Monthly Archives: June 2006

Show me the money . . .

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There is a great article by Richard Siklos in the New York Times about money and the web (or perhaps more accurately the lack of it).

The following gives you a good idea of the tone:

We’re still in the early innings, but given how much the Internet has already transformed the media and society, it’s surprising how little money traditional media companies make directly from it.

Don’t take my word for it. Flip through the financial statements of some of the biggest names to see what they say about their Web sales and profits. You won’t find separately broken-out figures at Disney, Viacom, or Time Warner (aside from AOL).

While towards the end we do see some shards of light:

A while back, I paid a visit to Sumner M. Redstone, the chairman of Viacom, at his home in Beverly Hills. While perusing his collection of saltwater fish — the world’s largest such collection, he says — I ran by him my theory that strikingly little money is being generated online despite all the activity among the media cabal. “I’m expecting we’ll have a $500 million business in three years’ time,” Mr. Redstone said. “That may not be a lot of money to you, but it is to me.”

The overall tone is downbeat in the medium term.

And the same issues were raised by the Guardian editor, Alan Rusbridger, on a few occasions over the last while. I have linked to the most relevant speech. Companies are forced to move rapidly to the web and to hope the revenues will eventually follow them.

Book publishers are taking a more relaxed approach. They are doing what the Music industry did. Waiting and waiting. Meanwhile rivals who would like slice of the pie are moving in on book publishers’ territory and very soon I fear profit base. Unless publishers start reacting and even better leading the money will not only be in short supply in the medium term from the web but it will be re-directed into the pockets of their rivals long-term.

Publishers and Net Neutrality

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Previous apathy on my part
Normally I don’t get too riled at the idea of companies making money. In fact I rather like the idea. Normally too I tend to be on the other side of most “seemingly” popular outcries. But Net Neutrality is an issue that has been bubbling up in my consciousness for at least a month.

I was wavering. My instinct was on the side of the Telcos. Why the hell should they not be allowed to offer tiered service? It’s their investment after all and if someone doesn’t like the price they can not pay. They already offer tiered services on the consumer side. If service to corporations and business customers remains bad then competition is bound to follow though I can accept that it may come at a time lag.

But for those who doubt that investment flows to bandwidth just look at the glut that came with the Web Bubble of the late 1990s. Ireland was a key beneficiary of that glut with transatlantic fibre optic (If you want you can link to a Global Crossing [since in chapter 11] Press Release or Internetnews for a report) cable being laid and enormous data centres basing themselves in Dublin because of it.

Change of heart
So that is where I stood and even the clever appeals of Amanda Congdon and the Rocketboom team did little to sway me. But then I read I, Cringely yesterday and I got to thinking.

He pointed out something that has not really been addressed:

To recap: Giving priority to some traffic puts a hurt on other types of traffic and when that other traffic constitutes more than 30 percent of the Internet, the results can be severe for all of us. On the Internet everything is connected, and you can’t easily ignore the impact of one service on another.

So he tested the result of ending net Neutrality and discovered something a little unsettling:

My test results were clear. I had no problem downloading the same BitTorrent files, but it took longer. That was no surprise. After all, I WAS talking to my Mom, which would have taken some bandwidth away from BitTorrent. But the more interesting result was that the total bandwidth required to download the same files using traffic shaping versus not using traffic shaping was almost 20 percent more, which undoubtedly came down to increased BitTorrent overhead due to contention and retransmissions involving the priority VoIP service.

Now a bit of the technical points escape me but the reality is simply stated elsewhere in the article:

Let’s say Net Neutrality goes away and the broadband ISPs start offering tiered services. My simple test suggests that one possible impact is that Bit Torrent traffic, which currently uses, say, 30 percent of Internet bandwidth, is going to expand to about 36 percent simply because of inefficiencies created by the tiered services. This will increase the backbone costs for ISPs and will take back at least some of the very performance advantage they are supposedly selling to their priority customers.

The result of ending Net Neutrality under this scenario, then, is that the ISPs make money from tiered services but with higher overhead costs and lower priority service levels than one might expect. The ISPs then might try banning BitTorrent to keep it from messing with their tiered services, but we’ve already establish this can’t practically be done on a technical level because torrent encryption can always get around the ban. The only way, in fact, to limit BitTorrent traffic would be to have it made illegal and now we’re back again to the clueless Congress that started this whole mess.

