke without fire , and the question never seems to go away. The hard times on which traditional media has fallen has a lot more to do with declining ad revenues than the effects of the Internet. The arguments around how much prominence media companies should to be granted to digital or online media vs. the traditional print form continues. I'm sure you've heard lots more evidence for this today. I submit to you that the most dangerous thing we could do is to imagine that we know for certain how it will all play out. Greatest danger is on predicting the end of print. Radio didn't kill print even though you get it everywhere for free. and Tv didn't kill radio. The only cataclismic mistake we might make is to simply ape the kinds of products and revenue models we see elsewhere in the world. 4. First web, then phones, the apps…now this 5. New platform: eReaders and Tablets We've just started understanding possible Internet business models, and we've only started to realise the importance of mobile phone publishing, and we're still finding out what the fuss is about iPhone applications, and now this.... The reason I am here today is because there is a new device on the horizon that once again threatens to stir up the digital business model: a whole new platform is emerging: the eReader, or Tablet PC.
So what is it? 1. New PC? 2. Nothing new, e-Ink devices since the mid 90’s 3. Flipfile 4. 2001, was a laptop screen Is it a new kind of computer or PDA? Will it surf the web? Frankly it's not new: the concept of digital ink that could render on a flat surface, like a sheet of paper, had obvious appeal. The original outlandish concept, and one I still like a great deal, was to have a series of sheets of electronic paper in a binder much like a flipfile, with a GSM connection in the spine, which would download newspaper and magazine pages from the web, and books from Amazon.com, and render them, daily, on the pages on my e-paper binder. I used my first full tablet PC in 2001. It looked nothing like my flipfile. Those early models were electronic clipboard with processors, hard drives and full Windows operating systems, and were designed for industry verticals, like for use in hospitals or the insurance industry.
So what's the big deal now? 1. 2007, Amazon Kindle 2. Success 3. 5mill now, 10 million sold in 2010-03-15 If these have been around since 2001, why do we need to suddenly take notice of them? Around 2007 Amazon.com released an electronic book reader, called the Kindle, and marketed directly to consumers. For the first time consumers, not business, would become the driver of the electronic paper revolution. Most thought this would never work and the Interweb was awash with nostalgic book lovers laughing off the idea. But it worked and today we have over two dozen e-readers fiercely contesting the space. 5m e-readers in circulation worldwide and double that amount will be sold in 2010, according to iSuppli, a market-research firm
How does it work 1. Thin light plastic, screen, buttons and keys 2. Screen quality, battery life 3. Content 4. Features 5. Audiobooks It works a bit like this: It's an extremely thin plastic panel, about the size of an A4 page. More than half the surface is a monochrome screen, that's white with black text or grayscale images on it. It's not a touchscreen so you use a few buttons help to navigate: two for turning pages back and forth, and a tiny joystick for jumping to various options in the menus systems, and then some alphanumeric keys for typing in words and phrases when occasionally required. eReaders have made great strides by concentrating on specific things: The screen must be high quality and almost as white as paper, but must be undemanding on the eyes for a truly user friendly experience. It must be completely readable in bright sunlight, a problem that plagues all laptops and LCD screens. Normal backlit LCD screens are by far the biggest drain on battery power, but the ereader battery will last weeks between charges. Your reading material comes from either an online bookstore where you pay to download, or you can get free ebooks anywhere on the web as long as your reader will open the file format, or you can download magazine and newspaper subscriptions, reformatted for the purpose, or you can upload your own office documents, PDFs and a number of other mainstream formats. Other neat features include the ability to bookmark pages or highlight sections in the text you're reading book. Search the text easily and quickly. Look up words in the built-in dictionary. Instantly reset the text in different font sizes, especially for more mature readers. Some readers now also let you make notes in the margins of the e-book. [SHOW VIDEO OF THE KINDLE] I particularly appreciated the audio book functions where you can plug in your headphones and listen to recordings of your favourite works, many of which are freely available. Many readers also include a text to speech translator for peple who need to &quot;read&quot; while on the go. Huh? Why download a book if you need someone to read it to you?
