Does a Microsoft purchase of Nook Media make sense, and to whom?

Earlier this week, TechCrunch reported that it received private documents describing a $1 billion offer made by Microsoft to acquire Barnes & Noble's digital businesses from its Nook Media business unit, in which Microsoft invested $300 million last year. Nook Media also includes Barnes & Noble's college bookstore unit, which Microsoft doesn't want and would most likely be reintegrated with B&N's retail business.

Here's what Microsoft would be acquiring:

• Barnes & Noble's eBook business, including its publisher contracts, self-publishing business, eCommerce websites, online order fulfillment infrastructure and customer lists.
• The Nook hardware line (both eReaders and tablets,) and Barnes & Noble's hardware design operation in Silicon Valley.
• B&N's other digital product lines (apps, magazines, newspapers, audiobooks and video.)

The deal, if it goes through, would make Microsoft the second largest reseller of eBooks in the U.S., ahead of everyone other than Amazon. It would save Microsoft the time needed to build its own relationships with publishers and eBook distribution infrastructure. However, the other things it would buy might not be all that valuable:

• Barnes & Noble's tablet business, which was once a viable competitor for Apple and Amazon, has been declining since last year's Holiday sales season. B&N has been running a series of promotions to try to sell off its inventory of Nook HD and HD+ tablets.
• The document received by TechCrunch states that Barnes & Noble intends to shut down its tablet business by the end of its 2014 fiscal year. That's a huge "red flag" to B&N's Silicon Valley-based hardware and software engineers, who'll have no trouble finding jobs with other companies. By the time a Microsoft acquisition closes, most of Barnes & Noble's top engineers are likely to be gone.
• The existing Nook tablet line is of no interest to Microsoft, and in fact will represent a customer support liability.
• Microsoft already has its own app stores for Windows 8 and Windows Phone 8. It has no interest in maintaining the Nook's Android-based app store.
• Microsoft already sells videos and music through its Xbox Marketplace; it doesn't need Barnes & Noble's content.

That's what Microsoft gets for its one billion dollars, but what does the deal mean for Barnes & Noble? A billion dollars could fund a more serious reorganization of Barnes & Noble's retail business. The company is planning to reduce its store count largely by allowing leases for less-profitable locations to expire. Microsoft's money could enable Barnes & Noble's management to buy out leases and reduce its total number of stores much more quickly. It could also be used to redesign the stores in order to make them more profitable--but there's no evidence to date that Barnes & Noble knows how to turn its stores around.

Selling its eBook business to Microsoft also leaves Barnes & Noble with a big problem. eBooks represent as much as 30% of the sales of the Big 6 publishers; for some genres, such as romance, eBooks comprise 50% of sales. B&N's eBook sales are profitable and growing. So, Barnes & Noble needs to continue to offer eBooks to its customers. It could do so by referring its customers to Microsoft's eBookstore and getting a commission. However, Barnes & Noble would no longer be able to use its eBook sales to negotiate steeper discounts from publishers, since Microsoft would actually be the reseller for those publishers.

So, is Barnes & Noble's eBook business really worth a billion dollars (71% of the company's market capitalization as of this writing) to Microsoft? Is that billion dollars worth it to B&N if it means getting out of the only segment of the book business that's continuing to grow in both revenue dollars and units? In the long run, will selling its eBook business save Barnes & Noble's retail bookstores, or will it only buy the company a little more time?

 

Barnes & Noble: Controlled landing or slow-motion liquidation?

Barnes & Noble just ended a bad week: First, It announced that it plans to close as many as 200 of its superstores over the next ten years. Then, a few days later, IDC released its global tablet shipments report for Q4 2012, which found that while the worldwide tablet market increased 75% in Q4 2012 year-over-year, shipments of  Barnes & Noble's Nook tablets actually fell 27.7%, from 1.4 million units in Q4 2011 to one million in Q4 2012. Those numbers added to the gloom from the company's quarterly financial report issued in early January, which stated that B&N's sales from bookstores and its eCommerce site in the holiday quarter fell 10.9% year-over-year, while its same-store sales for stores open at least 15 months fell 3.1%. Revenue at Barnes & Noble's Nook Media unit, which includes Nook devices, eBooks and college bookstores, fell 12.6% year-over-year.

The question to some observers isn't what the company will look like once it closes a third of its stores over ten years--it's whether B&N will even be in business ten years from now. The signs aren't good. As an example, take same-store sales, one of the most important financial indicators for retailers, because it only looks at sales growth in stores open a year or more, not new stores. In Barnes & Noble's case, the same-store number for the holiday quarter was -3.1%. However, that -3.1% is an average. Some stores probably had year-over-year increases, but no one outside Barnes & Noble really knows for sure, and that's a critical factor in whether or not the company's plan to close a third of its stores will work. If B&N has a relatively small number of poor-performing stores, the company can close them as quickly as possible and concentrate on the successful stores. However, if sales are falling across most of B&N's locations, a 33% reduction plan won't be nearly enough to stop the bleeding.

