Pristine Praise

Pristine Classical (the world's leading historic recordings site) have written up the experience of using Gramophone magazine on the Exact Editions platform. The full editorial is here, and we quote an extract in which Andrew Rose explains how the iTunes Newsstand interface, and the Exact Editions digital magazine platform works for him:

The iPad's news stand is a simple little app that Apple have recently built into the operating system. When you first touch it an empty set of shelves open up on the screen, just begging to be filled with reading matter. Fortunately there's a handy button to take you straight to the news store, where you can buy individual issues or full subscriptions to a variety of magazines and newspapers from around the world. Once you've bought one of these (and most offer a free trial issue to get you started) the magazine cover appears on your shelf.

Actually the shelf thing is a brilliant bit of nudge-marketing that really makes you want to fill its empty shelves, and so now I have four publications sitting there ready to read, including Gramophone at an annual subscription price which was around half the usual international rate. My daily paper - for which I now have the iPad subscription - is delivered as if by magic overnight while the iPad is asleep, ready to read when I get up in the morning. My Gramophone turns up on time every month. And because of the nature of my Gramophone subscription I can also read the same content on my web browser on any PC, and - at last! - copy and paste Rob Cowan's reviews directly into this newsletter rather than either scanning the text or retyping it. I've also been gifted every back issue going back to August 2010...

So as a user what's it like? Well, what you see is what you'd get with the print edition - every page in full colour (including all the ads). When you hold your iPad vertically the screen holds a full page, when you hold it horizontally it spins around to fill the width of the screen, making the writing bigger but requiring you to scroll the page down to read the full text, something that can be a bit of a nuisance is a story runs along a number of columns. In the vertical view this isn't an issue though the text can be a little on the small side - but then you can quickly and easily pinch and unpinch the screen to change your level of zoom, thereby resizing the text to suit both you and the page layout. The contents page has coloured links over the page numbers, allowing you to jump straight to an article, and you can also run a text search across the entire issue - which is how I know for sure that there are four instances of the word 'Pristine' in November's issue, of which three refer to us. There's also a little "page flick" button, enabling quick "flicking" through thumbnail representation of the pages, a button that takes you straight back to the contents page, and one other control button, which switches to a two-page view, for those with better eyesight than me! All in all it looks good, it's easy to read, it turns up on time, and it's saved me money and shelf space. What's not to like? (Pristine Classical Newsletter November 2011)

Rose goes on to explore the advantages and the options for independent music publishers who might want to sell magazines through iTunes. His view "And if you happen to be a magazine publisher who thinks this isn't for you, you really must read on..."

It intrigued me that this very positive review of the process of transferring well designed and graphically rich magazines to a digital medium should have come from someone with deep expertise in the business of transferring digital sound to online media. Maintaining the fidelity and the richness of the print experience is still a real challenge. As is the problem of fidelity and authenticity in sound recordings. The review is also timely since this week Exact Editions is now unveiling a portal through which publishers can explore for themselves the digital services that can enable magazines to achieve the best digital quality and access that we can provide. Magazine publishers who think that Andrew Rose may be on to something should turn their browsers to https://publisher.exacteditions.com/ and upload an issue of their magazine to conduct private trials with the platform whilst they consider the solutions proposed for their magazine. Either as a web edition, as a complementary service for print subscribers, an app solution for iOS or Android. And for many magazines all of those options will make sense.

Apple's Newsstand and Skeuomorphs

Apple's Newsstand was introduced with iOS5 and it is defined as 'a custom newsstand for all your subscriptions'. It puts all your periodical subscriptions in one place, a Newsstand, a folder, that 'lets you access your favorite publications quickly and easily'. At this stage it has three particular advantages for the user: first, it does the sorting for you and puts your subscriptions in the one folder, collecting them together on the iPhone/iPad (many of us are lazy about arranging apps); second, apps which are handled through this route will update automatically in the background when a new issue appears -- a big plus since many magazine apps are very slow to upload; third the front covers of the current issues are shown on the shelves of your newsstand, a fact which makes these apps rather more interesting and appealing than most app cover artwork. This is an especially strong point for magazines, many of which have outstanding cover designs.

