The Tome Reader

Confederacy of Dunces

2010-12-23T19:18:00.001-06:00

Hands down, no question, don’t even think twice, this is the funniest book ever written. This is such an incredible read on so many levels: its treatment of New Orleans is one of the best ever, the story of Toole’s life is bitterly ironic, and I promise you’ll never encounter another set of characters like this anywhere. Just read it!

Toast? Yeah, right.

2009-10-21T08:56:00.000-05:00

The post below has been making the rounds this morning on reasons the Nook will fail. It's not clear whether this is a well intentioned but poorly thought out evaluation or if it's simply a case of trying to get a little ink by going against the conventional wisdom. In either event, it's a good jumping off point for considering what makes a successful device and how it can impact the future of reading.

Full discosure - I'm a (really small) BKS shareholder

Barnes & Noble's (BKS) Nook seems really cool. But when you're third to market, life is harder.
Every single mention of your product is also PR for the #1 - Amazon's Kindle - most vividly in the form of a matrix of "Nook has" vs. "Kindle has". Check out their site - they have their own. Think what it's like when you read a review of Zune or Replay TV or Blockbuster Online or a Ford Focus Hybrid or Ted by United. This is worse because there was all this halo out there when Mr. #1 launched -- all the "will it work?" "Oprah likes it" "there is something new out there!" "how innovative..." articles -- that went exclusively to Mr. #1.

How much of a first mover advantage has Walkman been able to maintain against iPod? Or Alta Vista versus Google? In a nascent market like ereaders, there can't be a first mover advantage that's at all sustainable. How long will it be before the myth of "first mover advantage" is finally laid to rest?

The "ecosystem" has started running away from you. See how many Amazon (AMZN) titles are on Kindle - 350K, and publishers like the NY Times. You don't see mention of those on B&N's site. You see 500K old books, which is neat but it's not what people read. Those licenses are hard for Amazon to get, they have been wielding tons of bookselling clout for 3 years to get them, and I promise you that B&N will not get them on the same terms. iTunes store is not a commodity. They get the best stuff first. Same for Netflix streaming.

B&N has an ecosystem that Amazon can't match - it's B&N's retail stores. People will be bringing their Nooks (and other non-proprietary devices) to B&N, using the retail store as a browsing and discovery venue. It makes zero sense for publishers to offer exclusive rights to electronic editions any more than it does for them to offer exclusive distribution rights for paper editions. This hybrid offline discovery/online purchase model is in its infancy and represents an incredibly important business model evolution.

You reach for slightly crazy stuff to impress. That color touchscreen is nifty, and Amazon's "it's wireless",
"now we have a big one", "now we have a GSM one" is kind of boring really, but Amazon is obviously designing to real user needs and covering the gameboard. B&N is fiddling around with goofy stuff that might just be crazy enough to work. Think of those beautiful pictures on Bing.com or M$'s cashback program. There is no felt need in search for nicer wallpapers. Or, to pick on Apple, the video-in-iPod-nanos thing is another example of using goofy stuff to add sizzle to something un-different (in this case they are competing against last year's 100% excellent iPod nano models)

Look at a book. It's a small area (the cover) in color designed for marketing purposes coupled with a large area (the pages) in B&W designed for content consumption. The last several hundred years have validated this as a fairly decent package in publishing; it's safe to think that the twin-screen strategy will be equally effective.

Price - ouch. B&N launched nook at $259. I betcha they weren't planning that till Amazon goosed the price on Kindle last week down to $259. But that screen (the touch LCD!) and the wifi and the low initial volumes...those things are expensive. Looking at the gadget I am certain they lose money every time they sell one, and they will lose oodles if they manage to get it into a third-party channel/retailer (b/c they have to pay margins). Mobile devices with much smaller, more conventional screens that run Android have bill-of-materials-cost north of $259. This bad boy is likely worse.

Short term thinking. The ereader market - regardless of manufacturer - is a classic case of razors/blades. The boxes are inherently low margin, but selling electronic rights is where the money is. And when you look at the uptick in total purchasing volume from electronic device buyers, its easy to see how the subsidy on the initial device purchase rapidly gets amortized across the new book buying.