Another example is B&N's failed merchandising strategy. Nothing that the company has tried has done anything to improve its stores' performance. It cut back on its music and video departments and used that space to create dedicated display space for its Nook tablets and eReaders, which are usually prominently featured at the front of its stores. However, its Nook business is actually falling faster than its retail business in general, and it's adding to same-store sales declines. It replaced some of its book display space with an increasingly large assortment of toys and games, but that isn't improving same-store sales, either.

Barnes & Noble's situation is looking uncomfortably like that of Borders and Circuit City, both big-box retailers that closed stores and experimented with a variety of merchandising changes, only to find themselves bankrupt and in liquidation. That's where the "controlled landing" vs. "slow-motion liquidation" question comes in. If B&N starts closing stores, and that results in sustainable year-over-year same-store sales gains, the company's plan to slowly weed out poorly performing locations is likely to work. However, if the same-store declines continue, even with fewer stores, B&N will have to dramatically increase its pace of store closings or come up with even more radical merchandising changes that actually work. As much as I want to see Barnes & Noble's retail stores survive, especially now that Borders is gone, my gut tells me that the company is going down the slow-motion liquidation path.

If eBook sales are slowing, is it good news or bad?

Not long ago, it was common for eBook sales to increase by 100% or more year over year. Those days are behind us--last year, the rate of eBook sales growth fell into the 20%-25% range. Barnes & Noble released its holiday 2013 sales figures today, and eBook sales increased 13.1% year-over-year.

Some industry observers are saying that eBook sales growth has reached an inflection point, which means that sales growth has hit zero or gone negative. In reality, eBook sales growth is slowing but still positive, and will most likely remain positive for a while. In addition, both consultants and reporters have been overly quick to minimize the effect of the Justice Department's settlement with Hachette, HarperCollins, Simon & Schuster, and most recently, Penguin. (Random House will join the settlement if and when its merger with Penguin is completed.) The settlements are still being phased in, and unless price has little or no effect on demand, we should see the rate of eBook sales increase in 2013.

However, let's say that even with the price-fixing settlements in the U.S. and Europe, eBook sales increases level off or turn negative. Is that good news for the publishing business, or bad?

• Some observers believe that it's good news, because they think that those customers will buy print books instead of eBooks. However, there's no evidence that a slowdown in eBook sales will mean an increase in print sales. In fact, print sales continue to decline, even as eBook sales growth slows down. (Update, January 4, 2014: According to Nielsen BookScan, U.S. print book sales (in units) fell 9.3% for all of 2012. Print book sales fell just under 16% between 2010 and 2012. In the U.K., print book sales (in units) fell 3.4% in 2012.)
• eBooks are the only source of growth for the book publishing business. If eBooks stop growing, we'll see even more consolidation and shutdown of publishers, since cost control will be the primary way to improve publishers' bottom lines.

I don't believe that eBooks' sales growth is going to go to zero, but 20%-30% annual growth may well be the ceiling for the next couple of years. Let's be clear--eBooks (and, to a lesser extent, audiobooks) are the only parts of the book publishing and retailing business that are growing. Everything else is stagnant or declining. If eBooks become stagnant, that's bad news for everyone.

Part 5: Everyone is becoming a “hyphenate”

The silos between creative professionals are breaking down, just as the silos between types of media are breaking down. In established media, everyone has their own, well-defined role: Writers, editors, designers, artists, musicians, composers, singers, producers, directors, actors, etc. Each role is further defined by media, so, for example, there are writers for books, plays, movies and television. Historically, there have been “hyphenates”—people who perform multiple roles, such as the singer/songwriter or the writer/director, but they’ve been fairly rare.

Today, hyphenates are quickly becoming the rule rather than the exception, at least for Internet-based media. It’s not uncommon to find one person performing multiple roles. It saves time and money, and gives them more creative control. One person can be a composer, musician, producer and audio engineer. Another can be a screenwriter, director, producer and actor. Yet another can be an author, editor and book designer.

At the same time that creators are doing more, publishers should be doing less. The typical model for book publishers, especially those doing non-fiction, is to find writers, assign them subjects, provide editorial direction, do copy editing and fact checking, design the books' covers and layouts, do the typesetting, put together marketing plans, and sell the books to retailers and distributors. Most publishers don't start farming out work until it's time to actually print and bind books, or convert book files into retailers' eBook formats.

