The War on eBooks, by Market Incumbents

There is a brutal war being waged on eBooks. It is being carried out by the Market Incumbents (the people who currently control the Books & Publishing Ecosystem)

To better understand this War on eBooks, it’s first important to understand some Historical Context and to understand the motivations of the people attacking eBooks

Historical Context – Why the people who first started pushing for eBooks, wanted eBooks so badly

The first three companies to push for ebooks were Sony with Sony Reader, Amazon with Amazon Kindle, Barnes & Noble with B&N Nook. Please do note that Amazon and Barnes & Noble are the two biggest retailers of physical books, as this becomes rather critical

  1. Sony Reader pushed for ebooks, backed by its Sony Reader device
  2. Amazon jumped in at the end of 2007 (although there are reports that Amazon had an eReader in development from 2002 to 2007), a year after Sony Reader was launched
  3. In November 2008, after Oprah featured the Kindle, it really took off. It’s worth noting that up to that point sales had been slow. It is the Oprah mention that took it from a very niche device to almost mainstream (at that time)
  4. B&N jumped into the eReader market roughly 2 years after Amazon. B&N launched the Nook eReader in Nov 2009
  5. Apple iPad launched in April, 2010. It really shook up the eReader world because a device that could do just one thing (read ebooks) suddenly had to compete with the Apple iPad (a device that could do almost anything developers could make an app for)
  6. B&N made a reading tablet, Nook Color, and launched it Nov 2010. It started doing remarkably well, with Leonard Riggio (B&N’s CEO at the time) talking about B&N hiring extra 747s to fly over Nook Colors to America to meet the demand
  7. Amazon launched its Kindle Fire tablet in Nov 2011, with reading one among many focus areas

Sony dropped out, leaving the market to four main companies

  1. Amazon with the Amazon Kindle and the Kindle Fire tablet
  2. B&N with the B&N Nook and the Nook Color and the Nook Tablet
  3. Apple with iPad and iPhone
  4. Kobo with the Kobo Reader

It’s worth noting that 3 out of these 4 are also very big in paper books. Amazon is the largest retailer of paper books in America. B&N is the largest physical store selling books in America. Kobo was originally started by the largest book store chain in Canada

What was the original aim of these book stores? Why were they so interested in ebooks?

The main motivation for these companies was a combination of Fear and Greed

  1. Fear that the way Apple disrupted music, someone would disrupt books
  2. Greed that instead of selling $10 to $20 paper books and making a small cut (considering a share had to be given to the author, the publisher, the distributor), they could switch to selling $9.99 ebooks and take a 65% cut
  3. Please do keep in mind that originally Amazon’s vision was – Every book in the world, available in ebook format for $9.99
    1. Additionally, Amazon was asking for a 65% cut
    2. When Apple jumped in and started offering Authors and Publishers a 70% cut, asking for just 30% for itself, Amazon was forced to match
  4. The whole plan was to remove everyone else, and have authors go straight via the ebook stores to readers (ereader owners). The ereader companies would take 65% of all earnings
  5. Imagine if that would have been possible. Books in the US are a $32 billion a year market. If Amazon and B&N would have been able to convert half of the market to ebooks, and taken a 65% cut, they would be sharing a $10.4 billion a year revenue stream
  6. What magnified the Greed component was that with ebooks there were no shipping costs, no storage costs, no distributor share, and the publisher could in theory be kicked out of the equation. It would not just be a $10.4 billion revenue stream, it would be a $4 to $6 billion a year profit stream
  7. What magnified the Fear component was that if someone else did this before Amazon and B&N, then that entity could take over 25% to 30% of the books market. Down the line they could take over 50% to 60% of the books market
    1. Which would leave very little for Amazon and B&N

On the one hand – If Amazon and B&N did ebooks right, they could capture a $10.4 billion a year revenue stream, of which 40% to 60% would be profit

On the other hand – If Amazon and B&N did not do ebooks, they might lose a large part of their books business

There were very, very strong Fear and Greed motivations to create an eBooks Business

What happened for these book stores and tech companies to lose interest in ebooks? To refocus on paper books?