This is all a fairly straightforward matter of iOS plumbing and 'issue management', but I just mentioned the Newsstand's 'shelving' and one of the most obvious features of the Newsstand is that it is presented to the user as a wooden, pine, racking system. Here is a glimpse of mine:
















This is a classic instance of Apple's 'skeuomorphism'. Skeuomorphism, originally a term from archaeology, is type of ornamentation where the design or look of the object helps the user to understand the function of the device or tool. Greeks made bronze jugs and vases that looked as though they had been made from coiled pottery, with curious twists and patterns, because these derivative ornaments helped the user to know which bit to grasp as the handle and how to direct the spout. iOS5 and its apps are riddled with skeuomorphism -- some of which goes over the top. Much of it incredibly helpful: paperclips that indicate an attachment, soft calculators that work like calculators, brushes that brush, cameras that have buttons and dials etc.

The fact that the newsstand is a pine shelving system is helpful skeuomorphism because we know how to arrange items on a shelf, we know how to 'read' a shelf, we understand that the objects on the shelf will remain 'there' on both phone and pad and we know that can pick up one, or several of these objects and dive into them. All of this maps the functionality of shelved stuff straight into our collection of subscriptions. All is well and good.

The problem lies elsewhere. The metaphor of the 'personal shelf' works well enough for an individuals collection of 6 or 60 periodical subscriptions. But it provides no help at all when we come to the other angle on Apple's new newsstand. The newsstand is not just a way of organizing an individuals collection of subscription, it is a new classification within the app store for periodicals which are consistent with the distribution and access rules that pertain to the individual-facing, personal newsstand within an iOS device. 'Newsstand' is a new and rather unusual category within the iTunes store itself, and only the apps which would work on the 'pine-shelf' personal newwstand appear there. A lot of newspapers and many magazines have not appeared in newsstand yet, perhaps because the developers have not yet got round to it, but others are not there because they never will be. Apps like Flipboard or Zite which aggregate magazine content will not be going into the newsstand, nor will news apps that are based on real-time newsfeeds (there is still a seperate 'news' category for apps which are not in Newsstand). The 'newsstand' within iTunes is not a section for all newsy apps, it is a category for periodical subscriptions which meet some very specific criteria. All existing print periodicals could be transferred to it provided that the publishers develop an app which matches these criteria, so it will soon be an enormous emporium of periodicals. In fact what iTunes now needs is some sort of virtual kiosk, which would allow the prospective purchaser to float past and search thousands and tens of thousands of prospective periodical titles that might be purchased. For this task the pine-shelved personal newsstand is no good at all. We need a very different metaphor for the mega-kiosk that Apple's iTunes magazine store is rapidly becoming.

I suspect that Apple will soon be wishing that they had chosen a more flexible, and a more scaleable skeuomorphism for their magazine collection that the individual selects for herself. A carousel or a cascade of front covers that could be more easily translated or analogised to the requirements of the global kiosk. Google a month ago put up an example of the kind of carousel interface that might work well for a global range of magazine titles.

Final thought: I have never liked the pine bookcase metaphor at all. I would never put my printed magazines on such a shelving system -- its too reminiscent of a dentist's waiting room. If Apple decides that it was the wrong skeuomorph, perhaps they should smash up the pine bookshelves and turn them into kindling?

Magazines that just work

Adweek has a nice piece on how the magazine BusinessWeek appears to be thriving. It has changed its name to Bloomberg Businessweek (is that really better?) and has a newly invigorated editorial and design approach.

So far, the Bloomberg money has bought signs of life. Businessweek has bulked up to an average of 66 well-designed editorial pages that offer a level of global business coverage not found among other weeklies. Ad pages are up 21 percent year-on-year for January through July, the rate base will soon be raised from 900,000 to 980,000 (approaching Forbes’ 1,020,000), and subscriptions are up 12 percent. The magazine now loses, according to Adweek sources, between $20 million to $30 million a year. (Josh Tyrangiel Means Business -- Adweek)

Bloomberg bought the magazine from the McGraw Hill company for $1 in October 2009.