The job of publishers in the future is going to be facilitating, not performing, the work of creators. Publishers will become a member of the creative team instead of the driving force—part angel investor, part project manager and part marketer. The publisher’s underlying goal will continue to be to make money, because that’s how profits can be plowed back into underwriting more creation. However, they’ll do that by supporting their creators, not making creative decisions for them.

And that brings us to the end of this series. Here's a summary:

1. The role of publishers is being transformed by the Internet, mobile devices and wireless broadband.
2. Publishers are in the business of entertainment, information or education, not creating and selling print books and eBooks.
3. Being successful as a 21st Century publisher requires going “all in” on all types of media.
4. As a practical matter, there are no more financial or technical barriers to entry.
5. Everyone is performing tasks that used to be done by multiple creators, and publishers are becoming facilitators and supporters of creative teams.

Part 3: No more silos

In Part 2 of this series, I proposed a new definition for publishers. Nothing within the definition of the publisher's role requires, or even presupposes, printed books or eBooks. It can include websites, web apps, native apps, databases, videos and podcasts—as well as print and eBooks. However, today's publishers are missing a lot of the experience and skill sets that are necessary to create this kind of content—and to get it, some publishers are engaging in marriages of convenience. For example, Random House recently launched an operation called Random House TV—but rather than partnering with a producer with extensive dramatic television experience, it partnered with Fremantle Media, a company owned by its parent, Bertelsmann, that’s best known for reality and game shows.

Being successful as a 21^st Century publisher requires going “all in” on all types of media—nothing can be “out of your wheelhouse.” The silos used to be easy to define: Your newspaper was delivered to your house each day by a paperboy on a bicycle. The magazines to which you subscribed arrived in your mailbox. You listened to the radio using one box and watched television using another. You bought books at the local bookstore or borrowed them from the local library. Today, everything arrives the same way (over a high-speed Internet connection or wireless broadband) to the same box (your tablet, smartphone or PC) wherever you happen to be located.

Just because you can’t limit yourself to any one silo anymore, it doesn’t mean that you have to have all of the necessary expertise in-house—in fact, there’s never been a better time to use outside talent. However, as with the Random House example above, it's not enough to work with people who have generic experience with a medium. Instead, it’s critical to partner with the right people, with the right varieties of experience and talent.

Part 2: What business are you in?

In 1960, Harvard Business School professor Theodore Levitt wrote a landmark article for the Harvard Business Review titled "Marketing Myopia." Levitt focused on industries that were struggling at the time--among those that he used as examples were railroads and motion pictures. Levitt wrote that in both these cases, management forgot what businesses they were really in. Railroads thought they were in the railroad business when they were actually in the transportation business. As a result, they allowed competitors (trucking firms, package delivery services and air cargo companies) to take away huge portions of their revenue and leave them with the niche of slowly delivering huge quantities of materials.

Movie studios thought they were in the movie business, not the entertainment business. As a result, their management first dismissed television, then denied its impact, and then refused to make their movies available for broadcasting. It was only after most of the movie studios came close to or entered bankruptcy that they realized that they had to do business with television networks and stations if they hoped to survive.

When you're in a business for several decades, it becomes natural to think "inside the box." The barriers to entry (cost, technology, experience, customer habits, etc.) are simply too great for new entrants to overcome. Rather than redefining your business, you focus on doing what you already do less expensively. Customers have purchased your goods or services for as long as you've been in business, so whatever you're doing is working, and you should keep doing the same things. That mindset makes legacy industries vulnerable to disruptive innovators: Trucks replaced railroads, and television replaced going to the movies.

The lessons from fifty years ago are still being learned today, and nowhere more than in the book industry. Book publishers aren’t in the business that most of them think they’re in. If you talk to publishers, or for that matter, booksellers, most of them will tell you that they’re in the business of selling stacks of nicely bound paper printed with well written and edited text, and their digital simulacra, eBooks. In reality, they’re in one of three businesses: Entertainment, information or education.

Once the focus changes from manufacturing and selling books to performing a job for your customers, the definition of what a publisher does changes radically:

1. Deliver entertainment, information and education
2. Quickly and cheaply
3. To PCs and mobile devices as well as to legacy media
4. Via the Internet and wireless broadband connections, as well as legacy channels of distribution

Part 1: Birth, Death and Transformation

We’re in the midst of a massive shift in media consumption patterns. People consume more news than they ever did, but they don’t read newspapers anymore. Magazines, even on tablets, are slowly dying. And, as for books, The New Yorker published an article titled “Twilight of the Books”…on December 24, 2007, before eBooks were even a significant part of the business. Statistics in the article show that the market for books has been declining for at least 30 years. U.S. movie theater ticket sales peaked in the 1950s; the only things that have kept the industry going have been home video sales and higher ticket prices. But, home video sales are also dropping—they’re being replaced by rentals from Redbox, and online streaming from Netflix, Amazon and others.