Where are we now 1. Kindle, Sony, Samsung, others coming to market 2. SOFTWARE factor, on device and securing books 3. Microsoft, Adobe, others, free ePub, Standards elusive 4. Compatibility determines your reach, success, security 5. Kalahari, what are they doing? 6. Controversy 7. Tablets? Feature rich, new PCs, more utitlity Kindle currently dominates the space, with Sony in second position, Samsung a recent entrant, and LG bringing forth the greatest technical innovvation in the space. But more about all of them later. Some still believe that e-readers are actually a software dominated landscape. It is true that there is also a lot of development happening amongst software vendors from Microsoft to Adobe, and many more seeking to create the killer app to turn PCs, smartphones and tablets into credible e-Reading devices. More people have downloaded e-book software for iPhones than have bought Kindles. What's important about the software is that it determines what format you can distribute your content in, how interactive and feature rich it will be, how many devices will support it, and how secure and uncopiable it will be. So the software side is also important in the scheme of things [Show Kalahari.net screen] Large online controversy surrounding the pricing of ebook products at Kalahari.net. Not pretty. Anyone asking themselves this question through Google will be directed straight to this discussion on the Internet. And what of the Tablet PC running Windows, then? Colour screens, more utility with social networking apps etc. Docking solutions, make it the main PC
Summary of the 3 components 1. Device: two distinct types, readers and tablets 2. Content: formats, closed systems, free content, Google Editions 3. Connectivity: GSM, but also wifi 4. Sales: 12 million this year, +-60 million/year in 5 years. 5. Content and readers chicken and egg A number of things contributed to the current success of e-readers. So to summarise, whatever the technical capabilities of the device, three things characterise this new segment: 1. The device: Two kinds of hardware setup: the purpose built e-reader which focuses on being light and highly portable, clear paper-like screen with high contrast of black letters on white background. The more sophisticated panel-like tablets, with colour touch screens, proper oprating system and running a variety of programs. 2. The content There are a number of competing file formats for ebooks, which results in some ebooks not working on some devices etc. Amazon.com ebooks will only open on a Kindle-powered device, for example. ePub is the emerging open standard growing in popularity while the Adobe PDF format is well supported across devices. Most of the top-flight international magazine shave been available in Kindle-specific formats for some time. Besides this projects like Google's Books is making large libraries of material available for free. In short, there is more content more widely available than ever. [Show graphic of stories sold] &quot;Google Editions is expected to launch with some 400,000-600,000 digital books on its virtual shelves&quot; 3. The connection Even in South Africa connectivity is more-or-less ubiquitous. If you allow for the GSM signal to fluctuate wildly beyond the city limits you nevertheless can remain almost permanently connected to the GSM network for updating your eReader with news, new magazine content, web content and an occasional book (which is remarkably small to download, max 60 seconds anywhere in the US). The more evolved tablet PCs can also do wifi and bluetooth, obviously. Amazon's Kindle and Barnes and Noble Nook reader both usea dedicated circuit of the mobile phone network in the US, on the Sprint and AT&T backbone respectively. [Show story sales graphic] The bottom line is that market researchers predict by 2015 the industry will be shipping 58 million tablets a year, most of them with some form of eReader software. Which came first, the eReader or the rangeof content?
