Ken Auletta on the iPad, the Kindle and the future of books

The Papyrus Bodmer II, an early Christian codex (125 AD). Source: Logos Resource Page.

In the New Yorker, Ken Auletta has a highly-researched and rewarding piece on the industry manouvering behind the e-book revolution. It is a fascinating account a gyrating sentiments inside the big publishers, as the book industry confronts rapid technological change:

In the weeks before [the launch of the iPad], the book industry had been full of unaccustomed optimism; in some publishing circles, the device had been referred to as “the Jesus tablet.” The industry was desperate for a savior. Between 2002 and 2008, annual sales had grown just 1.6 per cent, and profit margins were shrinking. Like other struggling businesses, publishers had slashed expenditures, laying off editors and publicists and taking fewer chances on unknown writers.

The industry’s great hope was that the iPad would bring electronic books to the masses—and help make them profitable. E-books are booming. Although they account for only an estimated three to five per cent of the market, their sales increased a hundred and seventy-seven per cent in 2009, and it was projected that they would eventually account for between twenty-five and fifty per cent of all books sold. But publishers were concerned that lower prices would decimate their profits. Amazon had been buying many e-books from publishers for about thirteen dollars and selling them for $9.99, taking a loss on each book in order to gain market share and encourage sales of its electronic reading device, the Kindle. By the end of last year, Amazon accounted for an estimated eighty per cent of all electronic-book sales, and $9.99 seemed to be established as the price of an e-book. Publishers were panicked. David Young, the chairman and C.E.O. of Hachette Book Group USA, said, “The big concern—and it’s a massive concern—is the $9.99 pricing point. If it’s allowed to take hold in the consumer’s mind that a book is worth ten bucks, to my mind it’s game over for this business.”

It’s a great article that examines the fears and hopes of publishers, the shift in business models from physical objects to electronic entertainment experiences, and the incompatibility of spreadsheet-savvy IT behemoths and clubby, author-friendly book publishers. The article’s conlcusion? Unexpectedly, publishers may have leveraged their position as producers of compelling content to play various device operators off against each other, potentially saving the industry.

For now, many publishers believe that they have won the chess match that Sargent started. “We have three behemoths now competing,” the C.E.O. of one house said. “So one of them can’t force us to do anything unless the others go along.” Early sales of the iPad are promising: Apple said that more than three hundred thousand sold the first day, and analysts have guessed that between five and seven million will be sold this year. And a dozen other digital reading devices were on display at the Consumer Electronics Show, in Las Vegas, in January, providing more competition for the Kindle.

Publishers have another reason to hope. The recession has changed the thinking of Silicon Valley companies, shaking their faith in advertising as their only source of revenue. YouTube has begun charging for some independent movies, in an effort to compete with Netflix, and its managers know that to succeed it must have professionally produced content that advertisers—and consumers—will pay for. As digital companies begin charging for content, they are met in the middle by old-media companies looking for ways to charge for what they produce. The incentives for old and new media to form partnerships seem to converge.

I think that’s wishful thinking, to say the least.  But then again, the major record labels haven’t disappeared (yet) either. Ultimately, authors need a way to fuind consumers, and as musicians have found, that problem is as much about industry connections and marketing savvy as it is about the distribution of their content to places where readers and listeners can find it.

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