Saturday, December 11, 2010

The Most Important e-Reader Company You've Never Heard Of

Imagine you're the head of a big print media company. Sales of your print products have been eroding steadily and you find yourself competing with internet businesses that have very different business models and cost structures. Your own website revenues have been growing steadily, but it will be many years before they match your print subscription revenue. You know in your heart that digital subscriptions will somehow be the answer, but your otherwise loyal reader base is resisting web subscription rates that would allow you to sustain your business.

What do you do?

One answer is something I've speculated about, based on cost reduction trends for tablets and ebook readers. Bundle a reader device into your subscriptions! The consumer gets a device for "free", and you've retained a premium subscriber. You could even bundle a shopping application and collect a commission on purchases of content made through your estore.

At first glance, the obstacles to a successful implementation of the bundled e-reader strategy might seem profound. Here's an incomplete list of what you'd have to do:
  1. You'd need an inexpensive device, of course. But it can't be something cheesy, because it will be carrying your brand.
  2. You'd need an operating system for your device. Lucky for you, Google seems to have a good solution with Android. But you still need people who can customize and adapt Android to make it shine.
  3. You'd need to figure out the logistics of getting your content onto the device. Maybe you've already started this process with Apps for iPad or Android.
  4. If you're serious about an estore, someone has to build that, too. It's not only an engineering project it's also a big business development task to gather businesses willing to sell their content and goods through your estore.
  5. You'll need to build a customer support operation.
  6. You'll need some big marketing power and a sales channel.
Most big media companies have only the last item in their portfolio of competencies, so you might expect this isn't going to happen anytime soon.

But you'd be wrong.

On Thursday, my rounds in Bangalore took me to Ninestars Information Technologies Ltd. Ninestars specializes in back-end infrastructure for publishing companies. They started out doing newspaper backfile digitization, and today they work with a Who's Who of the newspaper and publishing world. It's Ninestars, an Indian company,  that's actually doing much of the heavy lifting in the preservation of the entire world's history. Early on, Gopal Krishnan, the company's Chairman, made a crucial decision to steer away from the brute-force, labor intensive approach to digitization in favor of developing technology and automation so that jobs could be done faster and with fewer people. That decision has paid off as publishing has become more and more dependent on advanced technology, whether it's website and e-commerce development, content delivery, or mobile and tablet apps.

Ninestars operates under a "white-label" business model. If you go to their website, you'll be surprised at its small size and inertness. But don't judge a book by its cover- Ninestars and Gopal are major players. Playing the white-label role to the hilt, Ninestars wants the spotlight to shine on their customers, as if Ninestars didn't even exist.

Ninestars' e-reader strategy is similarly white-label. Tablets and e-readers are being developed by Ninestars' associated company DisplayTronics Reader Devices Ltd.. DisplayTronics CEO Dr. Somanath V S gave me a peek inside the DisplayTronics development laboratory. I saw a range of e-reader prototypes- both EPD and color LCD, all with touchscreens. These will be sold under brands that are already familiar to consumers.

DisplayTronics is also building a white-label "estore" that its customers will use to sell their content, whether on their branded e-readers, or through apps on other device platforms.

While I've written a fair amount here about business models for ebooks, I haven't really covered business models for e-readers. Everyone knows about Apple's hardware-oriented business model and Amazon's commerce oriented business model, but there's not been much in the way of business models that put content at the center -yet. With e-reader pricing dropping at a relentless pace, big media companies are potentially in an excellent position to remake the e-reader market in a ways that sustain their businesses. Companies that try to make money by selling devices might find it difficult to compete against free or subsidized devices bundled into media subscriptions.

We'll find out how well the bundled-e-reader business models work when they launch - in 2011.
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  1. Interesting idea. I wonder thought if it makes sense at a broad scale. If every newspaper, magazine, and book publisher I have an affiliation with now decided to give me a reader for their content, I'd have a half-dozen or more readers in my household. To the extent that these devices would be single purpose -- just for the publishers content -- I think I would find it quite annoying that the device with the content I want to read is not in front of me, nor would I be able to read arbitrary content with publisher's device.

  2. dltj- would you feel differently if the e-reader was branded by a library consortium?

  3. I don't think the medium matters much. Is a ereader going to increase subsribers? They need to focus on what they do best - content. And right now they have stopped being know for their content. You can hardly differentiate among any of them if you look at content. Look at Siruis radio with Howard Stern 600000 subscribers to 20 million. Had nothing to do with the device and everything to do with Mr.Stern. Those are the kind of numbers media orgs will need to get out of the hole they are digging. They need to hire a Julian Assange or two. That will help.

  4. Also to dltj's comment: I must admit I feel uneasy with this direction of things. I already have to have several readers (I use software equivalents but that is the same) to read eBooks: if I need a Kindle book I have to use Kindle, for books in PDF I use another software, for yet another types of software I need an Adobe software, etc. And I begin to hate that. It is as if I had a separate pair of glasses for each book publisher, and everytime I pick up a book I would have to find the right set of glasses. I just do not believe that will work on long term. We have the same issue with the proliferation of journal reading software on, say, an iPad, by the way, each adapted to one particular journal or newspaper...

    We have to have universal eBook standard formats. All eReaders should be able to read that, all publishers should publish in that format (if they need DRM, than that should be part of it). eReaders should compete independently on the publisher, just like I choose my glasses that are well adapted to my eyes and whose style, colour, and whatever I like...

  5. To all of these comments: the question to ask is whether the addition of media companies to set of companies purveying reader devices will increase or decrease the likelihood of content compatibility and portability across all devices. It seems to me that media companies, compared to hardware or eCommerce companies, have stronger interests in making content work across devices.

  6. Would I feel differently if it was branded to library consortia? I don't think so, particularly if the underlying problem -- multiple readers for different subscriptions -- is still in play.