The magazine also has a respectable app for the iPad, though I suspect that its not (yet) a key part of the revived magazine's business strategy. I find their app clever, but a bit too fiddly and confusing and its not on Apple's Newsstand which suggests that Bloomberg have not yet worked out whether they see it as an integral part of a digital magazine strategy or more of a trial balloon. But the resuscitation of the core magazine is a good story for the magazine business. A new owner has been bold enough to take a fresh look at the editorial mission, has seen the need for investment in editorial content and design quality, and the magazine is a lot better than it was 2 or 3 years ago. This week it has a tremendous article on Apple's extraordinary strength in supply chain management, investment and logistics. Now that they have the core magazine working really well, they can consider how to make it a digital success.

It could be that there are a good many magazines out in the market which are suffering from tired ownership (McGraw Hill had no real rationale for owning a consumer-facing business magazine). There are some excellent editorial and content propositions that could be revived by fresh investment and owners committed to developing subscription audiences. This will become a positive story for the magazine industry in the near future as publishers realise that digital magazine audiences can be very large and can be reached very efficiently through the iPad and other web devices.

Amazon and Apple in Asymmetric Competition

Today it is widely expected that Amazon will launch a 'next generation' Kindle. The rumor mill says that it will be called the Kindle Fire, it will be running an Amazon controlled and adapted version of Android 2.1, it will be priced 'competitively' a bit lower than the basic iPad, it will have a smaller form factor than the iPad (7") and may look much like the Blackberry PlayBook, but above all it will be a new and better way of consuming the books, films, music and other digital media properties that Amazon successfully sells to its large consumer following.

Many observers think that Amazon has perhaps the best chance of competing with Apple in the 'tablet space', which increasingly looks as though it might otherwise become an Apple preserve. As David Streitfeld in the New York Times points out, one of the reasons that Amazon has a chance is that it is not a straightforward competitor but an asymmetric competitor. The tablets that have abysmally failed to compete with Apple so far (and its a long list: Blackberry, HP a fistful of Android efforts) have failed because they have been competing head-to-head the level of hardware with a device that in every case, however serviceable the hardware, abysmally fails to match the content and software eco-system (its all about the apps) which sustains and grows Apple's market. Amazon will position its tablet not as a device that matches the iPad in specification and function, but as a better conduit to media resources and media consumption. Amazon does have a very significant content mix that it can channel through its device. In the books area it has a stronger and deeper selection than Apple, and although it may be lagging in its selection of music and film, it has nonetheless a respectable harvest. Books is a key strength and with its successful eInk Kindle track record Amazon has the potential to migrate millions of book lovers (and their purchased libraries) to the new platform. Apart from Apple no other media/tech player has anything like Amazon's content reach (not Google, not Facebook, not Microsoft or Sony).

But the competition will be intriguingly asymmetric "because Apple sells movies, music and books in order to sell devices. Amazon sells devices in order to sell books, movies and music. Apple has never faced an opponent with such a vastly different strategy." (New York Times 25.9.2011)

