eBook Publishing

The only thing to say for sure about eBook publishing: it's changing rapidly.

CNET's article on eBook publishing from late 2010 is a good starting point. It covers both formatting and distribution of eBooks.

On the formatting front, Wikipedia has an exhaustive comparison of eBook formats. An author usually starts with a .txt, .doc or .pdf file which must be converted to a format an eBook reader understands. Those are:

• Kindle: .mobi, .txt, .azw, and models after the first Kindle, .pdf
• iPad: .epub (EPUB) and .pdf
• Nook: .epub, .pdb, and .pdf
• Sony eReader: .pdb, .pdf, and .lrx, and .lrf

Two important notes about format. First, format is tied to software reader, not hardware platform. For instance, the Kindle reader runs on iPads and Androids as well as the Kindle.

Second, just because a format is supported, doesn't mean it's easy reading. PDF files are supported on most readers, but the display isn't great on small screens and reader functionality like page turning may not integrate well with PDF files. For the best reader experience, convert to the software reader's preferred format.

An author has three basic options:

1. Find conversion software that converts to each of the target file types.
2. Hire a professional to perform the conversion (rates currently seem to run about $150 for a book under 400 pages with no graphics or footnotes to convert).
3. Find a publishing firm that manages the entire eBook publishing process.

Economically speaking, the more DIY, the larger the author royalty per sale.

A self-publishing author probably shouldn't use the same cover art for an eBook as a printed book. Since eBooks are listed as thumbnails in online catalogs, the graphics have to work on a different scale. Browse a few online stores to get a sense for what kinds of graphics work. Most DIY format conversion programs and services will require the author to provide the eBook cover art.

Besides formatting, the other decision for authors is distribution. Authors again have three basic choices:

1. Submit the proper file format to each online store. Not all stores accept files from individual authors. Stores that accept files are Amazon Digital Text Platform (DTP), Barnes & Noble pubit, and Scribd. Scribd is a special case, most useful today for publishing free excerpts, but also a bone fide store.
2. Find an aggregator that submits eBooks to online bookstores and keeps a part of the royalty. Popular aggregators today are lulu, smashwords, and fastpencil.
3. Find a publisher that manages the entire eBook publishing process.

Aggregators offer many services a traditional publisher offers (formatting, cover art, proof-reading), but for a fee. Aggregators pay larger royalties than traditional publishers and, for the most part, allow the author to set the price. This last point is very important as the eBook market evolves.

Authors who want print-on-demand (POD) versions of their books probably want to work with an aggregator since most aggregators provide this. Aggregators also sell eBooks in their own online stores, of course, but those stores don't appear to produce high unit volume sales yet.

The aggregator side of publishing is the hardest to decipher for an author. The CNET article does a good job of explaining both the upfront fees and the downstream splits between the online stores, the aggregators, and the author. But rates are changing, and throwing POD books in the mix complicates the decision process further. Since the rates today are reasonably competitive, a good rule-of-thumb is to use an aggregator that has easy-to-use online services.

More successful self-publishing authors should consider higher-end services like Ingram Digital that target publishers rather than authors.

Less Than Free

In Bill Gurley post about Google's castle-and-moat strategy with Android and Chrome, he writes that Google is:

... not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free (or even less than free). Because these layers are basically software products with no variable costs, this is a very viable defensive strategy. In essence, they are not just building a moat; Google is also scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it.

The "less than free" economic model got me to thinking about the history of technology-induced economic shifts.

When I worked at Sun in the 1980s, we watched one industry after another make the uncomfortable transition from hardware to software sales. CAD, medical imaging, Artificial Intelligence (LISP), and other vertical-focused vendors sold special purpose processors to speed specific calculations their customers made over and over using their software. As general purpose processor prices dropped and performance increased, inevitably the special purpose processors lost to general purpose processors in the market. Vendors ported their software to Sun and other general purpose platforms and jettisoned their costly hardware engineering and manufacturing.

Since the emergence of the Internet, two important shifts are taking place.

First, large Internet companies are supplying what is now called "Cloud Computing." In much the way that vertical-focused vendors in the 1980s built special purpose processors, Internet companies build large clouds, or computing infrastructures, that specialize in particular tasks. Google has built a search infrastructure, Amazon an online commerce infrastructure, eBay an auction infrastructure, SalesForce a CRM infrastructure, and so on. Some infrastructures are more "tuned" than others, more focused on a particular calculation. It's safe to say that you wouldn't want to use eBay's infrastructure to search the Internet, or Google's infrastructure to auction your collection of crock pots. Unlike vertical-focused vendors in the 1980s, cloud infrastructures won't be replaced by a general purpose cloud.

Second, the rapid proliferation of low-cost networked (usually mobile) devices (think iPad or Galaxy Tab) coupled with increased fluidity in employment and contract practices in the workplace (think frequent layoffs and organizational engineering) are changing asset ownership and use policies within organizations. A contractor, for instance, prefers to interface with a large firm's networked infrastructure using his or her own laptop rather than with a firm-issued laptop. The Bring-Your-Own (BYO) trend is now called "consumerization." This phenomenon is pushing IT departments to act like specialized Internet companies. More and more, a firm's IT infrastructure will work like a cloud service provider, a provider whose infrastructure is tuned for that firm's business processes rather than, say, for search or auctions.

This first trend (specialized consumer Internet infrastructures) has enabled and encouraged the second trend (consumerization). Consumer Internet companies leverage the consumer's device to provide service and generate revenue. Declining consumer device prices translate into more available consumers. As Google is showing, less-than-free software can not only drive device prices even lower, but also create stickier revenue channels.

