The LA Times: When Investors Should Stop Trying to Run Businesses

I wrote about the LA Times Magazine story on my blog about words and writing. However, it turned into a business rant, so I thought a link here might be worthwhile.

I actually just posted this on my blog about the writing business, but I realized that it was an interesting question of economic dynamics of e-books and the Kindle, so thought I'd post it here as well without using a link back.

Tim O'Reilly is a smart book publisher, and he took a look at some of the numbers that e-book enthusiasts tossed around with the advent of Amazon's Kindle. His argument is that even if prices do tumble for e-books, it will likely be only temporary. It's worth the read.I'll add an additional angle. Let's assume that he's wrong and prices do drop and stay at $5 a title. What publisher and author combination can make money that way? Reading hasn't reduced in volume because the prices are too high - books just aren't that expensive.

If you have a current business model under which most titles don't even make back the pitiful advances that authors get, and where the cost of the actual paper is only about $1.50 a copy, then dropping the price by 60 to 80 percent is going to mean that publishers won't be able to afford to print anything that isn't going to be wildly successful.Current backlists may stay around (if the publishers have acquired the necessary rights), but forget the variety of titles coming out now. You'll be down to a handful of authors who can generate the necessary sales.

Some individual authors might be able to self publish, but if they're getting 35 percent of $5, that's $1.75. Take out costs of design and production, and maybe they're at $1 a book if they're lucky, which is the inadequate stream of money they made from publishers - too low to support self-publishing. So $5a copy, if really gutting the paper model, would actually leave book publishing virtually dead. Then supply and demand will kick back in, because there are those massive infrastructures to feed, and prices will head back up anyway.

Google Experiments with Primary Election Coverage

According to Newsosaur, Google is running an online publishing project in Australia. Using maps, videos, web gadgets, and more, the Australia Votes site will let people get election news with a perspective that neither newspapers nor broadcast media offer. :

Australia Votes signals a significant strategic shift on the part of Google to become a primary web destination, as opposed to restricting itself to its historic role as a supplemental, though highly valuable, research tool. As such, it eventually could compete head to head with not only the likes of CNN, the Washington Post and all the other media biggies but also with the tiniest of tiny weeklies.

As I've been saying for a while, Google has all the characteristics of a publisher, not of a simple advertising medium, and is willing to be inventive in ways that traditional media don't appear to be, or possibly are too fossilized to approach:

The Google election project, an elegant mashup of Google’s arsenal of search, mapping, video, widget and other technologies, is a preview of how all but the most technologically recalcitrant consumers will expect to get political – and many other types of – news in the future. In addition to delivering a wealth of well-packaged election information and interactive tools, Google has created four content-pushing widgets and a number of ways for users to express their opinions via forums and home-brewed video.

News organizations have to be sweating at this point - but then again, so does Google. It can profit mightily from pasting links to content, and it is starting to license wire content. But the company could easily become a commodity purveyor, just as many newspapers are today. This may be one of several initial steps, but don't be surprised if Google starts hiring people to provide its own coverage.

As I've heard through the grapevine, it's already considering doing so in specialized areas. After all, if you know so much about your users and you want to keep them interested, then you have to be sure they get the content they want in the areas that attract them. But what if you aren't finding the depth of coverage necessary, particularly in niche topics, and you've got gazillions of dollars? It's cheap enough to hire experienced journalists who could provide coverage, and would probably relish the chance to dig into something more than "regular" media often allow. I wouldn't be surprised to see the beginning of "Google Coverage" - whether feature articles, video, or commissioned blogs - within the next 18 to 24 months.

Google to Host Wire Service Stories

I've mentioned before how I think Google wants to become a publisher. Now here's a story from IDG News Service saying that Google will directly display wire service stories on their own on the company's own news page, and not via a link to a site of a publisher or broadcaster. In trying to appease the wire services and reduce the law suits, Google has direct relationships with AP, AFP, the UK Press Association, and Canadian Press. (Can Reuters be far behind?)

Now, I've often run into wire stories via links to newspaper sites. Yahoo has not only been doing that for some time, but also directly presenting articles from Reuters and AFP with a combined branding. (I do wonder how long it will be until Yahoo also directly hosts some of the of the other wire services, particularly amid another round of rumors that it is up for sale.)

What I'm sure publishers are quaking about is how this will often cut them out of the loop. Why go to a newspaper's page to find it's running a wire story that you can get elsewhere - and in its entirety, not a cut-down version that the paper might decide to run? Every day Google looks more like a publisher of news, maps, photos, video, audio, books, published patents, blogs, and academic material.

Book Publishers to Let Public Vote on Title Ideas

There's a piece in the New YorkTimes about a fascinating situation in the book publishing business - letting the public pick winners before they're published. A virtual market called Media Predict will give people fantasy cash and let them vote with their pseudo-dollars on what book proposals will sell. Simon & Schuster "teamed up with Gather.com, a social networking site, to run an “American Idol”-style contest in which voters pick a manuscript for Simon & Schuster to publish."

It's interesting, but I think it also underscores how little understanding book publishers have of their most fundamental task: choosing what to send into print. This experiment smacks of desperation. But after so many years of effectively playing Eenie, Meenie, Minie, Moe, I can see how they might feel a bit anxious.