Benedict Evans covers mobile content, digital media and electronic publishing for Enders Analysis, a research and consultancy boutique in London. As part of his work, Evans regularly tracks the tech giants Amazon, Apple, Facebook, Google, and Microsoft. He will join Publishers Launch Frankfurt on Monday, October 8, to share his view of these companies and how books and the publishing business fit into their strategies.
In anticipation of the conference, Evans spoke recently with Publishers Launch co-founder Mike Shatzkin about the intersection of content, devices, and platforms and the future of these developing digital ecosystems. Read on for the full interview and a discount to next Monday’s conference.
Mike Shatzkin (MS): You track five companies that Ken Auletta in a recent New Yorker piece identified as those who will determine publishing’s future: Amazon, Apple, Facebook, Google, and Microsoft. I’m going to assume that Amazon is the most likely of these to be disruptive of publishers’ traditional business models. Of the others, which one do you think publishers should be paying closest attention to for the future of their own businesses?
Ben Evans (BE): That’s a tough question because publishing is really pretty peripheral to the businesses of all of these companies except for Amazon. (There is an argument about how important publishing really is even for the future of Amazon.)
I think the way to look at it is that publishing is a pawn in the maneuverings of these companies as they build platforms in order to serve their own interests. Microsoft wants to sell operating systems and therefore wants to sell devices; Apple wants to sell devices; Facebook wants to build a social graph of people sharing stuff. It’s really only Amazon for whom the core business is selling things; for everybody else, that’s a means to an end.
MS: A recent story in the Washington Post suggested that the platforms will be fighting it out for content they don’t own and that the content owners could see some significant opportunities developing soon as a result. Do you agree with that overall analysis?
BE: Stephen Elop, the Chief Executive of Nokia, said that his company is in a war of ecosystems and a war of platforms, rather than a war of products. So, you could produce a beautiful tablet, or beautiful phone, or beautiful website, for that matter, but if it hasn’t got an ecosystem of content and applications from all sorts of third parties attached to it, then it’s just a piece of plastic; it’s just a dumb screen that doesn’t do anything.
Now you could see that very clearly if you contrast the Kindle Fire that Amazon has just launched with the Google Nexus 7, which is another tablet that looks very similar to a Kindle Fire, at a very similar price. But the difference between a Fire and a Nexus 7 is that when you turn the Nexus 7 on there’s not really anything you can do with it. There aren’t a great many apps; there isn’t a great deal of content, except what you get from Google. As a buyer, you need to compare the Google content lineup with the Amazon content lineup, and of course, they see that Amazon can bring you a lot more than Google. Books are an important part of that. So are movies, so is music, so are magazines, so are games – probably all pretty much equal in importance in shifting the device.
So, Amazon has a coherent content proposition; Apple has a coherent content proposition; nobody else really does. That clearly opens up opportunities for any content provider whether they’re a games developer, whether they’re a magazine company or whether they’re a books company. In positioning their content, they’re extracting favorable terms from Google or from Microsoft in gaining placement and in providing their content on that device.
MS: Which of course means that Amazon’s position in the book business, of potentially being able to monopolize content, is a unique situation that could present them with strategic advantage in the long run.
BE: Well it could, but here’s where it gets complicated. Amazon’s own devices are just the front end of their store, but they’ve put their store in other devices, too. Amazon wants people to be able to buy their content on any device. You’ll get the best experience on a Kindle, but you can get Kindle content on a Nexus device or on an Apple tablet, too. So, Amazon is trying to have it both ways. They try to give you a monopoly experience on their own hardware, but also to draw people away from other competing content propositions and other competing hardware as well.
MS: Amazon has acquired some exclusive rights already of course, such as to the James Bond backlist and has picked up a couple of troubled publishers with small lists. Google acquired the Frommer’s list from Wiley. Is this the front end of a trend? Will they continue to acquire copyrights and do you think any of the other three will join them?
BE: It’s interesting that you mention Frommer’s because that points to the kind of oblique way that technology companies see this industry. Google didn’t buy a books company; what Google bought was content to make Google Maps better. They bought Zagat for that same reason. Apple’s reaction to that has been to partner not with a books company, but with Yelp, the online social reviewing site, in order to put reviews of restaurants and bars and shops into their new mapping service.
Both companies are doing this to get more content, but they’re not doing this because they think of these things as publishing. In fact, what Google is going to do is take all that content and stuff it into the mapping services for free. It’s a way of making their map services better, to drive their advertising revenue.
What all these companies are trying to do is build a really compelling ecosystem, but they’re building ecosystems in different places. Amazon starts with the proposition of having users choose one platform to read books on, and maybe even music and movies as well. They want to make the Amazon content platform ecosystem as appealing as possible, and that means TV shows, it means movies, it means books. And so, having exclusive rights to books makes it that much more compelling. It also, incidentally, is part of a more general attempt at innovating around what kinds of books are available. So Kindle Singles isn’t just about exclusivity, it’s also about giving people yet another proposition, yet another reason to switch to ebooks.
What Google does with Frommer’s and what Apple is doing with Yelp is totally different. That’s about making maps really great, so that you buy an Android device, or you buy an Apple iOS device. They’re not thinking in terms of books, they’re thinking in terms of making the mapping product really good. And so Google went out and bought Frommer’s and Zagat. Apple has a partnership with Yelp, and they bought a Swedish company called C3 that does 3-D mapping of cities, so that you can get 3-D models of 100 or 200 cities.
That’s the mentality that they’re coming out of. It’s, “How do we use these to make our proposition really great? How do we make it so that users get a really great service when they turn the device on?”
MS: Of course, if that’s what they want, in many cases they wouldn’t have to buy the company or own the content. They could license it for the purpose that they need, and it could continue to live as a book business elsewhere.
BE: I think that’s absolutely right. The other interesting thing about the Frommer’s deal is how cheap it was relative to the valuations of a lot of the internet companies in this space. Yelp’s market cap is about a billion dollars; TripAdvisor is about four-and-a-half-billion dollars. For the market cap of Yelp you could buy pretty much every travel book publisher on the planet. There might be a huge Japanese one or something, but you could buy all of the others. What they’ve done is by unlocking local advertising, and by tying it into a mobile device, they’ve hugely increased the value of a restaurant review – vastly beyond what you could ever have made from selling books.
There is a broader point here, which is that with some of these types of content, these very specific types of books, if you’re doing them now, you would never make a book, because they are actually a print-out of a database. This is very specific to topics like travel and location. However, if you turn to the New York Times bestseller lists, or the Man Booker Prize winners, or mainstream convention fiction and nonfiction outside of these very specific topics or genres, then that’s about simply having great books offerings and making their device the one that you adopt to get your books on.
There’s a question that applies to Apple, which is that when Apple created the iPad, they were not entirely sure what people were going to do with it. So they did put a lot of pieces in place to make sure that people would find it useful. In hindsight, it’s not apparent to me that they would definitely make iBooks if they knew then what they know now.
MS: This might open up the question of how long Apple will persist if it turns out to be harder than they thought.
BE: I think that’s more about Apple’s commitment to its customers and its willingness to cut them off, which I think is not really how the company operates. It’s more how Google would tend to operate. But you could argue that iBooks was there in case Amazon didn’t make the Kindle for iPad app.
MS: It was an insurance policy.
BE: Exactly. It was an insurance policy in case Kindle wasn’t very good, or Amazon demanded onerous terms, or they didn’t make the app at all, or something. Apple doesn’t really need iBooks to exist today to sell iPads. Obviously, from the fact that 90% of the share of ebooks in the UK is on Amazon, so clearly people are buying the iPad without using iBooks.
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Hear more from Ben Evans, and other insightful speakers, at Publishers Launch Frankfurt on Monday, October 8. You can save 20% off the full ticket price when you register with code Partner20PL.
Find out more about Ben Evans on his website, ben-evans.com, and follow him on Twitter @benedictevans.