Sanderson's Paradox - Free eBook Distribution

Over on Twitter, Brandon Sanderson was looking for potential ways to get package digital copies of his books for those who purchase hardcover editions of them. I've wished for this for years as it would allow me to leverage my Kindle Fire for travel and mobility while still supporting my rampant bibliophilia.

The basic requirements he lays out are as follows:

1) System should be publisher independent
2) Little to no additional cost to publisher
3) Books are available to be sampled in book stores (no shrink wrapping)

Option 1

The easiest solution is to have Amazon and B&N integrate it with their Kindle/Nook services where if you buy a physical copy of an eligible book through them, a redemption link is sent to your email or the e-book is automatically sent to the Kindle/Nook associated with that account. These companies both have the resources and the incentive to make this happen as it would correspond to huge growths in their tablet/e-reader sales. I actually wrote about this a long time ago back in 2009 though I don't think we're any closer to seeing this three years later.

Strengths

• No way to get the free e-book without buying the book first.
• No modifications to the book necessary.
• If a book is returned, access to the eBook could be revoked.

Weaknesses

• Doesn't prevent you from selling or sharing the physical copy of the book once you have your digital copy (no system really will)
• Would be driven by booksellers not publishers (lots of potential issues here with who has rights to what)
• Not open to indie booksellers.

But Sanderson throws another requirement in there - 4) that it needs to work as well for the big stores as it does for the little guys. If the mom and pop shops need to get involved it gets a little more complicated. Here are a few more potential solutions off the top of my head.

Option 2

Unique cards (similar to what is included in shrink wrapped DVDs with bonus copies) that are shipped with the books. It would be up to the book seller to distribute these cards upon the purchase of a book. Possibly enhance the security with a scratch off covering for the unique code and/or some type of bar code that the book seller would scan so it's included on the receipt (rings up as 0.00 with the purchase of the book.) This would you from returning the book without also returning the unscratched off card. You could then take this card to your eReader of choice and redeem it for free or a nominal fee.

Strengths

• No way to get the free e-book without the scratched-off code.
• No modifications to the book necessary.
• Open to all book sellers

Weaknesses

• Doesn't prohibit buying the book and sharing the code (no system really will)
• Requires modifications to the bar code databases.

Option 3

The next solution would require no additional cards or modifications to the existing book.

A book would be printed with a code inside it. The code would be the same and printed in every book, except possibly library editions. You would enter this code at some website which would then activate a program based on the printed text. This program would randomly ask you 3-10 random questions based on the text layout of the book - what is the third word on page 392? - that needed to be answered within a set amount of time. This would prevent people from getting the information from the books in stores or posting guides to acquiring the books online.Yes, this wouldn't prevent people from going out, buying the book and then returning once they had the free digital copy but the hassle of doing that (see rebate logic) would be better than storing some code you could easily write down in the book store. You could also couple this with a unique code that would prevent the redemption of multiple books.

Strengths

• Prevents people from easily subverting the authentication system.
• No modifications to the printing process necessary.
• Potential buyers can still sample the book
• Open to all book sellers

Weaknesses

• Process is more complicated than a simple redemption code and requires additional code.
• Risks reader seeing spoilers.
• Doesn't prohibit buying the book and sharing the code (no system really will)
• Either multiple eBook copies could be redeemed with the same book or people could return a book with an already redeemed code in it.

Option 4

Print "$1.00 eBook editions" that come shrink wrapped with a unique redemption code inside them. They would be priced a dollar more (or whatever price you set) than the regular, non-shrink wrapped edition and you wouldn't be able to return an opened eBook edition. If you were on the fence, the non-eBook editions would be available for you to read a few pages.

Strengths

• No way to get the free e-book without the scratched-off code.
• No modifications to the book necessary.
• Open to all book sellers

Weaknesses

• Requires a method of writing unique codes in the book and securing the codes
• Doesn't prohibit buying the book and sharing the code (no system really will)
• People could open the shrink wrap and take the code without buying the book.
• Could impact the sales of non-eBook editions if eBook editions were sold out.

So those are my ideas. Feel free to pick them apart or add your own.

