Tuesday, November 04, 2008

Authors Finding an Audience -- Amazon Leading the Way

While it has been fun to watch the development of the digital publishing industry, it has been difficult to see how part time authors could get paid for their work. Systems are developing, with Amazon taking a leading role.

Once Google and partners, such as Amazon, get cranked up, the number of books published annually is going to explode. Royalty income will grow dramatically while knowledge is more easily obtained. The $2 worth of gasoline spent on a trip to the library will be spent on royalties to "own a digital copy". Google will take a 36% share for having made a huge investment initial investment in this project. Google will have ongoing costs to store, catalogue and provide on-line access, but profit margins will be high.

The "Old Church Ladies" should make sure their 1975 and 2008 cook books have been posted. These books will have long digital lives. The "Old Church Ladies Club" might receive revenues for many years. There is no cost to storehouse a digital copy that just might produce a steady stream of royalty income, Grandma Graver's mince pie might gain a worldwide following. Of course, there will be many cook books available; so, the price to the consumer for a good cook book will be very reasonable. Productive technology gives us all a free lunch or two.

It remains to be seen if the Amazon "Kindle Model" is going to be the big winner. The "Kindle Model" combines the revenues from providing cell phone and Internet connection with the revenues derived from providing content. So far, the Kindle is not a cell phone but only an Internet connected book, newsletter and email reader. The first Google Android is primarily a cell phone but it too is an Internet connected "reader". Put a high speed video chip in these devices and they will become mobile TVs. The car of the future is going to have to drive itself because the passengers will be watching shows and making conference calls.

Bloggers have started finding access to revenues through the Kindle. Many bloggers offer monthly subscriptions through Kindle at the minimum rate of 99 cents. Amazon keeps 70% of subscription revenue. A blogger with 1,000 readers subscribers makes $300 per month. Amazon has the potential of making money from its 70% share of subscription revenue and from the charge for connect time. Users do not pay connect time for downloading but they do pay if they use services such as email. Sooner or later, the average person is going to always have a Kindle style device at hand. Most of us will take our calls, check our email, chat on Facebook, what TV and movies and read books on this type of device.

The rating systems are extremely important. They will allow the cream to rise to the top. Those who write great stuff will be discovered by many, as a result of receiving a 5 star rating by many. It will take 10,000 subscribers to provide a subsistence living but 20,000 subscribers at 30 cents would provide $6,000 per month. It the material is that good, a $2 per month subscription would take revenues up to $12,000 per month.

The gales of creative destruction, appear ready to blow many newspapers away, while blowing more information in every ones direction. I'm thinking about putting in the work to see if I can develop a paid audience. Several hundred people read my work daily. They read for free.

A major shift could be underway. Where have I hear that before? Oh, yea, I might have repeated the story about VoIP taking over the phone business one day. Skype was going to be everywhere for free, what happened?

Marilyn and I cut loose our land line the other day. We pay big fees for cable TV and broad band Internet and we pay monthly family plan fees for our cell phones. The land line was getting very little use. If I could pay the same total fees or less to combine my cell phone and broadband into an always connected portable combo device, I would go for it. The FCC seems ready to rule that the "white space" between TV channels will be available for WiFi connections. The monthly cost to provide always connected service will go down dramatically as more of the connect time is available from WiFi connections.

The key point is that content providers can get paid for even low value content out of per minute connect fees. It seems likely that Google will be in the position to offer many free connect services in exchange for potential advertising revenues.

Those of us who went from paying $20 per month for a limited distance use land line to a $30 per month time limited cell phone phone may be surprised to hear that communication costs are falling rapidly. After all, in the old days, one could stop on many a street corner, drop a nickel and make a 3 minute local call. Much of the reduction in cost is in other savings. Primarily the saving of time. One had to stop to make the call and stay at the location during the call. Today, we make the call on one corner while in our car on the way to some other corner. Mobile maps, email and information search capabilities add all the more utility to our new devices.

A couple of weeks ago, Opra added her endorsement and a $50 off coupon to the Kindle. As expected, the $350 price is coming down. It is possible the coupon is for the purpose of clearing out inventory before the advent of the Kindle II.

Four months ago, a good friend called me crazy for believing that the price of oil would come down. This friend buys and reads several books each month. He says he likes the feel of a good hardback. He thinks it unlikely that he will ever buy a Kindle. I chuckle because our resources are endless. We will never use all the oil or trees on this planet, but our vision is limited. We do not know the future, but we know that economics wins. We know that the cost to produce and deliver a newspaper or book is several times the cost to produce and deliver an electronic copy.

If I were the Postmaster, I would immediately reduce the price of postage stamps to 30 cents and reduce mail delivery to one day per week. I would also announce that mail will not be delivered by the US Government after 10-years. The savings in lives, fuel and trees would be tremendous. The public would be "incentivized" to adopt more efficient means of communicating. The person with a good idea or two would be able to find an audience.