Should Bookstores Be Publishers Too?

Lev Grossman and Andrea Sachs write in Time magazine about our love-hate relationship with Amazon. Their conclusion? It depends on who's doing the loving and who's doing the hating. Defining Amazon is about as easy for us as defining the elephant was for the blind monks of Chinese legend. Time succinctly states the case:

"Amazon has diversified itself so comprehensively over the past five years that it's hard to say exactly what it is anymore. Amazon has a presence in almost every niche of the book industry. It runs a print-on-demand service (BookSurge) and a self-publishing service (CreateSpace). It sells e-books and an e-device to read them on (the Kindle, a new version of which, the DX, went on sale June 10). In 2008 alone, Amazon acquired Audible.com a leading audiobooks company; AbeBooks, a major online used-book retailer; and Shelfari, a Facebook-like social network for readers. In April of this year, it snapped up Lexcycle, which makes an e-reading app for the iPhone called Stanza."

As if all that were not enough, Amazon has now become a publisher, too. First, there's its Encore program "whereby Amazon will use information such as customer reviews on Amazon.com to identify exceptional, overlooked books and authors with more potential than their sales may indicate. Amazon will then partner with the authors to re-introduce their books to readers through marketing support and distribution into multiple channels and formats, such as the Amazon.com Books Store, Amazon Kindle Store, Audible.com, and national and independent bookstores via third-party wholesalers."

Amazon has also put its print on demand division into play in the form of a service called CreateSpace aimed at self-published authors.

Most significantly, Amazon has begun to publish mainstream authors, notably Stephen King, recently engaged to write an original story for the Kindle.

For publishers the thought of Amazon becoming a competitor in their own space is their worst nightmare come true. As Time puts it, "If Amazon is a bookstore, it's supposed to be buying from publishers, not competing with them. Right?"

You got that right, Time! However, before we get out our pitchforks and start baying "Restraint of trade!" at Amazon you need to be reminded that it is not the only book retail behemoth that is also a publisher. Let's look at Barnes & Noble.

At the beginning of 2003 Barnes & Noble acquired Sterling Publishing, described at the time as "one of the top 25 publishers in America and the industry's leading publisher of how-to books." Publishers were gravely concerned and with every reason. Barnes & Noble's own titles were like a supermarket's house brand, often undercutting the prices of outside purveyors. Their anxieties were well founded. On many occasion, when I pitched a nonfiction book at a publisher, the editor would tell me to forget about it, Barnes & Noble already had such a book and the new one could never match the house-brand's low retail price.

The case against bookstores becoming publishers was stated so cogently by Morris Rosenthal that I reproduce it in full below. Though written four years ago as a followup to Barnes & Noble's acquisition of Sterling, it is word-for-word valid for Amazon as well and should serve as a chilling cautionary tale for all book industry watchers:

Monday, July 25, 2005
Sterling Publishing and Barnes & Noble Books

Barnes & Noble bought Sterling Publishing a little over 3 years ago, and publishing has been a rapidly growing segment of Barnes & Noble's strategy ever since. Sterling has over 5,000 titles in print and is adding about 1100 annually, primarily in the How-To area. Barnes & Noble also acquires books from other publishers, such as the "in easy steps" computer series from U.K's Computer Step publishers, and Barnes & Noble also publishes an extensive backlist of out-of-print and out-of-copyright classics. According to their annual 10K filing, Barnes & Noble also "commissions books directly from authors" and "creates collections of fiction and non-fiction using in-house editors." All of this shapes up as good business for Barnes & Noble, but doesn't cheer most self publishers.

The reason has to do with shelf spaces and market saturation. Barnes & Noble is the dominant bookstore chain in the country, and they have a good record of working with small publishers when it comes to in-store events and stocking titles. However, as their annual report points out - "Each Barnes & Noble store stocks from 60,000 to 200,000 titles, of which approximately 50,000 titles are common to all stores." For the true super stores which stock 200,000 titles (though I suspect they may have meant "books" rather than "titles") that leaves a lot of room for regional or independent books, but the smaller stores seem to do an excellent job stocking the Barnes & Noble published books (and they'd be nuts not to), so it's a scary thing for a small nonfiction publisher to find that a Barnes & Noble imprint is publishing a competing title.

Barnes & Noble now has some 10,000 books in print, and they tend to be lower priced than the competing titles, which while great for customers (vertical supply chain) doesn't make publishers very enthusiastic. I seem to recall Steve Riggio saying last year that they were targeting 10% of book sales as self-published by Barnes & Noble. I also seem to remember him saying three or four years ago that they were targeting 5%, so it stands to reason if they reach 10%, they'll up the ante again.

With half their books coming from their Sterling subsidiary which specializes in how-to, and a good chunk of the remaining half also in the how-to segment, it's safe to assume that how-to publishers are at the greatest risk for the time being. The how-to emphasis makes sense, since Barnes & Noble can easily track which titles are doing well throughout their chain, than commission or acquire similar titles. They don't need to be huge sellers, the acquisition cost for a commissioned book is pretty low (lots of hungry writers out there) and the guaranteed shelf space makes a large first print run, which combined with the lack of middlemen, makes the low pricing possible. If I was in the process of setting up a new imprint to publish nonfiction, I would look long and hard at my business model and focus on titles I felt would do especially well on Amazon or independent stores, as opposed to making plans based on the whole market.

Richard Curtis

Color Kindle? Well, Maybe Next Year

Newswire AFP reports that Amazon has designed a color version of the Kindle. Now for the fine print: don't hold your breath.

“I know it’s multiple years [away],” Jeff Bezos said in response to a recent question. How multiple? “I don’t know how many years but it’s years.” How about e-ink? What's wrong with that? He's seen it, but he thinks it's “not ready for prime time”.

Here's Bezos's problem: prime time is now. As we said in a recent survey of color e-book initiatives, Is Color the Real Kindle Killer?, "A kaiju is marching from Japan to the West, and the Kindle, Sony and other black and white e-book readers are in danger of being trampled. Call the monster Colorzilla."

Amazon may not have multiple years, because color is just multiple months away, and some of it is available now.

RC

On Collision Course for an E-Book-Off, Google-Mothra Enters Fray Against Amazon-Godzilla

A slumbering monster is awakened by greed and folly and, tormented beyond endurance, goes on a rampage.

The formula for a Japanese monster film? No, it's a riff on a major breaking story in the New York Times.

Motoko Rich reports that "In discussions with publishers at the annual BookExpo convention in New York over the weekend, Google signaled its intent to introduce a program by that would enable publishers to sell digital versions of their newest books direct to consumers through Google. The move would pit Google against Amazon.com, which is seeking to control the e-book market with the versions it sells for its Kindle reading device."

Though Google is currently a facilitator for readers seeking links to e-book retailers, the company now intends to sell digital editions directly to consumers.

Google has discussed such plans with publishers before, but it has now committed the company to going live with the project by the end of 2009. In a presentation at BookExpo, Tom Turvey, director of strategic partnerships at Google, added the phrase: “This time we mean it.”

Google vs. Amazon is not merely a major trade battle but a test of reader preferences, with huge stakes and social implications. Writes Rich:

"Mr. Turvey said Google’s program would allow consumers to read books on any device with Internet access, including mobile phones, rather than being limited to dedicated reading devices like the Amazon Kindle. 'We don’t believe that having a silo or a proprietary system is the way that e-books will go,' he said."

Read about it in Preparing to Sell E-Books, Google Takes on Amazon.

RC

Print Books Dead? "Not Even Wounded," Says Lightning President

Here's a trick question. Do you think that books printed on demand are tangible merchandise? That they are no different from traditionally printed books?

It's natural to think they are, but you might find it helpful instead to think of them as a form of digital book even though they are delivered by UPS instead of by your Internet service provider.

Because the trade publishing industry is in the doldrums we tend to think the book printing industry is suffering too. Nothing could be further from the truth. As I've contended again and again, there's nothing wrong with the book business that can't be cured by distributing books a different way. And that's why I believe print on demand is the salvation of the industry.

This is admittedly a pretty extravagant declaration, but it's supported by some statistics reported in an interview, conducted by Liz Thompson for Bookbrunch, with David Taylor, President of Lightning Source Inc., arguably the largest POD press in the world. (As a matter of disclosure, LSI is E-Reads' printer.) Taylor stated that LSI has printed 70 million books in the decade since POD was introduced, and its facilities in Tennessee and Pennsylvania hold about a million digital files. The business has "grown 20% to 30% in the last six months," he said. LSI prints, binds and ships 10,000 copies a day on machines that run around the clock. In Britain, the firm is building a facility the size of an English football pitch.

Just as the current recession has laid bare the weakness of a traditional book distribution model based on the returnability of merchandise - with return rates soaring deep into the double-digits - it has also revealed the strength of an on-demand system with a negligible return rate.

"The recession," Taylor told his interviewer, "is focusing publishers' minds on cash, on the amount of inventory they have sitting in warehouses, on the cost of transporting stock. Most global publishers in the academic and STM [scientific, technical and medical] markets are saying they want to get out of inventory, and some pretty radical discussions are now taking place which will allow publishers to do just that. Believe me, it's an exciting time to be part of the business."

Among the radical solutions to the inventory problem is the creation of digital warehouses. These are in essence a network of servers containing vast archives of POD files linked to Espresso printers, miniaturized machines that can print and bind paperback books in under 10 minutes. Someone called them ATMs for books, but while the logical place for them is bookstores there's no reason why Espressos could not be set up in facilities not necessarily book related (we half-jokingly suggested a bagel shop).

Certainly one place such networks could be set up is Third World countries, says Thompson, "which have none of the infrastructure of western publishing in place (warehouses, distribution companies) and where building it would not, at this point, make much sense."

In short, says Liz Thompson, David Taylor "believes that far from the being dead, 'or even slightly wounded', digital technology is powering a genuine revolution in so-called traditional publishing."

To witness the revolution, watch this video of an Espresso producing a book in front of your eyes. Order your book, buy yourself a cup of (liquid) espresso and by the time you've consumed it, your book will be ready.

Perhaps it will become apparent why, in 2005, Amazon.com acquired a modest little print on demand operation called BookSurge, and why, three years later, Amazon launched an aggressive campaign to promote its POD services to publishers. Though Amazon's is the quintessentially modern book retailing operation in the history of the world, a number of underlying brick and mortar functions - notably, some 12 million square feet of warehouses - compromise its efficiency and profitability. In The Nine Gazillion Pound Gorilla Bares Its Fangs, a blog posted at the time, I wrote:

If Amazon is capable of printing books on demand, they will no longer have to carry any physical books in their warehouses at all! They simply have to load the files of Random House, HarperCollins, Hachette, Penguin, and every other publisher onto their server and print all of their books - frontlist as well as backlist - on demand. It would not only be a huge savings for Amazon in terms of warehouse space - it would be a huge savings for the publishers, too: they all would eliminate printing, warehouse, and freight costs at a stroke.

That all middlemen are impediments in a digital world is bedrock truth. As stupendous as Amazon is, it is nevertheless a middleman between book publishers and book buyers. The key to disintermediating that function is print on demand. Amazon's 2008 foray in this arena was only the first skirmish. You can expect the company to continue seeking a large share of the POD business currently enjoyed by Lightning Source.

Richard Curtis

Get a Free Jumbo Kindle with Your NYT Subscription

King Gillette lives! The spirit of the mogul, who transformed product marketing by giving away the razor and selling the blades, hovered over Amazon's press conference unveiling the big-screen Kindle DX. There, New York Times publisher Arthur Sulzberger Jr. pledged to subsidize the full price of the jumbo reading device for subscribers committing to long-term subscriptions. The retail price of the DX is $489.00.

We did a little research and learned that a daily subscription to the Times in our area of Manhattan will cost $5.30 per week at current rates. At that rate, we would have to enlist for one year and forty weeks.*

It's not a bad deal for subscribers - you end up with a Kindle that you can use for many other things besides reading the newspaper. But is it a good one for the Times? Gawker, the snarky media website, doesn't think so. In fact, Gawker doesn't think so at all. The site's Owen Thomas thinks Amazon CEO Jeff Bezos "has managed to scare the press lords into shelling out their precious remaining cash into funding the distribution of his pricey e-reader..." and "...he's cajoled the gullible likes of Sulzberger into handing him a pile of cash."