Kindle Fire Impressions : Day One

Unboxed my Kindle Fire yesterday and spent the afternoon playing around with my new toy. Here's some early impressions.

 

1. Between an Amazon Prime subscription (which I already have) for Video and Books and Pandora for music, I could go probably go months without paying for any actual content. Throw in a Netflix or Hulu+ account and a few cheap eBook deals and I certainly could keep myself entertained for less than $200 bucks a year. I'm one of the million or so that dropped at least part of their Netflix account in the last few months and with the Kindle Fire as a content portal, I might go back.


2. I don't like the way the Fire organizes user-uploaded videos. Currently, it puts them in the photo gallery . If you're trying to watch a TV season in order, it's tricky to tell which episode is which. Unlike iTunes, there doesn't seem to be anyway to supply this metadata yourself. I also haven't found a way to increase the size of the thumbnails or display the file names or some other method to clean things up.


3. Speaking of user supplied content, the file system / mini-USB connection leaves a lot to be desired. We've got three computers in the YetiHousehold (2 Win / 1 Mac) and the connection only worked the first time on the Mac. The other two computers couldn't seem to connect with any regularity. The mini USB pin also seems to be slightly defective as it would sometime lose the connection with nothing more than a small movement of the wire.


4. The built-in store interface is clean but browsing is difficult. One thing that bugs me is the separation of SF and F books. That's like moving Bert and Ernie into a duplex. There might be better ways to sort and browse but if they aren't obvious to the user, that's a failure on the interface design team. 


5. The app store is very sparse right now. I'm going to assume that will fill up with time but right now, there isn't a whole lot to get excited about. Would love to see some old RPG ports from PS1 or SNES but I don't know if that's realistic. I can only launch so many ornithic missles at porcine targets before I need something new.


6. Browsing the web on this is fine. I wouldn't do a lot of typing but for basic browsing it works fairly well. I haven't really noticed if and when the Silk functionality come into play, but everything has loaded just fine. Not sure if it takes a little while to get to know my habits or not.


7. Touch screen responsiveness is the closest I've seen to the iPad / iPod Touch. No complaints on that front, which is one of the places where competing devices fall short most often.


8. I haven't read anything for any extended period of time but I do like the ability to have a back lit, low brightness screen. Good for reading in bed without disturbing the YetiWife, although I always end up falling asleep while reading before she does.


9. There is an odd sense of disappointment that comes along with the purchase of any technology centered around content consumption. While you have new ways to interact with your content, at the end of the day, you've got the same content you had before. It's like buying a really nice filing cabinet.


10. Bottom line: The Amazon Kindle is a near perfect device for content consumption (music, books, video, web browsing). It's lacking as a productivity device but it's not really being sold as such, especially not for $200.

More later, but aside from the USB connectivity I like everything I've seen so far.

Lest You Forget...

Today's lesson will discuss the fundamental difference between books and Ebooks.

I present to you two copies of Lauren Beukes's excellent Zoo City, when dropped from identical height.

Class dismissed.

eBook eConomics: 3 Tier Pricing

I'm starting the eBook eConomics series off with a rather simple strategy, not that different than the traditional model. I'll save the crazier stuff for later.

 

 

 

eBook eConomics 1: The 3 Tier Pricing Model

 

The Proposal: Create 3 tiers of pricing.

Tier 1 corresponds to the HC edition, marked down 50% from the cover price, between $10-$15. Be honest, when was the last time you bought a HC for list price?

Tier 2 is the Paperback edition, marked down to 50% from the inevitable $10 MMPB price to $5 flat. This would be available when the PB edition is released.

Tier 3 is the end-state version. Price drops again, this time to $2.  You could determine the Tier 3 event in several ways. You could wait until the MMPB run goes out of print. Or you could wait the same time between HC and PB releases. Or wait until the book sold X number of copies. Or keep a set number of books at each pricing level before moving them to the Tier 3 price.

