Evolution of the New Publishing Value Chain

Kevin Shockey, O'Reilly Radar:

... if we add in recent projections for the growth of ereaders, I think it is safe to assume that the disparity between ebook and hardcover sales will only increase. Which means that, over time, best-seller income for publishers will drop. This, of course, assumes an apples-to-apples comparison of relatively the same number of total units sold. Many publishers are hoping that this assumption is wrong and lower ebook sales will be made up with increased total units sold. ...

It will take time to achieve this transition. As I was reading Chris Anderson's "Free," I was reminded of "The Law of Conservation of Attractive Profits." It immediately struck me that publishing was suffering the commoditization of their main product: books. Essentially, as the value of books drops, the law suggests that the value has to emerge in an adjacent stage in the publishing process.

Right now, the stage that is absorbing the lost revenue from falling ebook prices is in the development of ereaders. As this new market expands, the value being lost in books is being captured in sale of ebook readers. But this will only be a temporary stop as the value continues to migrate away from books. After ereaders become a commodity, their collective prices will start dropping. The next logical adjacent layer to capture the migrating value is in proprietary, independent, and open ebook marketplaces. So once the market is flooded with ereading devices, then the value will move into the distribution channel of ebooks.

This framework explains the breakneck speed of device announcements, and the bigger players like Kobo and Kindle with their multi-platform clients looking down the road. In this scenario, Apple's closed platform may not work to their advantage. While Apple got such a big jump on other MP3-player manufacturers, it seems unlikely that the iPad will enjoy the same level of market domination as the iPod. While they've not hinted at expanding the reach of the iBookstore to other platforms, it will be fascinating to see if Apple will port the iBook ereader to other platforms.

I've got a feeling that the e-stores will not be the last stop in the book value migration. Once ebooks themselves become a commodity, then we'll need effective systems to help us manage our libraries and keep a personalized pipeline of books in our ereading queues. In this area, it's much too early to make any solid predictions, except that there is one large search company that's well positioned to help Internet users find the books they're looking for ... but that's a whole other story. ...