"If he's such a big believer in supporting journalism," asks Thomas, "why didn't Bezos announce he was personally giving away 160,000 Kindles to people who agreed to sign up for a newspaper subscription?"

Well, maybe Bezos never heard of King Gillette.

Read A Bigger Kindle Makes Jeff Bezos Richer and Newspapers Poorer.

RC
*(Of course, the Times would get a discount for buying Kindles in volume; on the other hand, subscribers who commit to long-term subscriptions also get discounts, so the two discounts wash each other out.)

The New Kindle DX: Amazon's First Large Screen Reader

As we've been expecting, today Jeff Bezos announced the new Kindle DX, a $489 large screen (9.7") e-book reader modeled after the Kindle 2. The DX is the first big step in Amazon's effort to create a platform for newspapers, textbooks, and other large scale documents. While developers such as Plastic Logic and Hearst are still preparing their large format devices, Amazon has beat them all out of the gate with a device available this summer in the U.S. (exact first shipping date is yet unknown.)

Besides the larger screen, the Kindle DX offers some special improvements: 3.3GB of storage, wide screen reading (rotate the device sideways), native PDF support (it's unknown if Amazon will support DRM for this format), and resizing/reflowing based on how many words per line you want. Other features remain similar to the Kindle 2, such as 3G Whispernet wireless service, USB charging, and the 16 shades of grey.

Importantly, Amazon has been working to ensure new content is available from newspaper and text book publishers. New arrangements with the New York Times, Boston Globe, and the San Francisco Chronicle will offer special rate subscriptions that will subsidize the cost of the DX. And Princeton, Arizona State University, Case Western, Reed College, and the University of Virginia will all be piloting programs serving text books to students with the Kindle DX. Hopefully, when more information about this initiative comes out, we'll see what Amazon's foray into the $9.8 billion text book market has in store for students at other universities.

The Kindle DX is available for pre-order now, although its price is $120 more than the Kindle 2, which continues to sell well. Many people who've already purchased the Kindle 2 may be feeling annoyed that the new model boasts the extra screen real estate and PDF support, but perhaps the higher cost pushes the Kindle DX farther out of reach for most casual customers. The premium will be worth it for those people who work extensively with large PDF documents, and when Amazon's text book pricing is revealed it may actually represent a big savings for students. Those who use the device over a number of years will probably get the most savings. However, at the rate that the technology is developing, the Kindle DX might not have the long legs you'd expect to justify its cost, especially when students might want to wait until a color device and more text books are easily found at retail to begin their investment strategy in an e-book device. University book stores will have to find a way to compete, and digital text books also means no used texts or selling-back for students. But we have to start somewhere. It might just be that the DX is an appetizer for things to come.

- Michael Gaudet

Behind the Kindle Curtain: Glimpse Amazon Reader's Jumbo Screen

In advance of Wednesday's Amazon.com press conference about - well, something or other - Daniel Ionescu of PC World writes that "pictures and details regarding the new Kindle DX have surfaced. Amazon's new e-book reader will have a 9.7-inch display and sports new features such as a built-in PDF reader." This jibes with our own speculations.

It's being referred to as the DX but more popularly the Jumbo, and will provide users with the ability to read newspapers and magazines formatted to look like their paper counterparts, and to highlight docs and make notes. Engadget seems to have copped the above photo.

A large-screen Kindle has been rumored for some time, and it just may be that the pressure of new - potentially better? - devices on stream from competitors has forced Amazon to make a preemptive announcement. We'd all be thrilled if Jumbo Kindle and its rivals were to rescue the magazine and newspaper industry. But what really turned me on is this:

"Some universities are also gearing up for the DX. Reports say that Case Western Reserve University in Cleveland, together with Pace, Princeton, Reed, Darden School at the University of Virginia, and Arizona State will equip their students with a brand-new DX to carry their textbooks.

"These university students will get this autumn their chemistry and computer science texbooks on a Kindle DX while the less lucky ones will still have to go to the library to get their books says the report. Amazon's move towards the textbook industry was expected though, as reports from as early as last year suggested the company would jump in to the $5.5 billion market."

From the moment I set eyes on a tablet-sized device I knew this day would come. The prize for the right student-friendly portable e-book is worth billions, but the current models of Kindle, Sony, and some other small-screeners (including cell phones) are simply inadequate for textbooks, illustrated books, schoolwork and homework. Read Kindle Sequel on the Way, But Will It Play on Campus? and you'll understand why I'm beginning to think it's time to uncork the champagne I put on ice ten years ago.

Richard Curtis

Is Big-Screen Kindle Subject of May 6 Amazon Press Conference?

What do an article in the New York Times and an emailed invitation to an Amazon.com press conference have in common? That's what we'd like to know, and that's why we'll be at the door mid-morning Wednesday, May 6th.

We're not sure if Las Vegas posts odds for stuff like this, but if we were gamblers we'd put a few chips on two possible announcements. The first is that Amazon will be producing a tablet-sized Kindle dedicated to newspaper and magazine reading. The second is that Amazon is teaming up with a major newspaper or magazine publisher to bring you a digital edition of your daily paper or favorite magazine.

That brings us to the Times's article, Looking to Big-Screen E-Readers to Help Save the Daily Press by Brad Stone. The gist? "Now the recession-ravaged newspaper and magazine industries are hoping for their own knight in shining digital armor, in the form of portable reading devices with big screens."

"These devices from Amazon and other manufacturers offer an almost irresistible proposition to newspaper and magazine industries. They would allow publishers to save millions on the cost of printing and distributing their publications, at precisely a time when their businesses are under historic levels of pressure."

For those who follow our postings, most of the information in Stone's piece will be familiar. For instance: "These new gadgets, with screens roughly the size of a standard sheet of paper, could present much of the editorial and advertising content of traditional periodicals in generally the same format as they appear in print." Check out our pieces about Plastic Logic's as yet unnamed device and the iRex 1000. The former is notable because of its state-of-the-art screen technology, the latter because it has successfully carried newspaper and magazines for a long time and actually beaten Kindle at its own game.

Stone's mention of News Corp's interest developing a device for its publications is detailed in a recent piece asking if that company's boss Rupert Murdoch is "ready to get E-ink on his fingers".

And of course, for many of our readers, Amazon's plans for large screen Kindles are old news.

Stone accurately observes that this new generation of tablet-sized readers offers publishers an opportunity "to rethink their strategy in a rapidly evolving digital world. The move by newspapers and magazines to make their material freely available on the Web is now viewed by many as a critical blunder that encouraged readers to stop paying for the print versions." But most intriguing of all is his speculation that newspaper and magazine publishers might "borrow from the cellphone model and offer specialized reading devices free or at a discount to people who commit to, say, a one-year subscription."

For some time we have been invoking the spirit of King Gillette, inventor of the modern safety razor, whose motto and fabulously successful approach to fame and fortune was to "Give away the razor and sell 'em the blades." You can read all about that here, and it just may be an idea whose time has come.

Our thumbs are limber for an instant posting after Amazon's press conference. But it won't surprise us if there are no surprises.

RC

Orson Scott Card Finds Kindle's Royalties Laughable But Not Funny

"So where, Amazon, is the incentive for authors to allow their books to be sold for the Kindle? The economics need to change, and soon."

That's the bottom line of Orson Scott Card's take on Amazon's royalty structure for Kindle sales. In a blog on Rhinotimes.com, Card casts a jaundiced eye on the imbalance between Amazon's profit per sale and the author's take-home pay.

Though traditional print publisher pay authors a modest royalty, Card is okay with it because the costs of printing, distributing and retailing hard copies is so high. "But with the Kindle and other electronic book systems" he points out, "nobody has to pay for unsold copies because none are ever printed. Nor does Amazon have to pay for rent or utilities for bookstores all over the country. They have exactly one bookstore, which is online, so when a book is "displayed" on the website, it is there on display for people all over the world to see it and buy it."

"I don't begrudge them their share," he says. "I begrudge them the obscene percentage they keep and the laughable share they give to the author."

(As a matter of disclosure, E-Reads pays a royalty of 50% of net receipts on e-book sales.)

Read Card's complete blog here.

RC

Stats Confirm: Kindle Is No Country for Young Men and Women

A Kindlista compiling data on Kindle use confirms our highly unscientific observation that the majority of the device's owners are adults (35-54) or seniors (55+). If you like graphs and pie charts, visit Kindle Culture and see for yourself.

Says the site's blogger:

"The resulting data suggests that the largest group of Kindle owners by decade are in their 50s. The next two largest are owners in their 40s at 19.1% and owners in their 60s at 18%, making the total number of Kindle owners between the ages of 40 and 69 an incredible 58.6%. Owners above 70 make up an additional 8.1%, with owners under the age of 40 accounting for just over a third of all Kindle sales.

Using broader target demographic standards, the results look like this:

Younger adults (18-34) – 22%
Adults (35-54) – 38.4%
Older adults (over 54) – 37.3"

Among Kindle Culture's conclusions: "The Kindle might also be a popular 60th birthday present..."

Note to family and friends: a gift certificate to Bloomingdale's will be perfectly fine, thank you.

RC

Too Young for Kindle? A 29 Year Old's View

Here's an insightful comment on our recent posting, Are You Too Young For Kindle?
RC
************************
Well, I'm 29 and I got a Kindle as a gift at the beginning of 08 right when they went on sale during Christmas 07. I LOVE my Kindle. Would I have bought one if it wasn't given to me? No, but I would have been salivating with jealousy any time I saw one on the street. I didn't pay money for books before I got my Kindle because books are too easy to come by. So I'd agree that my disposable income isn't something I'd spend on books (I work in book publishing too) generally. Now, however, it's almost too easy to drop $5.99 here or $9.99 there (btw - $9.99 is the absolute max I'll pay for an e-book) for a book. I also have a NYTimes "headline story" subscription for a $1.99/month which gives me the top 15 or so stories of the day. I wouldn't have taken a NYTimes subscription of any kind before then. It would have seemed like a waste of paper when I can get the gist of the news online.

The best feature is the "sample read". If I pull a sample book its almost a sure bet that I'm going to buy the book. My buy rate has DRAMATICALLY improved since I got the Kindle. The Amazon library is a big deal as well. The library coupled with the wireless download is a hurdle that will be mighty big for any $99 application to beat...

The price point of the Kindle is only half the problem. I think young people would spend money on a piece of hardware they'd use. The sad fact is that many people don't read enough to make a nearly $400 commitment to a piece of hardware. I carry my Kindle with me everyday and I use it regularly. The average reading in the US is like two books and a fashion mag, right? These people aren't dropping $359 for a Kindle. All the 80G iPods, iPhones, and Wiis out there tell you that young people will shell out the dough for something they want and that they'll use. Books aren't the thing for the majority.

Also, I think old people were the ones commenting on the Amazon community pages because old people are the only ones who'd be tickled enough to go to an Amazon community page. I've had my Kindle for more than a year and I've never felt the need to visit the Amazon community. I didn't need to ask a lot of questions on how to use it and I don't really have the time to "make friends" with other people who have a Kindle just because they have a Kindle...

IMHO.

Are You Too Young for Kindle?

Michael Cader, blogging in Publishers Lunch, says that "The Kindle is probably the only major consumer electronic device aimed at older buyers." He cites a survey conducted by Bowker: "The device is favored particularly by people aged 50 to 64, and women like it disproportionately more than men, while the iPhone is heavily preferred by those in the 35 to 49 bracket," Cader writes.

In one respect, these data should not come as a surprise; generally speaking, adults simply buy more books than the young, period - 60 percent of book purchases are by older persons. But because we associate e-books and reading devices with youthful innovation, the numbers bear some attention.

The party most interested in these demographics is Amazon itself, creator of the Kindle. Amazon asked visitors to its Kindle Community page to disclose their age, and as of this writing 1652 responded. That's a huge number of responders and we're not sure why the question elicited so much action. By way of comparison, the second most responded to question garnered only 20 replies! Nor are we sure why respondents felt compelled to relate their life stories in response to the simple request for "Average Kindle Owners Age" ("59 3/4 years old here...no arthritis here yet. Probably will start suffering from it when I turn 60.") I guess seniors talking about their age like to add a flourish or two..

In any event, though we didn't sift methodically through every response or tally the average, it was clear from a random clickthrough of responses that the majority of those answering the question were in their fifties and sixties.

On the trail of these absorbing factoids, I randomly selected and debriefed a 25-year-old male about his, and his friends', attitudes towards Kindle. Interestingly, this interviewee works for a publisher and uses the device in his professional capacity.