Let’s be clear: Movie attendance has been declining for half a century, but no one seriously expects the movie business to disappear. The same is true for books; readership will continue to decline, but it’s hard to visualize a world without books, even if most of the remaining books are digital instead of paper. Nevertheless, the balance has shifted. Consumers want their media faster and cheaper. Readers want their news from the Internet, as it happens (if not sooner, leaked out via Twitter.) One can argue that attention spans have gotten shorter—look at the popularity of viral videos on YouTube—but videogames, both casual and complex, can engross players for hours or even days.

The transformation of media in the 21^st Century is being driven by three forces: The Internet, mobile devices and wireless broadband. The Internet provides a conduit for every kind of content. There’s no need to ever leave your house to purchase any kind of media, and it makes possible entirely new types and combinations of media that didn’t exist prior to the rise of the World Wide Web. Mobile devices and wireless broadband make that content available anywhere, anytime, and open the digital world to hundreds of millions of people who can’t afford personal computers or high-speed Internet connections.

Amazon focuses on Apple with its new Kindle Fires

Earlier today, Amazon announced a refresh of its entire line of Kindle eReaders and tablets. The company announced a new eReader, a lower price for its entry-level eReader, an improved version of the Kindle Fire, and a new Kindle Fire HD line with three models. Perhaps even more interesting than the devices themselves is that Amazon said that it's services, not "gadgets", that are important, and it's explicitly positioning its devices as the delivery mechanism for its services. Amazon's metric for success is how many goods and services it sells through its devices, not how many devices it sells.

Here are the details:

• The Kindle Paperwhite is the new eReader. It's got a sharper, front-lit display with 25% more contrast and 212 ppi resolution (62% more pixels than before,) with a capacitive touch screen. Amazon claims that the display and lighting systems are both proprietary. The lighting system took four years of R&D and uses a flattened-out optical fiber for even illumination, instead of the discreet LEDs that B&N uses. Amazon claims 8 weeks of battery life. The eReader is 9.1mm thick. The Wi-Fi version is priced at $119, pre-orders begin today and it ships October 1st. The 3G version is priced at $179, same availability.
• The "$69 Kindle"--that's what they're calling it--appears to be the current $79 ad-supported model, just marked down $10. Pre-orders begin today, ships September 14th.
• The updated Kindle Fire has a faster processor, 1GB of RAM (vs. 512KB in the original model,) 40% better performance, a front-facing camera and longer battery life. Price is $159 (down from $199), and it ships September 14th.
• The Kindle Fire HD line is entirely new, and it comes in three models that will ship on November 20th:
• A 7" model for $199
• An 8.9" model for $299
• The same 8.9" model with 4G LTE and twice as much memory for $499, compared to $729 for the roughly comparable new iPad
• All three models use the same basic hardware: The touch screen is laminated directly to the display for 25% less glare and better contrast. They use TI OMAP 4400 series processors--4460 in the 7" tablet, 4470 in the 8.9" model (Jeff Bezos claims that they're better than the Tegra 3, but they only have dual cores vs. the Nexus 7's Tegra 3 with quad cores.) They have built-in stereo speakers with Dolby Digital Plus, and also have Bluetooth and HDMI out, along with front-facing HD cameras and Skype. The tablets have both 2.4 GHz and 5GHz 802.11n, with dual antennas for better reception and speed--Amazon claims that the tablet's Wi-Fi speed is 41% faster than that of the new iPad. 
• The new 7" Kindle Fire HD has 1280x800 resolution, while the 8.9" models have 1920x1200 resolution, 254 ppi IPS displays. By comparison, the new iPad's Retina display is 9.7", 2048x1536, 264 ppi resolution. Given the slightly smaller screen on the Kindle Fire HD, most users won't be able to tell the difference in resolution. The screen of the 8.9" model is big enough for two-page magazine (and, presumably, eBook) displays.
• The 7" and base 8.9" models ship with 16GB of memory; the Kindle Fire HD with 4G LTE ships with 32GB of memory.
• Buyers of the 4G LTE model can sign up 250MB/month of data usage, 20GB of cloud storage and a $10 Appstore credit, for $49.99/year. (Given that Amazon is encouraging customers to keep all their eBooks and media in the cloud, that 250MB is likely to run out pretty quickly.)
• The updated Kindle Fire and Kindle Fire HD models run a customized version of Android 4.0.3 (Ice Cream Sandwich.) The original Kindle Fire apparently will not be able to upgrade to the new version of the operating system.
• According to Engadget, the physical design and build quality of all the new Kindle Fire models is far better than that of the original Kindle Fire.
• The user interface has been updated, and some elements, like the "wood bookcase", are gone. The Kindle's "X-Ray" feature for books has been extended to movies (via IMDB, which Amazon owns), audiobooks and eTextbooks..There's now built-in Facebook and Twitter support, and many improvements to email. A new FreeTime feature offers much more extensive parental controls--parents can specify when and how long their kids can read books, play games, watch video, etc. And, parents can set different limits for each child. The screen's background turns blue when the tablet's in FreeTime mode.
• Audible's 100K audiobooks have been added to Amazon eBookstore. Whispersync for Voice allows audiobooks on multiple devices to be synchronized--stop listening on one device, open the audiobook on another device and start listening right where you left off. The Audible audiobooks will display their text at the same time on Kindle tablets, with the text synchronized with the narration, and with real-time highlighting (called Immersion Reading.) Amazon is also launching Whispersync for games--synchronizes game levels between multiple devices.
• Amazon is launching a collection of serialized eBooks as Kindle Serials. Customers can buy a Serial once and get all the installments. Each new installment is automatically appended to the existing portion, and there's support for reader discussion. The product line is launching with eight titles. $1.99 each, and Amazon is making Dickens' Pickwick Club and Oliver Twist available for free.

Digital Book World's new eBook bestseller list is being compiled by a Big 6 employee

Yesterday, the Digital Book World website owned by F+W Media announced a new bestseller list for eBooks, and claimed that its methodology would make the list more accurate than those published by other sources. In its release of the first edition of the list, Jeremy Greenfield, the site's Editorial Director, wrote that the new list is "a new weekly venture from Digital Book World in partnership with Iobyte Solutions." There's nothing more in the article that describes Iobyte Solutions. A press release announcing the new list has extensive quotes from Greenfield, F+W Media Chairman and CEO David Nussbaum, Iobyte Solutions "managing partner" Dan Lubart, and several others. Other than the quote from Lubart, nothing in the release describes Iobyte Solutions. Finally, Lubart himself wrote a post on Digital Book World, describing the methodology used for compiling the list. Here's how Lubart describes himself in the post:

About Dan Lubart

Dan Lubart is a technology strategist and data junkie who founded Iobyte Solutions in 2000 following a previous decade of solo consulting. Still fairly new to the publishing industry, Dan has been involved with digital disruption in the past, spending a year at Universal Music Group right around the time Napster was rearing its head and now focuses mainly on the familiar challenges and opportunities of the eBook marketplace. With Iobyte, Dan also developed a very cool consumer learning site for Scholastic, and has consulted with major clients in banking, pharmaceuticals, retail and media. Amidst his other current professional endeavors, Dan devotes great chunks of time to enhancing and marketing Iobyte’s eBook MarketView service (retail data and analytics on both physical and eBooks for publishers). Follow him at hiswebsite and on Twitter.

There's just one problem with all of this: Dan Lubart is also the Senior Vice President of Sales Analytics at HarperCollins. That's right--a senior sales executive with one of the Big 6 publishers is responsible for compiling an "unbiased" list of bestselling eBooks. I wouldn't have known anything about this if Mike Shatzkin hadn't mentioned it in passing in his blog. When I first read Shatzkin's blog, I was sure that I was reading it wrong--surely Lubart had worked at HarperCollins before leaving to set up Iobyte Solutions, but a quick check with LinkedIn showed that I read it correctly. Lubart is apparently continuing to run Iobyte Solutions while he also works for HarperCollins.

This opens up an enormous can of worms. Did Greenfield and Nussbaum not know that Lubart had a massive conflict of interest? Mike Shatzkin certainly did, and he's quoted in the press release that announced the new bestseller list. If Greenfield and Nussbaum did know, why didn't they reveal that information? They had plenty of opportunities to do so. Unless Lubart was suffering from a case of selective amnesia, he should have revealed his employment in the post he made describing the list's methodology. He spent an entire paragraph talking about his background, with no mention whatsoever that he's currently employed by HarperCollins.

Any argument that Digital Book World or F+W Media might make about Lubart's ability to somehow keep a "Chinese wall" in his head separating his duties at HarperCollins from his work for Digital Book World is laughable. This is an inherent conflict of interest. It should have been fully disclosed, and even then, it undercuts the impartiality of the list. The best thing that Digital Book World could do is admit what happened and separate itself entirely from Iobyte Solutions and Mr. Lubart. Another option would be if Mr. Lubart ends his employment at HarperCollins, declines to accept any consulting business from the company, and works full time at Iobyte Solutions. Failing that, the Digital Book World list has to be seen as inherently unreliable.

