ebooks and deadwood - how comes big publishers are making more money?

The top Amazon executive in charge of kindle content spoke last week at the Frankfurt bookfair - the largest publishers gathering in the world. One of the graphs he showed tells the story of ebooks vs paper very starkly. In the US and the UK, Kindle sales outstrip paper book sales on Amazon. And in the UK's case that happened within two years of Kindle's launch. Of course while you can only buy kindle books at Amazon you can buy paper books at your local bookstore (if you have one - in Africa they are often few and far between). But any publisher - or bookseller - will tell you that Amazon is the dominant retailer in digital and print, at least in the US and the UK. According to the trade paper, Publishers Weekly, Amazon had 29% share of all book sales in the US in the first half of 2013.

An interesting difference though between the books business and other media businesses is that in the transition from physical to digital, publishers don't seem to be suffering in the same way that their equivalents in the music industry for example are. Grandinetti quotes Random House, Harper Collins and Simon and Schuster to prove his point. He cites Simon and Schuster's profits rising 28% year on year due in part to (quoting the company) "the decline in expenses resulting from an increase in more profitable digital sales as a percentage of total revenues."

Prices

One obvious reason for the difference could be prices. If you buy ebooks you may wonder why the average price of a best-selling ebook is almost $10 according to digitalbookworld.com - about the same as the top selling trade paperbacks at Barnes and Noble. But prices really don't differentiate books and music - buying eight or ten tracks on iTunes is at least as as expensive as buying a CD.

Piracy

The recording industry points to piracy - books are not available for free to the same extent as music. But a recent Business Insider article cites studies by the UK telecommunications regulator - OFCOM, and Columbia University that suggest consumers of pirate content spend more on legal content than those than consumers that only access legal content. An alternative explanation is market concentration. The digital book market is controlled by a very small number of firms with Amazon dominant. But digital music sales are also very concentrated with Apple iTunes dominant.

Sharing

Another explanation could be sharing. I was in a village in Kenya recently researching Internet use and came across a group of young men all intently listening to music on  their mobile phones. When we discussed how they got hold of their music, they explained that almost always they shared it - not via drives or the Internet but via bluetooth. That is what they were busy doing. My impression is that Digital Rights Management (DRM - the systems that try to control a users ability to share content) has been much more effective in books than in music. Media owners tend not to differentiate between pirate downloading and sharing. It is all lost sales to them. But we should. Paper books can be shared - given, resold, lent. And more than a century ago battles to ensure free access to books were fought and won in many countries - establishing public libraries built by governments, foundations and public subscriptions. Amazon allows for the limited ability to share ebooks if the publisher enables this feature on a title. Many don't. New York is the only city I have been to where I have seen ebook public lending widely available and used.

eBooks in Africa

From an African perspective, the most important issue is that books (and CDs) have been expensive to produce and distribute and so they have been too expensive for most to afford. Digital content has much lower distribution costs so should enable many more people to access them. But the lower costs of distribution are not being passed on to consumers. eBooks represent and extraordinary opportunity on the continent. Something for competition commissions to get their teeth into.

You can watch Russ Grandinetti's presentation below via slideshare.

Amazon on The Global Transition to Online Bookselling (Russ Grandinetti at Launch Frankfurt 2013) from Publishers Launch Conferences

300 hundred Africans die but don't make my local news station's news bulletin

Question: how comes BBC British domestic radio news and the BBC News website  led this morning with the story of more than 300 Africans having died off the Italian coast when a ship carrying them sank while the South African radio stations I listened to this morning didn't run the story at all ?

These days I switch between five radio stations: two Johannesburg talk stations - Power FM and 702, the national public broadcaster's english language station - SAFM (all on FM - no digital audio broadcasting in South Africa) and BBC World Service and BBC's domestic talk station (via Internet). My local award-winning news station - Radio 702 -  and my national talk station - SAFM - didn't run the story at all in the news bulletins I listened to this morning.

On their website today, the BBC leads with the story on their main news page. It also has testimony from survivors and quotes from the Italian interior minister in a detailed story last updated this morning.  It has a video report by their European Correspondent Gavin Hewitt. It also has a background piece on African migrants from the horn of Africa by their Africa correspondent, Andrew Harding. SABC's news website does not have the story on their home page. Under 'Africa', you can find a Reuters story from yesterday. On 702's news website home page there is a reference to the story buried low down on the page. Their coverage relies on the same Reuters story  from yesterday that SABC carries.