The different objectives of consumer Internet companies and Corporate IT departments are coming into conflict, and Corporate IT departments are in a bind. Consumer Internet companies want as many customers as possible, and most IT departments don't. Falling consumer devices prices coupled with end-user familiarity with and preference for new mobile devices mean the firm will be more efficient by leveraging BYO devices. Opening up the private infrastructure to public consumer devices, on the other hand, creates many problems for IT departments used to controlling all the end-user devices. Application portability is one significant problem. If an IT department has deployed all its applications to run on specific browsers or operating systems, portability is a large cost of opening up the infrastructure. Security is another. Who has access to what data on which devices? Who knows what malware is running on all those consumer devices?

Simultaneously, IT departments are faced with a completely different set of challenges employing clouds to increase efficiency of their own infrastructures.

I suspect that smart IT departments will learn from consumer Internet companies and markets. The future may lie in strategies to extend their infrastructure to as many users as possible. Financial institutions and other service firms have started this trend because they share the same goal as consumer Internet companies of extending the reach of their infrastructure to as many consumers as possible. To various degrees, firms also share infrastructure with their supply chain partners. Will the IT organization end-game include "less-than-free" somewhere? Don't be surprised.

Brief Timeline of Written Word Media

The Daily Ticker picked up today's story on eBook sales.

E-book sales topped sales of paperbacks for the first time ever in February, according to the Association of American Publishers. In fact, e-book sales tripled -- soaring 202 percent -- to $90.3 million when compared with February 2010. Adult trade paperback sales trailed at $82.1 million.

The trend lines have crossed!

The full report from the American Association of Publishers gives more details. The "Adult Trade" category is broad, including: Adult Hardcover, Adult Paperback, Adult Mass Market, Children’s/Young Adult Hardcover, and Children’s/Young Adult Paperback. Categories like Religion, Education, and Professional books are not included in this number.

The prevalent medium for the written word has changed slowly over history. Changes in media are crucial to higher volumes and increased distribution of written words. Here's a brief timeline of Western civilization's media for the written word:

– circa 1200 B.C.: The Phoenician alphabet increases demand for an inexpensive writing medium. Papyrus replaces clay for recording agreements and laws.

– circa 700 A.D.: With the advantage of being locally produced and more durable, velum and parchment begin to replace papyrus in Europe.

– 1282 A.D.: According to Wikipedia, the first "water-powered paper mills [enable] a massive expansion of production and [begin to replace] the laborious handcraft characteristic of both Chinese and Muslim papermaking." High-volume paper manufacturing was an important pre-cursor to the printing press.

– 1844 A.D.: Charles Fenerty and Friedrich Gottlob Keller simultaneously invent machines to extract pulp from wood. By 1900, most paper is produced from wood pulp instead of rag pulp.

– 1897 A.D.: Ferdinand Braun builds the first Cathode Ray Tube.

– World War II: Albatross Books and Penguin books assemble paperback books with glue instead of stitching as the war-related travel market creates an opportunity for cheap, light-weight books.

– 1969 A.D.: Datapoint 3300 ships, the first computer display.

– 1970s to present: Several electronic paper technologies invented, including Grycon, Electrophoretic, and Electrowetting. Other technologies like Liquid Crystal Display (LCD) and Organic Light Emitting Diode (OLED) are used in specific applications. Many manufacturers working on a flexible lightweight display to replace paper.

– November 19, 2007: Amazon releases the Kindle, the first high-volume eBook appliance.

– February, 2011: unit sales of eBooks outnumber sales of paperbacks.

Historic changes in media have created gigantic shifts in economic and distribution models. With the introduction of the Kindle eBook and iPad tablet product categories, written words once again are finding more and more ways to readers.

Blogging About Delux

I started a new blog today. It's a separate place to blog about the processes of writing and publishing Delux. Enjoy!

Time Value of Books

Dan Ariely, a behavioral economists, asks why we are so fixated on the price of a book.

Think about it this way — if you were going to spend 10 hours with a book, do you really care if it costs $3 more? Shouldn’t you happily pay $0.30 more per hour of reading if the quality of the book was slightly higher or the experience was slightly better? Personally my more pressing problem is time, and if someone could assure me a better, even slightly better experience, I would pay a substantial amount more

Books pricing is likely to mimic music pricing. Consumers don't consider utility of music when they pay $0.99 at iTunes, even though that $0.99 may create hours of listening pleasure. That's because they don't know in advance how much they'll listen to one song or another. Even if they've heard a song before their purchase, they don't know the durability of the tune or if another more popular tune will dominate their personal "air time."

The same holds true with books. Consumers don't know whether they'll read an entire book, or put it down because it's boring or because a better book comes along. Since new bound books have been priced within a tight range, consumers don't feel they're taking a larger risk on one book or another based on price. With eBooks, though, pricing is unsettled. Risk-averse consumers may prefer buying a lot of $0.99 books that are "best sellers" because a few will be good and the cost of the losers is not significant.

DRM systems can ask consumers to pay more as they use a digital product more. Try-and-buy is a simple example of that idea. In music, advertising-based radio has been the traditional "try" part of try-and-buy. In story telling, the author can hook the consumer at a cliffhanger, then ask for the money. However, the complexity of different DRM and payment systems works against initial uptake.

Publishers who want to charge high eBook prices need to think about more than gross margins. As Ariely points out, time is a valuable commodity for the consumers. If consumers are viewed as risk-averse, and time and money are scarce, fairly priced products with consistent quality will sell. But don't expect eBook prices to mimic bound book prices just the margins are nice.