Update, August 21, 2012: Nate Hoffelder at The Digital Reader picked up on the story, and contacted Digital Book World to ask some questions. As of this writing, DBW hasn't responded to Hoffelder, but after it received Hoffelder's request, it edited Dan Lubart's biography to add a mention of his employment at HarperCollins:

About Dan Lubart

Dan Lubart is a technology strategist and data junkie who founded Iobyte Solutions in 2000 following a previous decade of solo consulting. Dan currently works with HarperCollins as S.V.P. of Pricing and Sales Analytics while concurrently managing Iobyte and the eBook MarketView service providing retail data and analytics on both physical and ebooks. (Emphasis added.) Still fairly new to the publishing industry, Dan has been involved with digital disruption in the past, spending a year at Universal Music Group right around the time Napster was rearing its head and now focuses mainly on the familiar challenges and opportunities of the eBook marketplace. With Iobyte, Dan also developed a very cool consumer learning site for Scholastic, and has consulted with major clients in banking, pharmaceuticals, retail and media. Follow him at hiswebsite and on Twitter.

Note that DBW didn't just add a mention of Lubart's employment at HarperCollins--it also edited other parts of the biography out. They did this without explaining the reason why, and without addressing Lubart's conflict of interest. In addition, note the wording that "Dan currently works with HarperCollins as S.V.P of Pricing and Sales Analytics...", implying that his relationship with HarperCollins is that of a consultant or contractor, when his LinkedIn resume makes it clear that he works FOR HarperCollins as a full-time employee.

F+W Media's and Digital Book World's logic for how they're handling this revelation isn't clear to me. Surely Lubart isn't the only researcher in the country who could put together this bestseller list. I've done market research and industry analysis for years, and what Lubart says he's doing is nothing that literally thousands of other analysts couldn't do. Instead, DBW's actions are like the New York Times hiring the head researcher for the Obama or Romney campaign to do its election polling, and responding "Yeah? So what?' when the truth is discovered. No organization with any pretensions to journalism would act this way, so the question becomes, what kind of organization is Digital Book World, and why should anyone believe that its eBook bestseller list, or anything else it publishes, is untainted by conflicts of interest?

Interview with me on the BookGoodies website

An interview that I did with Deborah Carney of BookGoodies about things that publishers and self-publishing authors need to keep in mind when getting into eBooks, especially those for children's books and other graphic- and design-heavy applications, has been posted on their website. It's about a 45-minute interview, and there's lots of useful information. You'll also find a permanent link to the interview in the left-hand column of this blog.

PressBooks prepares to launch its eBook publishing service

PressBooks, an eBook editing and self-publishing service based on WordPress, has announced its pricing plans and is nearing a formal launch. The service, which has been in beta for some time, enables writers to collaboratively create eBooks, either online or via file uploads. Existing WordPress users can selectively convert their blogs into eBooks using PressBooks. The service outputs EPUBs for Apple iBooks, Barnes & Noble's Nook and Kobo, converts EPUBs to Amazon's Kindle formats, creates public or private web versions of eBooks and exports to PDF for print-on-demand. PressBooks offers an assortment of templates that are optimized for different eReading platforms. It can directly post eBooks into Apple's, Barnes & Noble's and Kobo's eBookstores, or self-publishers can download the files and manage their own distribution. (Apparently, self-publishers will have to post titles into Amazon's Kindle Store themselves.)

The new pricing plans, which appear to still be under discussion, are as follows:

• The first five books are free (beta users who've already created eBooks are exempt from monthly pricing on those titles, and will be entitled to five more free titles.)
• Up to 20 books: $50/month.
• Up to 200 books: $200/month.
• Distribution to the Apple, Barnes & Noble and Kindle eBookstores will cost a one-time fee of $100/book + $25/year/book.

Which eReaders and tablets support multimedia and CSS3 features?

Vook has put together a list of some of the devices that support multimedia enhancements, along with the maximum eBook size on each device (which turns out to be dramatically affected by both the device and eRetailer), and a list of CSS elements that can be controlled in Vook's editor, with which devices they're supported on. Here's a summary:

• Only iOS devices running iBooks and the Kindle app, and the Nook Color and Nook tablet, support multimedia enhancements. The only desktop PC eReader that supports the enhancements is Vook's own Reader software. 
• Here are the maximum file sizes for various devices and eBookstores--conventional publishers (with "Vendor of Record" accounts) get far more file space than do self-publishers, which makes self-published multimedia-enabled eBooks impractical:
• Apple's iBookstore: 2GB 
• Barnes & Noble Pubit! (self-publishing): 20MB 
• Barnes & Noble via Vook distribution relationship: 600MB 
• Amazon Kindle Direct Publishing: 50MB 
• Amazon via Vook distribution relationship: 650MB
• The Vook source link has much more information, but in general: 
• iOS devices handle all the CSS3 attributes. 
• Nook devices (both eReaders and tablets) handle all the CSS3 attributes. 
• Kindle devices handle only a subset of the CSS3 attributes, with the Kindle Fire supporting a few more than Kindle eReaders. 

