Friday, October 26, 2012

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.
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Part 4: The end of barriers to entry and financial limitations

Publishers can afford to be in all kinds of media because the capital investment required has dropped dramatically. Almost everything that a publisher needs to do in order to create and distribute content can be done with a personal computer. Adobe will rent you Creative Suite 6, with all the software needed to create almost any kind of media, including books, audio, video and apps, for $50/month per person. You no longer need to invest millions of dollars in networks and distribution equipment in order to do live worldwide broadcasting—all you need is an Internet connection and an account with YouTube, Livestream or Ustream. With the right people, a $1,000 DSLR can create video comparable to a $65,000 camera, and a $2,000 camcorder has the features and quality necessary for broadcast television. Every significant device used for creating media—PCs, tablets, smartphones, cameras, camcorders, audio recorders and much more—includes (or is based on) a microprocessor that’s subject to Moore’s Law. Costs go down and capabilities go up like clockwork.

It’s widely believed that the reason that media became “mass media” was due to its dependence on advertising—advertisers wanted to reach the widest possible audiences. That’s partially true, but the original reason was that the capital investment needed for newspapers, magazines, radio, television and motion pictures was so high that media companies had to pursue big audiences. Today, however, there’s no reason to pursue mass audiences—capital requirements are low, technology is readily available at the consumer level, and infrastructure that media companies once had to own themselves is now available in the cloud, on contract or on a project basis.

There are no more technical or economic barriers to entry. The biggest remaining barrier is the attitudes of the people making decisions at publishers, and those of the people advising them. If you believe that your business is making and selling bound stacks of printed paper, and you’ve believed that for your entire career, it’s almost impossible to accept that you’re really in the entertainment, or information, or education business. It’s very easy to confuse the tools with the products that the tools create, but it’s the products, not the tools, that matter.

Patton Oswalt delivered a brilliant keynote at the 2012 Montreal Just for Laughs Festival in the form of two letters, one to his fellow comedians, and one to the “gatekeepers in broadcast and cable executive offices, focus groups, record labels, development departments, agencies and management companies.” Here’s a quote from his letter to the “gatekeepers”:

“In my hand right now I’m holding more filmmaking technology than Orson Welles had when he filmed Citizen Kane. I’m holding almost the same amount of cinematography, post-editing, sound editing, and broadcast capabilities as you have at your TV network. In a couple of years it’s going to be equal. I see what’s coming. This isn’t a threat, this is an offer. We like to create. We’re the ones who love to make stuff all the time. You’re the ones who like to discover it, patronize it, support it, nurture it and broadcast it. Just get out of our way when we do it.”

Oswalt is being overly generous when he describes what the “gatekeepers” like. The only thing they truly “like” is to make money. Everything else they do is necessary in order to obtain the talent and content that they need in order to make money. To them, the content that they create is a “unit of production,” just as cars are to Ford or boxes of cereal are to Kellogg’s. “Patronizing, supporting and nurturing” are nothing more than product development—the process necessary to get any creative idea from an outline on paper to a finished work that can be sold in order to make money.
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Wednesday, October 24, 2012

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 21st 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.
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Tuesday, October 23, 2012

Is Apple becoming a victim of its "reality distortion field?"

Earlier today, Apple announced a new 13" MacBook Pro, refreshed its Mac mini and iMac product lines, and introduced not one, but two new iPads: The 4th Generation 10" iPad, and the long-rumored iPad mini. The biggest news came from the iPads, and the financial markets are already reacting negatively.

The iPad mini has a 7.9" display and an A5 processor, but other than that, it's essentially an iPad 2 in a smaller package. Apple took pains to compare the iPad mini to Google's Nexus 7; Apple said that its tablet's display has 35% more area, and that it offers a "tablet experience" while the Nexus 7 offers a "scaled-up phone experience." Apple left a few things out of its comparison, however: The Nexus 7's display has higher resolution than the iPad mini, 1280 x 800 vs. 1024 x 768, which should be noticeable on the iPad mini's larger display. The Nexus 7's quad-core Tegra 3 processor should be faster than the iPad mini's Apple A5, and most importantly, the 16GB Nexus 7 sells for $199 (U.S.), while the 16GB iPad mini is priced at $329.

The Nexus 7 isn't Apple's only problem: Amazon's 16GB Kindle Fire HD also sells for $199, while Barnes & Noble's 16GB Nook HD is $229. In fact, Amazon's 32GB model is only $249 vs. $429 for the 32GB iPad mini, and the 32GB Nexus 7 is expected to be announced by Google next week for $249. Price isn't everything, of course, but it's very important, especially for 7" tablets. Apple's pricing raises an interesting question: Do people buy 7" tablets because they're seven inches, or because they're cheap? If they buy because they're seven inches, then Apple's in great shape, but if they buy because they're cheap, the iPad mini could spell trouble for the company in two ways.