Channel space is scarce by the time you arrive. You know who the #1 online electronics/gadgets retailer is? Not Barnes & Noble. And Best Buy appears to be giving room to Sony (Mr. #2) this fall. So where is B&N's gadget going to be? Book stores? Perhaps this sounds logical to you, but we did a little research at Peek on who buys what. And "the literate" is not the target market for e-book readers.
In this case, the unlucky nook is not from a mighty cosmic power like Google or Microsoft

where you might say "well, they can overcome anything" (though they can't), so the verdict is especially clear in this gadget guy's book: nook is toast. Sony's got a better shot of making it for a while.

Again, if I were B&N looking at gadgets like the Walkman/iPod, I wouldn't be too worried about the impossibility of making it onto retailers' shelves - even without my own direct presence at the locus of buying books. The assumption that this market is wrapped up, dominated by any entrenched player is simply laughable. The only piece of the book market that's even close to that is the presence of large-scale, widely distributed offline stores that can offer both books and the reader to consume them.'

Barnes & Noble's (E)Book

2009-10-15T11:12:00.000-05:00

Think for a moment what a book is: it's a color wrapper designed to entice you to buy it and a center of black-and-white pages from which you consume the contents. Now take a look at this picture of the rumored Barnes & Noble e-reader that Gizmodo released.

What a brilliant design inspiration for this electronic reader device: the book. B&N has used two different screens, for precisely the same reason that paper publishers use two different components in fashioning a real book. The tools - a color wrapper designed to sell and black-and-white pages designed to consume - are both perfectly suited for their respective purposes.

Congratulations to the folks at B&N for going back to first principles and not focusing on the technologies per se but rather the purposes that they're supposed to facilitate.

I liked it so much, I bought (a very small fraction of) the company.

Reasons to Buy News

2009-09-21T16:53:00.000-05:00

Eric Schmidt and Rupert Murdoch are (indirectly'ish) debating whether or not people will pay for news. Of course they will. Sometimes. Lost in all the discussions about subscription revenue versus ad revenue, payment platforms, and federal bailouts is a more fundamental question: Why would someone pay for news?

Run your favorite title through this "Reasons-to-Pay Gamut," and place your bets on their success or failure as paid content:

Unique Content - Is this news I can get everywhere equally easily? I can get NFL coverage in dozens of places, but how many papers carry local high school football? 401(k) reconstruction stories are everywhere, but how many places provide the local depth of American City's business journals?
The Right Package - The New York Times is free online. But people buy it on their Kindle. Arguably a worse product (no color, multimedia, archives, etc.), but wrap it up the way people want, and they'll pay for it.
Be Reliable -Dan Rather. Nobody's willing to pay for something - either with cash or attention - that they don't trust.
Give Me Cachet - The Economist publishes free online. And 800K people in North America buy the same articles in the magazine for $100+/year. How many of them simply want to be seen reading The Economist? Or have it on their reception area coffee table?
Let Me Pay with Other People's Money - Variety is going back behind a paywall. How many subscribers aren't going to expense-report their subscriptions? And to the extent that subscriptions are deductible business expenses, you're buying at a 30% discount anyway.

Here's a quick five. There are plenty of others no doubt, but it's tough to see people paying for news that runs afoul of more than one or two of the above.

eBook Retailers: Imminent Demise?

2007-11-26T22:24:00.000-06:00

So if you're the CEO of BooksOnBoard, eReader, or eBooks, what are you asking yourself about the arrival of the Kindle? Clearly you can't base a business model on the hope that Amazon will invest enormous financial and intellectual capital to sell electronic books on their own gizmo but completely ignore today's reading platforms (PDAs, Sony's Reader, and the iPhone) as well as all the others that are on the horizon to be the device the Kindle should have been. Mobipocket is already an Amazon.com company, so it's equally unclear why it won't just be rolled into Amazon's electronic book category.

Back in my econ days, we learned about natural monopolies. Before the Internet, the thought was that industries like utilities, postal service, etc. made the most sense - for all parties - when there was only one player. Since then, iTunes, eBay, and Google (really) have proved the same thing for their respective service categories. It strikes me that selling electronic books is another natural monopoly.

Take apart the cost structure of the electronic book sale: a website catalog, customer service, data storage and delivery, brand awareness and marketing, electronic commerce processing, and most importantly - and challengingly - consummating the business relationships with the publishers to provide content. Having purchased from all the other electronic book retailers - or just take your own quickie glance - it's abundantly clear that none of them is playing in the same league with Amazon. So where do they go?

The Book Sense shops have gone the route of becoming clubhouses as much as stores. That's a decent route. It doesn't scale, but these will remain nice lifestyle businesses with few, ardent fans. They've inverted the equation, going from places that put on readings to sell books to selling books to support author readings. And there are plenty of people that see buying the book as the admission ticket for an enjoyable lecture. It works.