iPad 1. Hype and pre-ordering last week 2. Significance in Africa 3. ALSO has eReader software, and Apple iBookstore 4. Shake the market 5. Strong specific or weak general? Finally, I must reluctantly pay tribute to Steve Jobs! Last, but by no means least, we need to give some mindspace over to Apple computer. Speaking frankly I am not a big fan of Apple products if for no other reason than the sheer marketing hype puts me off. The the latest hype is the Apple iPad which goes on sale in the US next month. In fact, so great is the hype that technically it went on sale last week, for people who wanted to pre-order the product a month ahead of its actual delivery date. Adding to the hype: they will limit pre-orders to two per person. Imagine getting people to queue in order to pre-order a vapourware product. That's the power of marketing at work! Apple products have always been relatively insignificant in Africa: unofficial statistics show that less than 2% of South Africans owns iPods, and much hyped products like the Apple iPhone account for less than 4% of the local smartphone market, and fractions of a percent of the overall cellphone market. The Apple iPad contains no innovations and technologies which have not been seen before. It is more of a tablet PC running the iPhone operating system, than an e-reader. It runs programs, does email, web and video playback, and all on it;'s rich, full colour screen. But it;s otherwise an unremarkable product. It also sports e-reader software and that's the the reason it's significant. Because it has enough clout in the marketplace to break Kindles grip on the e-reader marketplace. It almost doesn’t matter if it's successful or not because people believe it will move the market, and so the market moves. The battle of Kindle and iPod is interesting from another philosophical perspective: the consumer technology industry has followed a fairly similar pattern of delivering devices to market. The convergence trend sees multiple mature devices, called &quot;strong specific&quot; coming together like cameras and GPS systems in cellphones. However in this instance we have the strong specific Kindle e-reader coming up against the weak general iPad, but it;s unclear if the market truly wants a Swiss Army knife multimedia panel or a simple monochrome device to perform the basic task of reading, and not the bells and whistles of multimedia interaction.
Technology blahblah. Show me the money. Business models 1. Format is closest to newspaper/magazine/book yet 2. Portable, battery life, ubiquitous 3. Easier sell -> Benefits of web (distribution), less downsides (obtuse format) The hard costs in the publishing business are the subject of an entirely separate talk, but they are important in the e-reader discussion for one simple reason: It's so far the closest digital product direct drop-in replacement for the paper-based newspaper, magazine or book. The display format of an e-reader is thus far the closest tihg we've seen to a magazine page, or the page of a book for that matter, or, turned landscape, the size of a tablet newspaper. This makes it much easier to imagine porting the existing print format with a minimum of reflowing or redesigning. It's also a truly, truly portable medium... much more so than the conventional laptop PC, and certainly much easier on the eyes than even the biggest screened smartphones. You carry around and consume it much more like a magazine, newspaper or book. Taken all together, the reason the eReader has caught the attention of the publishing world, is because this might be most saleable digital platform ever: as cheap to distribute as the web and as attractive, easy to read as print, and as portable.
Will people pay? 1. Paid-for content, market confidence? 2. Unique content, convenience users 3. Always free alternatives, Jimmy Wales 4. Success of device is key, iPad anagram for Paid The riddle of whether people will pay for content continues to torture media owners. Who will be the first to blink and risk marginalising themselves? Rupert Murdoch's entire print empire will gradually be moving to a paid-for model. There will always be free alternatives and the paid-for model will suit those who have the unique, uncopiable content, or information so valuable that people will pay to know it. This has usually been limited to the business and financial publications where people justify the expense as essential business information. And others who lifestyle and workstyle depends on such information... convenience is a really big driver here... but experts agree that there will always be free alternatives... &quot;This doesn't mean people don't trust newspapers, but they've lost their exclusivity as an authoritative voice.&quot; - Jimmy Wales, founder of Wikipedia. Recent research from the American Press Institute amongs 118 newspapers indicated that just 1. 51% were confident that a paid for content model would work, and 2. 52% believed that it would be easy enough for readers to find free alterntives to the news they offered. Altogether 3. 50% believed they would be charging for some content by mid-2010. 4. 65% of publishers wanted a new revenue stream from paid-for content 5. IMPORTANT: 71% said their objective is preserving print circulation Another challenge which remains unacknowledged: if Apple was so successful at convincing consumers and record companies to &quot;buy the single, not the album&quot; then can media companies get people to pay per story, and not pony up for the subscription? The success of the device is key : if this does become the standard for people to read their news then there will be amarket of people who will pay for the utility of it. &quot;Good news: iPad is an anagram for Paid!&quot; [Show video of CNET]
Advertising 1. Junk CPMs, for every 1000 pages 10% money 2. New flash ads 3. Double dipping: Triple dipping for m24 For mass media such as news portals, every 1000 pages viewed online media makes about 10% as much as it's print counterpart. This is a term ungraciously referred to as junk CPMs. There is view that the e-reader format lends itslef to much more flashy ads, bigger and more complex, but comparable in scale with some newspaper ads, and not limited to online industry standardised banners and buttons. What really sets the cat amongst the pigeons is that this new platform with all the benefits of Internet publishing, and few of the drawbacks, arrived as the debate around paid-for content reached its peak .
