As bleak as the industry sometimes seems, the news media can be profitable—but only if companies better serve their customers, transform their business models, and alter their financial time-horizons. That includes having the kind of patience that Bezos demonstrates at Amazon. Outlets that cuts back on basic services—especially reporting—will improve their near-term quarterly profit, but squander the future…At Amazon, Bezos didn’t just “crack the digital code” in a technological sense; he understood how the Internet changed the economics of serving consumers.
Julius Genachowski and Steven Waldman, New Republic, Newspapers Should Be More like Amazon: What Jeff Bezos can teach the Washington Post.
Here’s a snippet of the e-commerce king’s letter to the Washington Post employees:
So, let me start with something critical. The values of The Post do not need changing. The paper’s duty will remain to its readers and not to the private interests of its owners. We will continue to follow the truth wherever it leads, and we’ll work hard not to make mistakes.
[…] There will, of course, be change at The Post over the coming years. That’s essential and would have happened with or without new ownership. The Internet is transforming almost every element of the news business: shortening news cycles, eroding long-reliable revenue sources, and enabling new kinds of competition, some of which bear little or no news-gathering costs. There is no map, and charting a path ahead will not be easy. We will need to invent, which means we will need to experiment. Our touchstone will be readers, understanding what they care about – government, local leaders, restaurant openings, scout troops, businesses, charities, governors, sports – and working backwards from there. I’m excited and optimistic about the opportunity for invention.
It’s become almost a cliche: A small company builds its entire product on the back of a larger company’s data. Big company pulls the plug, startup gets screwed. I know I should feel sympathy for the startup in those situations but the truth is, I rarely do. if your entire offering is dependent on data from, say, Twitter then you’re not really a company — you’re a feature. And free data isn’t a basic human right. Business is business, etc, etc, etc.
But then — very, very occasionally — a big company behaves in a way that misses business entirely and instead crashes straight into stupid. And that’s precisely what just happened with Amazon’s decision to ban social reading startup Findings from reposting extracts imported by Kindle users.
Paul Carr, PandoDaily. A “Moment of Temporary Insanity”? Amazon Orders Findings To Stop Importing Highlights.
Findings, as Carr describes it, promotes social reading by being “a kind of Tumblr for word-nerds, an easy way to share inspiring, provoking, stimulating, and otherwise fascinating little snippets of text, whether they be found on webpages, in magazines, or deep inside books.”
Most news stories are covered by many media outlets. News is not a scarce commodity. Magazine articles, on the other hand, typically provide more in-depth commentary or analysis on interesting topics. A consumer can’t easily find other sources for a magazine story.
Hamish McKenzie argues that magazine publishers, like music publishers before them (album versus iTunes single), should break up the sacred magazine bundle online and allow consumers to either pay a Netflix type subscription to an all-you-can eat buffet of articles from a variety of publishers, or provide an a-la-carte menu for consumers to discover and pay for the articles they want to read
Of course, this implies that publishers would need to coordinate the development of an industry led technology and distribution platform (similar to Hulu), or watch an external technology company such as Flipboard, Google, Apple, or Amazon build a business model off the publisher’s content and own the relationship with the end consumer.
As McKenzie states:
The first problem is that there is an app for each magazine. To subscribe to the New Yorker, Wired, Vanity Fair, GQ, The Atlantic, Details, New York, and Time, you’ve got to have seven different apps, many of which are bloated. Some issues of Wired, for example, have weighed in at 500MB each. And what do you get inside? Aside from the occasional animation, or supplementary audio and video, they’re basically just digital facsimiles of the paper product. Worse – you can only get the stories if you get the whole magazine.
So here’s an idea for how to do it better and make money from it.
Break up the bundle. Present stories on an individual basis. Do to the magazine what iTunes did to the album, but do it with a Spotify model. And put it all into one app.
In short: build a platform not for magazines, but for magazine stories.
Here’s how it works. You have an app called something like Mag Reader. When you open Mag Reader, it shows you a list of the latest works from your favorite publications, as well as ones that align with your interests, or the stories currently most talked about on social media.
