Technology researcher Forrester released a survey of US publishing executives yesterday which uncovered an interesting disconnect: 82% were optimistic about the digital transition of books, but only 28% thought their own company would be stronger as a result. The explanation?

“Publishers have started to do the hard work of making the digital transition and they’re finding that it is, indeed, hard work,” says James McQuivey, vice president and principal analyst at Forrester Research.

The hard work has probably been delayed by early windfall profits from ebook backlists, with major publishers still reporting good results, despite the mayhem in the book trade.

But if the transition is going to be successful for incumbent print players, it will need a shift in thinking. The biggest barrier is the widely-held idea that ebooks are just another format. They’re not.

It’s an easy idea that reassures staff and stakeholders and provides a potential lifeline for the existing business. But it’s damaging because it leads publishers to focus on the similarities and overstate their advantages. These similarities are much less important than the differences.

The paperback was just another format. It fitted neatly into the same business model and the same supply chain. It had the bonus of delivering everyone more business. Cheaper books brought armies of new buyers to buy the same books from the same group of sellers through the same channels.

But digital isn’t like this.

• The supply chain is completely different. The companies driving the structure of the ebook industry are technology companies, not publishers, booksellers or book distributors.
• The economics are different. That includes both the overall cost structure and the marginal cost of delivering one more unit anywhere in the world.
• The value proposition to the reader is different. That means price but it also means a host of other benefits. And the ability to instantly access your books or buy any book 24/7 from anywhere is a killer app, no matter how much you love the feel and smell of paper.
• The barriers to entry are different. They’re both lower (for a publisher/self-publisher) and impossibly high (for most booksellers). And soon Google Ebooks and a beefed-up Amazon partner programme might flip this around again and make the entry barrier so low that not only indie bookstores but every website and blogger will be able to sell ebooks.
• The value chain and power relationships among major participants are radically different. If you want proof of this, you only need to see how Random House was backed into a corner by agent Andrew Wiley. The reason? No one believed one of the world’s biggest trade book publishers had any more power getting an ebook to its readers than a miniscule start-up.
• The content will be different once the digital tail starts wagging the print dog and richer digital editions diverge, instead of being cheap replicas of print-ready PDFs. Of course, this can be an opportunity for big publishers — or big new entrants — to shine.
• The rights are different. Authors don’t have to tie the two formats together and increasingly they won’t. Publishing and distributing narrative works as ebooks is actually easy and inexpensive, and plenty of service providers and ebooksellers are jumping in to help authors.
• Major customers are different. How much time do publishers spend peddling ebooks to today’s most important customer group, bricks and mortar booksellers? Almost none. How important are sales reps for ebooks? Not very.
• Marketing is different. If your book is digital, almost nothing in a traditional book marketing plan is relevant. Scratch everything tied to bookstores (all the in-store, most author touring). Reviewers are usually different (bloggers, readers — most traditional reviewers don’t review ebooks though that will change in time). Merchandising happens online.
• Most jobs are different. Many—possibly most—skills are different from those found in a traditional book company, whether publishing or supply chain. Whether you’re selling ebooks (to whom? how?), marketing them (how? to whom?), producing or editing them (books as software), your job in an ebook business will be different. Very different in many cases.

So just how different must ebooks be before they’re not just another format? I know from personal experience the challenges CEOs face as they’re torn between serving existing customers, resource demands and processes; and giving new ones the freedom, resources and fresh-thinking to grow. What they almost always do is tether an exploding new business to a limping old one in the name of synergy  —  and to cover the old business’s overheads.

But how much synergy did Amazon need when it got into online bookselling in the mid 1990s? Jeff Bezos had an IT degree and worked on Wall Street. He’d never sold books.  How much synergy did Barnes and Noble leverage when it completely failed to get into the game? This article from Fortune magazine of September 27, 1997 is a great example of an incumbent overstating the value of what it brings:

The big guys can just as easily join the fun. Barnes & Noble, the nation’s leading bookseller, opened its own online bookshop (at www.barnesandnoble.com) three months ago and has swiftly exposed the tenuousness of Amazon’s head start. It turns out that figuring out the sexy new stuff, like Web pages and online order taking, is a lot less difficult than figuring out such drudgery as how to cost-effectively finance, stock, and move the physical stuff, the books.