Advantages:

• High starting price will allow publishers to recoup the editing, marketing, and formatting costs.
• Low final price shares the reduced distribution cost with readers
• Low "long-tail" price will keep readers buying older books
• Readers will be more likely join longer series due to low buy-in costs

Disadvantages:

• High initial eBook prices don't subsidize the buy-in price for eReaders.
• This approach could negatively impact backlist sales of paperback editions
• Final price point would necessitate additional negotiation for royalty distribution.
• Doesn't deviate from the traditional pricing model much

Verdict: Probably one of the most realistic approaches, especially if publishers are willing to trade high prices for more backlist sales. I know I would buy a lot of backlist books (particulary Hugo and Nebula award winners) if they were more affordable.

eBook eConomics: Alternate Approaches

Ignoring minor variations, the publishing model for popular fiction has been relatively stagnant for decades. A book comes out in hardcover at a price point of $20-30. About 9 months to a year later, that same book is reissued in paperback at a lowered price around $5-$10. Sometimes the hardcover is replaced by a TPB, sometimes the paperback is. Over the years, the cost of manufacturing and the slow burn of inflation has pushed the prices ever upward. But at it's core, the model remained the same. Hardcover than paperback. Book after book.

And then comes along the concept of the eBook. Immediate. Disposable. Low cost. Simple distribution. Infinite print run. Zero shelf space. Aside from the whole story thing, it's basically everything a physical book isn't.

So why do publishers insist on pricing it like it is?

The debate over the eBook price point rages on and on. Publisher vs. retailer vs. author vs. consumer. But it always seems to gravitate between a hardcover price point ($15-25) or a paperback one ($5-$15) give or take some form of DRM. Why do publishers insist on keeping things stagnant when so much around them is changing? Where are the alternate approaches?

More importantly, where are the game changers?

Over the next few weeks, I'm going to offer a few very simple alternate ideas.  They'll be high level thought experiments intended to inspire a little bit of discussion. They probably won't be feasible for one if not several reasons but who knows, maybe they will spark someone to try something different.

Amazon Enticement: Too Little, Too Late?

It was all over the Web today (here for example) that Amazon is revising the pricing model for publishers and offering them a better cut of the action (roughly 70% of the price). There are various stipulations but in essence Amazon is trying to get the publishers to offer their books on the Kindle and offer them relatively cheaply. More thoughts on this later. [Day Job Sucks This Week]

With the all but confirmed iTablet set to debut next week, Apple also appears to be entering the eBook market, most likely through their pervasive iTunes Store, which can be access by virtually any computer with an iPod. I don't know the number of iPods vs. the number of Kindles but it's not close.

The timing of this makes it look like a desperate ploy by Amazon to proactively combat what has been dubbed the Kindle Killer. By why so little and so late? Amazon could have become the dominant eBook reader. They had the best device on the market for at least a year and arguably the best marketplace for selling eBooks.

But rather than enticing readers and publishers, they squandered their advantage. Amazon should have taken the long-tail approach and offered Kindle for a drastically low price ($100-$200) and tried to drive prices down as much as they could by offering publishers 70% of the cut much earlier. With a projected $.06 distribution cost (to be paid by the publisher) there is plenty of extra margin to entice the publisher and cut the costs compared to physical books. Video game publishers do this all the time with the intention of making up on the cost on the back end. With basically no cost scaling for additional copies (i.e. limitless supply), eventually you will make back the money.

They also could have aggressively pursued something like my reader enticement program (suggested here) to lower the buy-in for readers. Instead they continued to sell expensive eBooks with a high initial purchase price. I'm interested in eBooks but if I'm going to drop 300+ on an eReader it's going to be something I can dual purpose. That's why I'm waiting to see what Apple brings to the table.

If Amazon had gotten Kindles in the hands of more readers and gotten those readers invested in it, they would be in a much stronger position than where they are now. They would have people used to reading eBooks and with the Amazon DRM being what it is, readers wouldn't be so quick to switch libraries. Even if people did get the iTablet and let's face it, they will a cheap Kindle would have still been picked up by technophiles. If Amazon can still maintain their iTunes App, you could potentially read Amazon purchased books on both devices. With the rumored battery problems of the iTablet, a dedicated reader might be something people are still looking for.