Simon & Schuster revenues up 3%, but operating income down 47% in Q2

The Wall Street Journal reports that CBS issued its Q2 financial results yesterday, including Simon & Schuster. The publisher's revenues increased by 3% year-over-year to $189 million, with a 44% increase in eBook sales offsetting a decline in print sales. eBooks now represent 21% of Simon & Schuster's revenues, and the company expects eBook sales to increase slightly less than 30% for the full year. Operating income before depreciation and amortization was $9 million vs. $19 million in the previous year, down 47%, for a profit margin of 4.8%. The company says that profits were affected by the proposed settlement of eBook litigation with the Justice Department and states.

Vook launches HTML5 eReader and new pricing models

Vook just launched a new HTML5 eReader for its eBooks (to try it out, go to http://vook.com; http://www.vook.com will take you to their sign-up page for writers). The samples I've seen are similar to a conventional EPUB display with flowable, resizable text plus embedded rich media.  It can display one or two pages at a time. It also has three layout options with different typefaces. A nice feature is that Vook has anticipated that the eReader will be used on both PCs and tablets, so it supports a single-page vertical scrolling mode for smaller devices, as well as two-page mode for desktop and notebook PCs.

The company has dropped its monthly fees and now offers two options for self-publishers:

• Publish the eBook free of charge to Vook's own eBookstore; the author gets 85% of revenues.
• Create eBooks using Vook's tools and then pay the company $99 for the files, which can be uploaded and sold by the author through Amazon, Barnes & Noble and Apple. 

Proof that thinking too much about sex makes you stupid

Michael Cavnar, the CEO of Vook, a self-publishing company, has posted the story of "The Diamond Club," a hoax erotic eBook that made it to #4 on the list of paid books in iTunes after just three days. Brian Brushwood and Justin Young, the hosts of TWiT's NSFW podcast, learned that all ten of the top eBooks on iTunes were erotic fiction, and came up with an idea similar to Mike McGrady's 1969 potboiler hoax "Naked Came the Stranger," which was credited to "Penelope Ashe" but was actually written (as badly as possible) by 24 journalists. Brushwood and Young invited their listeners to submit chapters for the book. The only thing they had to do was feature the main character--the chapters didn't have to connect to each other at all. Even though the eBook does deliver on the sex part, Young said “It’s a hoax in that we are not erotic fiction writers. We don’t genuinely think it’s any good. But I will stand behind our product that it delivers what we believe to be the most important component in this genre: sex.”

I fully expect a Big 6 publisher to offer Brushwood and Young a seven-figure advance and commit to a huge print run. Because it's "pre-sold."

28% of all library patrons want to download eBooks from their library; Kindles are the most popular devices for reading library eBooks

Digital Book World has a summary of a new Patron Profiles report from Library Journal and Bowker. Their survey found that 28% of all library patrons want to download eBooks from their public library, and almost two-thirds of patrons who already read eBooks want to be able to get them from their local library. Here are some other findings:

• eBooks are the most popular downloadable media for all respondents, followed by music and audiobooks. Video downloads are the fourth-most-popular media with everyone except existing eBook users, who prefer enhanced eBooks by a small margin.
• As far as eReading devices are concerned, Kindle eReaders are the most popular with both "power" media users and regular library patrons, by a significant margin. The next most popular device is the Kindle Fire, followed by the iPad, and then the Nook Color eReader and Nook black & white eReader, both of which were preferred by less than 10% of patrons.
• "Digital" patrons--those that own a smartphone, eReader or tablet--are more active library users than any other group, across all activities. 28% of library patrons own a smartphone, 16% own an eReader and 12% own a tablet.
• Only 3% of library patrons have used a dedicated app for their library, although many patrons would like to be able to access their library's online content via a mobile app.
• Library patrons that visit their library's website an average of once a week are generally dissatisfied with the quality of their library's website.