Microsoft Engineering Excellence Microsoft Confidential You've heard of Double Dipping. That's where you take a chip, place it in the dip, take a bite then stick the same chip back into the dip. So you get two bites, both with lots of dip. I would like to introduce the opportunity for triple dipping . It's not too hard to imagine that Media24 could get 3 bites of the same chip, each with sauce. 1. Newspapers and magazines and e-zines paid for content 2. Newspapers and magazines with new, dynamic ads 3. eTailing books through Kalahari, Selling books direct 4. Conventional Web, breaking news, blogs, social media
Microsoft Engineering Excellence Microsoft Confidential The marketplace 1. Kindle, then Sony. Incl mags, papers. 2. Kindle now in SA (globalisation). 3. Sony going with Google free books and bookstore 4. Most have a shop, B&N Nook 5. Amazon under pressure, Apple 6. Publishers own reader, sell direct? 7. eBooks 0.4% of US book market 8. Growing strongly 9. Sweet spot: $15 a book, carry non-blockbusters. 10. New readers, slight diff tech 11. Adobe playing with ebook maker and reader 12. Microsoft still quiet 13. Hearst Skiff, Android, multi vendors So then let’s take stock of the market before looking at the specific opportunities in South Africa. First it's important to note that the crucial development in eReaders arrived as a result of the maturity of the content marketplace. Here's is what the leading players are doing elsewhere in the world. For this it make sense to look at what some of the leading players are doing in the market. Kindle is the leading seller by a wide margin, followed by the Sony Reader. The Kindle only wne ton sale in SA officially towards the end of 2009, with some titles missing from the US Kindle library. SOny has relationships with various book stores but references Google's free books downloads as it's main source of books. You can subscribe to most leading magazines to be downloaded and automatically updated on the Kindle over the GSM network. Most of the leading devices have their own proprietary book shop which is integral to their business model, akin to giving away handsets to make back your money on phone calls. Amazon has been widely criticised for enforcing a single price of US$9.99 for all it;s titles, akin to iTunes 99c a song model. It has since emerged that Amazon kept 70% of those revenues, with the publisher sharing its 30% cut with the writer etc. Enter Apple's iPad where, in a reverse of traditional business practice, Apple will allow publishers to determine the price of books in their iBookshop. This has had the desired effect of loosening Amazon's grip and they recently announced a more realistic 50% split with publishers, going up to 70% in certain cases. Three heavyweight publishers, Macmillan, Hachette and Rupert Murdoch's Harper Collins have recently withdrawn from the Kindle Shop program because of the Amazon-enforced 9.99 price tags. This has lead to some speculation about the publishers develop an e-reader application of their own which will run on Apple's iPad and other tablet hardware, which will allow consumers to buy direct from the publisher, and cut out the retialer entirely. The Association of American Publishers, an industry group, reckons that total book sales in America last year reached $24.3 billion, but e-books accounted for just $113m of that amount. That's less than half a percetage point, but growing strongly at over 70% a year, off a low base, of course. There is a general view by publishing industry pundits that $15 is the sweet spot for ebook sales, for both the publisher and retailer to see sustainable profit across a wider rnage of books, and not just a few blockbuster titles. Leading bricks-and-mortar book retailer Barnes and Noble launched it;s own eReader called the Nook, which only displays books purchased form it's own online store. The product has been fairly well received, but remains a niche player. Hedging its bets, B&N is also launching its iPad application shortly. More than a dozen ereaders have been released in the last three months, with rumours of half a dozen more in the pipeline Then there is Adobe touting two new products: Adobe Digital Editions for making and reading ebooks and Adobe Air for web-type applications that go beyond the browser and go on working even offline. Adobe's Digital Editions is a known entity, of course, and can supply strong enough formats to stop your material being copied or printed out without your consent. It is currently in use at Kalahari.net where you are required to download the reader in order to purchase an eBook. The Library Box function used at Kalahari.net keeps records of all your e-book purchases so that you can replace your books if you change devices. Probably the most interesting development of the last few weeks is the launch of Skiff, an ereader created by the Hearst media corporation. It uses the Google Android operating system and uses a breakthrough, ultra-thin plastic-coated display in an outsized format closer to a full tabloid newspaper page. At less than 1cm thick the bigger format is a sign of things to come: that certain ereaders might be purpose built for newspaper readers.