The Italian Interior Minister said yesterday that "This is not an Italian tragedy, this is a European tragedy," according to the BBC. It appears he and South Arican news editors are in agreement that it is not an African story.

In this case the cynical guidance that 'if it bleeds it leads' does not seem to have been applied. 'What is newsworthy?' is a question that occupies the minds of editors and journalism educators frequently and no two editors may agree. So there is always room for differences and choices between publications. But the day after the bomb in Nairobi, there was plenty of coverage in South African media. This time virtual silence. Maybe refugees and migrancy is somehow less interesting to editors here than global terrorism? There is also a question of resources. A recent report on South African newsrooms from Wits journalism highlights shrinking newsrooms. But even where editors are forced to rely on agencies, their weighting of this story demonstrates to me a shocking lack of connection to the continent and continental issues.

(note that the links in this piece were found on the morning of 4th October. If you are reading this story at another time they are likely to be out of date). 

Mark Zuckerberg's 'rough plan' for the next five billion

By Elaine Chan and Priscilla Chan [CC-BY-2.5 (http://creativecommons.org/licenses/by/2.5)], via Wikimedia Commons

In a CNN interview last week Mark Zuckerberg said that “one of the biggest problems of my generation is to get everyone in the world to get Internet access.” He announced a new partnership, Internet.org that aims to bring Internet access to 'the next 5 billion'. And he has a plan, or as his white paper "Is Connectivity a Human Right?", now published on facebook puts it, 'a rough plan'.

The vision is big and inclusive - its about the rest of us in those parts of the world not usually referred to in Silicon Valley press releases -  something to be welcomed. Zuckerberg was ambiguous as to whether this was a philanthropic or a commercial initiative in the CNN interview - though he tended to focus it as largely the former.  Maybe it could be described as an example of enlightened self-interest: though Zuckerberg claimed that 'the next five billion' may not be a profitable market for Facebook for a long time to come, Facebook's growth in users is now almost entirely dependent on growth in emerging markets and that is being constrained by access. Not necessarily a bad thing if you believe that getting it done matters. If we depend on philanthropy to connect the disconnected, we may wait a very long time. But clarifying this point would be helpful.

There are three areas of activity in the plan that Zuckerberg proposes to bring low cost Internet to those so far not online: 1. Reduce data costs by improving the efficiency of transmitting data between network operators and users. 2. Reduce data costs by reducing applications' data requirements. 3. Develop or expand use of new business models for no or low cost data.

1. Improving efficiency of wireless data transmission

The plan suggests that it may be possible to improve transmission efficiencies by up to ten times in the next decade. Network operators across the world need such efficiencies as the demand for data increases. Facebook's optimism on the opportunities here is encouraging. Also helpful is their support in the white paper for making use of "White Spaces" (something Google also supports). These are unused parts of licensed spectrum - for example within frequencies used for television broadcasting - that are unused but which need some management at the users' end to avoid the potential to interfere with television signals. There is a pilot project going on in South Africa supported by Google at the moment.

2. Reducing applications' appetitites for data

Those Internet users in "bandwidth poor" countries are often using many of the same applications and services that those in bandwidth rich countries are using. The (bandwidth-rich) designers and providers of those apps have been designing them largely for the bandwidth rich - commonly users on unlimited data plans. This is not a new digital divide - I've read decades old online correspondence recently of an early Africa-focused list-serve in the pre-web Internet where "irresponsible" European partners were being chastised for overloading the system with data (measured in KBs) that had cost an African partner hundreds of dollars to download. Facebook has been a leader in developing low bandwidth versions of its apps that have worked well in Africa. Their 'Facebook for Every Phone' consumes much less data than its smartphone app and is widely used in Africa (the facebook page has nearly 300 million likes).

Zuckerberg says in the plan that: "The technology behind Facebook for Every Phone is generally applicable, and we’re looking at ways to make this available so other apps can be as data efficient as well." If "we're looking at" turns into "we will" then this could be an important commitment.

3. Zero-rating data and getting pre-paid users onto contracts

Facebook has done deals in Africa with mobile operators - MTN for example - to offer free data on facebook. The service is called Facebook zero. Google has offered something similar with Freezone.  In the white paper, Facebook says that this can work as a business model for operators: "We think this model exists. We’ve already seen results where attaching free data for Facebook — what we’ve historically called zero-rating — increases both phone sales profits and data plan profits." That's interesting information. But since the launch of Facebook Zero in 2010, it doesn't seem to have extended its reach. At this stage, from my own limited research, it is not available in more than a handful of countries.