TeleRead is imploding

TeleRead, one of the leading sources of eBook news on the web, is imploding. Long-time editor Paul Biba resigned a week ago last Monday, and he apparently gave publisher North American Publishing no notice of his departure. Then, late last week, NAPCO appointed Dan Eldridge editor--Eldridge just joined NAPCO a little more than a month ago, is working on multiple publications and has no eBook industry experience. That was followed on Tuesday by the resignation of senior writer Chris Meadows, who contributed almost as much content as Paul Biba and kept the site afloat after Biba left. Meadows is joining competing site The Digital Reader. Finally, today, Eldridge posted "Interested in writing for TeleRead?", but in response to a question, he said that writers wouldn't be paid.

Hiptype offers third-party analytics for eBooks...with a catch

PaidContent reports that Hiptype, a company that offers third-party analytic reporting for eBooks, has launched. Amazon, Barnes & Noble and other eBook vendors can gather a variety of information about how their eBooks are read--how far a reader gets into an eBook, how often they open it, what notes and highlights they add, etc. However, that information is rarely shared with publishers. Hiptype allows publishers to independently gather similar information. The information is anonymized, but consumers can opt-out of Hiptype's data collection completely (assuming, of course, that they know that Hiptype is collecting information.)

There's a huge hole in Hiptype's data collection that may make it unattractive for most publishers: It requires eReaders that support both HTML5 and JavaScript in order to work, but according to paidContent, neither web-based eReaders like Kindle Cloud nor desktop eReaders, even those that are browser-based, will work. Black & white eReaders are also unsupported. That limits the usefulness of Hiptype to Apple's iBooks and a few iOS and Android eReading apps. Frankly, I'm surprised that they even released the service when its practical value is so low. This isn't a Minimum Viable Product--there's virtually no value in the current offering for most publishers.

They're offering a 30-day trial with service for one book, or programs priced at $19 or $99/month. The $19/month program is limited to 1,000 readers, so it's not useful to anyone other than self-publishers and very small publishers.

BISG survey says that eBook buyers are more willing to buy print

The Book Industry Study Group has just released the third part of Volume Three of its Consumer Attitudes Toward E-Book Reading research report. Here's a summary:

• The percentage of eBook buyers that exclusively or primarily purchase eBooks has dropped from nearly 70% last August to 60% in May 2012.
• The percentage of survey respondents with no preference for eBook or print formats, or who buy some genres in eBook format and others in print, has increased from 25% last August to 34% in May.
• Amazon's Kindle Fire has overtaken the iPad as the tablet of preference among eBook consumers. 7% of survey respondents owned a Kindle Fire last December vs. 20% in May 2012, while iPad ownership remained flat at 17% in both surveys. By comparison, 5% of respondents owned a Barnes & Noble Nook Tablet in May, and 8% owned another Android-based tablet.
• While overall use of tablets as primary eReading devices is increasing, the changes aren't uniform across devices:
• 35% of respondents cited Amazon's Kindle eReaders as their primary device for reading eBooks, down from 48% last August.
• Apple's iPad was cited as the primary device for reading eBooks by 9% of respondents in May, down from 10% in February.
• Respondents who cited Barnes & Noble's Nook tablets and eReaders as their primary device for reading eBooks declined from 17% last August to 13% in May.

Apple accuses author of naming the eRetailer that she dare not name

Apple's never had much love for that pesky First Amendment, and The Digital Reader reports that the company has now banned an eBook from its iBookstore simply because it mentions Amazon. Here's a summary:

Author Holly Lisle was asked to release her series of eBook lessons on writing in Apple's iBookstore, which she did. Everything went swimmingly until she reached Lesson 6, which teaches authors how to do research in order to identify other genres in which to sell their books. As part of the lesson, she included an example with links to Amazon's website. Apple rejected the eBook on the basis of the links to Amazon (something that Apple's done in the past,) and Lisle edited the eBook and replaced the links to Amazon with links to her own site. Then, she resubmitted the eBook, and Apple rejected it again, this time because it simply mentioned Amazon. (To be completely accurate, Apple rejected the resubmitted version because it claims that Lisle didn't remove the links to Amazon, even though she actually did remove them and has uploaded the new version of the eBook without the links multiple times.)

It's not unusual for eBookstores to delete, or fail to approve, eBooks due to plagiarism or because they reproduce public domain content that's already available in the bookstore in multiple forms. However, Apple appears to be only eRetailer that refuses to carry eBooks that even mention competitors. Lisle claims that Apple's actions aren't censorship because Apple isn't a government entity, but it's a distinction without a real difference. If, instead of having 10% market share, Apple had 90% market share and engaged in this behavior, it would be de facto censorship.

Update, August 2, 2012: Apple has apologized to Holly Lisle and has reinstated her Lesson 6, including the links to Amazon. However, the decision to allow Lisle to sell her eBook should be seen more as a response to negative PR than as any change in Apple's policy of banning eBooks with links to competitors.