The Unicorns are Here, They're Just Not Evenly Distributed Yet

I really didn’t want to do another post about The Tablet. But then I saw this piece from Fortune (via @jafurtado — does he ever sleep?) and this sentence drove me to it:

[S]ome publishing industry watchers think that if a deal were to go through, it could lead to an Apple-enabled selling platform that would allow publishers to sell books at a price they determine.


Sincere apologies to William Gibson for the the title of this blog post, but everything that publishers seem to want from this device that will deliver them from evil is in fact already here.

The iPhone and the iPod (and the Nexus One, the Droid…) are rich multimedia devices capable of full-color, high-resolution display of text, images, and videos, as well as stereo audio. Many of them have GPS built in, along with an always-on web connection, and built in (or easily and freely acquired) social media hooks (email, Twitter, SMS, Facebook…). But most importantly, they feature (drum roll please ……) a platform that allows publishers to sell books at a price they determine. This market is available worldwide, it never closes, and most of its customers are within inches of the registers nearly all of their waking hours (and often beyond). This selling platform requires no inventory, returns are minimal, and sales data is provided nightly.

I’ve heard numbers tossed around suggesting that for some large trade publishers, Amazon represents 70% or more of their ebook sales. That’s a scary situation, but consider that of the top 10 bestselling books on Kindle (as of this writing), exactly the-opposite-of-70% are available in the Books aisle in the App Store, and all at prices significantly higher than on Kindle:

If publishers pushed the price lower on those iPhone Apps, Amazon would quickly decline from 70% of ebook sales (and I would lay odds that those additional app sales would exceed any corresponding decline in Kindle or print sales).

The problem is seriously compounded by the territorial restrictions most publishers face because of the historical approach to acquiring rights. But the Tablet isn’t going to fix that problem — publishing executives are the ones who can deal with that one, especially for frontlist titles. (I accept this is a very, very, very Hard Problem. There’s enormous legacy business and infrastructure, and perhaps more importantly organizational structure and politics to manage. I’m glad I don’t have that problem, but neither does your emerging competition.) Publishing executives must also accept that wishful thinking is not a pricing strategy. If your current cost structures do not permit you to include relatively low-priced mobile ebooks in your product mix (preferably at the same time or before the print version), then your cost structure must change.

But I said this post was about The Tablet.

I should clarify here that I have no actual knowledge of any Apple plans, nor any knowledge of conversations between Apple and publishers beyond what’s already been reported in places like Fortune. So salt this complete and utter speculation to taste, but here goes:

  • If a tablet is announced on Wednesday, it will run on a variation of the iPhone OS, and include access to the App Store (and the 100,000+ apps within it, including 15,000+ books).
  • If Apple is talking to publishers, they are playing matchmaker between publishers and developers to help publishers turn their content into apps (including apps designed specifically for the new device). Book-style content is something a lot of people are already expecting to be prominent on this device, and it’s in Apple’s interest to make sure there’s good stuff there at launch, stuff that’s interesting and appealing to a wide audience. For example, I highly doubt that the New York Times just happened to sign up for the iPhone SDK and submit an App to be ready when the App Store launched. Apple must have helped. (Yet no one then claimed Apple was getting into the newspaper business…)
  • That 30% is non-negotiable, so any give-and-take on this stuff relates to promotion and merchandising. It’s most certainly worth a lot to any App to be featured in a product announcement, TV commercial, or ad campaign, and this device will result in whoppers on all of those fronts.
  • Apple will almost certainly update iTunes (including the App Store) and that update may well include better merchandising and recommendation features for all apps, including books.

Nothing on that list prevents any publisher from taking advantage of the 50M+ strong market that already exists. While it’s true that creating mobile apps requires software development skills, it’s also true that at one time, creating a web site was considered something that required similar skills, yet somehow publishers seem to have figured that one out along the way. (OTOH, those two skills are merging very fast, especially for book-style content.) There’s of course room for collaboration on developing or adapting open-source alternatives to commercial products.

Of course, building out mobile apps and a presence on emerging and growing platforms and markets (not to mention dozens and dozens of devices and services) is no easy feat, and in the same way that financing a print run and selling into the trade required both capital and a certain set of skills that publishers developed, a new generation of distribution service is on the horizon — though whether existing publishers play a major role in that remains a very open question.