I don’t think these latter ideas are even in the heads of broadband ISPs. They simply haven’t thought that far. But eventually, as they try trimming this and expanding that to solve a problem that shouldn’t have existed in the first place and can’t otherwise be solved, they’ll come up with something all of us will hate. I guarantee it.

So why is any of this relevant to publishers?
Publishers must be wary of this for several reasons. Firstly anything that reduces the usability of the web will reduce their ability to interact with customers and serve them with products that rely on the web. While in most cases this will not be of huge concern imagine the future scenario where a customer buys a new e-book online and choose to host that eBook with a publisher rather than download the title to their hard drive. If the tiered services make that at once more expensive and less reliable then the publisher has higher costs and a weaker product offering. That surely should be something to avoid.

The argument for Net Neutrality then comes down to something I understand and believe in, money, profit and business opportunity. These are things that publishers can dig too. Not for fluffy ideas of fairness and innovation. Not for the basic reasons that are currently being offered by the majority of Net Neutrality advocates should publishers resist. But on a simple platform of costs rising and potential growth markets being cut off publishers should be resisting the Telcos. Self interest dictates it.

Random House & BBC Books

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Random House have bought BBC books.

You can read the story in Publishing News Here or on Guardian Unlimited Here.

I have to say I have always been jealous of BBC books and their ability to create an instant author platform by leveraging Televion success into the book world. from BBC Worldwide’s site:

BBC Books
BBC Books is a significant publisher of hardback non-fiction and is the UK leader in the food and drink book market. Disappointing trading in 2003/04 was tackled with a major restructure and the business expects to be back in profit in 2005/06.

A number of BBC TV-tie-in titles hit the best-seller lists and sold outstandingly well at Christmas. These included Alan Titchmarsh’s A Natural History of Britain; Venice, based on the BBC 2 series; the family history title, Who Do You Think You Are?; and Grumpy Old Men. The hardback book Auschwitz, by Laurence Rees, immediately became a UK best-seller on publication in January 2005 and is also achieving international success. Editions are published or planned in 13 territories so far including USA, Poland, Holland, France, Spain, Denmark, Hungary and Germany. In France, Auschwitz hit the top ten best-seller list after only ten days on sale.

Overall a good deal for both sides seems to have been struck but I cannot help but feel that Random House have had the best of it, indeed any publisher with the scale of Random House would have been an excellent partner to BBC Books and hence my jealousy!

Dragon’s Den & print publishing

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I was up late watching a reprint of Dragon's Den a very fine show from BBC. One pitch struck me as interesting and actually achieved a deal for £175,000 and the backing of one of the Dragon's. The concept was a new publishing 
company and a magazine called Wonderland and the following is the concept from their website:

Wonderland is a uniquely positioned, independent, bi-monthly publication for both men and women spotlighting contemporary visual culture – art, design, film – both the influences and the developments, together with the very latest fashion, shot by some of the most innovative photographers working today. Published every two months out of London, but with worldwide distribution, Wonderland will entertain, challenge and inform – assisting the reader rather than dictating to them, so that they may decide for themselves how to spend those two most valuable of commodities: their time, and their money. By combining new talent with new ideas and higher standards, we will push the boundaries and exceed expectations of what a magazine today can be.

Wonderland

Now forgive me if I don't jump up and down at the idea myself. It doesn’t appeal. But this post is not about that, it is about what this publication shows about publishing and print.

To my mind it shows one possible future of the print product. Exceptional Niche Products. It is in short the route that Blurb.com has taken. It is one side of the market that retains its pricing power. The other more pedestrian titles have very little pricing power especially in the modern market. Walking through Dublin bookshops this week I have been struck by which genres are still expensive and which have dropped in price dramatically. New releases in hardback are still steep as are science fiction and fantasy novels and business but paperback non-fiction and fiction seem to me to be very cheap. Only the stand-out niche publications seem to retain higher prices.

For magazines the calculation is obviously different. Readership is the key to advertising so cover price will remain at least relatively low. But the Niche and up market readership this magazine targets makes for a tempting advertising platform.

I am not sure that Wonderland is necesarily the magazine to take the market nor do I know how successful it has been (It was a repeat after all, the company may be no longer) but Ithink it is important that the implications of this type of effort be considered.