Me: Do you own a Kindle personally?

Him: No.

Me: Because?

Him: The expense. I can't afford one. [It currently lists for $359.00 on Amazon.com] My friends can't either.

Me: Do you read books on another electronic device?

Him: No, call me old fashioned, but I like printed books. And they're also economical compared to the Kindle. If you read eight or ten books a year, buying them is cheap compared to buying a Kindle. Some of us either borrow books from the library or from each other, so it doesn't make sense to buy a Kindle.

Me: But you spend money on music.

Him: I would rather spend my money on music. I can listen to music while I'm doing something else. But reading a book is a dedicated activity. You can't do something else while you read a book.

Me. You call yourself old-fashioned. Doesn't that strike you as ironic, that a 25-year-old is more old-fashioned than a Kindle-reading fifty or sixty year old man or woman?

Him. [Shrugs] I guess so.

Are you too young for Kindle? The answer is right under our noses - for kids, it's simply too expensive.

Though Kindle is sitting high atop the e-reader heap, a competitor producing a $99.00 device could topple the Goliath, or at least give it a good healthy fight.

RC

A Dedicated Kindlephile Flirts With Rival Device

Joe Wikert, who operates and blogs about all things Kindle on a website called - natch! - Kindleville, has reservations about the device, and he's expressed them in a posting headlined Why Isn't Amazon the 800-Pound Gorilla of eReaders? A great many observers have issues with Kindle, but this Kindlekind earns triple points for candor.

For one thing, asks Wikert, how many Kindles have you seen "in the wild?" meaning on a bus or subway or airplane. "I've been on at least 30 different flights since the original Kindle arrived in November of 2007 and I think I've seen one other person using one on a plane. It's an unfair comparison, but I couldn't even tally the number of iPhones I've seen on those same flights."

He also accuses Amazon of complacency. "It seems every time I turn around someone else is announcing plans for a new reader. Why do I get the impression Amazon isn't hungry and aggressive enough to dominate this space? They seem perfectly content to take the slow and steady path, focusing more on customers with the most disposable income and not the mass market."

So deep is his disillusionment that he openly speaks of transferring his affections to a more satisfying love object.

"I admit I'm down on Amazon right now. I feel like I spent $360 on a Kindle 1 and although I use it every day I don't see growth potential or an upgrade path for it. My iPhone, on the other hand, features a slew of new apps every week, making it even more appealing today than it was yesterday...and who knows about tomorrow? How long will it be before someone creates an e-reader with that sort of sex appeal? Or does it already exist and it's called 'the iPhone'?"

With just a little more kindling Wikert's love affair with the iPhone will burst fully into flame. Does that spell Splitsville for Kindleville? And if so, what will he call his new website? Not iPhoneville.com - the domain is already taken. But it looks like plasticlogicville.com is still available. Grab it, Joe!

RC

Gay Books Stripped by Amazon?

Publisher Weekly reports "A groundswell of outrage, concern and confusion" over a cascade of Twitter messages alleging that Amazon had removed adult titles from sales rankings. A spokesperson for Amazon said that it was a glitch, that there is no policy involved, and it was restoring the rankings.

Out of curiosity, I visited Amazon and checked out Boy Culture, a highly touted gay novel by Matthew Rettenmund. As of 9:25 AM it had no amazon ranking.

It was published by St. Martin's Press. Last time we looked, St. Martin's Press was not reputed to be a notorious purveyor of pornography.

RC

Barnes & Noble Developing Anti-Kindle?

Call it The Swindle? No, that will never do. The Jindal? Not a front-runner. The Tyndale? Actually that's promising. William Tyndale was a 16th century book guy who translated the Bible from Hebrew and Greek, and -- you ready for this? - was "the first to take advantage of the new medium of print, which allowed for its wide distribution," according to Wikipedia. And yes, his name rhymes with Kindle. The fact that he was burned at the stake - well, in those days that was an occupational hazard for people venturing into new media.

These reflections are triggered by news in TheStreet.com that Barnes & Noble is developing an e-book reader to go head to head -- or thumb to thumb - with Amazon's and its Kindle.

It seems logical, given B&N's recent dramatic leap into the digital world with the acquisition of Fictionwise, the world's leading e-book retailer.

Is B&N starting too late? Not necessarily. It's a business truism that early innovators don't necessarily fare as well as those that come in later and go to school on the mistakes of their predecessors. And popular though the Kindle is, few technologists think it's the last word in e-reading devices. Many more are on the way, as we have frequently reported here.

One thing we guarantee: E-Reads will definitely distribute its e-books on the Tyndale.

RC

Good News: Publishing Guy Goes Over to Dark Side

Publishers Weekly reports that David Naggar is joining Amazon to become vice-president of Kindle Content. Naggar, former head of Random House Information and president of Random House's audio group (and son of prominent literary agent Jean Naggar), will “be working with the team to continue building a massive selection of content in the Kindle Store.” Naggar got his digital feet wet as president of a startup called iAmplify.com, described by PW as providing a "subscription-based access to digital and audio content across a number of genres."

Book people should greet this news enthusiastically. Given the love-hate relationship between traditional publishers and Amazon, Naggar's move may help to push the dial a little closer to the "love" position. He brings great savvy, experience and the respect of book industry colleagues to a post that requires all three qualities as Kindle girds for challenges to its early hegemony as the e-reading device of choice. And his special skill-set in audio comes as Amazon licks its wounds after the book and audio industry thwarted its attempt to enable a text-to-voice feature that would have triggered a trade war and, undoubtedly, a major lawsuit.

We don't know what Naggar's mandate is, but if he wants to push that dial to full "Love" position he can start by offering a royalty on used books, one of Amazon's most prosperous business practices but a thorn in the flesh of every right-thinking author and publisher. How about it, David?

Richard Curtis

Welcome Sweet Springtime, We Greet Thee in... Lawsuits? Apple Latest Target

Spring has arrived and lawsuits are pushing their hardy green shoots through the soil everywhere we look. It started last week when we reported that Harlan Ellison is suing Paramount and the Writers Guild of America. Then we learned that Discovery Communications was suing Amazon for patent infringement over the Kindle ("Did Jeff Overlook U.S. Patent Number 7,298,851?"). Today it's a Swiss company called Monec Holding Ltd. and the target is Apple. Did Steve Jobs overlook patent No. 6,335,678? According to an Apple Insider report by Katie Marsal, he may have. She writes:

In a 7-page complaint filed with a Virginia district court Monday, Berne, Switzerland-based Monec Holding Ltd accuses the iPhone maker of patent infringement, unfair trade practices, monopolization, and tortious interference for allegedly treading on its January 2002 patent No. 6,335,678 titled "Electronic device, preferably an electronic book."

Monec claims Apple's distribution of e-book applications violates an early patent filed by the Swiss firm. "Although Monec does not identify the specific eBook reading applications that prompted its lawsuit," writes Marsal, "the complaint was filed just weeks after Apple began distributing Amazon.com's Kindle eBook reader software through the App Store."

Monec's website is unadorned, uninformative, unimaginative and uninteractive but if anyone reading this finds himself in the vicinity of Galgenfeldweg 18 in Berne, Switzerland we'll be most interested to know what their office looks like and how many people work in it.

It's easy to dismiss the actions against Amazon and Apple as nuisance lawsuits but they must be taken seriously. Pundits who brushed off the patent infringement suit brought by a firm called NTP Inc. against BlackBerry vendor Research In Motion Ltd. stopped laughing after the court awarded NTP more than $53 million in damages.

Actually, if anyone has grounds for a lawsuit it's science fiction novelist Ben Bova, author of a novel entitled Cyberbooks. He published it in 1989, long before e-books were a gleam in the eyes of Jeff Bezos or Steve Jobs. Here's the summary: "A futuristic satire on the fate of the publishing industry after the invention of 'cyberbooks', electronic books which eliminate the need for paper, printers, salesmen, distributors and even booksellers." Unfortunately, Bova didn't patent the gadget but wouldn't you imagine that one of the parties in these lawsuits owes him a generous tip for his foresighted concept?

In any event we'll be at ringside watching Amazon and Apple wrestling with their tormentors.

RC

Did Jeff Overlook U.S. Patent Number 7,298,851? Discovery, Saying We Invented E-Reading Device First, Sues Amazon Kindle for Patent Infringement

Publishers Lunch Deluxe, picking up on a story in PRNewswire, reports that Discovery Communications has filed a patent infringement lawsuit alleging that Discovery's founder, John S. Hendricks, invented and patented a Kindle-like e-book delivery system back in the 1990s.

Discovery hasn't sought an injunction, but simply seeks compensation. They have not (yet, at any rate), sued Sony or other e-book device manufacturers or service providers. That includes the inventors of the Rocket Book, the putative mother of all e-books, which has been around for eleven years.

What took Discovery so long to file its suit? That will undoubtedly come out in the wash, so watch these pages for updates.

RC

Why Kindle On The iPhone Matters More Than You May Have Thought

This week, Apple quietly released Amazon's new Kindle application in their iTunes Application Store for the iPhone and iPod Touch as a free download. There was some buzz, but not a lot of amazement from the iPhone community. In the Kindle community, there weren't any big parades, either. But while it might seem superficially like Kindle is just another ebook reader for the iPhone, and one that's not as full featured as Stanza, the Amazon Kindle app is probably more important than the new Kindle 2 for the future of E-Book sales at Amazon. This is a little application that represents the future of E-Books: wirelessly syncing your purchased library across multiple devices, letting you jump from device to device as easily as possible, picking up where you left off every time. And in one day, it opened up Kindle E-Book sales to almost 20 million Apple customers.

The Amazon Kindle iPhone application can read any Kindle E-Book that you've purchased from Amazon. It uses the phone's 3G or Wi-Fi connection to connect with Amazon's "WhisperSync" network services, by using your Amazon login identity and password to look up an inventory of all the Kindle E-Books you've purchased, and it allows you to re-download any or all of them for reading on the iPhone. If you have a Kindle 2, it can synchronize where you left off reading on the Kindle when you pick it up again on your iPhone (and vice versa). iPhone users can buy Kindle E-Books using the Safari browser on their phone, or going to Amazon.com with any other device, and once the book is added to your WhisperSync Amazon E-Book inventory, you can access it on any Kindle or iPhone. And that's the trick we've all been waiting for. Allowing more than one device to keep track of Kindle books and to do reading is an Amazon service that has been a long time coming, but one that's probably going to attract many more customers to Kindle E-Books.

Platforms and Device Multiplicity

This sort of device multiplicity is the heart and soul of many popular "platform" applications, like Twitter or Facebook. User activity takes place not only on a home computer's browser, but at work, in desktop widgets, cell phones, and their netbooks or laptops. People use all sorts of methods to participate in a service, even though the experience changes from device to device. What Amazon is finally acknowledging is that E-Books are a multi-device service and that Kindle is not just a device but an E-Book platform. E-Books may be commodities, but reading is a user habit that has always required a distribution service that anticipates the creative ways readers are looking to acquire new content. Bookstores, libraries, schools, the internet. Amazon used the first Kindle device generation to build their platform's first user base and gently ease them into an E-Book service that will continue to grow.

Restricting E-Book reading to just the Kindle device was important for Amazon initially to create a small niche market of evangelist users, but it was no way to sustain long term growth for E-Book sales when the majority of E-Book readers are experimenting more and more with different platforms. Fictionwise (now a part of Barnes & Noble), who were among the first to create an E-Book service for the iPhone with the eReader software, demonstrated that E-Book platforms are successful because users read their content across many devices, and now Amazon is taking the ball and running with it. In the near future, I expect to see Kindle applications for Google Android phones and maybe even your favorite flavor of operating system (Mac, PC, or Linux).

Is it going to hurt Kindle 2 sales? Probably not. The user experience is still quite different enough on the iPhone to make the Kindle 2 much more attractive for leisurely reading, because of the larger screen size and eye-comfort of Amazon's device. Hopefully, it's going to entice people to trade-up to a Kindle device and keep investing in Kindle formatted E-Books. It's adding value to the brand and every Kindle E-Book purchase.

