The Coming Ecology of Ebook Publishing

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Tim O'Reilly
Apr. 02, 2000 01:33 PM
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In a recent Salon story on ebooks, I was struck by the following comment:

Fatbrain.com contends that Simon & Schuster's decision not to let Fatbrain.com join other online retailers like Amazon.com and Barnesandnoble.com in selling King's book was a way of punishing Fatbrain.com for presuming to poach on the venerable publisher's territory.

Here's what this story led me to say to Fatbrain CEO Chris McAskill:

S&S is right, though. Fatbrain put a stake in the ground, and started acting like a publisher rather than a reseller. As I've argued repeatedly on the StudioB mailing list, it's tough to be both a publisher and a retailer, because you end up with the worst of both rather than the best of both. Not only do publishers rightly see you asa competitor, but authors see you as a publisher who has only one outlet: your own web presence. So unless you get dominant share REALLY quickly, you're out of the game, because faced with a publisher with single-point distribution, or a publisher with multi-layer distribution, the multi-point, multi-layer publisher will appear to have significantly more reach.

Later on in the Salon story, this point is driven home:

[David] Gernert [John Grisham's agent] says that electronic publishers have approached Grisham, but none has succeeded in persuading him to go digital, partly because the needs of author and e-publisher don't, as Gernert sees it, entirely coincide. "For an electronic publisher to say that they're publishing Grisham is instant legitimacy and instant publicity and instant viability," he says. "As an author you would want a story to go on as many computers, Web sites and devices as possible."

Until we have a system where "publishing" is distinct from "distribution" and from "retailing", and "publishing" means being an intermediary between authors and a complex, multi-point distribution system, we won't have a market that is ready for prime time. (The nature of that publishing intermediary includes shielding retailers (and ultimately consumers) from the slush pile, and shielding authors from building relationships with thousands of resellers.)

It's OK to have a publishing arm, I think, but not OK to munge publishing and retailing together. It's OK for a retailer to publish some of its own books, but not to compete with publishers for original content by offering royalty levels that ignore what publishers bring to the table. It's OK for a publisher to have some direct sales, as long as they don't cut out their resellers by offering preferred pricing to direct customers.

Fatbrain has made some good progress by separating mightywords.com from fatbrain.com. That makes mightywords your publishing arm. Now, maybe you can find a way to get fatbrain.com back into the ebook retailing/distribution space, where I predict all your competitors will soon be, using a format that reproduces many of the characteristics of print publishing:

1. The author/publisher can produce the work once, and have it resold by many parties.
2. Distributors will allow authors/publishers to reach specialty retailers, so that every retailer can participate without the overhead of one-to-one relationships with every publisher.
3. Specialty distributors/retailers/publishers may make the work available in alternate versions.
4. Third parties will catalog and review the various published works.
5. To support the needs of libraries, companies like Netlibrary will make works available for "check out" rather than purchase.

There are a couple of other points I'd make, partly coming off #3 above:

There will likely be two or three branches of the online book tree.

3a. There is likely to be a format that is targeted for download, either to the PC or to a small device. The format that ultimately succeeds may well need to be easily transferable from one to the other.

3b. There is likely to be a format that is targeted for online/connected access, which benefits (e.g. in the tech book space) from integrated online searching across a library of titles, supports other ancillary materials from the web space, and so on. This kind of thing might be hosted by a publisher, by a corporate intranet, by a library, or by some new class of information reseller/integrator.

3c. The solution to prevail will include print-on-demand (and/or the bundled sale of print and online copies. In fact, the ideal Digital Rights Management solution would support the aggregation of a, b, and c, such that someone could buy a copy for download (which would take advantage of the ability to buy the product from a variety of retailers), but present some sort of credential representing that purchase to a central site (hosted either by a publisher or a third party) so that it can get access to that book in the context of other services provided by that aggregator. Such DRM solution would allowed tiered pricing (either up or down) for the purchase of added services (such as print on demand) or for some kind of repeat purchaser discounting.

In any event, it will be interesting to see how it all plays out. The one thing I'm sure of is that we'll see a repeat of what we saw in the web space, where everyone started out thinking "disintermediation" but things didn't take off till we had reintermediation, with the development of a rich ecology of sites and services cooperating to make a fully functioning marketplace.

In the early days of the web (1993), when we had created GNN, the first web portal and the first web site supported by advertising, we had a huge uphill struggle, because we had to do everything ourselves. We had to get people on the web in the first place (equivalent to getting them to download some kind of ebookreader, but even harder); we had to convince advertisers that there was a market there (we commissioned the first ever market research study on Internet demographics); we had to evangelize the possibilities and experiment with different formats. The list goes on and on.

I contrasted this with my experience as a print publisher, where we fit neatly into an ecology, with manufacturers who already knew how to make our product, retailers and wholesalers who came to sign us up, natural places to advertise and create demand, known standards for pricing, customer expectations of what a book looked like, etc. etc.

I ended up going around giving talks saying that the web wasn't going to take off till it looked more like print publishing. When I was explaining this to Ted Leonsis of AOL, he "got it" with the memorable line: "You're saying 'Where's the Publisher's Clearinghouse for the Web?'" Exactly. There are all these crazy intermediaries who make any branch of print publishing work, from rack jobbers to remainder houses, to folks who've figured out how to make school children into a sales force :-(

Now, on the web, we're seeing the success grow in proportion to the richness of that cooperating ecology:

• ISPs and hosting services
• self-published sites (authors)
• online "magazines" (publishers) like Salon
• portals
• search engines
• ad agencies
• ad hosting services
• caching services
• web design firms
• market researchers to justify the ad pricing

So the challenge I put out to all would-be ebook publishers is to envision a future in which they aren't the only party who succeeds. The market won't take off till it's a win for many parties.

This isn't to say that there won't be massive realignments of power and success in the new market (you only have to look at how much market share amazon.com took from traditional booksellers to know that.) There will be new publishers, new retailers, new wholesalers, and new "manufacturers" (software platform providers) springing up, as well as new providers of various support services. But my suspicion is that anyone who tries to go it alone will be left behind by folks who figure out what niche in the ecology they want to own, and pursue it wholeheartedly.

Tim O'Reilly is the founder and CEO of O'Reilly Media, Inc., thought by many to be the best computer book publisher in the world. In addition to Foo Camps ("Friends of O'Reilly" Camps, which gave rise to the "un-conference" movement), O'Reilly Media also hosts conferences on technology topics, including the Web 2.0 Summit, the Web 2.0 Expo, the O'Reilly Open Source Convention, the Gov 2.0 Summit, and the Gov 2.0 Expo. Tim's blog, the O'Reilly Radar, "watches the alpha geeks" to determine emerging technology trends, and serves as a platform for advocacy about issues of importance to the technical community. Tim's long-term vision for his company is to change the world by spreading the knowledge of innovators. In addition to O'Reilly Media, Tim is a founder of Safari Books Online, a pioneering subscription service for accessing books online, and O'Reilly AlphaTech Ventures, an early-stage venture firm.

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