A decade ago, I was traveling with one of the founders of the company that I worked for at the time, Timm Martin, and we arrived at the discussion of electronic books (ebooks). I said that I thought ebooks were the wave of the future and I wished that I could figure out how to start a company that was a part of that change. Timm, who was the technology visionary of our company, seemed to cautiously agree with me at the time and I think we both worried that the portable platform had yet to be created that made that prediction a certainty, at least in the near term.
Now with products like the Kindle and the iPad (and the several others that have come on to the market that will likely fail), we have either arrived at or have become very close to the age of the digital book. It seems quite unlikely that the cost of the ebook reader will go dramatically higher over time and it is more likely that the cost of a good quality ebook reader drops below $100. The price maybe goes to under $50 if the ebook reader can be successfully locked into one type of proprietary book format that locks the reader to one type of store (so that the store can subsidize the cost of the reader in return for future book sales).
Here are my predictions:
- within 5 years most (more that 51%) students will not be required to buy paper based books at their college.
- within 5 years I give it 50/50 odds that ebooks with an ISBN number exceed the sale of paper based books with an ISBN.
- within 10 years, I give it 90/10 odds (meaning I would take a 10:1 bet)
The risk in my argument is there may be a rush to non-proprietary standards. Unlike the music industry where it was quite easy to take a CD and convert it to a musical file (and thus was born MP3s and Napster), it is quite difficult to convert your paper based book to an electronic version. So the strength of a non-proprietary standard is not in place. This means it is in the interests of the book industry to lock everyone to their proprietary standard and give away the reader so that they can control the sales of books. I think that Bezos says he gets 10 ebooks from every Kindle, if he can make the math work to get enough ebooks per Kindle to offset the cost down to $50 then he would be fool to not do that.
The recent dropping of the price of the Kindle are a perfect example of giving away the reader to sell more books. Jeff should hire a bunch of marketing guys from Gillette so that he can learn about razors and razor blades. The low cost of the razor is offset with the refill of that razor. He could also hire some folks from HP/Brother/Lexmark as their printer market is also driven the same way.
If the standards become ubiquitous, it is difficult for the books to offset the cost of the reader. The manufacturer of the reader must sell the reader for greater than the cost of manufacturing. This is not true of the book readers on the market today. Nearly all book readers on the market today can open only one store’s books and therefore there is a symbiotic relationship between the success of the store and the success of the device.
The flip side could also be true. I could see Steve Jobs doing the reverse tactic that may be even more effective. Jobs is in the business of selling computers (although that is arguable considering the amount of money that the iTunes store makes on music). With books, he has the ability to change the argument since there are no ebook MP3 equivalents. He could say, “Buy my reader (iPad) and I will give you 20 ebooks for free out of this limited list of 250 ebooks.” If I was an author and Steve came to me and said, “Let me have your ebook for $1 royalty and I will make it one of the 250,” I would jump at the opportunity. For Steve, this would be a cost of $20 but for the buyer of the iPad, this would be a benefit of $200 to the user. I am not sure that Bezos can make the same deal since his real job is to sell books, not to sell Kindles (which is why his Kindle software sits on so many other platforms). Bezos wants to make the reader proprietary so that he personally can sell more books and his competitors like Barnes & Noble can’t compete with him on selling books.
Steve Jobs should be pushing for the creation of standards and he should be giving away his ebook format to anyone that wants to use it. Then, he can beat his fellow reader manufacturers and making an insanely great reader – something that his company is uniquely setup to accomplish.
Interestingly, the publishers of books have more to fear from Amazon then they do from Apple (unlike the music publishers). Amazon is sitting at a perfect point to lock up a commanding portion of the market and dictate terms to the publishers. Apple on the other hand will have a much more difficult time in doing to the book market what it did to the music market (by making the iPod the King Kong of music players). While the iPad has the ability to be the commanding presence in the emerging tablet market, it is not nearly as well positioned to be the commanding presence in the book market. There are rumors of an upcoming iPod Touch that is an inch or so larger than the current format so that product may be the horse to ride in the dominance of the ebook marketplace.
For a lover of reading and company strategy, the next 5 years are going to be very interesting. Will my prediction come true? Eventually, I am certain of this, it is really the timing that is in question. I am also certain that my ability to start a company that would ride this wave is probably gone. It will now be fought by multi-billion dollar corporations like Apple, Amazon and the various book publishers.
PS to Steve Jobs: Steve, if you are reading this article and are willing to include a book that I write in each iPad and pay me a buck for that book, please call me! I will have the book written within a month!! Heck, I might even get it done for 50 cents!