Growing Pains or Limitations with the Kindle on iPhone

Right now, the Kindle application for iPhone is not as full-featured as the Kindle or Kindle 2, and for good reason. Amazon doesn't want the Kindle on the iPhone to cannibalize Kindle device sales - it's got to encourage Kindle 2 sales by hinting at what you're missing. There's no dictionary look-up, text-to-voice, note-taking, store browsing, and all the other bells and whistles. And the page location (instead of page numbering in the traditional sense) is still hard to decipher for newcomers. But at least there's a scroll bar to fast-forward (albeit imprecisely) around. Quite simply, all you can do is read the text, change font sizes, jump around with a scroll bar or interior bookmarks, and sync. Compared to other E-Book software for the iPhone, this is very anemic. But maybe the most important part of the Amazon platform strategy is that Kindle on iPhone is crippled from reading non-Kindle books, because Amazon does not allow WhisperSync to carry a bookshelf of user created content, or content purchased from other sources. You're only able to read and sync your Kindle E-Books.

In January, I wrote that MobiPocket (owned by Amazon) was missing from the iPhone, even though it could have been a breakthrough, and maybe now we know why it disappeared. It was too threatening to Kindle as a platform. MobiPocket is a format that allows E-Book content to be distributed from sources other than Amazon or MobiPocket, particularly without DRM encryption. With the release of the Kindle 2, Amazon now has too much invested in the Kindle format to risk losing any Kindle compatible E-Book sales to other distributor channels, and so it has to suppress MobiPocket as best it can, or at least not offer them any free rides, if it wants to nurture Kindle E-Books. And the Kindle platform on any device has to stay consistent to this rule. Kindle for iPhone is a lot of what I wanted in a MobiPocket application, particularly WhisperSync, but even though I respect Amazon's attempt to build Kindle E-Books sales, I'm not happy that it prohibits user generated content.

Competing iPhone E-Book apps, particularly Stanza, grow in popularity because they try to be agnostic to any given platform or format. Smart readers don't like to be forced to buy from only one sales channel or stick with just one format. And pirate E-Books are also another reason why "open" E-Book reader software will continue to thrive. Although the Kindle device can read non-DRM MobiPocket files or converted texts, users are responsible for putting these files on their Kindle themselves, using USB or email transfers (or an SD memory card, if you have a first-gen Kindle). Unfortunately, there may be a very good reason Amazon keeps the system relatively difficult for non-DRM books: Amazon would be opening itself to a world of copyright hurt if WhisperSync allowed anyone to upload and store pirated material with Amazon's servers. A policed WhisperSync is very important to build Kindle E-Book sales.

Will there be a Sony Reader on the iPhone?

The competing E-Book reader devices from Sony have a much more open approach to accepting content (ePub, PDF, RTF, etc.), but now Sony will have to be more adept at sharing Sony DRM E-Book content with other devices if it's going to stay competitive with the Kindle platform. What's just as problematic is that the Sony Reader must be physically tethered to computers or memory cards to move files, which make them harder for users to manage their purchased E-Book content, and this makes wireless synchronizing like WhisperSync seem almost magical in comparison. If Sony could build their own E-Book wireless sync service that also allowed non-DRM user content to be hosted in the cloud, they would be a formidable foe to Amazon, but it remains to be seen if they can put those resources together.

The fabled end-of-the-rainbow for any E-Book platform is the ubiquity of all the content (both user generated and publisher sales) to be accessible and synchronized to as many user devices as possible, while preserving a comfortable reading experience with generous perks like note-taking, review tools, some sharing, and bonuses like custom dictionaries and writing tools. Even though it's a slow climb, we're getting there. Now that Amazon is on the iPhone, it finally looks like the biggest distributor is admitting they have the same dream, too.

- Michael Gaudet

In Game of Chicken with Audio Biz, Amazon Swerves

Under pressure from authors, audio publishers and other audio rights-holders, Amazon pulled back from its initiative to convert the texts of Kindle e-books to speech without permission. The company declared that it is

"modifying our systems so that rightsholders can decide on a title-by-title basis whether they want text-to-speech enabled or disabled for any particular title. We have already begun to work on the technical changes required to give authors and publishers that choice. With this new level of control, publishers and authors will be able to decide for themselves whether it is in their commercial interests to
leave text-to-speech enabled."

Amazon did not concede that its provocative act of enabling text-to-speech infringed on anybody's audio rights. In fact it asserted that the "experimental text-to-speech feature is
legal: no copy is made, no derivative work is created, and no performance is being given." That said, "Nevertheless, we strongly believe many rightsholders will be more comfortable with the text-to-speech feature if they are in the driver's seat."

Whether Amazon did or did not have a leg to stand on, the high stakes of a possible rights infringement on the interests of a billion dollar audio industry all but guaranteed litigation. Though many opponents of Amazon's text-to-speech function would prefer to do away with it altogether, they may have to live with the voluntary, book by book nature of Amazon's revised position. Indeed, because of Federal disability mandates requiring the function to be embedded in e-books, a complete termination of text-to-speech might actually be unlawful. For now, calm has descended over Kindle City and Authors Guild and other opponents are withdrawing their tanks to the perimeter.

For background on the dispute you can click on our recent summary, and for details of Amazon's concession, link to cnet's coverage.

RC

If They Can Make the Kindle Smell Like a Book, Maybe She'll Buy One

Danielle Belopotosky is a dedicated "real-book person" but was prepared to keep an open mind as she road-tested the Kindle 2, a variety of Sony readers and some iPhone nouvellement arriveés like the Stanza and Shortcovers. The net result is that she's still a dedicated real-book person, but now maybe a little less so. "I’ve come around on my opposition to e-book. Somewhat," she grudgingly admits in her New York Times e-book survey.

Not surprisingly she devotes most of her attention to the Kindle 2 and echoes many of the positive reviews we recently assembled including our own. But she does have some issues:

The new Kindle is thinner than the original and has a sharper screen with more shades of gray, producing easy-to-read, crisp text in any light. But while the Kindle is nice to look at, it is a pain to navigate. There’s a five-way joystick that you can use to maneuver through menus, but it’s stiff and tough to master. Would a touch screen be too much to ask?

The keyboard lets you add notes to text, but no one is going to want to write a novel of their own using its small plasticky buttons. Also, Amazon’s page numbering system is ridiculous: Instead of “page 23,” you get data such as “location 47-82” and “2%” along the bottom of the screen. After using the Kindle for a week, I still don’t know what all that means.

She likes many things about Sony's PRS-700, especially its touch screen, virtual keyboard, easy page numbering and access to many book websites and digital libraries. Some other functions, especially the annoying difficulties of downloading e-books via cable instead of wirelessly as in the Kindle, got lower marks from Belopotosky.

Check out A Walk Through a Crop of Readers and note what she has to say about the hot-off-the-press Shortcovers.

Despite increased respect for e-books Belopotosky will stand pat with book-books "unless Amazon comes out with a special 'book scented' Kindle." Don't laugh: if Amazon can make a book talk, they can make it smell.

RC

Will You, Won't You, Will You, Won't You, Will You Buy a Kindle?

CrunchGear's John Biggs conducts a debate with himself about whether or not to buy a Kindle. He offers ten reasons pro and ten con, and it's logical to conclude the results are a draw. But every consumer brings different criteria to decisions.

For instance, travelers will put great weight on carrying lots of books in one slim device. (It also helps that the Kindle works well in inclement weather.) Scholars will agree with his criticism that it's terrible for research, reference and student applications ("Expect ebooks to hit colleges in perhaps five years and high schools and grade schools in about seven" Biggs says). For some, cosmetic beauty is a consideration, and the sleek look and feel of the Kindle (v. 2) trumps functionality. For others, such functions as highlighting, bookmarking, dictionary lookup and 16 greyscale shades are paramount.

And then there are those who love the idea that you only need one hand to read on your Kindle. What you do with the other hand was a source of great hilarity when Jeff Bezos appeared on Jon Stewart's The Daily Show to hype the newly released device. For a good smirk, click on Bezos' appearance, and note his laughter, which soars beyond good-natured and approaches the diabolical.

If you're still on the fence about buying a Kindle, read 10 reasons to buy a Kindle 2… and 10 reasons not to and see if it helps you make up your mind. And keep both hands where we can see them.

RC

Kindle 2 Getting Blog Fever: A Round-Up Of Kindle Hype

Yesterday was one of those days when the stars aligned for Amazon's Kindle PR team. All the major tech blogs published multiple articles on the Kindle 2, coinciding with the recent deliveries of the new device into people's homes and offices. And then today, even a few more articles shuffled out of the gate.

The Kindle 2, as pictured dissasembled by iFixit.com

The Kindle 2 has some serious opponents, namely the editors at Gizmodo, who have been eager to take the e-book reader down a peg because it's not yet their dream device, but all press is good press in the end. Here's a round-up of some of the best and most colorful blog writings about the Kindle 2 in the last 2 weeks.

The Kindle 2 at Blogs Round-Up:

Review Matrix of Kindle 2 (USA Today vs. Wired vs. NYT), by Gizmodo, Feb 25th, 2009

Jeff Bezos chats up the Kindle 2 with Jon Stewart, by Engadget, Feb 25th, 2008

Amazon Kindle 2: a full review, by CNET’s Crave Blog, Feb 25th, 2009

10 reasons to buy a Kindle 2… and 10 reasons not to, by TechCrunch, Feb 25th, 2009

Kindle 2 Unboxing and Hands-On, by Engadget, Feb. 24th, 2009

Kindle 2 Stripped Naked; Chip Is Faster Than iPhone's, by Wired, Feb. 24th, 2009

Designing the Kindle 2, by CNET’s Crave Blog, Feb 24th, 2009

What's the average age of Kindle owners?, by CNET’s Crave Blog, Feb 24th, 2009

Kindle 2 dissected, found to contain space for a SIM card, by iFixit, Feb. 24th, 2009

Kindle's text to speech feature voiced by "Tom" Cruise?, by Engadget, Feb. 20th, 2009

Showdown: Kindle 2 vs. Sony Reader, by Wired, Feb. 9th, 2009

And more from Gizmodo’s War Against The Kindle 2:

First Kindle 2 Destroyed, Showing Extended Warranty May Be Worth It, by Gizmodo, Feb 25th, 2009

Giz Explains: Why There Isn't a Perfect Ebook Reader, by Gizmodo, Feb 12th, 2009

Why Kindle 2 Isn't a Big Step Forward For Voracious Readers, by Gizmodo, Feb 9th, 2009

- Michael Gaudet

Listen to Umless, Erless Kindle Audio, and Learn why Authors Guild Prez is Pissed

The New York Times carries an op-ed article by Authors Guild president Roy Blount Jr. with the provocative title The Kindle Swindle? The Guild has attacked Amazon over the Kindle feature enabling readers to listen to the texts of their Kindle books read by a computer voice.

The Guild's position is that Amazon is not paying royalties for the text-to-speech versions, and that the Kindle may be infringing on audio rights reserved to authors, book publishers, or legitimate audio companies. E-Reads' Michael Gaudet has commented extensively on the controversy and strongly recommends that interested parties sort this out through discussion and negotiation. If they don't, this is a lawsuit waiting to happen. The audio business is a billion dollar one, a sum worth going to court over.

"You may be thinking." writes Blount, "that no automated read-aloud function can compete with the dulcet resonance of Jim Dale reading 'Harry Potter' or of authors, ahem, reading themselves. But the voices of Kindle 2 are quite listenable. There’s even a male version and a female version...And that sort of technology is improving all the time. I.B.M. has patented a computerized voice that is said to be almost indistinguishable from human ones. This voice is programmed to include 'ums,' 'ers' and sighs, to cough for attention, even to 'shhh' when interrupted."

Author Guild has released a demo of a Kindle audio reading of Lincoln's Gettysburg Address. Any ums? Any ers? Judge for yourself, but if I'm Abe Lincoln I'm on the horn with my lawyer faster than you can say Jeff Bezos.

RC

The Drama of Audio Rights

With the Authors Guild getting angry at Amazon's Kindle 2 for read-aloud technology (see their statement), many readers (and writers like Neil Gaiman) are wondering how a robotic-sounding voice reading is an infringement on the rights of a published book. And if that's an issue that requires prevention, then why haven't other non-professional readings been restricted (like when you read a bedtime story to your kids), and could they be in the future? And what about the sight-disabled readers and their legal right to access text in this manner?

I seriously doubt the Authors Guild is going to sue moms for reading Dr. Seuss, or sue the blind, or sue publishers for allowing that to occur. What's of concern is who's making money from the added value of the reading performance, whether it's a digital voice or not, and the Authors Guild is trying to make sure that a line is drawn in the sand now before an income stream (audio "performance" rights) dries up, because new technology often gives distributors a chance to make extra money before the author realizes how valuable it is.