To end with the beginning, the other current players in the electronic book world better find their "author readings" offering ASAP. The minute that Amazon - or iTunes that knows something about electronic content delivery - decides to move away from Kindle-only sales, these guys are doomed.

Publishers' Electronic Opportunities

2007-11-25T20:25:00.000-06:00

The real story here isn't the Kindle; it's the publishers. They've got paper. They've got audio books. They have movie treatments. Now they've got electronic versions. The exciting chapter is just about to start, as publishers start to ask themselves how else they can monetize a book electronically when they have zero marginal cost of production. Marvel Comics has just moved from being a product company to a service company, offering unlimited reading for a monthly subscription. How long before other publishers follow suit? Random House could offer everything from Del Ray as a Sci-Fi & Fantasy "Channel." Free Press, and other serious publishers with specific topic orientations, could work the very same way.

So then the question becomes, "Why continue to sell (exclusively) through middlemen?" Some publishers have limited, direct, online sales, but why not start to really establish the value of a brand without the intermediary? Some imprints (Penguin Classics, Harlequin Romance) are far better known than nearly all of their specific titles, so why not build on that? It's really just the next evolution of the book club idea. It's also precisely what magazines and newspapers have done since... forever.

Charge me $99/year for access to XYZ Publishing content. If I want the audio recording, I get an mp3. If I want a pdf or eReader or Kindle format, let me have it. I'd even be willing to pay a per-title surcharge to have a paper edition produced by a print-on-demand house and shipped to me. Electronic versions with no marginal cost make all these options possible. The Internet is a decently effective marketing tool, but it's the best distribution tool yet developed. It's time for publishers to take advantage of the Internet's strengths instead of continuing to compensate for its weaknesses.

Amazon's Shot at Apple

2007-11-24T09:47:00.000-06:00

Think about what makes Amazon a great and successful (book) company:

They offer a huge variety of highly desirable products, many of which haven't traditionally been available outside large cities/specialty stores
They charge reasonable prices vis-a-vis their competitors
They provide tools that make it very easy to find not only what you're explicitly looking for but also items that you didn't know you wanted
Their purchase process is streamlined and simple
Working together with UPS, they've provided a seamless delivery mechanism for what you buy
They provide "endorsement" tools: reviews, rankings, etc. that help to confirm your leanings towards purchase
They provide "engagement" tools: send to a friend, the ability to rate reviews, etc. that provide reasons other than just a buying impulse to visit their site

Now think about what Apple has done with the ecosystem of iTunes and the iPod. Is there absolutely anything different between the two companies? Couldn't you list precisely the same reasons for Apple's success? Would anyone that has bought books from Amazon hesitate to purchase music, or would music music aficionados hesitate to buy a book from iTunes?

Apple was able to brickbat the record labels into making their products available for purchase electronically, mostly because it was a rearguard action against rampant piracy. Book publishers haven't had that fear, except in a very limited way from Google's scanning efforts. Now that book publishers have gotten over the intellectual hump of electronic versions of their books, why would they restrict themselves to selling solely through Amazon's Kindle? There may be (unknown at this point) contractual obligations, but those can't be forever. Clearly the inevitable evolution is the platform-agnostic electronic book.

Bezos has to be thinking that he can compete heads up against Apple by providing books, music, movies, and other digitized intellectual property faster/better/cheaper. I wonder. Amazon's software certainly doesn't seem to be groundbreaking, and it's almost rude to compare their hardware designers to Apple's (or RIM's or even Palm's). There are numerous companies who have staked their existence on building out around iPods. Who's going to tool up a line to make Kindle covers or the other accessories that make the iPod preferable to the other technically equivalent mp3 players out there? The long aapl-short amzn pair trade should be very interesting over the next few quarters.

Kindle Fails to Spark

2007-11-23T23:09:00.001-06:00

There's certainly plenty of fuss being made about the Kindle. And in the tried and true tradition of product criticism, my review is made without ever having actually held the gizmo....

Before getting into my disappointments, let me start by saying that I'm thrilled that the 800-lb gorilla of book retailing is putting its heft behind electronic books. There is unquestionably a place - and I'll talk more about venue shortly - for electronic books. Unfortunately I don't think the Kindle is it.

