Fascinating way to make money, hard to argue with it as a service too, why shouldn’t the owner of a book scan it for their own convenience?
Consumers such as Yusuke Ohki, who has 2,000 books in his Tokyo apartment, are scanning them and accessing them through their iPads.
Ohki has since started up his own 120-person firm that does the same thing for customers. There are as many as 60 companies offering such a service, according to Bloomberg.
There’s an issue I’ve been exploring on this blog and elsewhere for some time. It’s about digital change and what it does to large and small markets, especially when the rates of change in these markets differ. I’ve called it the differential rates of digital change problem and I think it is time I put a solid definition on it.
So here it goes. The Differential Rates Of Digital Change Problem occurs:
When a large publishing market undergoes a more rapid shift towards digital delivery and consumption of books than a smaller publishing market.
This change has many significant implications but the three I want to focus on here are:
Let’s look at these one by one.
Rights Pressure
I’ve highlighted how larger market publishers increasingly have an incentive to acquire global digital rights in works, whereas, as of yet, smaller market publishers have little incentive to hold on to those rights, though they know that in the future they will need them. I’ve pointed to one possible way to meet both needs here.
Sales Pressure
This is almost a bigger deal for small markets. And it has a few forms.
These sales are starting, slowly but surely, to leak sales from small markets to large markets. The levels are unquantifiable right now in anything but the most sketchy way, but they are surely growing with each Kindle, Kobo reader, iPad, iPod Touch, iPhone and Android device sold into a small market. The proliferation of devices offering ebooks sold through large market retailers MUST be driving sales from those markets. When those retailers start sharing their data (and how likely is that) we will know for sure.
Over time the sales impact will become pronounced, especially if the small markets don’t develop a local infrastructure for selling ebooks. Imagine for instance if all digital sales in Ireland were made through Amazon, Apple, Google and Kobo with maybe a small share for the rest? If the system remains as now, no digital sales will ever be recorded and the market for books will shrink dramatically OR at least it will seem to.
Actual Vs Observable Data
This is a bigger issue than it sounds like and is deeply relevant. As digital change moves on, small markets get a false idea of how rapidly their market is shifting, or at least publishers native to that small market do. If sales are happening in the estores I’ve already highlighted then the local market doesn’t see them. If 20% of the market shifts to digital, but buys its books from foreign retailers, then the market will fall by 20% and it would still look like digital has no presence.
Clearly there are offsets here. For instance, if a local publisher starts putting their titles on those outlets they will start selling books and will realize that the digital shift is ALREADY happening, or perhaps they will realize that even if it isn’t happening, they can sell some of their books to a global customer base.
What’s more, local offices of large publishers (quite a few of which exist in Ireland) will be able to see their rising ebook sales through their corporate parents and will know well enough how quickly digital sales are growing.
But even so, the data for the smaller market as a whole will be fractured and patchy, controlled by outside forces whose good will cannot be relied on and all the time digital will seem, because there is little reliable evidence to the contrary, to be a marginal market.
In this strange scenario, local publishers remain unwilling to invest in digital because they feel the market is small but equally the market to them remains small because they have not even invested to get a few titles digitized and for sale on these foreign platforms. The only way to see beyond the apparently tiny size of the market is to take the leap and invest a small amount, but companies, in the absence of data, are rightly reluctant to do so.
Conclusion
So there it is, the Differential Rates Of Digital Change Problem. It’s not a problem for larger publishing markets of course and I don’t see any real way of addressing it until figures for digital sales begin to be shared more freely by the large companies like Apple, Amazon and Google who are not really minded to share it.
The only way beyond it is to accept on faith that digital is growing in smaller markets but in hidden ways, then to step beyond that and start offering your products digitally. This doesn’t have to be a huge investment (and if you doubt that, spend some time online reading about ebook creation from text files) but it does need to happen and it needs to happen soon.
There’s A Problem
I’ve written before about how small markets, both English language ones like Ireland and other territories with major markets in similar languages, face challenges when it comes to ebooks:
So we have large publishers seeing sales internationally that they can EASILY service at little marginal cost. Acquiring the right to sell to those markets is a sensible strategy that hedges against future global digital sales while delivering real if small sales now.
But the impact on smaller markets is large
Take for example Ireland (I could as easily choose the English language markets in Spain, Slovenia or San Marino), where ebook sales are lower than 1% right now. From that perspective any Irish publisher approached to do a deal for a title they have published in Ireland would be fools to let that deal flounder over digital rights.And yet, at what point would a publisher be crazy TO do a deal that required them to cede global digital rights; 5%, 10%, 20%, 25%, 50%? What’s more, if a publisher agrees the principle now at sub-1%, how can they hope to grab back that principle at 5%, 10% or 75%?
But What To DO About It?
I’ve been pondering one solution to that problem for a while and I thought I’d roll it out. It isn’t fancy, it’s hardly innovative, but it SHOULD become standard practice for small market publishers ASAP.
And it is simply:
Set a time period for reverting digital rights at 3, 5 or 7 years. Make sure this is independent of print rights, or at least make sure that a publisher can hold print rights even while digital rights revert. If you like, allow for a renegotiation of key points at these break years rather than a reversion, but ensure that YOU have the right to revert nonetheless.