Anything Amazon.com can do on the Internet, so, too, can Barnes & Noble. “There was a mystique about how difficult it was to get started on the Web,” says Steven Riggio, chief operating officer of Barnes & Noble, “but it’s quickly fading.”

In fact this article— and B&N —  were 180 degrees wrong. Barnes & Noble failed miserably, Amazon shone. It turns out that the ‘sexy new stuff’ is actually hard and important, and the ‘drudgery’ of the old business was much easier to figure out (and mostly irrelevant to online success). The guy who came to work every day to sweat over the new stuff, without distraction or compromise, won.

Says Ingram Book Group CEO John Ingram in this insightful Q&A:

Publishers have two business models to run: a legacy print model and a new digital one. What competencies are needed now? And if they’re different competencies, and I think they probably are, how do you pay for those? How can the business be restructured so that cash can be created to pay for new things that need to happen?

Unfortunately, very few legacy businesses can sever their digital arms to give them the best chance to compete. The reason: doing this will create huge internal problems. Everyone will be frustrated, nothing will seem to work, communication between the print and digital businesses will be terrible. Out in the real world, it won’t matter, but inside the company it will become a major issue. So the digital business will be reined in and have to serve two masters.

Is this why executives in the Forrester survey are pessimistic about their own company’s chances of winning?

Creating ‘synergies’ with the legacy business — which the ‘just another format’ thinking encourages — too often ends up being a straitjacket for the new one. That’s pennies from heaven for those upstart new competitors.

Apple made several announcements yesterday which can drive the textbook’s digital transformation — or, in Steve Jobs’ more colourful phrase, its “digital destruction”. My pick is that this will  be the tipping point for educational publishing, its ‘iPod moment’ or ‘Kindle moment’ when the market suddenly takes off. But Apple’s moves will go much further than textbooks.

While the technology is important, Apple has a unique combination of assets to pull off a home run in the education market. Unlike major rivals such as Amazon and Google, which are consumer-focused, Apple has deep roots in education. This includes a large, highly-skilled direct sales force with strong relationships in schools and universities around the world. It has big support in education where Apple regularly jostles for top spot in market share around the world.

Before looking at the implications of its announcements, here’s a brief summary.

• iBooks 2.0. This is a rich media ebook format for Apple’s iBooks e-reader app. Apple’s move follows the release of Amazon’s KF8 format for the Kindle, and EPUB3 which is the rich media upgrade to the industry’s own EPUB standard. While iBooks 2.0 is based closely on EPUB3 (as is Kindle’s KF8), it’s not compatible. Unlike the Kindle KF8 and EPUB3 announcements, which were primarily focused on the general consumer ebook market, Apple chose to launch its rich media format with textbooks as its main target. But the format can, and no doubt will, serve as a general purpose ebook format.
• iBooks Author is a free — and impressive — tool to create rich ebooks in the iBooks 2.0 format. Author is aimed at regular users, like teachers and self-publishers. What is especially interesting is that Apple’s concept of a textbook production tool shares a lot in common with elearning rapid authoring tools such as Articulate and Adobe Captivate, with their quizzes, interactions, and Powerpoint/Keynote integrations.
• Apple’s iBookstore gets a textbook category to sell textbooks in the new iBooks 2.0 format.
• iTunes U gets some major changes. In many ways, iTunes U is likely to be the biggest part of Apple’s play, even though it’s received less attention. iTunes U is the free educational podcast section of iTunes which  has more than 1000 universities from 20 countries including Australia and New Zealand who provide some great educational content. Apple’s changes will open it up to schools as well (US only for now). A new app, the iTunes U app, lets teachers create courses and students access them. And the new web-based iTunes U Course Manager provides the sort of course creation and delivery features found in a full-fledged LMS (learning management system) like Moodle, the widely-used open source LMS.

Apple’s moves have been met with a great deal of publishing industry scepticism and disquiet. Critics of iBooks 2 have focused on two main areas:

1. Its format ties it to Apple devices: You can’t read iBooks 2.0 on anything but an Apple device, and Author is Mac-only.
2. Its distribution is tied to Apple’s iBookstore, unless you want to give your textbook away. The terms of use for iBooks Author, the tool for producing the new format, prohibit paid sales from anywhere but Apple’s iBookstore.