The first issue is that price-conscious customers need to justify spending $130, almost twice the price, for a tablet with the Apple name on it. I'm far from convinced that the iPad mini is worth the premium that Apple is asking, and the financial community, which expected the 16GB model to be priced at $299, isn't convinced, either. Apple could justify a $100 premium and keep the iPad mini under the psychological $300 threshold with a $299 price. An additional $30 doesn't make a huge difference, but pricing the entry-level model over $300 does. The second issue is that a lot of consumers will look at the iPad mini and realize that it's all they need, for $170 less than a comparable 4th Gen iPad. That will result in the iPad mini cannibalizing sales of the more expensive and more profitable 10" iPad.

And, what about that new 4th Generation iPad? It replaces the 3rd Generation model, which had only been on the market for six months. It has a faster A6X processor, which Apple claims has twice the CPU and graphics speed of the A5 processor in the 3rd Generation model, and it also has a Lightning connector. Other than those two changes, the 3rd and 4th Generation models are essentially identical, which is leading some pundits to call the new model the "iPad 3S." The 4th Generation model, although not a complete surprise, will throw some uncertainty into consumers' future iPad purchase decisions. There's fairly reliably been a year between new iPad and iPhone models, but now we've gotten a new iPad just six months after the release of the previous model. Does this mean that Apple is speeding up its product replacement cycle, or is this a one-time event to get the Lightning connector into wider use?

I suspect that Apple may be believing some of its own hype--it can demand a premium price for the iPad mini just because it's an iPad. However, the 7" segment is by far the most competitive segment in the tablet market, and Apple is a late entrant. Apple will sell lots of iPad minis, but I doubt that they'll sell as many as they or analysts expect
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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

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Monday, October 22, 2012

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 21st 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.

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Sunday, October 21, 2012

Publishing--From Evolution to Revolution

Over the next five days, I'm going to be writing about how publishing is changing--and how it's likely to change much more in the next few years. Here's a rundown of the sections:
  1. Monday: Birth, Death and Transformation
  2. Tuesday: What Business Are You In?
  3. Wednesday: No More Silos
  4. Thursday: The End of Barriers to Entry and Financial Limitations
  5. Friday: Everyone is Becoming a “Hyphenate”

Tuesday, October 16, 2012

If you buy a Microsoft Surface, it probably won't be because of the price

Earlier today, Microsoft announced the prices for its Surface for Windows RT tablets. The entry-level Surface for Windows RT tablet comes with 32GB of storage and sells for $499 (U.S.); the same model with a black Touch Cover keyboard sells for $599. The 64GB model bundled with a black Touch Cover sells for $699. If your tastes run to a more colorful Touch Cover, those are available separately for $119; if you prefer a more conventional keyboard design, the Type Cover is also available in black only, for $129.

Several months ago, there were some rumors that Microsoft would try to underprice Apple with an entry-level Surface tablet priced as low as $199; those rumors were disproved today. Microsoft has taken pains to point out that it's pricing its 32GB model where Apple prices the 16GB third-generation iPad, and the 64GB bundle is priced the same as Apple's 32GB model without a keyboard. Microsoft's prices are very competitive, but Windows RT will only have a tiny fraction of the apps available for iOS or Android when it and the Surface tablets are released next week.

Microsoft seems to be at a loss to describe exactly what the Surface is--according to Windows business unit president Steve Sinofsky, it's neither a tablet nor a notebook computer. Microsoft's new television ads don't help--they show people dancing around with Surface tablets as they connect and disconnect keyboards, but they don't actually show anyone doing anything useful with the devices. That's the trap that tablets like the Motorola Xoom and BlackBerry Playbook fell into--Motorola and RIM showed their tablets playing videos and games, but not doing anything useful.

There's not going to be a lot that consumers will be able to do with Surface tablets when they first ship, at least in comparison to iPads and Android tablets. It will take time for developers to build up a competitive catalog of apps, and developers won't bother until they see Windows RT gaining market momentum. By themselves, Microsoft's prices will do little to stimulate sales.

In addition, I believe that we're going into the Christmas of 7" tablets: Apple said that it plans to make an announcement, most likely of a 7" iPad (among other products,) on October 23rd. The focus this holiday season will be on tablets selling for $199 to $299, not $500 or up. Consumers will be comparing the small iPad to the big iPad, or the small iPad to Amazon's Kindle Fire HD, Barnes & Noble's Nook HD and Google's Nexus 7. They're unlikely to be comparing anything to the Surface for Windows RT.

Microsoft may believe that Android, on tablets at least, is highly vulnerable to being displaced. Under this scenario, Microsoft's goal would be to make Windows RT the credible alternative to iOS, and then wait for Apple to make a serious mistake, just as the Xbox 360 capitalized on Sony's mistakes with the PlayStation 3 to become the video game console market leader. (It's the "I don't have to outrun the bear, I only have to outrun you" idea.) If that's Microsoft's approach, all they have to do is beat Android, not take away a significant number of iPad sales. If Microsoft fails, however, people will be comparing the Surface not to the Xbox, but rather, to the Zune.
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