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June 08 2012

Publishing News: Wattpad raises $17.3 million in series B funding

Here are a few stories that caught my eye this week in the publishing space.

Wattpad raises $17.3 for its storytelling community

Wattpad LogoBookExpo America (BEA) took place this week in New York City. One of the big announcements made at the show was Wattpad's newly raised $17.3 million in financing in a series B funding round led by Khosla Ventures. Wattpad is a social ereading and storytelling platform that connects writers with readers, and according to a story at GigaOm, the company vision is to establish the platform as the YouTube of writing. Andrew Chung, a partner at Khosla Ventures and a new board member at Wattpad, told GigaOm in an interview:

"You're able to upload a story chapter by chapter, folks are able to comment on that chapter, and they can provide encouragement to the writer and actually signal where they'd like the story to go, which creates a type of engagement that's impossible in an offline context. There’s a very strong parallel to the way that YouTube was able to do that for amateur or user-generated video content."

Liz Gannes at All Things Digital took a look at Wattpad's explosive growth, reporting that the platform now hosts five million stories and has about 500,000 added each month. Gannes also highlights the popularity of the site with readers, noting that "a book by teen author Jordan Lynde (a.k.a. XxSkater2Girl16xX on Wattpad) about a relationship between a teacher and a student, has been read nearly 20 million times."

The future of publishing has a busy schedule.
Stay up to date with Tools of Change for Publishing events, publications, research and resources. Visit us at oreilly.com/toc.


Publishers are reducing themselves to book packagers

The BEA show this week also inspired insight. Brett Sandusky took a look at the notions swirling about digital publishing. He argues that publishers have been fooling themselves with the idea that "digital is free and easy," that you can take your existing content, simply change the format and rake in the money. He writes:

"While our processes have arguably improved and modernized, the fact remains: viable digital business models require more than afterthought. Simply converting content and making it available for sale is a recipe for disaster. This prevailing free and easy digital model is actually harmful to our businesses."

Sandusky says the real money in digital is in distribution. He called for a curated distribution experience and emphasized the importance of owning the customer experience:

"Right now, we take so much time to polish our content and our products, and then we just throw them away. All this content curation we're doing (or at the very least talking about) makes no sense at all if we simply hand over the UX ownership to retailers and their locked devices. In fact, not owning the whole customer experience with regards to digital has basically reduced us to little more than book packagers for our retail partners. And, we're not even getting paid for it."

The real take-away from BEA, he says, is that it's time to start focusing on the customer, to "[pay] attention to every touch point, every interaction, every experience and make sure we own it." His post is a must-read this week.

A look at the state we are in

Jeremy Greenfield over at the Wall Street Journal's MarketWatch put together a sort of State of the Publishing Industry post this week, looking at how ebooks are effecting change. He offers a nice roundup of the DOJ lawsuit, the B&N venture with Microsoft, trends in venture capital and important startup entrants to the publishing space, and a look at how children are responding to ebooks (PDF). Greenfield also talks about Pottermore and how J.K. Rowling's moves to set up her own store and sell the Harry Potter ebooks directly to consumers — without DRM — is affecting the industry. He highlights two important points:

  1. "In the first month, she sold $5 million worth of e-books through her own store, Pottermore. ... Pottermore's success has renewed speculation that it's possible for publishers to develop direct-sales channels."
  2. "When Pottermore opened, it sold its e-books without digital rights management (DRM) software that is meant to prevent piracy. This move ran counter to what most book publishers currently do. ... When Pottermore launched, piracy initially spiked, said [Pottermore Chief Executive Charlie Redmayne]. But a backlash from anti-DRM advocates as well as appreciative fans resulted in an overall 25% drop in piracy of Harry Potter e-books."

You can read Greenfield's entire roundup here.

Related:


April 27 2012

What if ebook DRM goes away tomorrow?

This post originally appeared on Joe Wikert's Publishing 2020 Blog ("What if DRM Goes Away?"). This version has been lightly edited.

TOC Latin America was held last Friday in the beautiful city of Buenos Aires. Kat Meyer, my O'Reilly colleague, and Holger Volland did a terrific job producing the event. As is so often the case with great conferences, part of the value is spending time with speakers and other attendees in between sessions and at dinner gatherings.