Each story is listed with a small picture, headline, by-line, date, relevancy rating (just like Netflix’s customized recommendations), introductory teaser, and publisher name. Before clicking through, you can expand each one to see more art work, the first few paragraphs, who has recommended the story, links to similar stories, and what else the publisher has put out recently. If you feel the urge, you can even buy the magazine issue into which the piece has been bundled for paper consumption.
You have a profile page, just like you do on Spotify or Facebook, on which your most recently read stories are listed alongside the stories you recommend most highly. On your page, you can also list your favourite magazines and writers, along with your interests. Perhaps you even list all the readers you follow, Twitter-style. You can discover new stories through the social connections you have built around your profile, just like you do now through Twitter, Facebook, and Google Reader (people still use that, right?).
Each writer has a profile, too. Some writers will be affiliated with magazines; some will be independent. You can follow your favorite writers, so you’ll always know when they have a new story out. On his profile, a writer has a bio, links to his stories, and perhaps even a “works in progress” section that comes with a “donate” button, so readers can make financial contributions to stories they’d like to see materialize, Kickstarter-style.
Publishers have brand pages, as well, just like on Facebook. At each page, you can read about the magazine, check out the masthead, perhaps watch some behind-the-scenes footage, and maybe even subscribe to their bundled products.
The story-reading experience is seamless and alive. You can highlight passages you want to make a note of, just like you can on the Kindle. You can look up specific words in a dictionary. Publishers can easily integrate multimedia into their stories. Writers can update their stories as new information comes to hand. On each story you can leave comments that will then, if you so choose, publish to your Facebook profile. You will be able to sort comments on the stories to prioritize the ones written by “Friends” or “Friends of Friends” (thanks, Roman Meytin, for that idea).
One commenter from Germany, who actually tried to launch a service similar to the one described in the article, summarized the experience of trying to herd
cats publishers and get them to work together:
We presented our app to dozens of newspaper publishers and press agencies in Germany and we had around 20 of them joining our model as launching partners. But we realized very soon that this model was a failure.
Most newspapers, mainly the big and interesting ones, were not interested at all, they all wanted their OWN app in the AppStore. They did not want to promote an app that contains content from other newspapers. They did not want users to choose which article is interesting and which one is not. So, more or less all German newspapers launched their OWN apps, most of them never reached top 100 of the category news in appStore and – even more surprising – a lot of them are completely free or you have to pay an initial single payment of .79 €.
We need some angry nerds.
Jonathan Zittrain, Technology Review. The Personal Computer is Dead.
Jonathan Zittrain, whose 2008 book The Future of the Internet and How to Stop It explores the transformation of the open Internet to one that’s increasingly closed and controlled, writes that the growth of “App Stores” is putting too much technological and content control in the hands of too few companies.
The companies, Zittrain argues, are gatekeepers that lock us into platforms and the way we access content as they lock other content and technologies out.
"If I switch from iPhone to Android, I can’t take my apps with me, and vice versa," writes Zittrain. "And as content gets funneled through apps, it may mean I can’t take my content, either—or, if I can, it’s only because there’s yet another gatekeeper like Amazon running an app on more than one platform, aggregating content. The potentially suffocating relationship with Apple or Google or Microsoft is freed only by a new suitor like Amazon, which is structurally positioned to do the same thing."
And doing the same thing is to have an “App Store Framework” of their own where they can lock in or lock out applications and content.
"But the fact that apps must routinely face approval masks how extraordinary the situation is," writes Zittrain. "Tech companies are in the business of approving, one by one, the text, images, and sounds that we are permitted to find and experience on our most common portals to the networked world. Why would we possibly want this to be how the world of ideas works, and why would we think that merely having competing tech companies—each of which is empowered to censor—solves the problem?"
paidContent has a good primer on the European Commission and Justice Department investigations into the e-Book industry.
Before Congress today, the head of the Justice Department’s antitrust division reportedly confirmed months of rumors by stating that the federal government and state attorneys general are investigating the electronic book industry. Earlier this week, the European Commission said it has begun formal investigations to follow up on raids of publishers’ offices that took place in March.What is the Conspiracy?
The case turns on “agency pricing,” a scheme under which the publishers set the price for e-books on the iPad. In return, Apple (NSDQ: AAPL) collects a commission.
What is the Point Of Agency Pricing?
Publishers watched in horror as Amazon (NSDQ: AMZN) decided to build up its market share in e-books by selling prized titles for less than $10. Amazon sometimes sold at a loss. This set a low floor for e-book prices and also threatened the sale of more expensive hard cover books. The agency model lets publishers set higher prices and ensure customers don’t become used to cheap e-books.
What’s the Problem with Agency Pricing?
The class action suits complain that agency pricing is an illegal cartel. Here is how one complaint describes it: “As a direct result of this anti-competitive conduct as intended by the conspiracy, the price of e-books has soared. The price of new best-selling e-books increased to an average of $12 - $15—an increase of 30 to 50 percent.”Is Agency Pricing Against the Law?
For decades, it was illegal for manufacturers to impose prices on retailers. That’s why you used to see “Manufacturers Suggested Retail Price” on many items—companies could suggest a price but not impose one. This changed after a 2007 case called Leegin in which the Supreme Court said it wasn’t illegal for a handbag maker to control prices. Now, the analysis is done on a case-by-case basis to see if pricing is fair. In this case, the publishers are the manufacturers and Apple is the retailer.
Mark Coker of SmashWords, which works with Indie authors to get their titles on e-Books, adds some insight from the small guy perspective in support of Apple, Amazon and the large publishers:
It would be a sad day for authors, publishers, readers and online bookstores if agency pricing was overturned, because it could allow one or two well-funded companies to sell books at below cost and effectively drive every other ebook retailer out of business. That would lead to *less* competition in the ebook retailing market, not more, would prevent the development of indie ebook retailers in smaller markets, and would ultimately lead to less competition and higher prices.
What critics of agency pricing forget is that these large traditional publishers are becoming less and less relevant each year as more authors independently publish and distribute their own books. At Smashwords, we distribute over 90,000 of such indie ebooks, and we let our authors and publishers set their own prices. We only distribute to agency retailers. These indie authors benefit from the higher royalty rates enabled by agency pricing, and they set the average price of their book under $5.00. Why do they price low when they have the power to price high? Because they know they can sell more copies at a lower price, and since they’re earning 60-70% of the retail price under agency vs. 42-50% under wholesale, the author can still earn more at a lower price to the consumer.
If an author wants to earn $2.00 for each book they sell, they’d set the price to customer at $2.86 under Agency and $4.00 under wholesale. In this new world of indie publishing, Agency facilitates lower prices.
The book market is extremely competitive, and that’s a good thing. If publishers make the mistake of pricing their books too high, readers now have 90,000+ lower cost alternatives.
Out of all U.S. adults who read magazines, 11 percent do so exclusively via digital platforms, new data from GfK MRI says. But with newsstands available on more devices, that number should increase.
Between May and October 2011, GfK MRI estimates that 1.58 billion U.S. adults read magazines. Of those, the company pegs the print + digital audience at 135 million people, and digital-only at 166 million people. That digital-only group is made primarily of men (63 percent), and they’re more likely to be young, affluent and well-educated. The sample size for this survey was 12,546 people, and GfK MRI extrapolates its results to the entire U.S. adult population.
Digital magazine reading is likely to increase as digital newsstands become available on more devices. The Apple (NSDQ: AAPL) Newsstand, launched in October, has broughtsome magazine publishers a significant number of new readers. Conde Nast, for example, reported subscription sales across nine titles up 268 percent in the two weeks following the Newsstand’s launch.
Of the current top ten e-book bestsellers on Amazon, four of them are self-published. These aren’t flukes: They’ve been in the top ten more than 50 days on average…
…This is staggering, and it’s a part of the story that hasn’t yet been fully explored.