Decades ago, audio rights were pretty unpopular. They were sorted into many publishers' contracts as ancillary, or completely left out - that is to say, unless it looked profitable for more than just rare radio adaptations. (No one really even tried to distribute novels performed and recorded to LP records–who wanted to flip a record every 30 minutes for a ten hour reading?) What changed all this was the age of the cassette tape: car radios with cassette players and the Sony Walkman. With the new convenient medium that lent itself well to long listening sessions, there was a new market. And publishers eventually started making extra money from the potentially lucrative books-on-tape edition of their texts, often without having paid authors any additional advance for the audio rights. This was good gravy for the publishers when the audiobook was a hit, even though the books-on-tape market was relatively tiny compared to book sales. By the time that CD technology increased the quality and cost efficiency per unit further, authors and agents already knew it was worthwhile to negotiate better terms and payments for the audio rights, to make sure that this commodity was now compensating everyone properly. In some cases, the rights were starting to be reserved by the agents so that they could be sold to the growing field of specialty audiobook publishers. In the last 8 years, MP3 file distribution of these recordings (especially through iTunes or Audible) has only made the market more competitive. So, unlike 40 years ago, today everyone is aware that the audio rights can make money when handled properly.

The primary distinction of the audio rights is not so much that a real human voice is involved and compensated; it's more that a publisher consented reading or "performance" of the book has controlled distribution (each copy is accounted for), and that the proportionate value of this performance makes money for the publisher and author. This is why parents reading to their kids isn't an issue, or even teachers reading in a classroom. In those cases, the average reader is adding a negligable value (commercially speaking) to the book by speaking it aloud themselves, and that's fair use. Now if that reader wants to go on stage (or the web) and sell their reading performance without publisher consent, it's another story.

With computer assisted reading, the value added is a bit more contentious. First of all, there are disabled readers who require text to be spoken aloud, and digital voice reading is a welcome technology for them. This service is valuable to those people, sometimes at a premium. However, the typical expectation is that disabled readers are adding the value themselves through assistant technology, and that they haven't paid inclusively for that assistance when they purchased the text. For example, you don't pay an additional $1 for read-aloud service offered to you from the book you've bought. You paid $357 for the Kindle 2, which adds that service to the book.

The cost of the digital voice application is a moot point to publishers, agents, and authors. What worries them is that in the future the voice applications are going dramatize the text too well, and that the additional exceptional value isn't compensated to them in any way under current contracts. Amazon's Kindle 2 was developed with the read-aloud function to add value not only to the Kindle, but to make the books themselves a better commodity–to sell more books.

Picture the future, when you've got an e-book of the latest bestseller and you ask your little e-book device to read it to you. Right in front of you pops up a digital hologram of John Houseman (licensed to the device by the actor's estate), and he proceeds to read the book to you in his nuanced dramatic voice (recreated through excellent programming). He reads Chapter 4 to you while you prepare dinner in the kitchen. He sits in the passenger seat, delivering chapter 14 as you commute to work the next day. This is essentially the benefit of read-aloud, although the Kindle 2 or Apple's Text-To-Speech isn't quite that far advanced yet. However, I'm sure you can see that a good digital voice has the future potential to add a lot of value to the reading, enough to give today's properly recorded audio books something to worry about.

The issue is that this value added isn't accounted for in current distribution contracts between the publisher and e-book retailers like Amazon, and potential publisher revenue might be getting lost (or cheated away from the future), and that's what rankles the Authors Guild. I'm not a fan of sword waiving tactics, but there needs to be new descriptive contract language that pertains to the read-aloud service. I'm not sure how accounting for the read-aloud service in financial terms can be done until there's a proven track record for consumer habits with this technology. Those numbers aren't available yet. But Amazon and other companies are investing in the technology more and more, so someone sees there's money to be made there in the future.

In many ways, it's an issue not unlike protecting song performance rights so that companies like YouTube can't make money off "free" performances of copyrighted material. (I'm not sure an amateur 8 year-old singing Miley Cyrus songs for YouTube has much value, but aggregate all the entertainment from thousands of such videos and it starts to paint a different picture until it appears obvious the songwriter is due some small increment of YouTube's revenue from distributing those clips.) Publishers don't want to chase after innocent people, but they also don't want to encourage wholesale ripoffs with loose legal terms. So maybe it isn't a bad idea to start new discussions with all the major players now about the audio rights for e-books and bring the agenda to Amazon's Jeff Bezos or a company like Google. I'm looking forward to having David Niven read me Sherlock Holmes stories on my Kindle 4 and I'd hate for anything to stand in the way.

- Michael Gaudet

Jeff Bezos and Stephen King announce the new Kindle 2

The Morgan Library is the most museum-like library in New York City, and so it was fitting that Amazon's Jeff Bezos (pictured above) took the stage there this morning to announce the latest version of his book antiquifier known as the Kindle. His grand vision, often repeated throughout the hour long presentation, is that Amazon wants to see nothing less than every book ever published available to all Kindle owners in less than 60 seconds. Is the Kindle 2 going to be the device with enough popularity to create such a seismic shift in readers' habits that the world of publishing bends its back to make this happen? Well, maybe. Just maybe. Apparently e-book sales have jumped to 10% of all Amazon book sales in just one year thanks to the first device, after years of staying well below the radar, and now Amazon wants us all to see the writing on the, err, Kindle. I expect word of mouth and adoption to be stronger this time around because the product deserves it.

The new Kindle 2 ($357 and shipping Feb. 24th) offers enough improvement from the original that I can now recommend it strongly to friends and family:

• It has 3G wireless for faster download speed (especially for browsing the Kindle store).
• It uses Amazon's latest 'Whispersync' service to keep your Kindle's books and notes backed up on the internet cloud and synchronized to other Kindle devices you may own.
• Its shape is now thinner than an iPhone (less than half an inch thick) and perfectly symmetrical, with rounded corners and softer buttons.
• The latest e-ink screen redraws slightly faster (20% over the original) and now does 16 shades of gray instead of just 4.
• 2GB of built-in storage.
• Charging via USB mini-port (everyone has these cables by now).
  
• It has longer battery life (now up to two weeks between recharges).
• It has implemented a pleasant text-to-speech computer voice reader for any text (it's better than Stephen Hawking).
• It has a new 5-way button navigation instead of the old up-and-down wheel.

Now, none of these things represent bleeding edge technology and are probably a little more anemic than what most of us dream about in a best possible e-book device. For example, any page-turning lag is still annoying (especially in the age when Google has taught us that people can't bother to wait even 0.5 seconds more than they have to for a page to load). 3G service isn't going to make a huge difference in speed for most people downloading new books that are typically 900K. And grayscale screens? Don't even get me started. But what Amazon is offering that makes the Kindle 2 so appealing is their dedication to the book delivery service. Jeff Bezos wants the device to disappear in your hands while you read it, because no one pays attention to the paper or binding of a book when they get wrapped up in the story. They don't want distractions. So, the device itself is really just something meant to be unpretentious, transient, and replaceable. What they are selling is access to published books in the most convenient manner yet possible. Amazon is dedicated to helping readers find and download books quickly, and the Kindle 2 serves that purpose better than anything else. And for that I think they have a winner.

What makes the Kindle 2 experience more likely to win people over is that Amazon still seems to be letting the Kindle ride its tide of popularity instead of hard selling customers. More and more e-book content is being converted and added to the Kindle online store every month. The incremental technical improvements in the Kindle 2 are the type that give consumers confidence that the company has a long term investment in their satisfaction, and that more improvements will surely come downstream. Original Kindle owners are even being given a two day opportunity to jump to the head of the queue for pre-ordering the Kindle 2, and what better way to spread the word than allow the converted the first opportunity to evangelize. Instead of a discount or trade-ins, this means hand-me-down first-generation Kindles are going to be circulating amongst friends and families.

Stephen King, at Jeff's invitation and previewing his new Kindle exclusive short story "Ur," read a passage where students confront a teacher who has never seen a Kindle before. The teacher likes to think of himself as "old school" and defends the tactile properties of the trusty paper book, such as the musty smell acquired with age. The Kindle-familiar students counter that the words are still the same, no matter what old school or new school device is being used to read them. And that's the epiphany that many readers are similarly experiencing thanks to e-books. We want ideas and stories foremost, and the digital experience is helping us get the access to texts that generations before us never had unless they lived with a very deep library. Jeff and Stephen have understood this for years. They've both been trying to get more people interested in the digital distribution of books for as long as the e-book industry has been around and they can feel rightfully proud that the Kindle phenomenon is really taking off.

- Michael Gaudet

Smartphones About to Get 1.5 Million Books Smarter

If the New York City subway system has no practical means of delivering cell phone service in its tunnels, why are so many subway travelers gazing so intently at their cell phone screens? In all likelihood they're reading one of the 1.5 million books that Google has just made available for download into such devices as the iPhone and the T-Mobile G1. The books are all public domain titles, meaning their copyright protection has lapsed. This according to Miguel Helft of the New York Times.

Amazon, too, is adapting its Kindle e-book library for distribution on mobile phones. Though the Kindle selection at about 230,000 titles is a fraction of Google's, Helft thinks that "the public domain books available through Google Book Search are not likely to be the most popular titles, as they are older books for which copyrights have expired. In contrast, the Kindle library includes scores of newly released books, including many current best sellers."

I'm sure many bibliophiles will take passionate exception to Helft's suggestion that newer is better, and it will be fascinating to see how many obscure titles are downloaded - and which ones.3

Google's scanning initiative drew a lot of fire, indeed a major lawsuit. The suit is behind us (settled), and we can look forward to counting 1.5 million blessings as this flood of displaced literature settles over us like a delicious blanket.

In his statement about the lawsuit settlement, Sergey Brin, co-founder and president of technology at Google declared,

“Google's mission is to organize the world's information and make it universally accessible and useful. Today, together with the authors, publishers, and libraries, we have been able to make a great leap in this endeavor. While this agreement is a real win-win for all of us, the real victors are all the readers. The tremendous wealth of knowledge that lies within the books of the world will now be at their fingertips.”

RC

Counting Jelly Beans in a Jar - Easy. Counting Kindles Sold, Your Guess is as Good as Citigroup's

It's hard to understand why Amazon and Sony haven't shared information, or better yet boasted, about sales of their respective e-book readers. The book business, the music business, the movie business, all proudly parade units sold, downloads, website visits, box office receipts, and other data to impress the public, and even if you cut the hyped figures in half, disclosure of sales inspires confidence in one's products. So why do we have to do everything but hack confidential archives to find out if the Kindle and the eReader are flying or flopping?

Engadget's Donald Melanson reports that a Citigroup analyst named Mark Mahaney found a clever way to track down Kindle sales. Mahaney reviewed Amazon's deal with Sprint and concluded that Amazon sold about 500,000 Kindles in 2008. Kindle, it seems, uses Sprint Nextel network for transmitting books to customers.

Could be. Or couldn't be. Given that Citigroup these days doesn't even know how much money it has in its own vaults, one must take its Kindle count with a major grain of salt.

The hunt for a Kindle number has been as intense as it has been futile. Back in August TechCrunch's Erick Schonfeld bragged, "We know how many Kindles Amazon has sold. " He put the number at 240,000.

Even Amazon itself got into the act, sponsoring a chat on the subject that was slightly less scientific than voodoo.

Maybe Amazon is going to reveal sales figures at its February 9th press conference. Talk about secrecy, none of our intelligence operatives has been able to penetrate the reason why book and tech industry leaders have been convened to the Morgan Library for an announcement. What good are secrets if people actually keep them?

RC

Amazon "Mystery" Announcement Slated for Feb 9

Back in October E-Reads Production Manager Michael Gaudet speculated on rumors that the second generation of Kindle was in gestation, and the proof was in some "leaked" spy shots of the device.

Today a number of publishing and e-book executives received invitations from Amazon to attend a press conference at New York City's prestigious Morgan Library.

What could the announcement be? Perhaps...

1. Jeff Bezos, head of Amazon, has been named the Obama administration's Car Czar;
2. Amazon envoys have brokered a lasting peace treaty in the Middle East;
3. Amazon has acquired Random House, Simon & Schuster, HarperCollins, Macmillan Group, and Hachette for $137.50.

Gizmodo thinks that "Amazon's new-and-improved Kindle could soon see the light of day." That would make the most sense.

Amazon's pre-announcement announcement comes on the heels of the firm's notification of publishers and authors that it will cease offering e-books in the Microsoft Reader and Adobe e-book formats. "In the future, the online retailer says it plans to offer only e-books in the Kindle format (for wireless download to its Kindle reading device) and the Mobipocket format, both of which are owned by Amazon," writes Calvin Read in Publishers Weekly. The move won't have much practical effect. As Reid points out,

"Amazon did not specify how long the Adobe PDF and Microsoft formats will continue to be available. A search of the site turns up mostly technical works and e-docs in PDF form and very little in the Microsoft format. Amazon offers tens of thousands of titles in the Mobipocket e-book reader software, which allows e-books to be read on a wide variety of handheld mobile devices. The company said it will now be urging customers to buy e-books through Mobipocket. Amazon also sells more than 200,000 titles for use on the Kindle."

E-Reads will be in the throng at the Morgan, thumbs poised over the Send key to release the announcement.

RC

For the First Time, the $B-Word is Used to Describe E-Book Future

Jeff Segal and Rob Cox, blogging on the breakingviews website, crunched some breathtaking numbers in an effort to project a valuation for Amazon's Kindle. They projected clear into the stratosphere (or "blue sky", as quixotic speculations are often referred to), suggesting that billions of dollars is by no means an unrealistic number.

You can trace their thinking on the breakingviews.com blog, but in essence they calculated that out of Amazon's $24 billion market capitalization, "$9 billion of value is apparently unaccounted for. Could that be the 'Kindle premium'?"

Segal and Cox assume that Kindle sales will expand as exponentially as iPods have done, which means sale of over two million Kindles in 2009. They further assume that Kindle owners would then buy two $10 books every month. These are assumptions that Don Quixote himself would shake his head over. If only we loved books a fraction as much as we love music!

But then Segal and Cox drop an intriguing number and the laughter stops. Pointing out that Amazon is developing a student version of the Kindle, they wonder if that could be "an attempt to snag part of the $5.5 billion annual United States college textbook market." Now you're talking, gentlemen. The student market is ripe for the E-Book Revolution, and a ten-digit revenue projection is completely in the realm of possibility.

But - there's another whopper of an assumption here, namely that is that Kindle is the only dog in the hunt. Knowing that a lot of big, well heeled companies - Apple for instance - are developing tablet-sized readers for the educational market, Amazon will have to produce a killer gadget to realize the kind of profits being bandied about.

For that reason I wouldn't be too quick to propose putting Jeff Bezos's picture on the billion dollar bill. But it certainly quickens the heartbeat to hear the B-word kicked around.

RC

Hand-Wringing Over Used Books While New-Book Industry Teeters Over the Brink

The New York Times's David Streitfeld recently beat his breast so hard, the thumping reverberated throughout the book publishing's trade journals and blogs. In an article called Bargain Hunting for Books, and Feeling Sheepish About It, he expressed guilt feelings about buying used books.

...it’s all the fault of people like myself, who increasingly use the Internet both to buy books and later, after their value to us is gone, sell them. This is not about Amazon peddling new books at discounted prices, which has been a factor in the book business for a decade, but about the rise of a worldwide network of amateurs who sell books from their homes or, if they’re lazy like me, in partnership with an Internet dealer who does all the work for a chunk of the proceeds.

Since Amazon's used-book feature has been in place for years, and indeed six years ago Streitfeld himself wrote about it (Authors, Publishers Protest Amazon’s New Strategy for Selling Used Books), it's a little too late for Mea Culpas. But Streitfeld does raise some important issues when he asks, "...where do I want that money to go? To my local community via a bookstore? To the publisher? To the author?"

The first thing we need to get clear is that money for used books has never gone to authors. There are some enlightened lands where royalties are paid to authors when their books are checked out of a library. Otherwise, authors are not exempted from the cruel fact that the secondary market for artistic product leaves the original creators out in the cold. Authors may take what comfort they can from knowing that someone out there thought enough of their books to buy them used. But unless they're saints, that comfort will be more than offset by the realization that their books were resold for as little as one penny, a fraction of what the bookseller, Amazon and UPS made on freight and handling charges.

Nor do publishers participate in the proceeds of used-book sales. Streitfeld's 2000 article acknowledged the bellows of anguish from publishers about being cut out of the loop.

Local community bookstores? They don't realize much by way of profit from used books, either. Major booksellers like Olsson's, Robin's, and Powell's have either gone out of business or are contemplating it. Wonder Book and Video, a major firm in the field, is fighting to stay competitive. And, though described as one of the great used-book stores in the country, New York City's Strand closed its Annex in the Financial District in September of 2008. Is anybody making money in used books? Think about this: a month before Strand shut its Annex, Amazon announced it had bought Abebooks, a major used-book purveyor.

As I say, it's a little late to lament the ceding of the used-book business to Amazon. The game is pretty much over. Jeff Bezos, the company's founder, beams with pride about the centralization of a process that, for all its serendipitous delights, was chaotic, labor- and real estate-intensive, and frequently just plain crazy. To hear him tell it, Amazon is rescuing a dying business and bringing service and professionalism to it, to say nothing of increasing literacy. Reading Bezos's defense of the practice - written six years ago - is a little like listening to Mephistopheles praising the virtues of immortality. But you have to pay the Devil his due, and I think we should.

Feeling sheepish about helping to fatten Amazon's bank account? Time to get over it. Big as the used-book issue is, we have far greater fish to fry, like how our poor dear broken old publishing industry is going to go on producing new books.

Richard Curtis

Nine Gazillion Pound Gorilla - 2008 Holiday Sales Best Ever

Amazon reports that the 2008 holiday season was the online retailer's historic best. On its peak day (December 15th), the retailer shipped 5.6 million items.

Amazon did not break out book sales, so we don't yet have a clear idea of how they compare to those of traditional bookstores and store chains like Barnes & Noble, Borders and Books-A-Million. Amazon retails a wide variety of nonbook products, and we know from other sources that among the items moving briskly out of their warehouses were Nintendo Wii, Samsung's 52-inch LCD HDTV, the Apple iPod touch and the Blokus board game.

Amazon is a key bellweather for the emerging digital retail business model, and the weathervane this year has pointed to fair weather for etailers. Worries arising from the economic crisis have had traditional retailers on edge, and a great many brick and mortar stores slashed prices to the bone, causing a drop in overall holiday spending, according to a credit card transaction tracking outfit. If some of those stores were booksellers, it will tell us a lot about book-buying patterns.

In the absence of hard trends, I'm putting my money on the Nine Gazillion Pound Gorilla.

RC

An Amazon Mole Uncovers a Grinch

London's Sunday Times carries a story asserting that Amazon's UK management is making its staff work seven days a week or else. How do they know? It seems they planted an undercover reporter with co.uk after a temp ratted the employer out.

According to the story,

The reporter spent seven working days at Amazon’s warehouse in Bedfordshire as a packer after signing up with Quest Employment, an agency based in Northampton that supplies it with temporary staff. The reporter found that the company refuses to allow sick leave, even if the worker has a legitimate doctor’s note; sets quotas for the number of items to be picked or packed in an hour that even a manager described as “ridiculous”; allows only one break of 15 minutes and another of 20 minutes per eight-hour shift, with permission needed to go to the toilet.

Why employees need to go to the toilet was not made clear by the Times.

RC

An Open Letter to Jeff Bezos

Dear Jeff (if I may):

I congratulate you on the honor that Publishers Weekly has bestowed on you. It is completely well deserved if not long overdue. Amazon.com is a brilliantly conceived and managed company that introduced a revolutionary paradigm, one that has both exalted the value of a tangible product, the book, and at the same time exposed the vulnerabilities of an industry built on that product. We who work in that industry are keenly aware that we are denizens of an old world that is rapidly giving way to the virtual one represented by the efficient electronic delivery of information and merchandise. Despite its flaws and problems, however, this aging book culture represents the very best values of human civilization. I know you know this. In statements you have made you have displayed a love of books for their own sake, sensitivity to those who write and produce them, and respect for those who buy and read them.

Because, like any revolutionary paradigm, Amazon.com crosses borders that for so long have been considered rigid and inviolable, it has sometimes stepped on the toes of authors, publishers, and booksellers. Your justification for doing so is that some collateral damage is unavoidable in the creation of a new world. I don't entirely disagree with that.

But it is my hope that as you build on your success you remain aware that you possess a privilege given to very few people in any given era and hold many destinies in your hands.

I urge you to use this responsibility wisely.

Richard Curtis

Jeff Bezos "Person of the Year"? How About Person of the Last Fourteen?

Jeff Bezos, founder of Amazon.com, a company publishers and booksellers love to hate and hate to love, has been named Publishers Weekly's Person of the Year. The announcement comes with a profile by PW's Jim Milliot.

The past week has been a kind of High Holy Days for the trade publishing industry, offering all who work in it, from writers to agents to publishers to booksellers, an opportunity to reflect on how the industry has gone wrong, atone for our complacency, and resolve to create a better world than the one lying in shambles at our feet. If you don't know where to begin, read Bezos's pithy quotes and realize that the answers to these questions have all been under our noses for the fourteen years of Amazon.com's existence. No one is saying Amazon is THE answer, but its business model so far superior to the existing one that a visitor from another world would consider pre-Amazon and post-Amazon two entirely different species.

Jeff Bezos deserves every honor accorded to him, and in a separate post I have addressed an open letter to him. Meanwhile, below are a few excerpts from Milliot's article:

Despite, or perhaps because of, Amazon’s success, many publishers have a love-hate relationship with the company. They love the units that Amazon can move, but hate its monopolistic position. There is also some fear among publishers that Amazon’s dominance as a bookseller, together with its growing ability to publish original content, will turn one of their biggest customers into their biggest competitor.But Bezos says any such worries are unfounded. “I’m not sure we have any skills per se to be a content originator,” he says. “What would we do differently [than publishers]? Why would we be better at it? It’s a well-served industry."

Among some of Amazon’s other controversial tactics are the selling of used books on the Amazon site and the launch of the Kindle. While many publishers and authors contend that used books hurt sales of new titles, Bezos insists that making used books available through Amazon simply makes the sale of used books, which Bezos surmises has been around forever, more efficient. “Every time you make something easier to buy, you are going to [sell] more of it,” Bezos says.

Still, Bezos is convinced that the digital future will be better for the book industry. What digital publishing will ultimately mean, Bezos says, is that “you are never out of stock, don’t have to guess at print runs, and there will be no returns.” In that utopia, publishers will sell books at lower prices, but move more units, resulting in higher revenue, Bezos predicts. But equally important for Bezos, the evolution to digital publishing will allow the book to compete with other “attractive media forms.” One digital approach that Bezos is not enamored of is reading book-length narrative accompanied by advertising, a strategy that Google could follow. “I’m very skeptical of advertising as a good [business] model for long-form narrative,” Bezos says.

RC

The Wii and the Kindle: Holiday Shortages By Design?

For the last year, the Kindle has been quickly selling out of its limited production runs, thanks in no small part to endorsements from Oprah (NYTimes: "Will Kindle get an Oprah Bump?") and countless excellent reviews in magazines and online. The Kindle is as much a status gift to adults this year as the iPod was 6 years ago to teenagers.

Jeff Bezos and Amazon's Heather Huntoon have claimed that the Kindle manufacturing end is doing their best to keep up with demand, while at the same time no firm numbers are being released to the media for us to see just how many units comprise a production run or how many Kindles there are in the wild (NYPost: "Amazon Hope to Re-Kindle Sales After Supplies Run Out"). We have to believe their nebulous shortages are the result of a happy accident: they underestimated the popularity of a hit product. And right now, 3 weeks before Christmas, the Kindle is back-ordered at Amazon until February (E-Reads: "Panic in Kindle Park"). In a season where most companies want to stock as many of their popular units as possible into their retail channels, Amazon is proudly claiming to have completely sold out of their season's stock a whole month early. We read this and believe it must be a hot item, right? And so the status buzz gets perpetuated even more. However, I have my suspicions that this is orchestrated for a crescendo sales effect, similar to the old Broadway adage "keep 'em wanting more." Aka. Supply and Demand. Not that I blame Amazon for manipulative tactics, because these moves just happen to be part of a de rigueur consumer technology marketing technique perfected by successful companies like Nintendo and Apple. I call it "the shortage."