There was a race to zero

  1. B&N leveraged ‘1 million free public domain books’ to drive a lot of Nook eReader and Nook Reading Tablet sales. It began to steal market share from the Kindle, which already had to compete against Sony Reader
  2. Amazon countered by offering ‘free new books from self published authors’. This gave it incredible market share
    1. Amazon pushed free books very heavily in its Affiliate Program. There were ‘free book sites’ that were making $40,000 a month just from Amazon affiliate income. Even smaller sites were making $5,000 to $10,000 a month
    2. In return, readers were being pushed to Amazon Kindle Store
  3. By mid to end 2012, Amazon had a very large share of the market. It began to understand that ‘free books’ were counter to its long term vision of ‘$9.99 ebooks’. It also realized that free books were a threat to its ideal revenue break up of ‘65% of everything goes to Amazon’

Basically, what Amazon and B&N were trying to do was

  1. Tempt people into the ecosystem with the promise of – Buy the eReader, and then get loads of free books
  2. Once in the ecosystem, try to convince these same readers to pay $9.99 for ebooks

There was a realization that offering free books in abundance was perhaps not the best way to get readers to buy $9.99 ebooks

In 2012 to 2016, all the major players in the ecosystem started making massive moves to cut back on low priced ebooks and instead try to convince readers to pay $9.99 to $14.99 for ebooks

The dream was

  1. Every book in the world in ebook format at $9.99
  2. The ebook store getting a 65% cut
  3. The ebook store cutting out everyone else and taking over complete control – thereby ensuring it could keep taking a 65% cut

The reality was

  1. Readers, tempted into the ebook system with a promise of free and cheap ebooks, wanted free and cheap ebooks
  2. Authors, especially self published ones, were willing to supply cheap and free ebooks
  3. The Dream of selling ebooks at $9.99 became just that, a Dream

That meant eBooks had to be stopped or slowed down

Reasons why the Market Incumbents are trying to kill eBooks

It’s rather simple

  1. The Market Clients (readers) are demanding cheap and free ebooks
  2. The Suppliers (authors) are willing to supply cheap and free ebooks
  3. The Market Makers (ebook stores) realize that 65% of $0.99 is far less appealing than 65% of $9.99
    1. Even worse, 65% of $0 is $0
  4. The eBook Stores suddenly realized that in trying to protect themselves from getting eliminated by a disruptor
    1. They have created the mechanism to wipe themselves out
  5. If the infinite supply (tens of millions of authors) were given a free market, they would supply so many books that $0, $0.99 and $2.99 would become the new price points for ebooks
  6. In that scenario, there is almost nothing for the Market Makers (ebook stores)
    1. 65% of $9.99 is $6.50
      1. 65% of $0.99 is 65 cents
      2. The ebook stores would have to sell ten times more books at $0.99
    2. The ebook stores were not willing to let $0 and $0.99 ebooks take over their stores
  7. They were left with only 3 possible solutions
    1. Eliminate eBooks and go back to Paper Books
    2. Hide low priced eBooks, and try to convince readers to buy $9.99 to $14.99 ebooks
    3. Convert to a subscription service, where readers are charged a subscription fee
      1. A far better option than ebooks going to zero

In chasing the Dream of ebooks making them sole possessors of a $10.4 billion a year revenue stream, the ebook stores had created something which could wipe out a large part of their paper book business, and take their ebook revenues to close to zero

It was Frankenstein’s Monster, hell bent on killing Frankenstein

Proof that the Market Incumbents are making moves against eBooks

Let’s look at various data points that the Market Incumbents and Market Makers are trying to wipe out eBooks