But it's too little too late. The Kindle Killer appears to be looming around the corner with all of the hype and the interest. Hopefully, Amazon will be able to still sell books that are viewable on the iPod. I actually strongly suspect that this is the case, because the only way Amazon's actions make sense is if they were intending on being a third party seller all along and merely used the Kindle as a Beta test for their distribution system all along. At the same time, I think their competing music stores might sour any potential partnership. Ahhhh, who knows? I guess we will see next week.

Apple Tablet Rumors

Over at MacRumors, an industry analyst predicts that Apple is prepping mass production for the long awaited Apple tablet in February for a March debut.

Why is this mentioned at a book blog?

The report claims that the device will include a 10.1" multi-touch LCD screen, specifically countering a recent rumor that the device's launch would be delayed to the second half of next year and would include a model sporting an OLED screen.

Another claim included in the report is that Apple has begun contacting book publishers about distributing their books through Apple for consumption on the new device. Apple is reportedly proposing a similar business model to its App Store, where Apple would retain 30% of each download's sale price with 70% going to the publishers. This model is seen to be a significantly more attractive deal to publishers than that offered by Amazon for its Kindle Store, where sales are split 50-50 between Amazon and the publishers.

Book publishers may not be the only ones looking to get on board with Apple's tablet launch, as a coalition of magazine publishers just yesterday launched a joint venture to develop standards and business models for digital distribution of their content. Magazine publishers have also been designing prototypes of how their content might be presented on tablet devices.

This thing looks to be a netbook/giant iPod Touch/eBook reader. I'm too bibliophilic to want a eBook reader (Kindle/Sony/whatever) but if I could upgrade my iPod Touch which I use to watch/listen to a lot of video/music and have added capacity for reading books, it's definitely something I would get in line to buy.

New Kindle Price. Same Kindle Problem.

The Amazon Kindle has a new lower price: $259 for the US model, $279 for the International model. There's also a $489 Kindle DX. $259 is $40 off the $300 price which was $100 off the introductory price of $399.

Carry the 2, add some sales tax, factor in shipping, divide by book, adjust for inflation, and round up the remainder and the final price is:

Still Too Much.

Amazon is getting closer but they still don't have it. It's not the price of the device, it's the price of the content you put on the device. I'm willing to spend a lot for a large, touch-screen, video capable iPod but that's only because I have the ability to fill it with content that I previously own and that I can get for a reasonable price. I don't have that ability with the Kindle. I can't burn my existing library onto a Kindle and rebuying everything is cost prohibitive. It's not necessarily a deal breaker because of the nature of books (many of which I will only read once) but it's still enough of a disincentive to keep me from attempting a Kindle transition. But even that isn't a huge deal in the long run.

eBooks are expensive.

Until the eBooks themselves are priced for what they are, nontransferable DRMed copies that can be endlessly reproduced at zero additional cost with miniscule storage and distribution fees, I can't get on board with them.  I don't know all the ins and outs of the publishing industry but I do know that the raw materials/printing/warehousing/shipping/etc. physical fees are significantly larger portion that the discount they are offering to the readers. After you make back your initial investment to the editors/digital production/author advance, everything (minus an almost zero per unit cost for servers/bandwidth) is pure profit split between Amazon, the publishers, and the authors. Unless the authors are getting more than they are letting on, the Publishers and/or Amazon are making a killing. And the market will only going to grow.

So why doesn't Amazon try to aggressively pursue the market before Apple/Microsoft/whoever debuts their inevitable devices. Why don't they cut the eBook prices and get everyone on Kindles before competitors can release their own next gen eReaders? It doesn't make a whole lot of business sense if Amazon is in it for the long haul. The only rational explanation I can think of is that Amazon is trying to set themselves up as a distribution network across 3rd party platforms, similar to what they already offer as an iPhone app. They want to be the iTunes for books. Not the iPod for eBook readers.

Now I don't know if Apple would go with Amazon or with a new iTunes substore but Amazon already has a tremendous head start when it comes to selling, marketing, and recommending books. Internet books are synonymous with Amazon in the same way that internet music is synonymous iTunes. Microsoft on the other hand would be crazy not to go with Amazon. As of right now they don't have anything close to Apple's iTunes distribution system unless Windows 7 is hiding some stuff. They would get a proven distribution system that would rival iTunes level of exposure.

So is Amazon sitting on high margins and slowplaying the device market rather than developing that killer eReader and aggressively pursuing market share with low profit margins for the heck of it? Or is it more likely they are going to keep the price points high, monopolize the distribution system and split the high profit margins with Apple/Microsoft and anyone else willing to sign on to Amazon's whispernet eBook delivery system and proprietary format while getting out of the expensive and continually demanding hardware market.

My money is on the money.

Barnes and Noble eReader Revealed!

Here's a first look at it over at gizmodo. It seems to correct on a few of the things I don't like about the Kindle.

It also appears to be a horrible time to put this out with Kindle with an established marketshare and everyone else waiting for Apple/Microsoft devices.

It's going to be interesting to see what kind of files are supported/DRM/etc. There is so much potential for bad decisions here!

DRM device specific formats.
Exclusive publisher deals with Amazon vs. B&N.
Ridiculous price points.

Hopefully, the people behind the device put some thought into this. Either way, tune in next week when the device is official announced.

Also, a thought inspired by the dual eInk/multitouch screen design: What if Apple released a eInk reader that you could plug your iPhone iPod Touch into?

I'll Be Damned...

Thanks to John over at sfsignal, I became aware of the impending launch of Damnation Books. They appear to be mostly oriented towards Dark Fantasy/Horror/Paranormal Thriller-type work and offer a range of lengths from Short Story to full length Novel.

The full listing of launch titles can be found over their website. Honestly, none of the titles/authors interest me much. What I found interesting was Damnation Books pricing model.

First off, Damnation is offering ALL of their titles as eBooks. You can also buy any novella or novel as a TPB but they are fully embracing the eBook revolution.

Damnation Books also appears to be intelligent enough to realize that the physical book pricing system doesn't translate to eBooks. Just because you are willing to buy a $20 hardcover doesn't mean you are willing to pay 20 for a digital file.

Here's Damnation's variable pricing strategy.

What the heck is variable pricing? It works like this: At 12:01 A.M on the day a new book goes live on our site, it’s offered free. Yes, you read correctly. The first copy is FREE! With each download the book rises in price by five cents until it reaches its full retail price. At that time, the book remains at full retail price. Coupons and discount codes are not applicable for any book until it reaches its full retail price.

This means that every single one of the books listed above will be launched using the variable pricing at 12:01 A.M. on September 1st 2009. Awesome, huh?

So the first person to download the book gets it for free, the second for a nickel, the third for a dime, and so on until the book reaches full price. This is a very interesting strategy and I'm curious to know if it will work. It will definitely encourage people to follow the site and keep checking for new releases so that they can have a chance at getting books for a fraction of the cost. However, the incentive to buy the book will decrease over time so I'm not sure what this will mean for backlog sales, especially for those titles that don't get sufficient word-of-mouth support from reviewers and bloggers.

This system is also dependent on a continuous flow of new material. More than one project has started out hot and fizzled out as time goes by. If Damnation Books doesn't add quality new material on a semifrequent basis people will forget about them and without a significant level of people buying books, they will never reach the full price point.

I would also like to know what the final prices are going to be. Are they going to be determined via demand? Will there be a set format price (1.00 for Short Stories, 10.00 for novels)?

Also, how are the authors being paid for their work? Do they get a advance and then a percentage of additional sales? Straight percentage? If it takes 200 units sold to get to the full price of $10.00, are the authors getting paid for those 200 units or is Damnation losing money at that point?

There are still a lot of questions here but I'm glad to see someone is trying a different pricing model for eBooks. It could be an interesting experiment to see what price the market will support before sales fall off. I don't think this represents the final answer but it's definitely a step in the right direction.

Check in on Sept 1st to see how their debut goes.

Incentivizing the Kindle

I, like most bibliophiles, have a lot of money invested in my physical book collection. I purchase a lot of books in hardcover, display them proudly on my shelf, and take great care of them. I even manage to read paperbacks without breaking the spine, much to the amazement of my friends and family. I love my bookcases filled with books. Taking this into account, the potential e-book revolution scares me.

