After Info Systems class Friday, two students and I discussed whether or not a “new business model” exists right now for the music industry. Karina argued the new music model is currently in the process of being sorted out and still evolving; Vishal and I contended that the new model has been launched and is mostly concrete. Apple, we hear you roar, with your ten billion song downloads.
Here’s what struck me though, and it’s not about the music industry at all. Right now the publishing industry is where the music industry was ten years ago, trying to find its place and relevance in the digital age.
The story thus far: Earth’s biggest bookstore, Amazon, dominates the ebook market with its combination of a grip on content (earth´s biggest bookstore) and hardware (the Kindle).* Some data–see this NPR Fresh Air story–puts Amazon’s market share at 80%. For years, Amazon kept ebook prices largely at $9.99, possibly to help the market grow. Their market muscle allowed them to largely put prices where they want, until iPad came along.
In light of increased competition entering the market, Amazon has struck some new deals with publishers, allowing a few to even set their own prices. It looks like it took hold: Right now the US Amazon Kindle Store has Michael Crichton’s final book Pirate Latitudes retailing for $9.96, but Stieg Larsson’s bestselling The Girl Who Kicked the Hornet’s Nest sets you back a steeper $13.79.
The big deal is that really, ebooks ruined the party for publishers, ripping apart their fat “hardcover first” revenue stream, just like “price per track” from Apple messed up the $16 for a CD fiesta that the music industry used to enjoy (and I’ve got to say, I don’t miss going into Musicland or Sam Goody at all).
In the past, if a book wasn’t out in paperback you might be able to find a smoking deal at a large retailer like Barnes & Noble or Borders, but otherwise you were out of luck: Hardcovers would set you back over $20. Consumers who wanted the new book would either have to pony up or wait several months. Ebooks and their $9.99 prices turned this model on its head, offering a low-cost alternative with different pricing structures immediately. Macmillan and Amazon even had a public tiff over pricing in January. Amazon ultimately caved, raising prices. Maybe they saw the writing on the wall and the competition coming.
This is a classic case of a monopoly needing to be cracked open: Amazon’s domination of the market was choking publishers out. With Apple as a competitor, Amazon has plenty to worry about: Like itself, Apple knows how to sell content. So Amazon’s loosening up, and publishers have a little more negotiating and pricing power now that there are two significant sales outlets for their digital products.
That said, publishers will continue to have to slog it out, and they’re going to face myriad issues in the next few years. Fewer readers will come their way from the uber-connected Generation Y. As the NPR story referenced above also nicely points out, the future of author’s rights in the digital realm has yet to be finalized, and it’s valid to question whether brick-and-mortar stores or book distribution models are still relevant. In publishing, only one thing is clear: The fight is far from over.
*A marketplace for content connected to a high-quality piece of hardware. Sounds familiar….
