Richard Wright’s blog posts, on the parlous state of a book publishing industry that’s being lashed by the twin storms of digital distribution and ebooks, are another reminder of the amazing revolution that’s taking place in the way we access and ‘consume’ many forms of culture in an increasingly digital age; be it books, film, music or television. Digital distribution has magnified the forces at play many-fold, but this revolution is not just an ‘internet thing’, it’s been going on for some time and to a certain extent pre-dates the commercial internet, as Richard points out. To take the book industry* as an example, the concentration of buying power created giants like Borders that become subsequently dinosaurs in an incredibly short period.
Gil Scott-Heron famously told us the revolution will not be televised. He was right (who watches tv anymore), but it is being blogged about, talked about and tweeted. What surprises me is just how one-sided the discussion is: plenty of comment documenting the problems bedevilling the existing order, but precious little regarding how this revolution will finally play out. Just what will the brave new world look like? I want to know – I’ve got home cinema decisions to be made!
Maybe this asymmetry is simply another case of our natural fascination for bad news or it could be due to the fact that thinking this through is both challenging and time consuming … I know, I’ve tried (more on that later). However, I can’t think of a single instance where I saw someone lay out a vision of the future that spanned books, film, tv and music. It’s not hard to see that they can come together in one place in our home, but how will the nuts and bolts of access and consumption actually work? Do we really think that Steve Jobs didn’t have a vague idea where this was all going, or that Jeff Bezos might somehow have an interest in it? So if someone can point me in the right direction – I’m looking for the blog post from Steve Jobs that answers the simple question, “so how will this all play out Steve?”
If it doesn’t exist, then it’s because Jobs didn’t want to give the competition the keys to the golden kingdom. The global, digital media market is going to be the mother and father of all markets in the 21st century and Apple (and to a certain extent Amazon) have first mover advantage. That map of the future is probably better guarded than the formula for Coke. Of course, that doesn’t mean we can’t or shouldn’t speculate and someone has to go first, so over the next few posts, I thought I’d step in Steve’s shoes and speculate on how that map might look ….
* Note: it seems only right that I should declare that I have a vested interest in the revolution, both as an investor and Board Member at Ebooks Corporation and as a human being with a healthy respect and appreciation of the Creative Arts.
One of the most frequent questions I get asked by people at the moment is, “how’s business?” It’s an easy conversation starter, but I also think people are worried about the economy, jobs, the future; they’re looking for data points. You just know that they’re expecting a mildly negative response, accompanied by some grumbly comments about how tough life is at the moment, but that’s not what they get. What they get is, “pretty good, actually”, followed by a smile.
The reason is simple. I live in the UK, but that’s not where I do business. When the economic statistics are compiled, they’re always done on a country basis (because only countries have offices of national statistics) and we always see league tables of countries and growth. China is currently the world’s second largest economy and growing at over 9% per year. The UK is sixth and not really growing at all.
But an increasing number of people are working in an economy that isn’t based anywhere. It’s called the Internet. I think about the Internet as an economy in it’s own right, just as I would the UK or China or the US. According to McKinsey, if it was listed as a separate place it would be bigger than the Spanish, Australian or Canadian economies and it’s growing faster than Brazil. All around me, I see armies of well educated people working really hard to build out the infrastructure, services and communities of this place called the Internet. Some of that activity will be unproductive, a lot of it will change the way we live our lives. That’s why, when asked about business, I can smile and say, “pretty good, actually”.
The launch of the Kindle Fire is another shot in the ongoing war between the big web ecosystems (Apple, Google, Facebook, Amazon). The background to this war may be our rising propensity to spend money over the internet (when it comes to the web, we’re spending more money, on more things, more often), but it’s effects are being seen both on the web itself and on the world around us. It’s not just tough times that see shops closing in British High Streets; people shifting their spending to the web means less money for the local shops. In the US, it was a basic rule of retailing that each category could support three large retailers, but as we’ve seen with the closure of Borders in the books category, it’s now more typical to see one, plus the web.
The migration of spending power to the web in the space of ten years or less has created enormous incentives for the winners; just look at both the market cap and cash pile at Apple ( $370bn and $70bn respectively). Apple have created some truly ground breaking devices, but it’s easy to forget that they only work because people have become so comfortable with life and spending on the ‘net.
In order to build and maintain market share, Apple et al have reached for the oldest play in the book: the walled garden. Choose your devices from our retail/webstore, choose your apps from appstore, choose your content from iTunes. It’s a sign of how far and fast things have moved that it seems slightly clunky to be looking for film and tv shows on iTunes. I mean, iTunes? Apple have quietly and conscientiously spread the message: inside , everything works out of the box and life is easy, stylish and safe. Outside, it’s dangerous, clunky and uncool. Amazon, Google and Facebook were watching but were never going to sit by whilst Apple grabbed market share, so we now have a ‘walled garden’ arms race and a web that is more divided than ever. Amazon launches a tablet whilst Google buys Motorola.
Welcome to the (not very) brave new world. One where some are even arguing that we will see the end of the general purpose computing device (the laptop or desktop), as we prefer devices that ‘just work’ with our chosen content/software/friend provider.
A compelling story. And one, that in my humble opinion, is plain wrong.
How many times have we been here before? This is an early stage market. Of course people feel safe with the one stop shop; for the time being it makes their life easier. Expect the trend to continue for some time as the web giants deliver a seamless experience to customers in return for their super profits, but don’t expect it to last and make sure you know where you need to be when those Empires fall. Apple are annoying content providers with their excessive charges, Facebook user numbers are declining in their original markets, Google Search doesn’t seem to find what I want anymore and Amazon’s pricing practices seem to have suppliers looking for alternatives.
Empires come, empires go..
They lose the best people and the the ability to innovate quickly. People start wandering outside the walled garden. For those living on the stony ground outside, the answer is not to find a way in, but to keep our heads down and create stuff that customers love when they find it; things they want; things that solve a problem for them and work without too much aggravation across a bunch of platforms. As for those specialist devices? My house has less electronic toys than it did ten years ago. Gone are the VCR, answering machine, amplifier, CD player, telephone. My combination of laptop, smartphone, B&W Zeppelin and iMac gives me everything I need.
Print books attract zero per cent VAT (as they should). Ebooks, despite now being part of the (early) mainstream attract VAT at a rate of 20%. If, like me, you think this is more than a little wrong, you can sign up to a petition requesting the abolition of VAT on ebooks. The acquisition of knowledge should not be taxed …