I like the concept of the Kindle. A portable library that doesn't take up suitcase space? Sign me up! Getting books almost instantaneously? Heck Yes! $360 for the device (480 for the deluxe) plus $10 electronic books that I can't put on a shelf? Uh...what?

I get most of my books from Amazon, HCs around 15-19 (let's call it 18), PBs around 6-8 (let's call it 7). Assuming I buy as many PBs as HCs that's $25 for 2 books plus free shipping. For $360 dollars I can get 29 more books. If I wanted the Kindle and the 28 books, it would cost me around $650, and thats assuming that all of the books are available in Kindle format. That's 52 more books.

Even if you save $2.00 per Kindle book, it will still take 200 books before the Kindle has paid for itself. If you read 40 books a year, 200 books would take 5 years, more than enough time for Amazon to release Kindle 3,4, and 5.0. And that's for e-books, which have no physical form, no pages, no shelfability. What happens when the Apple iReader comes out and the Kindle books are non-transferable? Where does that leave my library?

Even if I was willing to shell out the money, there is also no assurance I will enjoy reading on the Kindle. I've downloaded the Kindle app for my iPod and read some sample chapters. That wasn't for me. I understand the Kindle is bigger with a different screen but until I sit down and read a couple of BFFs (Big Fat Fantasy), I don't know whether it would be for me or not.

So, in my mind it's going to take some incentive to get me to shell out a good chunk of change AND give up my comfort with the physical books. The Kindle is not an iPod; I can't buy one and fill it with the books that line my shelves. It's not as simple as buring your CDs to MP3s and dumping them to your iPod. But what if you could?

Amazon is in a unique situation as they are both the #1 internet book seller and the producer/seller of the newest big name e-Book reader. The Kindle is linked to a specific Amazon.com account. I know this because you can send samples of books from Amazon.com to your Kindle/Kindle app while you are browsing. If the Kindle knows what sample books your Amazon account requests, why can't it also know what physical books have been purchased by your Account? If I could buy a Kindle and it would come with free/low-cost (.$25-$1.00) electronic copies off all of the books I've bought off Amazon in the past 6 months/1 year/since Kindle go-live, I would definitely reconsider. Then you are getting about as close as you can get to an eBook iPod, short of including CDs inside every cover.

I'm thinking there are at least 3 business models that Amazon is in the unique position to take advantage of.

Option 1 (Conservative): Buy a Kindle and get the option to purchase a Kindle
Copy of any physical book already purchased on your linked account for a low
cost. You've already bought the hard-copy, chances are you won't pay another
$5-10 for the Kindle copy but you might be tempted to get one for a quarter or
two.

Option 2 (Decent): Buy a Kindle and get the option to download a
Kindle Copy of X number of physical book already purchased on your linked
account. If I can put 10/20 free books on my Kindle, I'm much more likely to try
one.

Option 3 (Awesome): Buy a Kindle and you get free Kindle copies of
all the physical books you've purchased/will purchase from Amazon.com on the
linked account. It's the equivalent of burning your library (or at least the
Amazon.com purchased portion of it) on to your Kindle. If I could do this, I
would buy a Kindle today. I could have my physical books and have the
portability/instantaneous delivery of the Kindle.

The worst case scenario I can see is 2 people sharing the account, one person getting the physical copies and the other getting the physical ones. You are still selling Kindles and it's no different than people simply passing the physical copy off to their friends when they are done with it.

The best case scenario on the other hand would have a number of benefits.

• People buying more Kindles (I would get one)
• People getting used to reading on the Kindle
• People potentially switching to Kindle full-time (which is more profitable due to no shipping, warehousing, or physical paper cost),
• Added incentive to purchase books from Amazon rather than other retailers.
• Satisfying the bibliophile technogeeks that love both tech and books and don't want to choose.

I think that this would be a brilliant move for Amazon. What do you think?

P.S. If anyone from Amazon reads this and likes it, a Kindle (and some stock options) would be appreciated.