For example, in 2006 Nintendo released their Wii gaming system in the U.S. in such short supply it sold out instantly at retailers lucky enough to get any units around Christmas time. The very same thing happened to the Wii a year later for Christmas 2007, even though by then, after 12 months of sales, Nintendo was surely aware from its metrics that the limited availability had actually increased consumer awareness and fueled the desire for plenty of consumers who wanted to get their hands on a hit product. Nintendo CEO Reggie Fils-Aime even held a press conference (Gamespot: "Nintendo, GameStop address Wii shortage") to let the media know that they were doing everything they could to produce enough Wii units to meet demand, but that it was not going to be enough: "There was no ability for us to stockpile systems in the summer for the holiday rush." Nintendo has always been adamant they've always manufactured the Wii at peak possible volumes, and that they'd never strategically limit supply to increase demand. The best they can do is make 1.8 million units a month, with a 5 month lead up time (Brandcurve: "Wii Shortage: Manufactured or Real?"), which are the kind of numbers that CEO's don't usually get embarrassed about. Christmas 2008 promises to be the same story (Forevergeek: "Wii shortage this holiday season faced by US shoppers").

The Wii stands out as an underdog gaming console in a very competitive arena. In 2006, the Xbox 360 and Playstation 3 were new systems with more features than the Wii, but the Wii's advantage was that it had a lower price and an innovative, wireless motion sensitive joystick (the Wiimote, pictured above) which attracted families and gamers looking for new experiences. It was never expected to be a sales leader, but Nintendo played their cards conservatively and the Wii became the little console that could, because word of mouth created consumer demand that couldn't be satiated quickly. By the summer of 2007, Apple was ready to try a similar conservative move with the release of the iPhone, and they hoped word of mouth about shortages would create magic, too.

Apple announced the iPhone in January of 2007, six months before it would be available in the sales channel. The pre-sale buzz on blogs created a nickname for the iPhone: the Jesus phone (CNet "Can the iPhone live up to the hype?"). When the iPhone finally hit AT&T and Apple stores in late June '07, there were line ups like no one had ever seen before for a handheld gadget. It was a blockbuster event. People camped out a whole week in advance at some Apple stores to secure a place in line to be among the first with an iPhone. As fast as Apple could manufacture and ship them to the U.S., the iPhone's demand outpaced the delivery and all throughout the summer and into the fall, the status of the iPhone was secured for those lucky few who managed to find one. Again, like Nintendo, Apple quickly waved its hands to get attention and tell everyone that the limited availability was the byproduct of a slow manufacturing process that takes months and months to ramp up. With the iPhone 3G, a year later, Apple experienced the same availability problems (Techcrunch: "Foxconn Building 800,000 iPhones A Week"), which in turn spiked demand again (Engadget: "iPhone Lines Form at Apple Flagships" - pictured above).

How can we not be skeptical about a company's claim that they are making as many units as possible when manufacturing is still lagging behind long after a product demonstrates its demand in the marketplace, sometimes for well over a year or two? Why does it continue to take so long? Clearly, someone is making the choice to conservatively manufacture units so that the life-cycle of the product can be maintained over a longer period, which means more sales overall.

The shortage gambit is that you don't flood the market too soon and that the sales you lose due to lack of availability get picked up down the road because the product maintains its caché longer in the marketplace. A product can have two years or more of great sales (like the Wii) instead of just one hot season followed by backlash. The shortage requires a delicate balance of just enough available units so that once demand rises, sales don't drop precipitously once units are easier to come by. Every parent shopping for the Christmas toy of the year knows that by March stores are practically giving them away. Sellers of limited editions also know this to be true: the value drops when it's too easy to come by.

So, is the Kindle just a lucky tech product that won the sales jackpot because of word of mouth/buzz and its limited availability cult status? That definitely has something to do with it. But I'll bet the Kindle is a long term product that Amazon doesn't want to jump the shark too early and they're plotting this very carefully. The whole publishing world benefits from Amazon taking this long-term status object approach, because e-book sales are the growth area of the book industry, and we should all support any marketing that whets readers' appetites for digital content, even if it's an artificial shortage. The long haul is what counts.

- Michael Gaudet

Panic in Kindle Park!

Two little words may screw up Christmas for a lot of shoppers who thought they knew just what to buy for the person who has everything:

SOLD OUT!

But those are the two little words on the Kindle page of amazon.com's website. The announcement in full:

Due to heavy customer demand, Kindle is sold out. Please ORDER KINDLE NOW to reserve your place in line. We prioritize orders on a first come, first served basis. This item will arrive after December 24. Note that Kindles cannot currently be sold or shipped to customers living outside of the U.S.

Amazon expects a new batch in eleven to thirteen weeks, meaning end of February or sometime in March, and gift wrapping is an option. Just in time to give a Kindle for Foot Health Month. Go on Amazon, take a number and get in line.

If you think you will absolutely die if you can't have your Kindle fix before then, Gizmodo reports that you can get a refurbished one.

This shortage plays up speculation that Amazon may be letting inventory run out in anticipation of the release of the long-awaited Kindle 2.0, which Kindlistas have pegged at Q-1 of the coming year. Common sense suggests that no sensible business would deliberately plan a shortfall of a hot seller in time for the biggest buying month of the year. So let's be generous and say that Amazon simply underestimated demand. Probably the only manufacturer that did in this Season of Surpluses.

RC

Kindle 2 Rumors On Again: Where There's Kindling There's Fire

If Oprah nearly lost it over v. 1 of the Kindle, it's hard to imagine what she'll do when she holds v. 2 in her hands. Though Amazon has thrown cold water on rumors, they just don't go away. TechCrunch.com quotes "Our sources" to confirm that the long awaited, long debated second version of the Kindle will be released early in the coming year.

"Our sources" is not exactly the kind of collateral you can take to the bank to borrow against your mortgage. But it actually does make sense. We've reported on serious development and actual announcements of competitors, especially in the area of tablet-sized handhelds suitable for students. Jeff Bezos may be hearing those footsteps

So, for what it's worth, TechCrunch.com's somewhat ethereal sources say Kindle 2 is tentatively scheduled to go on sale in “early next quarter.”

RC

Amazon Attacks Wrap Rage

I've been suffering from Wrap Rage for years but didn't know there was a name for it, or how large the community of sufferers is. I do have a tool box filled with shears, box cutters, awls, pliers, protective gloves and other gear I commonly engage to remove the plastic bubble from any one of a thousand consumer products, especially electronic appliances. I also have scars, stitches, bloodstained clothing and other evidence of those tools' failure to open clamshell packages. Finally, over years of struggling with modern packaging I have developed a repertoire of oaths that would impress the most hard-bitten Marine.

Thus it was with a huge sigh of relief that I opened my Amazon.com page today to discover that the company has launched an initiative to combat Wrap Rage and provide "Frustration-Free Packaging." Amazon has furnished a video and a page devoted to stories submitted by Wrap Rage victims.

All hail Amazon for identifying a huge, wasteful, dangerous practice and taking proactive measures to reverse it. If there's a Nobel Price for a practical solution whose time has come, Amazon gets my vote.

RC

Oprah's Kindle: "Absolutely my new favorite thing in the world."

Telling viewers that a gift of a Kindle changed her life this past summer, Oprah Winfrey gave a huge endorsement to Amazon's e-reading device in front of God and everybody. Well, maybe not God, but Jeff Bezos, who appeared with her on the program.

For viewers intimidated by the Kindle's list price, her website is offering a promotion knocking $50.00 off the purchase price through Friday, October 31st. That happens to be Halloween, but this is all treat and no trick.

Check it out.

RC

While There's No New Kindle Until Next Year, Sony Goes To Europe

The excitement for the next generation Kindle, fueled by lots of speculation at Wired.com, was quickly doused with some cold, wet reality from Amazon spokesman Craig Berman. Even though he didn't deny Frog Design were up to something special for the Kindle 2.0, he's quoted as saying "a new version will come out sometime next year at the earliest," in a recent interview with Dow Jones.

So, that leaves another key player in the ebook device market, Sony, some nice wiggle room in the months leading up to the holiday season. Sony has yet to make any announcements about what might be coming down the pipe, but they have just started expanding into Europe, most notably by partnering with Waterstone's, one of the UK's biggest book retailers.

From September 2008 onwards Waterstone’s will be selling the Reader itself in over 200 of their High Street bookshops. And the product is available to pre-order for September delivery now via their online store. - From Sony's Website, here.

It's very likely that this is just the tip of the iceberg for Sony's competitive march against the Kindle. Of course, E-Reads wishes them both the best of success, so we're currently prepping many more titles to be released in both Kindle format through Amazon and as Sony ebooks (and Reader compatible ePub) this fall, supplementing the over 450+ titles we have currently available at the Sony Connect eBook Store and Amazon.

- Michael Gaudet

Kindle Makes Bid for High-Profile Content

After saying no to e-books for years, a big-name author, Terry Goodkind, has now said yes.

Though reluctant up to now to put his books into e-book format, Goodkind surrendered to the allure of Amazon's Kindle (plus an undisclosed sum of money), according to a story by Rachel Deahl in Publishers Weekly. Goodkind agreed to let his first novel, Wizard's First Rule, be rereleased on an exclusive basis on the Kindle. Read the story here.

The fact that Amazon offered competitive terms is a promising sign of financial health for the e-book industry. But it also means that Amazon has placed itself into competition with publishers for content.

For an interesting analysis of the pros and cons of e-books and Kindle in particular, check out this commentary by Hugh D'Andrade on the website of the Electronic Frontier Foundation entitled,What If the Kindle Succeeds?

- Richard Curtis

Publisher is Civilian Casualty in Proxy War Between Barnes & Noble and Amazon

Barnes & Noble has canceled a 10,000 copy order to punish a publisher for giving Amazon.com a short exclusive window on a soon-to-be-published book about Barack Obama.

According to Associated Press's Hillel Italie, Chelsea Green, a small Vermont publisher, gave Amazon and its wholly owned on-demand print division BookSurge, an exclusive window to distribute Robert Kuttner's "Obama's Challenge" at the Democratic Convention next week in Denver. Chelsea Green's action put B&N's nose so far out of joint that it canceled a very big order. Smaller bookstores were reported to be equally ticked off, but none has the clout to hurt a small press the way B&N does, and B&N wielded its battle ax with a will.

This is just the latest skirmish in the escalating warfare between bookstores - in particular the behemoth B&N chain - and Amazon, and this time the publisher couldn't - or wouldn't - get out of the line of fire.

Chelsea Green President Margo Baldwin was defiant about Barnes & Noble's action: "They are not going to bully us and the book will be a huge success in spite of their boycott."

Read the whole story.

- Richard Curtis

BookLocker and Amazon Duke it Out in Court

Amazon has filed a motion to have the antitrust lawsuit filed last May by BookLocker thrown out. Publisher BookLocker launched the suit when Amazon started leaning on print on demand publishers to use its subsidiary BookSurge to print their titles or risk having deactivated the Buy buttons for the books they sell on Amazon.com. For a fuller description, click on this article by Jim Milliott in PublishersWeekly.com. And for a blow by blow click here and read details of the opponents' filings.

For background on the issue, you can read Richard Curtis's blog The Nine Gazillion Pound Gorilla Bears its Fangs.

Amazon Throws Another Elbow at a Major British Publisher

In April we reported that Bloomsbury, a division of PenguinUK, feared retaliation for daring to price some titles competitively with online behemoth Amazon.com

Yesterday a major American author received an email from Tim Hely Hutchinson, Group Chief Executive of Hachette in London, informing him that Amazon was "removing the 'buy button' from some of our books and also removing some of our titles from promotional positions such as 'Perfect Partner', in order to apply pressure on us to give Amazon even better commercial terms than it presently receives."

Hutchinson's letter details Amazon's tactics as an effort to bully publishers into giving Amazon such favorable discounts that bookstores and bookstore chains would be unable to compete, thus accelerating the demise of the traditional book retailing business.

Some highlights of his letter are reproduced below.

Larger British book retailers already receive the most generous terms in the English-language world from publishers including ourselves. Of the “cake” represented by the recommended retail price of a general book, major retailers including Amazon already receive on average well over 50%. Despite these advantageous terms, Amazon seems each year to go from one publisher to another making increasing demands in order to achieve richer terms at our expense and sometimes at yours... If this continued, it would not be long before Amazon got virtually all of the revenue that is presently shared between author, publisher, retailer, printer and other parties... We are politely but firmly saying that these encroachments need to stop now.

Amazon has grown very rapidly since it launched and it now makes some 16% of all book sales in Britain. We respect the creativity, the value and range offered and the standards of service that have made Amazon so successful. At its present rate of growth, which was 30% last year, Amazon would become the largest bookseller in Britain in about three years. You will be aware that the retail market for book is not increasing and therefore much of this growth would inevitably come at the expense of “bricks and mortar” booksellers. This is of course not a criticism of Amazon, and no publisher can or should tell the public where to shop. However, we are concerned that more and more traditional booksellers are having to close their doors, with skilled individual booksellers losing their jobs, and this is due in part to Amazon’s aggressively low pricing on prominent titles. Therefore, despite our limited role in respect of these changes in the retail landscape, we are determined not to provide Amazon with further ammunition with which it could damage booksellers who offer a personal service, browsing facilities and other valuable benefits to the reading public...

Publishers Finally Acknowledge the Nine Gazillion Pound Gorilla in the Room

At Book Expo America, the publishing industry's annual trade fair and self-celebration, attention focused on the fact that one of the few areas that is growing at a double digit -- indeed, at an exponential -- rate is e-book sales on the Kindle. And, according to the New York Times, the publishers are genuinely nervous. The Times pointed out that "...excitement about the Kindle, which was introduced in November, also worries some publishing executives, who fear Amazon’s still-growing power as a bookseller."


Worried they should be. Surprised they should not. They have had ten years to ponder the meaning of the soaring growth of e-book sales and spent half of that decade deriding the trend as a flash in the pan. Now they're rushing to put their backlists into e-book format even as they are haunted by the prospect that e-book sales undercut the profits they make from sales of traditional printed books. Publishing executives, the Times reports, "anticipate that it will not be long before Amazon begins using the Kindle’s popularity as a lever to demand that publishers cut prices."

But publishers are still missing the point, which is that profits from printed books are hamstrung by a wasteful retail system that takes back one copy for every two distributed. The beauty of e-books is minimal distribution costs and zero returns. Barnes & Noble CEO Stephen Riggio finally acknowledged the insanity of the system, but, as we pointed out here, it's just too late.

- Richard Curtis

Amazon Releases "Missionary" Letter to Shareholders

Jeff Bezos, CEO of Amazon, has gone public with the company's annual message to shareholders highlighting its achievements with Kindle and congratulating the company for all that it has achieved in the past ten years.

"We hope Kindle and its successors may gradually and incrementally move us over years into a world with longer spans of attention, providing a counterbalance to the recent proliferation of info-snacking tools," says Bezos. "I realize my tone here tends toward the missionary, and I can assure you its heartfelt. It's also not unique to me but is shared by a large groups of folks here. I'm glad about that because missionaries build better products."

Though the company has attracted battalions of critics, as any giant and powerful corporation will do, the congratulations are well deserved. Amazon has not only revolutionized bookselling, it has revitalized the publishing business.

As an e-book missionary myself (with the scars to prove it), I hail Bezos and his Amazon team and look forward to more of his zealous annual letters to shareholders, customers, and publishing people.

- Richard Curtis

Amazon Goes "Back to Press" With New Supply of Kindles

Amazon announced today that has replenished the stock of Kindles, and they're available for immediate supply to customers. According to Amazon's press release, the retail behemoth has added some 25,000 new books, blogs, newspapers and other items, bringing the total available selection to 115,000.

Although Amazon reported some 2000 reviews of the Kindle since its release, there was no mention of plans to upgrade the device, though bloggers and critics have pointed out lots of ways Kindle could be improved.

- Richard Curtis

Direct Sales: British Pubishers and Amazon Throw Elbows

My prognostication of war between publishers and retailers is less than a week old and the first clash of arms has already taken place. A price war, pitting a powerful publishing group and Amazon, has broken out in England over the very issues aired in my blog, Direct Sales: Publishing's Last Stand. Penguin, Bloomsbury and several other publishers are offering some titles directly to the consumer at discounts higher than those offered by retailer Amazon. Dalya Alberge, Arts Correspondent for The Times (of London, not New York) reports (Amazon Furious After Publishers Undercut Its Book Prices Online) that, "Penguin’s online store has reduced a boxed set of 20 Penguin Epics from £100 to £55. Amazon sells the collection at £98.64. Bloomsbury offers a 25 per cent discount on all its books, with free postage and packing on British deliveries over £20."

Publishers fear that Amazon will retaliate, and publishers on the other side of the pond will be watching anxiously. Publishers on this side of the pond should be just as attentive. This is no small matter. Amazon, Barnes & Noble, and other retailers have a lot to lose if publishers gain a toehold in the competition for sales to consumers.

Watch this space for more news. Helmet and body armor recommended: you are entering a war zone.

- Richard Curtis

Direct Sales: Publishing’s Last Stand

Amazon’s recent threat to coerce small presses into using its print on demand subsidiary BookSurge left the publishing community quaking. A coalition of Ingram, LightningSource, and publishers large and small - all escorted by mosquito squadrons of furious bloggers (like Angela Hoy) – has for the moment driven the beast back into its cage.


Lest you congratulate yourself, I have some bad news for you: BookSurge was merely a skirmish. There are war clouds on the horizon, and a decisive showdown between publishers and booksellers is shaping up. At stake: the revenue generated by retail sales of books to consumers. Publishers outsourced retail a long time ago, but now they want it back. In fact, they must have it back; it’s a matter of survival.

There are two ways to sell books today: one is through independent bookshops or bookstore chains, the other by mail order.

Bookstores

However quaint ye olde booke shoppes may once have been, modern bookstore retailing is dominated by behemoth Barnes & Noble. By aggressively building mall outlets and superstores to drive out competition, promoting frontlist blockbusters and superstar authors, and by maneuvering publishers into total financial dependency, B&N has aggrandized itself at the expense the publishing industry. It has also taken cruel advantage of the fact that books are returnable for full credit, placing the full burden of risk on the shoulders of publishers and contributing to a soaring return rate for trade books of 50% or even higher. To make things worse, B&N owns a publishing company, putting it in direct competition with its own purveyors and undercutting them with its own store-brand titles.

Mail Order

As for mail order sales, only a few decades ago these were a significant contributor to publisher revenues. The rise of book clubs largely took that function out of publishers’ hands, and Amazon.com finished the job - finished it with a vengeance. Capitalizing on the coming of age of the Internet, Amazon became not just the leading purveyor of mail order books; it became in effect the only one. Buying books from publishers at a discount of roughly 50% and reselling them at about a 20% markup gives Amazon its profit margin. Super-efficient service, brilliant marketing, first-rate catalogue information and ingenious bells and whistles like Behind-the-Book, peer reviews, bestseller rankings, free shipping on certain sales, and yes, even its used-book marketplace, have given Amazon a near monopoly over online sale of books.

Publishers have awoken to the horrible realization that by allowing themselves to be taken hostage by Barnes & Noble and Amazon, they made bargains with the Devil. As their profit margins wear down to transparent thinness, they understand they must recapture the advantage or risk being marginalized even more than they are now. The Amazon/BookSurge scare has made them realize that the slippery slope to total surrender is to let Amazon print their books for them. For, if Amazon becomes both printer and distributor, it will leave publishers with little to do besides acquire and edit, thus becoming glorified book packagers for the Amazon Publishing Company.

There is only one way for publishers to recover the initiative, and that is to sell books directly to the consumer. Which is precisely what they have started to do. Go to the websites of most publishers and you’ll see that you can indeed purchase their titles without having to go to a bookstore or logging on to Amazon.com. When you look at the prices, however, you realize there’s something wrong: most of their titles are sold at full list price or close to it. Wouldn’t they be more competitive if they gave their customers a discount?

Of course they would. But they can’t, for the simple reason that discounting their books puts them into direct competition with their retailers. As long as they depend on Amazon, Barnes & Noble, and other third-party retailers, they cannot cut prices.

Obviously, retailers hold the high ground and their position would seem to be all but unassailable, except for one critical factor: as big as they are, retailers are intermediaries in a world that is rapidly disintermediating. And, as we have seen in every major business from movies to music to banking to newspapers, no retailer is invulnerable to market forces bent on eliminating middlemen in favor of a one-on-one relationship between supplier and consumer.

Enter direct marketing. Today publishers are sticking a cautious toe in the water. But it will not stop there. Desperate times call for desperate measures, and if the only source of profit (to say nothing of independence and dignity) left to publishers is consumer retailing, they will step up their activities in this area until in time they are in a position to challenge the Barnes & Nobles and Amazons. Though the only weapon they have is their content, that may be more than enough to vanquish these Goliaths.

Aux barricades!

- Richard Curtis

Pictured above: "Kong Versus Carnosaur," copyright 2004 by Joe Devito Artwork, LLC. All rights reserved. My heartfelt thanks to Joe for personally granting permission for this beautiful painting from his excellent book, Kong: King of Skull Island.

The Nine Gazillion Pound Gorilla Bares its Fangs

I write this blog in two capacities: as an authors' advocate and as president of E-Reads, an Internet publisher that, in addition to publishing e-books, prints its titles on demand for readers who prefer traditional volumes. Indeed, fifty percent of our company's revenues are generated by print on demand. Our PODs are produced by Lightning Source Inc. and sold on Amazon. The excellent relationships we enjoy with both firms have enabled us to realize our vision of what a twenty-first century publishing venture can be. We are happy to claim them as partners and would hate to be placed in the position of choosing between them. But Amazon's proposed policy requiring small presses such as E-Reads to shift its POD business to its BookSurge press would do just that.



Though Amazon's ploy comes as a shock to publishers and authors, it did not come as a surprise to me. In the summer of 2005 Amazon.com announced the acquisition of MobiPocket, an e-book company, and BookSurge, a print on demand operation. A lot of ink was spilled on the MobiPocket deal but no one except me speculated on what it meant for a book retailer to have the capability of printing books on demand. In a guest editorial in Publishers Weekly, I wrote,

“It’s hard to say for sure what is behind amazon.com’s acquisition of BookSurge, the on-demand book-printer. But any move the Nine Gazillion Pound Gorilla makes is worthy of serious consideration. Indeed, the implications of the deal, especially combined with amazon’s purchase of e-book company MobiPocket, are profound.”

The implications were so disturbing that PW's editors urged me to tone down my speculations, which seemed to fall at the red end of the spectrum of possibility. Actually, I suspect that the editors were so freaked out that they went into denial. And who can blame them? In my editorial I spun the logic of Amazon/BookSurge to the max.

Here is the conclusion I reached: If Amazon is capable of printing books on demand, they will no longer have to carry any physical books in their warehouses at all! They simply have to load the files of Random House, HarperCollins, Hachette, Penguin, and every other publisher onto their server and print all of their books - frontlist as well as backlist - on demand. It would not only be a huge savings for Amazon in terms of warehouse space - it would be a huge savings for the publishers, too: they all would eliminate printing, warehouse, and freight costs at a stroke. Yes, they would still have to print and distribute books to other retailers besides amazon, but such sales would be modest compared to those of Amazon with its incomparable marketing and technical capabilities. Allowing Amazon to become the POD press for the publishing industry is a very seductive lure to publishers operating on razor-thin profit margins. But it would also enable Amazon to undercut bookstore prices, put Barnes & Noble and other bookstore chains and independent booksellers out of business and complete its march to monopoly. While you're trembling, consider the possibility of a mega-retailer ultimately deciding what you read as well as how and where it's printed.

If you are as incredulous as my Publishers Weekly editors were, ponder this statement in the letter just issued by the amazon.com books team: "It isn't logical or efficient to print a POD book in a third place, and then physically ship the book to our fulfillment centers. It makes more sense to produce the books on site, saving transportation costs and transportation fuel, and significantly speeding the shipment to our customers." You need only to remove the term "POD" from that statement to arrive at the terrifying conclusion that I reached in 2005.

Though I have railed for decades against the stupidity and wastefulness of an industry based on tangible books sold in brick and mortar stores, I have to wonder whether Amazon's Orwellian vision of absolute zero-returns efficiency is even more destructive than a traditional business model that pulps one copy for every two it distributes.

It is vital for publishers of every size to confront this potential restraint of trade.

- Richard Curtis