Neither of these is a good thing for the industry. But focusing on these areas is likely to throw publishers off recognising what is fundamentally right about Apple’s strategy. Apple can, and probably will, open up its platform when the time is right, just as it did by making key applications like iTunes available on the Windows platform.

Apple’s strategy is very smart and potentially very big. Here’s why.

The thread that runs through these announcements is the convergence of ebooks and elearning. Elearning and ebooks have followed parallel paths but seldom intersected. Apple sees that most textbooks, once digital, will be closer to elearning courseware than ebooks. With iTunes U and iBookstore, Apple has cleverly opened two distribution channels for digital textbooks.

And guess what? In spite of its partnerships with major textbook publishers at the announcement, Apple doesn’t see them leading this convergence. With its simple-to-use tools and distribution channels, Apple (rightly) picks that packaging and distributing educational content is something teachers and students, not publishers, should do, just as they do with classroom learning. A deluge of free content, neatly packaged and easily shared among teachers, will be a powerful incentive to buy into Apple’s ecosystem. And those users will in turn make Apple’s ecosystem an essential target for publishers’ paid content.

Apple’s move will boost the nascent open source content movement by providing high quality tools and extensive distribution for sharing educational content. This attacks the heart of traditional publishing but for Apple, what it loses in iBooks sales it more than gains from hardware and services.

There will certainly be a place for publishers, but it’s going to be quite different from providing today’s static, uniform textbooks. And it’s more likely to be based on selling specialised services or licensing quality content elements for digital mashups. Expect to see iTunes U adding a content licensing repository at some point in the future with educational terms more liberal than today’s contracts offer.

While publishers like to focus on the importance of great content as a value-creator, it’s going to grab a smaller chunk of the educational value chain in future.

Most of the textbook market has so far resisted digital transformation. It’s been fragmented with no effective solution. Unlike the simple narrative ebook sold by Amazon, the digital textbook market is complex in structure, content, sales process, and delivery. It’s lacked a standard technology with easy-to-use tools to produce interactive, rich media ebooks; and a distribution model that is scalable enough to reach deep into education. Apple’s latest package of announcements, combined with its unique assets, is big enough and good enough to fill that vacuum.

So whether Apple ends up dominating educational publishing or being one player among many, the path it set out with yesterday’s announcements will define the way educational publishing heads into its digital future.

Australian bookselling icon Dymocks last week launched a self-publishing service called D Publishing. While the service looks fine, its publishing contract is dreadful. Even if you’re not in Australia, you should look at it to see just how bad a publishing contract can be in the wrong hands.

The issue was exposed by The Australian Literature Review (AusLit) in a blog post headed, D Publishing by Dymocks Books – AUTHORS BEWARE. AusLit was concerned that, under the contract:

Authors grant an exclusive license to Dymocks for commercial rights worldwide for the duration of the copyright, including all subsidiary rights to the work.

While an author would have the right for their name to be attached to the work, they are essentially HANDING OVER CONTROL OF THE COMMERCIAL ASPECTS OF COPYRIGHT WORLDWIDE, INCLUDING ALL SUBSIDIARY RIGHTS, FOR THE DURATION OF THE COPYRIGHT.

Authors inexperienced in the business of publishing and in dealing with publishing contracts may not realise the implications of what they  are agreeing to.

What makes this grab for authors’ rights especially cynical is that the Dymocks service gets these rights for doing almost nothing. If Dymocks posts an ebook for sale on its website, it will have done enough under the contract to earn its exclusive right to the work worldwide for the author’s lifetime plus 70 years — and not just in book form: all subsidiary rights such as film, and other electronic forms are included.

AusLit’s criticism led to some minor changes to the contract. But Australian publishing contract expert Alex Adsett, who assessed the D Publishing contract after changes were made, told the Weekly Book Newsletter she thought it was ‘as terrible as some of the online commentary suggests’.

Other problems cited by AusLit and Adsett include:

• D Publishing has the right to amend the terms and conditions, including the royalties, at any time.
• Under the contract, this could entitle D Publishing to pay zero royalties for some rights.
• Signing up to it is as simple as clicking an online ‘accept’ button.
• There is no way for the author to terminate the contract, other than through a breach of contract by D Publishing — unlikely since the contract places almost no obligations on D Publishing. A copyright in Australia lasts for the author’s lifetime plus 70 years.

