2009 saw some solid progress made in various digital content marketplaces but it is too early to start talking about the green shoots of media recovery.The Media Meltdown (the process by which media industries are disrupted and reshaped by digitization of content) will continue to claim scalps throughout 2010 as digital content revenues do little to offset the impact of plummeting physical media sales and as analogue dollars crumble into digital cents.But consumers are not falling out of love with media, rather they are growing tired of paying for its 20th-century product iterations (and those 21st century products that try to reinvent the old products in a digital context).A new framework for media product innovation is now required to align media industry content assets with 21st-century consumer behavior and demand.Forrester proposes what form this should take in a new report ‘Media Product Innovation: Building Products That Thrive In The Media Meltdown’.
The core asset that media companies own is of course the content itself, but Content is no longer king. Or, at least, its throne is no longer undisputed. Instead, content is busy fighting off the republican advances of the channel. ISPs and mobile operators use content to fill their pipes, technology companies to fill their devices, and brands to help sell their products and to meet their branding objectives. The hierarchy is clear.
Frankly I am surprised that it took this long. But today, we read in the Wall Street Journal that two major publishers have decided to pull a music industry mistake. Simon and Schuster and Hachette Book Group have announced that they will not release most eBook editions until the hardbacks have been on shelves for four months.
And I quote David Young, CEO of Hachette Book Group, whom the article cites as saying: "We're doing this to preserve our industry, I can't sit back and watch years of building authors sold off at bargain-basement prices. It's about the future of the business."
Correction: This move is about the past of your business.
I'm just being a historian here when I point out that language like "We're doing this to preserve our industry" is a classic symptom of what we at Forrester loving call The Media Meltdown. I wrote a whole report on this ailment and its many symptoms, chief among them is that media businesses attempt to preserve analog business models in the digital economy, even when analog economics no longer apply. This is exactly that scenario.
I have two very important messages to offer the book industry (most all of them clients, so I'm trying to be delicate here, the way a group of friends running an intervention for an alcoholic have to act even if it involves summoning tough love). The first message is the hardest to hear and it will make me some enemies. But the second message offers some hope and I encourage you book types to give it a fair hearing, because I have history and economics on my side.
Today the long-anticipated joint venture betweenConde Nast, Hearst, News Corp, Time Inc and Meredith Publishing became official. These firms -- all of them up against the ropes in an effort to deal with declining magazine ad revenue and the lackluster performance of online ad models -- have decided that to face the digital future, they'd rather do it hand-in-hand.
The motivation for the union is simple: eReaders are taking over the book publishing world, meanwhile magazines are left in the dust, with no devices they can call their own.
I mean, really, have you tried to read Business Week on your eReader? It ain't pretty. And on the Kindle, most magazine publishers want to charge you for the painfully slow page turning experience of the device all in exchange for the convenience of automatic delivery to your portable device. So the industry -- seeing a world that is evolving without their interests in mind -- is joining hands to solve two problems:
The official announcements about the Nook went out yesterday and much has been said about the device, such as whether it trounces the Kindle (it does not) and whether the delay in shipping (units you buy today, for example, are expected to ship January 15) will permanently keep the Nook out of the running (it will not).
Because so much has already been said, we paid attention to what hasn't yet been said -- as far as we can tell, by anyone. It's this: the Nook is the first eReader to hit the market that has any kind of social connectivity built in to it. I'm referring to the "loan a book" feature the Nook offers. Read reviews like the one at CNET and you'd think that the book loaning feature is a flop because: a) it only applies to select books (at the publishers' whim) and b) it only lasts for 14 days.
I'm gonna tell you a secret: it doesn't matter how limited today's loan a book feature is, it's a huge step in an increasingly important direction for eReaders.
People share books. They share them, and then they talk about them. A lot. This fact is so critical to the way people read books that it is amazing that none of the eReaders yet offered to the market have any meaningful book sharing built into them. So even though the Nook is shipping late (folks, this is the eReader market, demand has been outstripping supply for the past two years now, stop acting surprised that Barnes and Noble and Sony are experiencing delays), we applaud its arrival because it opens Pandora's social box in this space. Once it's open, this box will set free all kinds of goodies that we are excited to have, including:
We've been writing a lot about eReader devices, but let's focus on the content for a moment. Why? Because selling a lifetime of eBook content to consumers is the end game of many companies in this space, especially Amazon and Barnes & Noble. They sky's the limit here. Consumers don't own digital libraries of books, as they did with music: When mp3 players came out, most consumers owned CDs that could be easily burned to a computer and downloaded to a device. Not so with books.
And the market for digital books, while catalyzed by the existence of dedicated eReader devices, will extend across multiple devices including desktops, laptops, mobile phones, netbooks, tablets, MIDs, portable gaming devices, and devices that haven't been invented yet. As we discuss in a new Forrester report, Forrester's data (based on a mail survey of 4,711 US consumers conducted in Q3 2009) shows that 3% of US consumers read eBooks on their desktop computers today; 2% read on laptops; and fewer than 1% read on dedicated eReaders, mobile phones, or netbooks, respectively. When it comes to future demand, 19% of US consumers say they're interested in reading eBooks on their desktop PCs, 14% say they're interested in reading on eReaders, 11% voice interest in reading on netbooks, and 5% say they're interested in reading on their mobile phones. What this means: Consumers are reading books digitally on multiple devices, and they will continue to do so.
2009 has been a breakout year for eReaders and eBooks--device sales will have more than tripled by the end of this year, and content sales are up 176% for the year--but 2010 will be anything but boring. Here are Forrester's predictions for what will happen in the next year: