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Ebooks and the threat from "internal constituencies"

Lessons from adjacent media companies can inform publishers' ebook strategies.

A recent New Yorker article by James Surowiecki on the problem of “internal constituencies” and how organizations respond to technology and market changes seems relevant to the ebook conundrum publishers are facing.

Surowiecki highlights how Blockbuster was unable to correctly value the assets that created the company’s initial success, especially when faced with insurgents like Netflix and Redbox. He ends with a warning for Netflix, and a look at the uncertain world of digital distribution to come.

The summary of how Blockbuster overvalued their “clicks and mortar” strategy may provide a catalyst for publishers to look at the opportunities and threats from ebooks. Will internal constituencies bias how publishers value and contrast print book and ebook assets and business models?

Subjective rambling on print and ebooks

Lessons from music and movies need to be tempered by the nature of the media. Vinyl, VCR tapes, CDs, and DVDs do nothing but carry information and require a player. While some may wax nostalgic for the media of their youth (yes, the pun is intentional; note the resurgence in vinyl records sales), the media of yore are awkward and limiting, particular
when compared to playing devices with enough built-in storage and connectivity to access everything users may ever want to hear or watch.

Print books and magazines –black print on white paper — create a uniquely effective reading platform that integrates both storage and a player in a convenient package. Reading material is consumed differently than music and movies. Books generally take longer to read and aren’t continually or frequently re-read, making the low storage density of books less of an issue than with music and movies. Ebooks and ebook readers are still maturing and may not be “good enough” yet to effectively replace the print book experience.

In books we may see a complementary relationship between print and electronic forms based on context, content, distribution and consumer usage. For example, students needing portable access to multiple textbooks may find the storage density of print a significant issue that pushes the adoption of ebooks (there’s a funny New Yorker cover showing a young girl with a backpack leading a mule, laden with books and school supplies).

Likewise, technical folks who want random access to a broad range of reference material may find the storage density, search capability and instant distribution of ebooks an unassailable benefit. For many others, the comfort and familiarity with print, the ereader experience, slow consumption rates, etc., may all continue to create demand for print books.

The audio book market may provide guidance as an alternate media channel that complementarily coexists with print books. Audio books have the same distribution characteristics as ebooks, as they are almost entirely distributed online these days. There’s also a market maker in Audible, where prices likely provide reliable information about demand and price elasticity (Audible has alternate flat subscription pricing). Audible charges more for new books, best sellers and evergreen sellers. Audio books are generally priced higher than Amazon’s print and ebook prices, anecdotally 10-40 percent higher for bestsellers. (A digression: researching Amazon pricing for best sellers and evergreen books shows about a 10 percent (+/- 7 percent) discount for ebooks compared to print books on Amazon.)

Smart publishers can work to keep the price differential between print books and ebooks close, and learn how to segregate price insensitive consumers via temporal distribution strategies (e.g., early access), distribution channels (e.g., print on demand), content (e.g., colors and diagrams that don’t render as clearly electronically) and form
factors that can provide extra margins from the commodity, low-margin mass market.

Or, maybe I’m just showing my age and internal constituencies.

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  • http://devinbriar.blogspot.com/ Douglas Morrison

    Interesting article. I have mixed feelings (like most people who love books) about the pros and cons of the e-book evolution in publishing.

    My concerns after reading your article now include the competitive-at-any-cost approach of the tech companies and E-retailers. Companies are now piling into the Nook and Kindle markets. Book retailers are setting up in-house E-publishing units.

    France has moved to try to fix e-book prices to protect authors work, but that will be much ado about nothing in the end.

    There has been NO attempt to fix quality of finished product problems of many books posted for sale. Editing is not regulated or required to any great degree.

    There is a general thought brewing that e-book will become a farm system for authors. Invited to the “Print World” upon sales approval at the e-book level.

    Yor article, as I said, was indeed insightful, yet it appears to lean more to hopeful thinking that some kind of publishing “better angel” will prevail. I join you in this hope, though I can’t help but feel authors are about to be “Napster-ed”.

  • James

    What traditional publishers have failed to recognize is that people are not willing to pay ebook prices that are anywhere near that of print products, particularly since they have no resale value, and will not last beyond the next switch to a new device.

    The magic price point for new bestsellers is around $9.99, as Amazon predicted. Backlist and midlist titles seem to work best at $2.99 each, as J. A. Konrath’s blog demonstrates.

    - James

  • http://Alan Alan Twiddle

    “Print books create a uniquely effective reading platform that integrates both storage and a player in a convenient package.”

    What a great quote and how right you are. Every bookshop and library should print it on all their stationery and hang it on signs inside and outside their buildings.

    Books are not the same as music and are not consumed in the same way. So why the constant suggestion that books will go the same way as vinyl and the CD? E-book sales are still miniscule, so why all the hype?

  • http://www.christianfinancialbooks.com/hsanders/ Hank Sanders

    I agree that e-books are slow in coming around, but with the increasing popularity and affordability of Kindle, people can now download and store over a thousand of their favorite stories http://www.amazon.com/dp/B003FSUDM4. They can read them anywhere and anytime, all from one hand held device. I believe eventually it will replace printed books.