Adsett told Weekly Book Newsletter (WBN) that the aspects of the contract she was most concerned about were not replicated in commercial publishing contracts or in ‘common vanity press contracts’.

I’ve reviewed the Dymocks contract as it stands. It really is as bad as its critics allege and is not typical of publishing agreements.

The damage it could do is made worse by the use of Dymocks’ good name and the targeting of authors who are  inexperienced in the business of publishing.

Dymocks’ initial attempt to address the issues raised by AusLit failed badly. This is not surprising when Dymocks general manger of ecommerce Michael Allara, speaking to WBN, put the problems down to “how technical legal contracts can be interpreted out of context.”

Says AusLit:

The major change has been to bury key details in less direct language and disperse that key information piecemeal across more clauses. This may make key details less obvious to inexperienced authors until they have accepted the agreement but doesn’t address the problems.

I think it’s time for the Australian Society of Authors and the Australian Publishers Association to step in to clean this up. The Publishers Association especially should be concerned that the industry is not tainted by such a high profile abuse. This is not a typical publishing contract.

Dymocks also has a strong presence in New Zealand so it would be disappointing to see this contract pop up in other markets. It seems to be planning to expand the geographical reach of its digital publishing initiative.

The publishing contract is posted here. Hopefully it will be updated and quickly brought into line with reasonable industry practice. Given the inexperience of its target market, and the online self-service environment, this should include  a clear and prominent summary of the key terms, not just nine pages of legalise.

[Update: 12 January 2012. Dymocks revised its contract again, partially addressing some of the concerns raised and doing a slightly better job of explaining the contract terms. AusLit has produced a detailed account of these changes. Says AusLit:

I think this is a big opportunity being wasted by Dymocks. I also think most authors are not going to be prepared to license their rights to a publishing service which takes the rewards of an upper-end traditional publisher while taking on obligations similar to a hands-off self-publishing service or vanity press in return.

I agree with this conclusion. This remains a terrible contract which authors should avoid.]

Australian readers will have few reasons not to join the ebook revolution this Christmas as a host of offerings come on stream. The past year has seen major strides in the key areas of local availability, price, ease of use and ease of purchase.

“This Christmas will be a very important one for ebooks in Australia,” says Google’s eBook Partnerships Manager Mark Tanner. “Devices that are ebook ready will be a very popular gift item,” he says.

With barriers to ebook adoption coming down, this could be the Christmas that ebooks go mainstream in Australia. One thing that points in this direction is Amazon’s move in September to sell Kindles through Woolworths’ Big W and Dick Smith chains. Prior to that, the Kindle was only available online from Amazon’s US site though Amazon still managed to ship more than 370,000 units to Australia, according to a PriceWaterhouseCoopers (PwC) estimate.

Price drops open up market for eReaders

A look at the Kindle’s pricing also shows how much more affordable eReaders have become. The cheapest model this Christmas is the Kindle WiFi which Big W is selling for A$139, a little more than half the price of the cheapest Kindle last Christmas. Competitors like Kobo have followed suit with its entry-level model matching the Kindle’s price.

Dedicated eReaders have been a key to the ebook market’s rapid growth. Amazon’s continuing success with its black & white Kindles in the face of competition from Apple’s iPad shows it remains an important option, especially since owners of dedicated eReaders spend more on ebooks than those who use smartphones, computers, or other general-purpose gadgets. PwC estimates that Amazon has 70% of this market in Australia, a position it achieved without the benefit of a local retail presence.

A hot new product category this Christmas is the colour ebook reader, led by the 7-inch Kindle Fire and Barnes and Noble’s second generation Nook Tablet. These won’t reach Australia until next year but rumours are that Amazon alone could ship 5 million units by Christmas. The Kindle Fire’s compact size and US$199 price point look set to make it a serious competitor to Apple’s hitherto-unchallenged iPad in the tablet market.

While Amazon is delaying the Fire’s Australian release, competitors aren’t waiting. Kobo’s new colour offering, the Kobo Vox, arrived in time for Christmas with Kobo partner Collins Booksellers selling it for A$299, about half the cost of the entry-level iPad. And local ‘social eReading’ start-up ReadCloud is selling the Cumulus, a 7-inch colour device preloaded with its reading app, through indie booksellers including Mosman’s Pages and Pages.