Think about where and how reading takes place, the challenges to reading, and the types of reading that make sense for these different venues. For example, there's a section of the bookshop called "Coffee Table Books." This is the nothing-but-venue section to the extent that the actual content of the book, the author of the book, etc. are completely irrelevant. All that's germaine is that the format of the book (size, photos, short chunk writing style) is amenable to being displayed and browsed on a coffee table.

Think about "beach reading" or "airplane reading." Whole genres of books that would certainly show up in a normal bookshop get culled from the shelves of an airport bookshop. Rightly so. A Tom Clancy page turner can stand up to the ambient din, the constant interruptions, and the wandering attention of the airplane experience. Can you really read Walden on a plane? Is a book that requires focus, attention, contemplation, much less notetaking, possible to enjoy on a subway?

These are just simple examples. Start to really get mechanical about reading and you start to wonder about the Kindle's success.

I like to read in bed at night. My wife goes to sleep before me. My Treo (small screen and all) is backlit, meaning I can read without a kludgy booklight or waking her. The Kindle doesn't give me that option.
I like to read in quick snatches when I'm early for an appointment or if I'm eating lunch alone. I can do this on my Treo because I carry my cellphone with me for work. Am I really going to lug a Kindle around with me all the time? Is interstitial reading really going to justify carrying around a single-purpose device?
The iPhone created a buzz that literally causes strangers to ask to see your phone. The Kindle's appearance is far more likely to brand the lucky(?) kid carrying one as a major geek.
Sure you can read on a Kindle at the park, by the pool, in the bath. But will you? I'd be scared to death that my $400 book would get wet, dirty, dropped, etc. Is this really the paperback killer?

Then go to the next step and think about the Kindle's features. Are the additions the Kindle introduces really the stiles that will get people over the hurdles that have prevented them from buying books?

Carrying 200+ books around with me at a time is kind of cool I suppose. That said, I usually just read one at a time, and unless I'm traveling for an extended period, I really just need the one. How often is the weight factor of carrying 2-3 paperbacks really an issue?
Electronic ink looks better than a computer screen, no question. But better than paper? And how about those colors! Oh, sorry.
Wireless Internet access is certainly a nice feature. Apple went first, then Microsoft, and now Google. Amazon is definitely late to the game here, and I can't think of any reason that selling books through iTunes, with the elegant search, seamless delivery, and browsing and discovery process that a billion plus song sales have perfected, wouldn't be much more likely.
Annotation, cross references, and Wikipedia access strike me as features in search of a mass-market. If you're reading a Grisham novel, what would you highlight? Or need to look up? These are academic or technical features, not mass-market ones.

Now get back to the buyer. My $400 ante really doesn't get me anything on its own. It gets me the right to buy books and read them. At $10/per, I suppose I'm saving a decent bit, but I'd really have to buy quite a few books to see this as a straight ROI play. I suppose if I lived in a small space, having all my books on the Kindle would be like getting rid of my CDs after ripping them to my iPod. But will I pay $400 for that space-savings? And if I'm really a serious reader, don't I like having my home filled with books, just as much as I dislike having it filled with jewel cases? And how do I share my books? People walk into my home and know what interests me by seeing my books. We talk about these things. With iTunes I can share playlists or music at the office. Can I ask friends to scroll through my Kindle library?

So now that I've carped, what would I suggest positively?

The Kindle has enormous potential as an academic tool. I could certainly see an SD card loaded with the entire reading list and all the text books for an 8th grader. Annotations, cross-references, Wikipedia access, a dictionary, etc. all make a great deal of sense for a school kid. College reading packets could be handled the same way.

I could also see the Kindle (moreso if it offered color) working very nicely as a way for a field technician to carry around an encyclopedic set of product manuals or repair guides. The access speed of the Kindle makes it a substantially better option than a laptop, which trades speed for flexibility.

What gives me hope about the Kindle is that Amazon has been able to get publishers to start thinking about their books as intellectual content instead of a physical artifact. More on this later.

Welcome to the Tome Reader

2007-11-23T00:00:00.000-06:00

Thanks for visiting.

In my day job as the guy responsible for Stratfor's publishing division, I spend a great deal of time thinking about where publishing and technology intersect. I'm also a voracious consumer of information for personal and professional reasons. What can sometimes seem like only a minor point in the context of my work can here be the focus of a hopefully moderately interesting little discussion. I'm looking forward to using this blog as a place to think "out loud" about the questions that come up at Stratfor on a daily basis. Please don't hesitate to share your thoughts.

All best wishes,

Aaric