This doesn’t sound like much, but it is a prudent and sensible precaution for the small market publisher.
Here’s Why?
Consider the following, your market for digital books isn’t huge now, but it is growing, perhaps faster than you realise (see my next post for why that’s the case). By ceding global rights a foreign publisher will take advantage of a global ebook-market selling ebooks to the new digital readers emerging in your market that hurts, in all likelihood, your local ebook retailer (if any exist), your own relationship with potential customers and your own understanding of the market.
The ebook market has changed quickly in the last three years and it will change even more in the next three. Setting the first reversion or renegotiation point at three years is therefore VERY reasonable. What’s more the front-list nature of the print book will almost certainly have passed at that stage.
After five years the market will surely be even more radically different and while it might be TOO long a period before rights revert, it would at least allow the small market to develop a real digital market. Seven years is the longest one should agree a deal of this nature. Seven years opens the possibility that your small market has changed SO much you own efforts at that point will be futile, however, if you use the seven years well, you SHOULD see a benefit of reverting.
One Final Thought
Whatever you decide when ceding global rights, make sure you are doing it as part of a strategy and not simply under pressure to do a deal. Short-termism now will almost certainly lead to your undoing as a publisher. NOW is the time for thinking, vision and long-term planning. Your survival is at risk.
I’ve written on this issue a few times before. I call it differential rates of digital change. I see it as being the biggest issue for non-US and UK publishers in 2011 and 2012.
The massive shift to digital is already leaking sales from smaller markets to those large markets. We just don’t see them. Frankly, how else can we explain the modest growth in those markets driven as they are by digital sales?
Mike Shatzkin looks at this phenomenon on his blog:
The topic of digital change outside the English-speaking world was placed on my radar in 2008 when I was invited to speak in Copenhagen to Danish booksellers and publishers. It was already the case that a large percentage of the books sold in Denmark were in English. (I have recently heard it said anecdotally that sales of English-language books in Denmark have climbed to 25% of the total!) I observed at the time that digital disruption, which would make books more ubiquitously available outside their home territories, would result in increased intrusion by books in English. It seemed to me, at first, that booksellers would be better able to adapt to this change than publishers because booksellers are not nearly as tethered to their language as publishers are.
via All publishers and book retailers are global now – The Shatzkin Files.
The Frankfurt Book Fair this year was an interesting one for me. It crystalized a few of the many ideas that have been bouncing around in my head. Publishing Perspectives in particular touched on one of the MAJOR issues for smaller market publishers and I wanted to hammer home the point in this post.
Being a small market english language publisher is going to get harder as digital grows
Put simply I believe that US and (initially less aggressively but shortly with the same fervour) UK Publishers will seek to control world english language rights for digital and with it any rights (enhanced/video/audio etc.) they may need in order to sell ebooks and enhanced ebooks on a global basis. This may spread to an all out claim on world English language right including print, somehow I suspect that’s a ways off for now and the emphasis will be on ebook rights.
Why is this?
The reason is that US & UK publishers a compelling economic case for holding those rights while smaller English language markets have less of a business case for retaining those rights.
As Kindle sales, and B&N’s Nook and Apple’s iBookstore and sales through the multiplying ebook retail outlets grow to 10% of group revenue US and UK publishers can begin to plausible include revenue projections for digital editions of new titles.
And some of the growth in ebooks is global. Kobo talks about serving over 200 countries with their ebooks:
Meanwhile, our direct business at Kobobooks.com is rocking and we’ve delivered ebooks into 200 countries from Azerbaijan to Vanuatu – we’re making books available in more places to more people than ever before.
What’s more, they know that the markets that are currently buying ebooks globally are likely to grow rapidly if they even partially reflect
So we have large publishers seeing sales internationally that they can EASILY service at little marginal cost. Acquiring the right to sell to those markets is a sensible strategy that hedges against future global digital sales while delivering real if small sales now.
But the impact on smaller markets is large
Take for example Ireland (I could as easily choose the English language markets in Spain, Slovenia or San Marino), where ebook sales are lower than 1% right now. From that perspective any Irish publisher approached to do a deal for a title they have published in Ireland would be fools to let that deal flounder over digital rights.
And yet, at what point would a publisher be crazy TO do a deal that required them to cede global digital rights; 5%, 10%, 20%, 25%, 50%? What’s more, if a publisher agrees the principle now at sub-1%, how can they hope to grab back that principle at 5%, 10% or 75%?
And it’s not just English
This will be a problem for smaller markets in all languages as larger publishers realise they can reach markets profitably in a digital world that they once could only do expensively and perhaps unprofitably in print.
And it works both ways
US and UK publishers may sell print rights to smaller markets, but they will become increasingly reluctant to sell ebook rights. How would a print only publisher hope to make a run viable in a small market served 10% or 15% or 20% by digital sales from the UK or US based publisher?
Be prepared
So, publishers, what will you answer when US and UK publishers demand your ebook rights? And whatever way you answer, are you prepared for the implications?
There’s more on Frankfurt, but this is the top priority I think.
Eoin
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