The entry of colour eReaders coincides with new generation ebook formats – EPUB3 and Amazon’s Kindle Format 8 – that will soon lead to richer, more colourful designs and content. Expect to see these ebooks appearing in 2012.

Google Ebooks opens for business in Australia

If you’re reading ebooks on a general purpose device or a non-Kindle dedicated eReader, good news arrived in early November with the long-anticipated launch of Google Ebooks in Australia. Almost a year after it launched in the US, Google opened its ebook doors to Australian readers through partnerships with Dymocks and online bookseller Booktopia. Partnerships with university bookseller The Co-op Bookshop and bookselling chain QBD will follow.

Google’s ebooks use the industry standard EPUB format. The company doesn’t offer a dedicated eReader like Amazon and Kobo. Instead its ebooks can be read over the internet using a standard web browser, or by using an eReading app that you install on your smartphone, tablet or PC. Google offers its own apps or you can use one like Bluefire, a free app for Apple’s iPhone and iPad that Dymocks recommends its customers use if they want to read Google Ebooks purchased from the Dymocks site. The bookseller also offers a Dymocks-branded app for Android devices.

Given how important branded devices have been to the success of ebookstores, it will be interesting to see if Google’s partners follow suit – or, indeed, whether Google itself releases a branded eReader to support its retail partners. In the US and Canada, Google promotes a third party eReader from niche player iriver but has so far avoided entering this market directly.

Google claims its Australian store will bring “hundreds of thousands” of ebooks to local customers. A search of the Dymocks site at launch showed 148,000 titles already in the catalogue, including many from Australia’s top publishers. Dymocks has integrated Google Ebooks into its Booklovers rewards programme so that ebook purchases earn credits that can be spent online or in-store on digital or printed books. It also sells ebook gift cards in-store and online.

Australia is the third international market that Google has entered since its original launch in the US in December 2010. In October this year, it entered the UK market through partnerships with academic bookseller Blackwell’s and book wholesaler Gardners whose Hive network supports independent booksellers. In early November, Google launched in Canada, choosing as partners the Campus Ebookstore and leading indie bookseller McNally Robinson.

Australia’s indie booksellers have been enthusiastic followers of Google’s ebook plans with many voicing hopes that they would enter the ebook market with Google-powered stores. But the absence of a shared technology platform among Australia’s independent booksellers would have made it difficult to offer full integration cost-effectively so Google launched without this facility. In the US, the American Booksellers Association has the IndieBound platform and in the UK Gardners has its Hive network, both of which simplify the ‘deep’ integration of Google Ebooks into bookseller websites.

Independents opt for local initiatives as they enter ebook fray

Aussie ebook start-ups Booki.sh and ReadCloud have jumped in to fill the vacuum created by Google – and by delays in the industry’s own platform, TitlePage, which was set to offer an ebook service. That now appears to be on hold as the industry lobbies government for a $5 million cash injection it says it needs to support independent booksellers with white label sites, and to compete in range and functionality with the large international players.

Melbourne-based Booki.sh launched its white label service in January, spearheaded by Readings and since joined by Fullers, Mary Ryans, Gleebooks, Avid Reader and Books for Cooks. ReadCloud is new on the scene. Its first site, Pages and Pages, launched in early November. ReadCloud could be the big beneficiary of Google’s absence from the indie market, claiming it’s signed up 200 bookstores to participate in its programme.

ReadCloud and Booki.sh are ‘cloud’ eReading systems meaning that your ebook library is stored on the web. Both systems allow ebooks to be read online or offline but they differ in how they do it. Booki.sh is the simplest. All you need to read its ebooks is a modern web browser so there’s no software to install. And it uses a feature of new browsers called ‘offline caching’ to store a local copy that you can read when there’s no internet connection. One advantage of the Booki.sh system is that you can even read its ebooks on some Kindle models using their built-in web browser.

ReadCloud uses a different system. You must first download the ReadCloud software or app in order to read its ebooks. To read offline, you download the ebook in EPUB format with Adobe encryption. This also makes the ebooks available to eReaders such as Sony, Kobo and others that support the widely-used EPUB/Adobe DRM combination.

Interestingly, Google Ebooks is a hybrid of these two approaches: Like Booki.sh, it allows online and offline reading using just a web browser; and like ReadCloud, it offers eReading apps and the ability to download an EPUB file wrapped with Adobe DRM for offline storage and reading.