In fact the competition is deeply asymmetric in a number of ways. Amazon already provides access on Apple devices through its Kindle app, the chances are that Amazon will try to maintain the compatibility between its eInk-based Kindle app on the iOS platform and its native Kindle Fire app software. That could get to be complicated, it could inhibit development of better native-Android reading software, but this is an asymmetry that gives Amazon market reach. There is no chance that Apple will provide access to iTunes or to iBooks on an Amazon tablet app. Amazon would probably not allow that, and Apple certainly would not want that. If iBooks were to get a lot better, perhaps through taking advantage of hardware or system features, that would put some competitive pressure on Amazon's lead with eBooks. Asymmetric also in that Apple will stick to its 'agent' or facilitator role, whereas Amazon will act more as principal (Amazon is in fact becoming an eBook publisher). Apple will continue on its policy of levying a distribution tax from content that uses its iTunes marketplace (30%). Amazon will seek to maintain and re-introduce its 'merchant' role, wherein it can exploit and require deep discounts from publishers developers. Amazon will not lightly give pricing power to its publisher partners (its rules for the app market give Amazon the right to discount to zero!). Apple does give developers and publishers more pricing autonomy, because Apple knows that it will attract more developers that way and will sell more hardware and grow the ecosystem. Ironically, Apple will be able to move much more quickly to cloud-based services (Apple has struck deals which permit this streaming management of content with the permission of the music majors and publishers). Amazon will be more 'stuck with' a distribution and download model in which bits and megabytes are moved from server to device and copied to personal lockers. Ironic this, given Amazon's second to none services in cloud computing. Netflix (Amazon WSC's biggest customer) has been streaming film from Amazon cloud computers long before Amazon has the music majors signed up to a streaming approach for consumer music.

In fact the competition between Apple and Amazon at this point looks so asymmetric that one doubts that either side really needs to win a knock out. Mutually assured co-existence will be enough. Amazon will have an apparent success on its hands if it can migrate the majority of its existing and growing Kindle market to a better tablet Kindle Fire. It doesn't need to compete with Apple at this stage in the provision of the widest and richest form of app market. It has a lot of negotiating and catching up to do before it can hope to challenge Apple in music and film, and it is not interested in the new post PC computer market that Apple has in its sights. Apple may not mind Amazon getting further success in the books market (as Jobs said people don't read books anymore). The incidental benefit for Apple of a perceived to be successful Amazon tablet is that this 'success' will severely compromise and complicate Google's struggles to move Android from success in the smart phone form factor to successful tablets. If the first acceptable Android tablet is one in which Amazon have forked the operating system and taken control away from Google we can expect further fragmentation and frustration in the Android eco-system. Apple should be rather pleased about that.

From my standpoint, the most interesting area of conflict that now opens between Amazon and Apple is the one which touches on magazines and newspapers (and of course that interests us most at Exact Editions). It seems very likely that Amazon will have a strongish hand in the periodicals space for its new Kindle, and it will be very interesting to see how the Amazon commercial model for those periodicals works out. I doubt it will be easy to get an entirely satisfactory magazine/newspaper digital experience on a 7" tablet, and there will be some challenges in then moving a suboptimal experience to a 10" device in 2012, just about the time that Apple brings out its likely iPad 3. We live in interesting times!

Forking the Business

Reed Hastings the inspirational founder of Netflix just owned up to a big mistake in running his business (see his video apology here) and announced that in consequence of this misstep and failure of communication he would split his baby in two: Netflix (the old name for the new business) which would now solely be concerned with selling digital streaming video to consumers on a subscription basis, and Quickster (the old business with a new name) which would be solely concerned with shipping DVD's to customers who wish to have films on DVD.

In software parlance he is 'forking' the code base (the assets of Netflix and the employees will be divided between the two new businesses), and he is duplicating the customer base (users will have two accounts where they had one before) and he is potentially setting them against each other.

So we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently. An Explanation and Some Reflections.

This does seem like a pretty drastic change to a business that has been steadily evolving towards a streaming mode of delivery for film and TV. I hope it works out for the Netflix businesses and its customers, but it certainly seems risky.

It is worth thinking about these drastic manoeuvres because a similar distribution challenge faces the magazine industry as digital delivery becomes more important. Will it be necessary for magazine publishers to split their editorial, development and design teams, their commercial and sales efforts to build separate digital and print-based work-flows and subscription operations? Some magazine publishers are working now with separate editorial and design workflows? Will this result in an inevitable split between subscribers for print product and for digital editions? Can magazines afford this duplication? Do consumers want two products?