4. Two Big Questions

Will Internet.org and Zuckerberg's plan help get many more of the 5 billion connected?
What kind of Internet will they be connected to?

Zuckerberg and his corporate partners (which include Samsung and Nokia) have significant capital - both economic and political.  Its a good thing that users/consumers in poor countries are now important enough to Facebook that they are willing to focus their own and others attention on getting 'the 5 billion' connected.  The rough plan highlights opportunities - both technological and commercial - that could have significant impacts. Note though that it omits any discussion about the role of governments or regulators - important actors with a role in reducing costs and increasing access.

The plan also gives an indication of  the contest to come over what kind of Internet we will be connecting to and so the business models discussion it raises is one which those who care about Internet access and use in Africa need to focus on. Facebook Zero doesn't enable poor people to connect to the Internet as a general purpose technology, it allows people to connect to Facebook. It also places the mobile operator in the position of selecting and differentiating the terms on which a user gets different content and services. There are other industry voices - Google springs to mind - that have not joined this coalition and that have also been actively and publicly engaged on these issues. Google also has its own zero cost access model - FreeZone - which they have made available in a handful of countries including South Africa. Free access is something to be welcomed. But this is not the open web.

Internet.org may represent a significant step in organising (some) powerful actors in the Internet industry to address Internet access for the majority of the planet. Indeed unless these actors do engage with this issue it may not be possible to achieve an Internet of 'everybody connected to everybody'. As Zuckerberg puts it:

"There is no guarantee that most people will ever have access to the internet. It isn’t going to
happen by itself. But I believe connectivity is a human right, and that if we work together we
can make it a reality."

But if connectivity is a human right then it must be an inclusive one. Not all of the bandwidth poor are economically poor though many are. The industry may be able to extend the market of users through some of the innovations that Zuckerberg proposes. But universal access will take more than industry alone.

There should be a robust debate about the 'rough plan'. And that debate must include not only the Internet industry but users, non-users, governments and regulators.  We should welcome the opportunity that Zuckerberg's initiative offers but we should request - or is that demand? - that that opportunity includes engagement with the people he is seeking to connect.

The New Wave - Who uses the Internet in South Africa

The New Wave

Who uses the Internet in South Africa, where they use it and what they use it for.

Mobile is not the (only) answer

We launched our South African Internet report this evening at Wits Art Museum in Braamfontein. @ambio - Steve Ambrose - of StrategyWorx tweeted "Amazingly comprehensive study with suprising results."

(c) 2012,  University of Witwatersrand.

We've gone from 15% of adults using the Internet (1 in 7) in 2008 to 34% in 2012 (1in 3). As the financial ads say, past performance is not an indication of future performance, but if this rate of growth was maintained, more than 50% would be online by 2014 and 66% by 2014.

What factors will slow this growth? Price is an important factor. But not the only one and possibly not even the most important one in maintaining growth.

Our research shows that many new users (those with 2 years or less online)  are on low incomes. A third of them are living on less than R432 per month, the poverty line used in the National Development Plan. Another third are living on less than R1,500 per month.

(c) 2012, University of Wiwatersrand.

 Many of these users are using expensive mobile data. But many of them are also using shared connections, some paid for and some free: Internet Cafes, Schools, Colleges and libraries. So increases in availability of shared facilities - especially free ones - may be just as important as reductions in data costs in explaining the increases in usage we have seen. This month, for example, Mpumalanga announced that they had almost completed their goal of making free Internet available at every one of their public libraries. Mobile and shared facilities have different limitations. One lesson I have drawn from our research though is that the increased availability of Internet capable mobile phones is not the only reason that usage has increased. Shared facilities are an important part of what has enabled many South African on low incomes to gain access to the Internet.

So to see whether growth rates are going to be maintained we may need to look at issues like whether other provinces are managing to their libraries as quickly as Mpumulanga's, at whether Western Cape's successes in connecting schools is being replicated elsewhere.

The report and info graphics were published this evening at  www.networksociety.co.za. Check them out. See http://www.networksociety.co.za/Media+Resources for credits and conditions for reproducing the report and infographics.