Things that cannot be construed as anything other than attacks on eBooks

  1. Every 3 years the largest ebook related services, the most successful authors, and the successful strategies that work, are all wiped out or severely hampered
    1. The entire ecosystem is given a hard reset every 3 years, which means that everyone needs to start afresh
  2. The Stores constantly do divide and conquer
    1. Why has there not been a J K Rowling or a Stephen King in ebooks?
      1. Are we saying that only authors who have deals with Publishers are able to become very big successes?
      2. Or is it that something is being done by the Market Makers to make sure that no ebook author can become very big?
    2. Why has there not been a BTS or Ed Sheeran in ebooks?
      1. In today’s connected world, shouldn’t the very best new authors blow up and become massive successes?
      2. Why is that not happening?
      3. Why is it that it is becoming tougher and tougher for new authors?
    3. In every other area, we have apps and games like Angry Birds and PUBG and Lil Nas X (Old Town Road) that take off and become global phenomenon
      1. Why is there no ebook author who has become as big or even one tenth as big?
    4. In every other area, we have large companies that rise up. Uber started as an App. There are many many companies that have become billion dollar companies starting off as Apps and Games in the Apple App Store
      1. Why is there no new ebook publisher or new ebook startup that has become very big?
    5. It is natural in any fair market, that the very best companies and creators will become very, very big
      1. The cream should rise to the top
      2. What is it about the ebook stores and the ebook ecosystem that prevents the best authors and best companies from becoming huge successes?
  3. Tight Pricing Controls
    1. Amazon will give authors 70% of the ebook price only if the ebooks are priced between $2.99 and $9.99
    2. What is the price most effective for self published authors to quickly build their brand? $0.99
    3. What is the price most effective for self published authors to compete against big name authors? $0.99
    4. Yet, if self published authors go with that price, they are given only 35 cents out of the $0.99 price
    5. This severely hampers their earnings and presents them with a terrible dilemma
      1. Should they price their books at $2.99 to get a 70% cut
      2. Or should they price their books at $0.99 to compete better with established authors
  4. Publishers price their ebooks between $9.99 and $14.99
    1. This creates an aversion to ebooks because the paperbacks are the same price or cheaper
    2. This, in turn, slows down the shift to ebooks
  5. The Stores hide lower priced books and free books
    1. The bestseller lists in every other area (apps, games, music) are dominated by $0.99 to $2.99. It is only in ebooks that we see prices like $9.99 and $14.99
      1. Are these books really selling more than $0.99 books?
      2. Or is it that the book stores are adjusting the criteria and showing high priced books as ‘Bestsellers’ even when they are selling far less than discounted ebooks?
    2. Some stores have even come up with completely new ‘Lists’ and ‘Charts’ which feature only high priced books

Things that become apparent as attacks on eBooks when you look at the Context

  1. The complete and utter lack of quality control
    1. Is there no quality control because the stores cannot afford it?
    2. Or is there no quality control to ensure that readers start thinking of ebooks as low quality and not worth their time?
  2. The lack of options for Authors
    1. Why are self published authors limited to making their book free for just 5 days every 90 days?
    2. There are several other restrictions that seem aimed at restricting the ability of self published authors to sell and market their books
  3. Refusing to work well with other companies in the ecosystem
    1. Why are some of the largest digital distributors and largest ebook distributors excluded from the biggest ebook stores?
    2. It is hard to view this as anything other than attempts to slow the growth of these companies, and of ebooks in general

Will the Market Incumbents be Successful?

No and Yes

No, they cannot be successful in the long term

Yes, they can slow down the shift to ebooks in the short term and in the mid term

  1. By wiping out every new generation of authors every 3 years, the Market Makers are buying themselves time
    1. In the interim, they are trying methods like subscription services and their own publishing imprints to see if they can get complete control of the ecosystem in another way
  2. By wiping out every new generation of authors every 3 years, and making it tougher and tougher for new authors
    1. They can discourage a lot of authors and cause them to drop out
    2. They can convince a lot of very good authors who are not good at sales and marketing, that these authors don’t have a chance
    3. They can make things very tough for authors. All the time authors are focused on surviving the various attacks, is time that authors are not writing books
  3. By attacking and removing lots of other companies in the ecosystem
    1. They can reduce the number of companies that could potentially offer authors a direct channel to readers
      1. Remember, a digital distributor already has a strong relationship with authors
      2. It is not that hard for a digital distributor to completely replace the book stores, IF (and it is a big if) the digital distributor could create their own ebook store, and grow it well
      3. So, when you hear that the book stores don’t play well with the big digital distributors, it makes you wonder why that is
    2. The Market Makers can attack existing companies in the ecosystem and wipe some out. This creates a ‘chilling effect’ of new companies not wanting to enter the ecosystem
      1. Why enter when you are going to have large behemoths gunning for you
    3. They can lower the number of companies that survive, thus lowering the competition
  4. By continuously showing readers high priced ebooks, and by hiding lower priced ebooks, they can get a small percentage of readers to fall into the trap of thinking ebooks should be expensive
    1. Remember, readers fundamentally understand that ebooks should be cheaper than paperbacks
    2. Readers see that now they can buy singles instead of albums
    3. Readers see that now they can get apps and games for cheap and free
    4. Readers expect the same with ebooks
    5. However, the Market Makers are trying to convince them otherwise
  5. By prodding authors relentlessly, the market makers are hoping that some authors will start going with higher priced books
    1. This is terrible for self published authors as a $9.99 book from a self published author has close to zero chance of competing with a $9.99 book from a big name author
    2. However, it is very good for the stores as they want to sell high priced books