But there’s good news for Australian booksellers, bloggers and other website publishers who might want a simple ebook option to test the waters. Google opened its affiliate network – the same one it uses to serve ads on partner sites – to Google Ebooks. This means you can place links to Google Ebooks on your site and earn a commission if the visitor you sent ends up buying an ebook. At its simplest, this can just be a link to the Google Ebooks home page but other options are available to link to specific books or to lists of titles.

With local booksellers now staking out their ebook territory, will the readers buy?

We seem to have gone very quickly from famine to feast with many competing – and perhaps confusing – options now open to Australia’s reading public. So will they buy from bricks and mortar booksellers or will the international online giants like Amazon leave little on the table for local businesses?

Jon Page, of ReadCloud partner Pages and Pages Booksellers, thinks the public will support the locals. “We want to give our customers the same service and expert advice they expect from us for physical books. The response has been fantastic so far,” he says. Among Page’s initiatives to achieve this is an in-store kiosk that brings the ebookstore inside the physical store.

From selling and supporting eReader hardware, to various promotional tie-ins such as Dymocks’ Booklover loyalty scheme, to serving communities with specialist needs such as campus bookstores, the new players will be aiming to pick up market share points from the giants, a point at a time.

Readings’ Mark Rubbo is under no illusions about how tough this will be. “It is going to be pretty hard for anyone to compete seriously with Amazon’s clout and GST free prices. The best we can hope for is to build a niche that complements what we do physically,” he says.

Kobo’s Malcolm Neill thinks all of the activity is going to be good for the market. “With the independent booksellers establishing a couple of boutique ebook options and Google finally reaching the market, we think that the education of the consumer in digital reading will now move at a rate commensurate with the rest of the world,” he says.

And that consumer awareness and education spells good news all around. In a rapidly rising market, it should leave plenty of room for newcomers.

 [This story was originally published in the November issue of the Australian Booksellers Association magazine News on Bookselling.]

Almost a year after it launched in the US, Google has opened its ebooks business to Australian readers through partnerships with national bookselling chain Dymocks and online bookseller Booktopia.

The two sites went live today and will bring “hundreds of thousands” of ebooks to Australian customers. A search of the Dymocks site shows 148,000 titles already in the catalogue including many from Australia’s top publishers. Dymocks plans to integrate Google Ebooks into its BookLovers rewards programme so that ebook purchases earn credits that can be spent online or in-store on digital or printed books.

Google’s Australian launch will soon include partnerships with university bookseller The Co-op Bookshop and bookselling chain QBD. And it comes just a day before another offering comes to market. High-profile indie bookseller Pages & Pages kicks off a series of launches from indie booksellers who are adopting the made-in-Australia “social eReading software” ReadCloud.

Google’s Australian move follows its opening in the past month of UK and Canadian ebookstores. Its strategy is to sell through partners as well as selling directly from its own site, Google Ebookstore, and via its iOS, web and Android apps. In choosing its early partners, Google is focusing on quality operators with bookselling experience, making it a direct rival of Canadian operator Kobo.

However, in one respect they’re different: so far, we haven’t seen a Google-branded ebook reader backing its offer. Google has also been much slower than Kobo in doing deals with ebook manufacturers to make it their preferred ebookstore. So far, a deal with minor player iriver back in July is the only one that Google has done. This mirrors the cautious approach Google took with its Android smartphone where it initially worked with a single partner HTC.

We can expect things to change now that Google has bedded in its systems and is developing broader distribution. It will have an added incentive to quicken the pace with the announcement from US number two ebookseller Barnes & Noble that it will be rolling out its successful Nook internationally in 2012.

Meanwhile, in that far outpost of Australia, New Zealand, we’re yet to see Google Ebooks and Google representative Mark Tanner confirms there’s nothing to announce at this stage. Dymocks is active in New Zealand but its Australian store is off-limits to New Zealand customers and Google’s own app is yet to appear in Apple’s New Zealand App store. Indeed, we’re still waiting for Apple’s iBookstore to open to New Zealand consumers, a year after it reached Australia. So for now, Kindle and Kobo, the latter through local bookselling chain Whitcoulls, remain the only major players for Kiwi readers.