I am going to use this page to share occasional thoughts on the industries I know a little about. I like the words from Voltaire, on the right: truth, in a world in which technology is changing faster than ever. You will not find much prescription here.
With the launch of Apple’s Newsstand (which judging from its appearance, they bought in Ikea), and the Kindle Fire, and WH Smith’s announcement of a deal to sell Kobo’s ereaders in stores, there’s a lot of comment on publisher apps, and how the shift to digital reading is working. The fact that the sentence ‘our publishing strategy will be driven by tablets’ would have been simply incomprehensible 24 months ago, reinforces just how contingent life is for content businesses. As nobody really had a clue in 2009 where the industry would be in 2011, it is well to be cautious in projecting forward.
What do we know about tablet and ereader sales? Very little directly from the two big players, the reflexively secretive Amazon and Apple. Kantar, though, estimates that as of last month, 3.6m people in the UK own a tablet, and around 2.7m of them have opted for Apple. Meanwhile in the ereader market, Kindle, we know, is Amazon’s biggest-selling product of any type.
40% of tablet usage is during commuting, and much of this use – from personal observation – is substitutional. Now that I can board the 07:56 with today’s Times or Guardian on my iPad, there is precious little reason to encumber myself with the (more expensive) paper copies.
In that respect, tablets do little to resolve the problem facing print media – the ineluctable decline of volumes across the developed world. Matthias Dopfner, CEO of German newspaper giant Axel Springer, celebrated recently the 109,000 daily digital sales for his mighty Bild tabloid. But that’s only one-third of the sales lost by the paper version during 2010. Springer, one of Europe’s strongest publishers, saw German newspaper sales fall 6.8% in the first half of this year, a trend that was accelerating through the period; a rate of decline closely matching that of the UK’s quality press market. As Dopfner acknowledged: ‘I see no sign that the negative trend among newspapers and magazines can be turned round’.
It is these sobering numbers which render forgivable the hyperbole rained on the iPad by glass-half-full publishers. The 19th-century business model, that saw them binding together disparate articles and advertising, and selling the bundle on at rich margins, appeared to have been undone by the free internet. Then along comes the tablet, which seemingly allows them to smuggle that model into the 21st century. (Hallelujah! we get to keep the corporate jet after all). There are a few challenges though.
Print remains a scale business right through the supply chain, from paper to retailer. While there is much rejoicing in heaven over one reader who buys a digital subscription – seemingly cheaper to produce/deliver – that does not greatly mitigate the threat as publishers lose the scale to compete profitably in the hard-copy world. (One UK-based publisher, Future, recently spoke about accelerating its switch from print to digital in the US market, reflecting these trends).
On the new platforms, we are still in early adopter territory. Look at the best-selling magazines on Kindle. Asimov’s Science Fiction, and Philosophy Now both feature in the Top 10. That does not mean they are brilliant publications (though they may well be); it means that this is an embryonic market, where very small volumes hugely inflect your ranking. What is true though is that the shift from early adoption to mass is occurring faster with every new tech category. So publishers are rightly not waiting for the dust to settle before getting stuck in. Print publishers, by upbringing, hate making their mistakes in public; they like to go through numerous dummies before publishing issue one. On digital platforms, being there is half the battle. Publish, test, learn, adapt, republish has to be the approach, as it has always been for the software industry.
Revenues are low. Pricing is controlled by the platform, either de jure – Amazon dictates pricing in certain categories, for instance – or de facto. The default price in the iTunes app store remains zero, and it is a brave publisher who sticks their prices up beyond the low norms prevalent even in the “high-value” content categories. There is a related issue here, using our commuter as an exemplar. In the past he would have been confronted with a choice, at the station newsstand, of a number of newspapers and magazines ranging in price from 20p to £5 or so. On his tablet, reversioned print is merely one of many ways he has of passing his journey – many of them completely free. Publishers are not competing with each other for the reader’s time on the tablet; they are competing with the entire digital ecosystem.
No publisher would entertain (say) printing in mono for WH Smith, but in colour for Sainsbury; but those are the terms of multi-platform digital publishing. Investment in these divergent platforms carries significant cost for content providers, which is why there has been no rush to create apps for the Blackberry Playbook, for instance.
Speaking of terms, there is the issue of margin. Apple has been much maligned for its 30% take, though if it felt the need to engage, it might well retort that that is almost exactly what publishers surrender to the physical supply chain. The reality is that whatever UK publishers think of these terms, makes little difference. As a very senior Google executive once memorably remarked: ‘Your brand is roadkill on the information super-highway’. The UK market is virtually invisible from San Francisco, and the global terms of trade are decided in negotiation between the West Coast digital platforms and the East Coast publishing giants. Sensible publishers, in any case, attach far more importance to customer data than to margin. (Those UK magazine publishers owned in NY, 3 of the top 5, should be helped by their parents’ relative proximity to the action, as well as by their investments in apps – if they can persuade their local management to desist from reinventing wheels).
These platforms that tend to winner-takes-all: the best search engine doesn’t command 33%, or even 53%, of search – it gets >75%; likewise Facebook, etc. The only reason I can think of for buying a Kobo reader over a Kindle would be price. Yet seemingly it is to be priced in line with its bigger rival. I struggle to see how this is a game that can be won against Amazon: their volumes, both of hardware and the software to consume on it, will drive not only price, but also the ability to upgrade the technology faster and smarter. As the old saying goes: the race is not always to the swift, nor the battle to the strong – but the wise man bets that way. On the other hand, from WHS’s viewpoint, the more sandbags they (and their suppliers the book publishers) can hurl in front of the inexorably rising Amazon tide, the better. The deal with Kobo is from the ‘my enemy’s enemy is my friend’ chapter of the Art of War.
One final thought about the challenges of tablet publishing: two contrasting treatments of Steve Jobs. He died on October 5th. On 10th I was able to download the New Yorker of October 17th , (an excellent, Amishly plain app, great value at roughly $1 per copy) with memorial cover and three essays, including a brilliant piece by novelist Nicholson Baker. On 12th I downloaded the then current (October) issue of US Wired (another Conde Nast title) – complete with an upfront piece on ‘Apple After Steve Jobs’. To my astonishment, as I read, it turned out to be a piece about how Apple might cope now Jobs had stepped down from the CEO role. So Wired magazine – whose readers are more likely to be Apple adherents than those of any other publication, short perhaps of Macworld – was content to at best baffle, at worst offend those readers, through the “integrity” of its locked-and-loaded “current” issue. People in the business will say ah, New Yorker’s a weekly, Wired’s a monthly. That’s a very producer-centric remark. How fixed-schedule, lower-frequency titles adapt to the immediacy of digital life is just one more sharp-edged piece of the jigsaw. And unlike proper jigsaws, there is no picture on the box, to show you what the endgame looks like.