At Exact Editions we are convinced that such a split cannot work, is ruinously expensive and results in sub-optimal solutions for print subscribers and the digital audience. Perhaps magazine publishers have been too mesmerised by the possibility that magazines as digital resources on the iPad could be something completely different from the print object (and perhaps not quite honest enough about the talents that they have to produce something completely different and digital, some ghastly interactive apps have been the result). The key thing that magazine publishers have going for them is that they already (in many cases) have a strong and renewable subscription relationship with their print audience. Actually most music producers, film companies and book publishers would die for a situation in which they had a direct billing relationship with the digital audience. Magazine publishers have no idea how lucky they are. It is therefore vital to transfer this subscriber relationship to the digital sphere as soon as possible. Print publishers can do this because it can be very simple and straightforward to offer those print-subscribers who want it a digital subscription as a complementary part of their print subscription. Enfranchise the print audience as quickly as possible.

Consumer magazine publishers are in an extraordinarily privileged position because they 'own' their audience (subscribers who come to them direct) in a way in which very few consumer media operations are able to match (music, film, book and TV producers all struggle through not being able to bridge the gap directly between digital product and digital consumer). From this standpoint the concession that Apple has given to magazine publishers is extraordinarily important.

“Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing,” said Steve Jobs Apple Press Release Feb 15, 2011

Although magazine publishers do realise the importance of 'owning' their digital audience, very few of them have yet made the transition that the prevalence of the iPad/iPhone and the army of Android devices affords to them. Relatively few magazines yet have 2% of their subscription numbers through digital subs. By Christmas 8% of the US consumer magazine market will have access to their own iPad, and 4% of the UK audience will be similarly placed. Surely it is time to get those subscription offers in place? No need to fork the business for that.

Financial Times Tablets

As a regular FT reader I watch their digital development with real interest. Paid Content has been following their strategy and has a note about the reasons why the FT has now withdrawn its app from iTunes.

Two months after the deadline for compliance hit, it’s now clear The Financial Times and Apple (NSDQ: AAPL) can’t come to a compromise over the new requirement that in-app subscription payments must go through iTunes Store. The paper’s iPad and iPhone apps have disappeared from iTunes Store. Apple says the FT took them down to comply with its new terms. Financial Times Apps Finally Pulled from iOS Paid Content

The FT has a really excellent HTML5 app designed for the iPad (and other tablets?) and subscriptions for this app can be purchased directly from the FT web site. Note that the headline is misleading, the FT has not pulled its app from iOS, the app actually works fine with an excellent touch-interface on the iPad. What has happened is that the app cannot be bought or distributed via iTunes. The reason for pulling out of iTunes? Well, it apparently isn't primarily about the 30% commission that the FT would have to pay for all subscriptions sold through iTunes:

“(Giving away) thirty percent of subscription revenue isn’t something we celebrate, but that was secondary actually - we already pay other distributors and agents; newsagents take a cut. Central to our whole strategy and all our aspirations is to have that direct relationship with the reader.” John Ridding CEO FT, interviewed by Paid Content, August 8, 2011.

But this is still hard to understand, because the newsagents and other distributors who sell the physical product not only take a cut, in aggregate much more than 30%, they deliver readers who have no direct relationship with the publisher. Refusing to sell subscriptions through iTunes and refusing to participate in the shortly to be launched Newsstand within iTunes is de facto hiding the publication from the 200 million people who have an iTunes account. The FT has lots of costs to get on to physical news stands but good product placement within iTunes is pretty much free for the publisher, so why turn that away? Sure some loyal readers who have purchased an iPad will be willing to go to the FT's web site and sign up directly there, through the Safari web browser, but everyone who has an iPad has an iTunes account and knows how much easier it is to use it to buy a subscription within iTunes than to transact with a web site using a credit card. The FT's move away from iTunes makes no sense in the context of customer acquisition, especially since Apple now allows publishers to provide free for subscribers access through an app. Apple has also stepped back from requiring that publishers who sell subscriptions should offer the best price in their iTunes sub. If the FT wished to promote digital subscriptions which include free access to the app, and at a lower price to direct subscribers who have given their demographics to the publisher, there is nothing now in the Apple rules to prevent this. They could have in-app purchasing within iTunes, but no reader demographics, and off-iTunes direct selling with complementary iPad access to those subscribers who complete the demographic form. Anonymous readers via Apple, and 'engaged' subscribers via their own transactional system.