What all these measures are doing is

  1. Many companies from the current and the next generation (assuming every 3 to 4 years we get a new group of authors and companies) will get wiped out
    1. This buys the Market Incumbents 3 to 8 years of breathing room
  2. Many authors from the current and next generation (assuming 3 to 4 years for each generation) will not be able to make it as authors
    1. Again, this gives the Market Incumbents 3 to 8 years to plan and test and try to get ebooks to $9.99 per ebook

In the short term, by leveraging their control of the ecosystem, and by using various illegal methods, the Market Makers are able to wipe out a large percentage of successful authors and companies. They are able to slow down the rest

However, in the long term it is inevitable that

  1. Readers who are looking for cheap and free ebooks
  2. Authors who are willing to supply these cheap and free ebooks AND are looking for readers
  3. A third party that brings these two sets of people together

Will be able to figure out a solution

What does this mean for Authors focused on eBooks

If you are an author who is focused on ebooks (as that might be your only option for getting your book into the hands of readers at a price that sells)

  1. Your most important priority is SURVIVAL
    1. The Market Incumbents are trying to wipe out everyone and everything related to cheap and free ebooks
    2. Make sure they can’t get you
  2. Don’t put your eggs in one basket
    1. Especially if that basket is controlled by a corporation that specializes in destroying author’s futures
  3. Be aware that every 3 years the entire ecosystem is cleansed
    1. If you are too dependent on one particular marketing method, be aware that the Market Incumbents might eliminate that marketing method
    2. If you are too dependent on the ebook stores, then be aware that the ebook stores might do a purge
  4. Do not exchange a comfortable present for guaranteed death in the future
    1. If the ebook stores offer you something where you become more and more dependent on them
    2. Run away as fast as you can
      1. Even if in the short term it is very promising
    3. They wipe out everyone (companies, authors, everyone) who is dependent on them, sooner or later
  5. Build DIRECT Channels to your readers

You’ve chosen an exceptionally difficult career, at perhaps the most difficult time

However, if you can survive, you will be very well placed when some company, inevitably, creates a non predatory ecosystem that connects authors and readers in a win-win-win manner

What does this mean for Companies providing services to Authors focused on eBooks

Well, a few things to keep in mind

  1. Your clients (authors, publishers) will be wiped out by the Market Makers every 3 to 4 years
    1. Only the strong ones will survive
    2. This is unlike any other ecosystem, as you basically have to keep finding new customers at a rapid rate
  2. You will get attacked in every way imaginable
    1. Look around the ecosystem
    2. You will see companies such as digital distributors, editors, cover designers, platforms, service providers all getting attacked
    3. You will see them taking various counter measures
    4. Make careful note of what your attack vectors are
    5. Do not leave any attack vectors unguarded
  3. You will get attacked in lots of illegal ways
    1. Do not be under the misconception that the people trying to wipe you out will not use illegal methods
      1. Hacking attacks and DDOS attacks are two frequent methods they use
      2. Another is Black Hat Search Engine Optimization
    2. They actually specialize in illegal methods such as astroturfing attacks, fake reviews, and social engineering attacks
  4. You must have multiple services and products you sell
    1. Whenever possible have services that no large technology companies can interfere with
    2. If you are competing against one large tech company, you are competing against them all
    3. Have multiple ways to reaching your customers
    4. Have multiple ways of taking money from your customers
  5. You must have multiple customer bases. You must make sure that you have 2 or more of these customer bases
    1. Large Publishers, as they are the most immune to attacks
    2. Medium Publishers, as they are somewhat immune
    3. Small Publishers, though they are at risk
    4. Hybrid Authors, as they are quite immune to attack
    5. Self Published authors, though they are very vulnerable

The 3 to 4 year cycle of wiping out all companies in the ecosystem is a very real thing. You must set yourself up to be as immune to these periodic cleansings as possible


Leave a Reply

Your email address will not be published. Required fields are marked *