Wednesday, June 23, 2010

eBook Wars: Clicks, Bricks and Clouds Build New Fronts for Retailers

In a flurry of activity in the ebook reader marketplace, price drops, new features and sales reports are filling the headlines to paint a rapidly shifting portrait of forces reshaping the book industry. Barnes and Noble kicked off the week with a price drop on its AT&T-equipped  Nook ebook reader to $199, with a wi-fi-only model coming soon at $149. Not to be outdone, Amazon announced within a few hours of the B&N announcement that its AT&T-equipped Kindle was now only $189, with a wi-fi-only option likely in the near future. The move by Barnes & Noble is more a move of opportunity than desperation. Research from DigiTimes reports that Nook units outshipped Kindles in March, though Tim O'Reilly notes that this includes stock shipments to retail outlets. Nevertheless, with iPad becoming a hot ebook reader rapidly, price-cutting to reach a broader audience for ebooks seems to be the order of the day.

The growing presence of iPad seems to be only part of this rapidly changing landscape for ebook sales. You also have to factor in what's happening with the devices themselves and with wireless network access. With Starbucks coffee shops offering two hours of daily free wireless to its patrons starting in July and Google's latest version of its Android mobile device operating system offering wi-fi access to the Internet to nearby devices, there's a diminishing reliance on built-in mobile data network access to get content downloaded into ebook readers. Barnes & Noble also has had success with encouraging the use of wi-fi access in its own stores, many of which are also equipped with Starbucks-like cafes, so there is a continuous presence of the Web forming wherever one finds content and coffee together. Add in home wi-fi access and it's just not that hard to get a hold of ebooks in most places where you'd want them.

The other leg of this story is a set of brand-new features on the Nook that were also launched the day of the price drop announcement. In addtion to some niceties like improved ebook and network connection navigation, version 1.4 of the Nook sports two key additions: games and competent Web access. Both of these new features use the two-centimeter color touchpad at the bottom of the unit to activate their features, leveraging the Nook's Android underpinnings to good advantage. It's a little awkward to use the color display for navigating eInk displays of Web content and games, but you get used to it quickly enough and the eInk is fine for basic text and graphics and great when bright outdoor light would make iPads, mobile phones and computer screens all but unusable.

Thinking of the forthcoming launch of Google Editions and the emerging plans of news publishers to charge for some of its online content, the Nook is coming up with an interesting and affordable way to access a broad array of content in a highly affordable device that can put book content alongside Web content in some interesting ways. If there are community features or other online "extras" that might be a part of an ebook offering, the Nook is now better positioned to integrate them into the ebook experience. Content integration need not be just Web-oriented, either; with Google TV arriving this fall on Logitech's Revue unit and other home theatre devices, the Android side of a Nook can double in time as a TV remote and search tool. You've read the book, now see the HDTV video. All interesting angles that coincide with Barnes & Noble's media selling profile.

Ron Miller points out on Fierce Content Management that there's a race to the bottom of sorts on ebook reader pricing, which you can't deny on one level based on these recent events. But I do think that it's also the beginning of a new race for book retailers to define value-add services in a mobile world in which digital delivery of much of their core inventory is a given and the need to make it valuable alongside pervasive Web content a given also. This latter race need not be a race to the bottom. It can be a very profitable race as retailers and publishers alike become more adept at integrating their brands, their online and physical selling spaces and their ability to integrate communities with content and services across these arenas. Mind you, this opportunity has always been there for book retailers, but as it finally sinks in that they cannot escape the Web via ebook readers, devices like the Kindle and the Nook will become extensions of an increasingly sophisticated cloud of content that spans our mobile devices, our entertainment systems and our desktops.

Tuesday, June 1, 2010

High Tech, High Touch: SIIA NetGain 2010 Searches for Content's Place Amidst Shifting Value Points

The SIIA NetGain conference this year in San Francisco was a hit from many perspectives, not the least of which were the great program and networking events on the first day and the bus caravan "road trip" to major technology company briefings in Silicon Valley on the second day. But for those who were willing to brave the final leg of the conference there was a special and ultimately instructive trip up into the high hills of Sonoma's wine country to Ridge Vineyards, a beautiful boutique winery known for blending the ancient art of wine-making with high-tech know-how.