Last Thursday night, I was fortunate enough to have dinner with Kat, Holger and a number of other TOC Latin America speakers. We discussed a number of interesting topics, but my favorite one was asking each person this question: What happens if DRM goes away tomorrow?

The DOJ suit against Apple and five of the Big Six has led to a lot of speculation. One of the most interesting scenarios raised is that if the government is intent on limiting the capabilities of the agency model, publishers need to figure out what other tools they can use to combat the growing dominance of Amazon.

Charlie Stross is right: DRM is a club publishers gave to Amazon and then insisted that Amazon beat them over their heads with it. So, what if we woke up tomorrow and DRM for books disappeared, just like it has (for the most part) with music?

I was unable to reach a consensus at that dinner, but here's what I think would happen: Initially, not much. After all, Amazon has a lot of momentum. If current U.S. estimates are accurate, Amazon controls about 60-65% of the ebook market and B&N is second with about 25-28%. That only leaves 7-13% for everyone else. And if you've been buying ebooks from Amazon up to now, you're not likely to immediately switch to buying from B&N just because they both offer books without DRM. On the surface, Amazon's and B&N's ebooks use incompatible formats — mobi for the former and EPUB for the latter. But that's where it gets interesting.

Converting from mobi to EPUB (or vice versa) is pretty simple with a free tool like Calibre. I've played around with it a bit, converting some of the DRM-free ebooks we sell on oreilly.com. I didn't do those conversions to get our books in other formats. After all, when you buy a book from oreilly.com you're buying access to all the popular formats (mobi, EPUB and PDF, as well as others), not just the one format a device-maker wants to lock you into. I did the conversions because I wanted to see what's involved in the process.

If you've ever used Microsoft Word to save or convert a DOC file to PDF you'll find it's just as easy to go from mobi to EPUB in Calibre, for example. But just because the tool is available, does that mean if DRM goes away we'd suddenly see a lot of Kindle owners buying EPUBs from B&N and converting them to mobi with Calibre? I doubt it. Those Kindle owners are used to a seamless buying experience from Amazon, so unless there's a compelling reason to do so, they're not likely to switch ebook retailers. And that leads me to the most important point ...

Creating the best buying and reading experience is one way any ebook retailer can steal market share from the competition. Amazon has a pretty darned good one, that's for sure, but there's plenty of room for improvement. I'm not convinced any ebook retailer has pushed the envelope on innovation and exciting new features in their devices or reader apps. In fact, these enhancements seem to move at a glacial pace. So, what if B&N (or anyone else, for that matter) suddenly invested heavily in reader app functionality that puts them well ahead of the competition? And what if some of those features were so unique and innovative that they couldn't be copied by others? I'd much rather see a competitive marketplace based on this approach than the one we currently have, where the retailer with the deepest pockets wins.

Innovation is better than predatory pricing. What a concept. The iPod revolutionized music, an industry that was highly fragmented and looking for a way forward in the pre-iPod days. The iPhone turned the cellular market on its head. Think about how significantly different the original iPod and iPhone were when compared to the clumsy MP3 players and flip phones that preceded them. I believe today's crop of ebook readers and apps are, in many ways, as clumsy and simplistic as those MP3 players and flip phones. In other words, we haven't experienced a radical transformative moment in the ebook devices and app world yet.

Of course, all of this innovation I'm dreaming of could happen today. We don't need to wait for a DRM-free world. Or do we? Amazon has no incentive to innovate like this. They already have a majority market share, and it's only going to get larger when the DOJ dust settles.

This is more of a rallying cry for B&N, Kobo and every other device and ebook retailer. If DRM goes away tomorrow, nothing much changes unless these other players force it to. But why wait till DRM disappears? It might not happen for a long time. Meanwhile, the opportunity to innovate and create a path to market share gain exists today. I hope one or more of the minority market share players wakes up and takes action.

The future of publishing has a busy schedule.
Stay up to date with Tools of Change for Publishing events, publications, research and resources. Visit us at oreilly.com/toc.

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