Add a case study or class simulation to encourage discussion and apply lessons.
South African opportunities 1. Readers and tablets distinguish in functions 2. But always a niche product 3. SA market, who will buy it? Targeting same age old demographic 4. Forrester $99 threshold. Kindle R2500, iPad at least double that. 5. FNB, Peter Bruce, Buckland 6. PROVES THE BUSINESS MODEL, some cannabalising of print subs 7. Subsidise the device over time, capital outlay 8. Education market, One Laptop failings In the end we will need to distinguish between e-ink readers and tablet pcs. The simplistic, lightweight monochrome readers will focus on the serious book reader, who may still consume newspapers and, to a lesser extent, magazines, but all in black and white. &quot;People like color. Books need color. Get used to it. Pure e-readers are always going to be a niche product, the iPad is designed for the mainstream.&quot; The tablet user will have a much more varied experience and will certainly subscribe to some paid for content services and newspapers and magazines, and may also consume books. The device will be far heavier and have far less battery life and might not be carried everywhere as conveniently as the dedicated e-readers. What's the catch? It's going to be a niche product. Everything we've learned about the South African market is that historical class and education inequalities mean that for the short and medium term hi-tech media only reaches 10% of the population. So many media business models all target the top strata of South African society with disposable income. And this is no different: the same low hanging fruit. Regular book buyers? Newspaper subscribers? Glossy magazine readers? Internet savvy laptop users?Smartphone owners? Who in South African society is going to be able to buy a third or fourth piece of digital tech that fits somewhere between their PC and their cellphone? And who is going to pay for content that is mostly available for free elsewhere? Research firm Forrester predicts that adoption of e-readers will only take off once the price of such devices falls below $99. The international Kindle model currently costs roughly R2500 and the entry level iPad costs at least double that. You might recall a small fracas that erupted several month ago when the CEO of FNB circulated a personal note recommending that FNB stop buying the Business Day because it freely available online. Business Day editor Peter Bruce then waded in arguing that the print product was effectively subsidising the production of the online product, and that it was reckless of FNB to make such statements. I believe it was Matthew Buckland who called him nostalgic. The truth is that these dynamics are what give credibility to the possibility of a paid for version of the newspaper in digital format. So it may be perfectly possible to do good business in this niche, but it's always targeting the same tiny demographic at the top of the food chain. Another model is to sell longer term subscriptions and subsidise the eReader , much like the cell phone industry, but there will be considerable upfront investment, obviously, and a minor cannabalising of the print readership. There is another possibility: the education market . It is conceivable that with a low cost device, a basic ruggedised monochrome ereader, the problems of distributing costly textbooks to South African schools could be part way solved. I am thinking of the failings of the One Laptop Per Child program: the cost of the device could not get adequately reduced because it was always a complete PC. Replacing that with an ereader whose battery can last several weeks, and whose schoolbooks can be updated every year, even over GSM,
CONCLUSION 1. It’s inevitable 2. Device is crucial, reader or tablet 3. Paid-for content possible, LIKELY 4. eReader market is established and growing Its arrival is inevitable, but it will take a long time to find traction as a mass market product in South Africa. Even when established, might be relegated to a niche market unless device becomes much, much more affordable and we have a wide range of compelling content that can be synched on the device. People are not going to read extensively on their smartphones or their PCs, so the device is quite important in terms of screen size and functionality etc. These have to take off and become more ubiquitous and more affordable to create a new category. In my opinion the ebook can't work unless we have a credible, working device to draw people away from print. And the paywall for online content might work better or worse on the web, but the most expensive type of subscription for the tablet format, won't be saleable. Then we will have to get past the first generation devices to see what capabilities the next generation offer up. For example bigger colour screens seem inevitable, and lower price points. Free vs paid content is an unanswerable question at this time, and will differ a lot from publication to publication based on how strong it is in the market and the number of &quot;free&quot; online competitors. But the ebook market is established and growing.
Microsoft Engineering Excellence Microsoft Confidential So, as you contemplate a way forward for the media business in South Africa, I leave you with this thought from Dr. Martin Fisher, a great African entrepreneur and businessman and inventor of the MoneyMaker irrigation pump which allows African farmers to irrigate their land and rise out of poverty. 3 things to do to succeed with a product in Africa. 1. Speak to at least 25 poor people 2. Make sure your product will positively impact at least 1 million people 3. Make sure your product pays for itself in 1 year. It might not seem immediately obvious how this relates to the products we've been discussing, but I believe that eventually it does. Thank you.
Microsoft Engineering Excellence Microsoft Confidential
Take A Tablet: eReaders and the future of publishing
TAKE A TABLET Gavin Dudley [email_address]
The death of print… <ul><li>Again. Still. </li></ul>
What’s the big deal? Jeff Bezos, Founder of Amazon.com
Using an e-reader <ul><li>Light, ultraportable </li></ul><ul><li>Comfortable screen </li></ul><ul><li>Long battery life </li></ul><ul><li>CONTENT: Books, magazines, newspapers, industry journals, blogs, your own work documents </li></ul><ul><li>Full text search </li></ul><ul><li>Bookmarking, reference </li></ul><ul><li>Font sizing </li></ul>
Software factor More people have downloaded e-book software for iPhones than have bought Kindles.
Device / Content / Connectivity trifecta + eCommerce Editions Launch with half a million books for sale
Bringing a gun to a knife fight <ul><li>Apple’s iPad </li></ul>
Paid-for content <ul><li>Will anyone pay for content in this format? </li></ul>
Advertising <ul><li>New, big, sexy ad formats </li></ul>
Triple dipping <ul><li>… in the Media24 value chain </li></ul><ul><li>PAID FOR CONTENT incl. newspapers, magazines </li></ul><ul><ul><li>or </li></ul></ul><ul><li>DYNAMIC, NEW ADS in e-reader format newspapers and magazines </li></ul><ul><li>eTAILING books through Kalahari.net </li></ul><ul><li>TRADITIONAL WEB with breaking news, blogs, social </li></ul>
The marketplace <ul><li>The products and plays </li></ul>Association of American Publishers Total US book sales, 2008 $24.3 billion Total e-book sales $113m (just 0.4%!) … but 70% growth projected $350 million in 2009
Think local <ul><li>Who is the target market? </li></ul>
Conclusion: Where is the event horizon? <ul><li>Reader device crucial </li></ul><ul><li>Paid for content possible… and likely </li></ul><ul><li>Projected 2-5 years to critical mass in ZA </li></ul>
3 things to do to succeed with a product in Africa <ul><li>Speak to at least 25 poor people </li></ul><ul><li>Make sure your product will positively impact at least 1 million people </li></ul><ul><li>Make sure your product pays for itself in 2 years. </li></ul>
ALL GOOD. QUESTIONS? Gavin Dudley [email_address] 083 326 8587