Ridge Vineyards CEO and Stanford University graduate Paul Draper and his VP and former software engineer Eric Baugher led our group of leading content and technology executives through the history of this century-plus establishment that transformed some of the oldest vineyards in California into a highly efficient award-winning winery that blends the high-tech science of Silicon Valley with the best of traditional winemaking techniques. Ancient cellars lined with oak caskets were interspersed with rooms filled with stainless steel vats, processing equipment and the latest sensors and analysis tools for managing the aging and production of their highly valued products. It is an operation which Draper characterized as "high tech/high touch," a phrase familiar to many content and technology executives wrestling with how to position their products and services. "High tech/high touch" is in many ways at the heart of The Second Web, the blend of old and new publishing and technology worlds that places context ahead of content often and challenges publishers to adapt to transforming senses of what constitutes high-value, immersive content amidst rapidly changing content delivery platforms and models.

Like the content industry, Ridge Vineyards has had to look at a very old business model and figure out which parts of it were truly unique and valuable and and which parts needed to be transformed radically for the sake of modern business practices.And like Ridge Vineyards, the challenge for premium content producers is to convince a marketplace that has access to plenty of cheap or freely available products to buy in to the mystique and the unique qualities of their highly crafted products. Where the analogy begins to strain a bit, though, is in where many publishers have placed their focus as of late. You might say that where Ridge Vineyards has been able to focus on using high technology to preserve their "content" - superior "high touch" wine that improves with age - many publishers have lost focus on what parts of their businesses should be high tech and which parts should be "high touch."

One key problem is in part that the content industry is used to treating all content "wine" like "fine wine" in a time at which content is practically gushing from every place imaginable. Massive content markets are being mistaken for niches too often by publishers, and niches for mass markets. Ridge Vineyards can afford to stay in business comfortably because its production is highly limited, its revenue goals relatively modest and its products in relatively constant demand via a very stable distribution model. It was always a niche player, and its technology advances did little to disturb the core product and distribution model but allowed it to buy up small vineyards and parcels that could help its model to grow. This is, in many ways, like the publishing of the past several years, which saw most content producers using technology to leverage acquisitions of magazines and content licensing agreements to build up production scale - while leaving their core models undisturbed.

Now that the impact of the Web is being felt in force during economically challenging times, though, it's as if publishers are being asked to consider whether they're in the wine business at all and whether bottles, caskets and wine stores mean anything anymore. In this unstable new world, the boutique model remains very seductive. But like Ridge Vineyards, the real estate and the techniques that can make high-touch content work today for high unit revenues "the old way" tend to benefit publishers who know which parts of the past are worth leaving behind.. The "gentleman's game" of publishing has changed forever, for better or worse, and forces publishers to absorb some of the hard and potent lessons that NetGain sessions highlighted. Here are a few of the key points from NetGain that content and technology companies should pay most close attention to, followed by links to session coverage:

  • Immersive content with multiple layers of context across platforms is the key to today's premium publishing. One of the better sessions of the conference came at Adobe Systems, the first stop on our "road trip" down Highway 101. Adobe highlighted some of their new video and tablet-oriented content enrichment technologies that they previewed at last week's Google I/O conference (see our ContentBlogger analysis), but also demonstrated how their technologies also incorporate multiple layers for searchable core text and graphics, rich interactive media and use analytics from its Omniture acquisition. Their demo of Wired Magazine's experiment with an iPad edition showed what this could look like on at least one device, complete with touch-sensitive interactive ads interspersed with beautifully designed editorial with rich graphics and embedded videos. Adobe emphasized that they were positioning their technologies as a cross-platform, multi-layered solution, including the enabling of enterprise-oriented content solutions. The lessons of the first Web are not going away in The Second Web; they just have more sophisticated layers in which to manage them.
  • It's the experience that will determine premium value, not the channel. There were quite a few people equipped with iPads at the conference, indicating that many people in the content industry are convinced that the iPad is a key component in the future of publishing by virtue of is touch-screen ease of use and premium content model via Apple's online store. Yet looking at the lessons from most of our sessions and visits, turning to proprietary platforms as "the solution" to packaging engaging content is not likely to solve many publishers' long-term revenue problems. Ridge Vineyards doesn't rely on a specific group of wine stores or vat suppliers to drive up demand for its wine; it's the sensation of the wine itself and their own brand's mystique that drives their demand. This was driven home by NetGain keynoter Tammy Nam, Vice President, Content & Marketing for Scribd, which is preparing to deliver content using the emerging HTML 5 Web page formatting standards. Nam referenced the demo at last week's Google I/O conference of an interactive issue of Sports Illustrated (see video) that went toe-to-toe with the Wired demo on iPad in a format that will work across most Web-enabled devices over the next couple of years.
  • The Web isn't going away. In fact, it's getting ever broader. Don't confuse the allure of niche markets with the realities of mass markets and massively niche markets that the Web enables. Even as publishers are gearing up to figure out how to produce immersive, slick media for touch-screen mobile devices, others are taking approaches to immersive experiences that are going to continue to compete for people's attention. Scribd, for example, winds up being a place where journalists and book authors post notes and other raw materials for some of their writing; like the extra materials included in many DVDs, sifting through the nitty-gritty of the "content behind the content" turns out to be very valuable to highly targeted audiences. Adobe showed off not only Web-searchable rich magazine content but also new game applications running on Google Android phones, which will also be discoverable via Web searches when Google opens up its Chrome Web Store next year. And, of course, Google's TV initiatives are merging Web search with searching of video from traditional platforms such as cable TV. So having more slick content and workflow tools is no guarantee that your Web competitors won't be getting as much attention.
  • Traditional publishers are closing the gaps, but will it be fast enough? Unlike years past when disruptive technologies were usually about what might happen in the future for publishers, this SIIA NetGain featured people from online media and enterprise-oriented publishers demoing and talking about real-world implementations of products and services leveraging social media, new ways of producing and funding journalism and methods for repackaging book content for ereaders. The future is now for many publishers, some of which are struggling to adapt to the rapidly accelerating impact of new technologies on business models that have in many instances barely survived tough economic times. But will fast catch-up and experimentation be enough for these innovators to close the gap on declining unit revenues and sales? One hopeful stat that came out of Google's SIIA NetGain presentation: last year there were 400 more independent booksellers than there were the year before, an indication that perhaps a "new normal" for traditional publishing is emerging for Ridge Vineyards-like boutique organizations that can leverage new technologies for production, distribution and sales more efficiently.
  • Measure, measure measure. The main office of Ridge Vineyards was littered with charts and graphs  of data that tracked meticulously their production processes, indicating that even when your core product is as old as the hills it pays to keep on top of it with the latest technologies. The publishers and technology companies were singing the praises of best practices that included up-to-date content and audience behavior analysis technologies, with "listening to your customer" the key mantra for their efforts to tune content and services to maximize revenues and audience engagement. Content that focuses on understanding behaviors is becoming more valuable than the content itself in many instances, a fact that's driven many Web startups for years and a lesson that major publishers seem to be embracing more aggressively. Software by Vitrium Systems used to track the use of downloaded sales collateral and to encourage data gathering from the most highly engaged sales prospects was highlighted at NetGain, an interesting example of how looking at your content assets in new ways can provoke innovative responses to content marketing challenges. This may, in time, force publishers to rethink just what portion of their intellectual is worth defending and which is worth letting go of as content that can feed into that defense. We may see a topsy-turvy analytics-centric world for many content producers acting not unlike a child who ignores a new toy in favor of playing with the nifty box that it came in.
So as the era of The Second Web unfolds, it appears that although media and enterprise publishers are still running hard to catch up with many of the disruptive technology trends that have impacted them, they are beginning to come to terms with what needs to be done to get beyond the First Web phase of :"me too" look-alike and act-alike online and mobile content services and to embrace a Web of multiple devices, venues and presentation styles that are required to engage enterprise and media audiences today. Listening is joining licensing as a core publisher skill, enabling them to build immersive experiences that will continue to thrill and engage audiences for many years to come. If brands are trusted relationships, then innovation is beginning to favor these content and technology companies that are working hard to build deeper relationships with their audiences than ever before. Perhaps there are some vintage years yet ahead for these new and unfolding strategies for "high tech, high touch" success.

My online notes from the SIIA NetGain Day One sessions: