How To Capture The Internet Publishing Market

One form of electronic commerce (the one that is the focus of this book) is the creation, marketing, selling and distribution of digital goods and services. As the content of electronic publishing is "digital" these products are suitable for on-line sale and delivery.

Electronic publishing is a particular type of electronic commerce of digital goods and services and therefore having similar problems and issues. There are also issues and opportunities which are common solely to the electronic and on-line publishing industry which require to be tackled if electronic commerce is to develop in this environment.

There is an existing market for electronic content and a growing potential market. A recent study showed that fifty-four percent of SME's (Small and Medium-sized Enterprises) in the US and the UK are now online. Of that fifty-four percent, thirty-six percent hope to be using electronic commerce within the next six months. SME's are a growth area requiring information to compete on a global and more competitive level. Electronic publishing entrepreneurs, developers should consider these implications carefully when designing their business models.

In addition, instantaneous delivery of information, entertainment and digital goods of all kinds is the force propelling the sale of digital goods online. Online users are already accustomed to receiving instant delivery of digital goods -if they wait more than 10 minutes before receiving an email or delivery it will be followed up will concerned emails to customer service. It has been the consumer driving faster delivery times.

Although the number of businesses on the Internet has grown, many organizations simply have a web presence and do not make strategic use of the opportunities the web offers.

The Organization for Economic Cooperation and Development (OECD) predicts a four hundred percent growth in electronic commerce transactions by 2005 (OECD: 1999). Presently only eighty-five percent of businesses are using the web for any purpose. And utilization of electronic commerce is small.

This lack of progress is probably due to concerns over issues such as security, payment mechanisms, user authorization and misuse of personal data. Technologies concerned with authorization include firewalls, password access, smart cards and biometric fingerprinting.

However in order to provide secure electronic transactions (SET), encryption technologies are used. Encryption technologies which are supported by the appropriate legal mechanisms have the potential to develop electronic commerce globally and exponentially.

These issues have to be addressed not just for the development of e-commerce within the publishing industry, but for the development of global electronic commerce.

A recent study and recommendations by Forrester Research stated:

"Digital security won't stop theft of content on the Internet, nor will lawsuits. Content owners in threatened industries -- music and books, but not movies -- must focus on selling better services, not locking up assets."

Here are some additional results of the report:

v Content companies foresee 20% of revenues online by 2003.
v They fear Napster and hope digital security will stop it.
v But only 50% have made digital-rights partnerships.

v Record labels will lose $3.1 billion, publishers $1.4 billion, as consumers embrace piracy and artists go independent.
v Companies facing collapse must seek service opportunities.

v Record labels should rework their new-artist pipeline.
v Book publishers should start selling e-books now.
v Movie studios should move toward Video On Demand (VOD).

(
Content Out Of Control, By Forrester Research. Released September 2000)

Intellectual property is another major issue for publishers and authors and in particular copyright. Copyright is initially retained by the author of the work, however it may be sold or a license granted to enable reproduction of the work.

Any electronic transaction in the publishing industry should include a mechanism for copyright payment- but 99% of the time, it doesn't. Just like the sale of physical books, after it has been sold 'new' the copyright holder loses rights to royalty payments with subsequent sales by used and out-of-print book dealers.

Digital copies of copyright works never become 'used' --or do they? Does the sale of a previously sold, copyrighted digital work lose it's ability to generate royalty payments for its creator? The recommendation made by Forrester that content owners "must focus on selling better services, not locking up assets" may be seen by traditional publishers as a threat to their current business model. It is.

If traditional publishers and content owners don't understand, now, that their content is really a service and not a tangible product, they will not be able to profit from the coming revolution. The identical situation has happened in the computer industry. Computers were a novelty, now they are a commodity. The computer company who is focusing on service and creative programs for their customers is going to be the winner.

New digital rights management (DRM) technologies may help prevent theft and copyright infringement- but not eliminate it. In the very early stages of development, DRM strategies and technologies are hoping to prevent unauthorized copying of digital content without payment or registration to the appropriate source. Software technologies exist now to prevent un-authorized copying of computer files in EC. A few proprietary technologies exist such as Adobe's Content Server2, Pay2See (
http://www.pay2see.com) from Perimele, Microsoft's OverDrive DRM solution (http://www.overdrive.com/) and FileOpen PersonalPublisher (http://www.fileopen.com). There are few standards. This has been a stumbling block to industry growth.

Electronic commerce allows authors the opportunity to self-publish. It's technologically easy enough to create content. Content and creation tools are accessible to almost everyone. But as MightyWords (one of the first online content marketplaces and publishers) discovered, ''It was just too easy to publish work that wasn't that good".

Only a small portion of authors who write for the traditional publisher (physical books) ever make enough sales to generate substantial revenue. That may change with electronic publishing, but probably not. Self-published authors have the opportunity to eliminate traditional publishers and go directly to their audience to sell their work- so net profits will be larger. Stephen King did just that in got over 500,000 people to download digital copies of his e-book, The Plant. He reportedly netted $450,000 in profits.

There is also the issue of quality especially if the information chain is redefined. The publishing chain, as it's now defined, incorporates a number of quality filters such as copy editors and proof readers which may be difficult to apply in the electronic environment. Self-publishers will learn that they need to be their own 'quality control' or contract for it. One site that's used frequently by online self-publishers is Editor.com (
http://editor.com). They provide proofreading, editing, ghost writing, content consulting services and more.

On-line publishing will also become increasingly fragmented and confusing to the end-user unless it controls or establishes quality control. Evidence of that occurred recently (11/2000) when MightyWords (
http://www.mightwords.com), decided to eliminate 7,500 of the 10,000 self-published electronic titles on their site.

Managing director of MightyWords, Judy Kirkpatrick, said the company, which is partially owned by Barnes & Noble.com, …"couldn't afford to provide the editing, proofreading, layout, and cover design services needed to make all 10,000 of its titles marketable".

In other words, their marketplace was fragmented. It had to decide between charging authors for these services -- "moving toward becoming a vanity publisher," as Kirkpatrick puts it -- or becoming much more selective about the titles it sells. "You can't build a Web site with the right kind of infrastructure, the right kind of customer support, and the right kind of marketing for free," Kirkpatrick said.

So the company chose to husband its resources, notifying authors that all but 2,500 of the site's titles would be removed by the second week of December. It asked authors of its surviving titles to sign a new contract that reduces their royalties to 30% of a work's selling price, down from 50%. And it eliminated authors' ability to upload titles directly to the site, substituting a new, stricter selection process.

"There is a value MightyWords provides that warrants compensation of some kind," Kirkpatrick said. "What we have chosen to do, as opposed to moving toward becoming a vanity publisher, is publish fewer works upon approval." The new submissions policy limits works to four categories: business and management; computing and technology; health; and self-help and requires that authors provide a competitive analysis and marketing strategy along with their manuscripts.

I was lucky. I was one of the authors asked to sign the new contract. I had 2 self-published titles listed with MightWords when this policy was implemented. One was continued under the new policy, one was dropped because it didn't meet their profile. It is not the only means of marketing my titles, of course, but for many self-published authors the new policy was a severe blow.

But Kirkpatrick says marketing is what the change is all about. "We've been selling content for a long time now and we've learned a lot about who's buying it," she says.

Pay close attention to what Kirkpatrick says next. It cost MightWords several million dollars to learn who their market is:
Kikpatrick says, "The company has identified 'harried professionals' looking for medium-length, 'need-to-know' information as its best customers."

That meant, for starters, banishing most of the site's fiction.

"We really don't think that fiction is the category that will catch on electronically first," Kirkpatrick says. "There is so much great fiction already available in print."

Kirkpatrick denies, however, that MightyWords' policy shift means the company is giving up on Internet self-publishing. "I would only agree with that if there were no self-published titles remaining on the site, which is not the case," she says.

She points to MightyWords author Verne Harnish, author of a 12-page, $2.00 document called "Mastering A One-Page Strategic Plan," as an example of the kind of go-getting self-publisher who is most likely to succeed in the new medium. "He is not an author per se, but a business expert on this topic who has done things with us and on his own to market his title," says Kirkpatrick. "It's now a very good bestseller."

In other words, stay in touch with your market, understand what they want and give it to them.

MightyWords is mostly described as an e-book site by its customers and competitors, but CEO Chris MacAskill disagrees with that view.

What MightyWords is, according to MacAskill, is a 'digital marketplace' that specializes in works that are longer than a magazine article and shorter than a book. Most MightyWords customers print out the ''e-matter'' they purchase on the site before they read it.

MightyWords is also a work in progress. After launching as a kind of literary eBay in March 2000, and receiving a $20 million investment from Barnes & Noble in June 2000, MightyWords rapidly filled up with nearly 10,000 self-published works. Then the site radically adjusted its business model, as we mentioned, informing thousands of authors it would no longer host their work.
''It was just too easy to publish work that wasn't that good,'' MacAskill said.

Within the next two weeks, customers noticed far fewer selections, closer to 2,500. And MacAskill promised the quality will improve as the company adjusts to this emerging market.

''We've learned a lot of lessons,'' he said. ''One is that our best customers tend to be technically adept professionals. That shouldn't have surprised us: They were the first to adopt cell phones and Palm Pilots. We also had to recognize the power of brands. Even eBay, our original model, relies on brands.''

eBay?

''The seller might be anonymous, but think about it: He is selling a BMW motorcycle - a brand you know. He can also display a picture so you can see if it's exactly what you want...'', MacAskill states.

Brand recognition, knowing your market and giving it what it wants…it's starting to sound more like a traditional publishing venture than high-tech digital publishing. But in life and the Internet, "there's nothing new under the sun" and the Internet will not change what people want to purchase…only the way people decide what to purchase and when. The basic motivations of making a purchasing decision never change.


Entire Contents © Copyright 2001 by David Vallieres. All rights reserved.