The FT's stance in this matter is so puzzling that I wonder if there is some hidden explanation. One that occurs to me is this: the FT will have spent some time developing its HTML5 app and the service that delivers it. It surely will have done this because the FT expects there soon to be a range of media consumption tablets of which the iPad is merely the foretaste. So the publisher would like to manage the way in which subscriptions are handled across all platforms, collecting similar information from Android, Windows and iOS platforms on similar terms. That this may be the main concern is shown by this remark:

“You have to think about the customer - life is going to get pretty confusing if you have to have a different sign-on with all the different device manufacturers. John Ridding CEO FT, interviewed by Paid Content, August 8, 2011.

Sure there is a certain logic to this approach: the FT is going to do everything the FT way. This is a 'consistent' way of looking at distribution channels from the publisher's point of view, but it is an extraordinarily un-customercentric way of looking at the market. Suppose every publisher develops apps in a similar fashion. There is no likelihood at all that different publishers will offer their subscriptions on similar terms or have matching demographic requirements. So life is going to get very confusing for periodical subscribers who have to learn about the very different sign-on steps required from different publications. An approach that may appear to be simplifying matters for the publisher is vastly complicating the lives of consumers. One of the great advantages of iTunes for the customer and the publisher is that the terms and conditions for purchasing apps and subscriptions are pretty much standard. You know what to expect and its all very simple.

It will be interesting to see how the FT app plays alongside the terms and conditions that will be attached to the heavily rumoured Amazon Android tablet. Its hard to see how Amazon could keep an HTML5 app off the hardware, but it will be surprising if the publication is sold through the Amazon app store, because there is no likelihood of Amazon letting publishers collect all that demographic data that they would like to have from subscribers. So, rather than being a rebuff to Apple, perhaps the FT's stance in this matter is a statement of principle and a shot across the bows of the soon to be revealed Amazon periodical platform.

How much will it hurt the FT if they persist in their policy of not offering the app through iTunes? My hunch would be that iTunes availability with very modest promotional efforts could easily double the level of sales that they can achieve from a stance without iTunes. We are currently seeing a big step up in iTunes subscription purchases (mostly for the iPad). iPad sales are ramping up. There is a good chance that the FT app will go back into iTunes with 12 months. Apple will not have changed its stance, but the FT will have seen that it can work with iTunes and 'upsell' to customers who may have initially been reluctant to provide personal details to the publisher.

The Changing Shape of B2B Services

In the last few months I have been hearing a bit about box.net, which seems to be a Dropbox-type of solution for corporations, so I was interested to read a somewhat lengthy interview at Business Insider with Aaron Levie its youthful founder and CEO. Here are a couple of smart points:

(On why the big office Suite products that bundle email, social, CRM, collaboration, ERP etc in a big coalition -- are not such a threat) ...If you go to the average company in America, that's not what they've implemented. They've implemented Salesforce as their CRM, Google Apps for email—a large number of them, in the millions—they'll be thinking of Workday or NetSuite for their ERP. Each of those companies is or will become a multibillion-dollar company just focused on that best-of-breed aspect of what they're trying to solve. With the Web, you can connect these properties together, you can connect this information together, so you don't actually take a productivity hit by having different services. There might be a slight management complexity, but there's new technology that helps with that,


....how we distribute our products is totally different from how Oracle and Microsoft distribute their products—we're direct to the customer, we're all over the Internet, you don't have to go through a whole network and channel of distribution. The way our applications are built—we release updates to our products every week. Microsoft takes 3 years to release a new product. So the whole DNA of our company is completely different. That will take some time to cycle it into Oracle and Microsoft.

(On why its not a problem selling into corporations that have pre-existing agreements) ...That [agreement] will expire and the customer will be ready to jump when it does. Companies that keep customers captive because of contracts aren't always the hardest to disrupt. Ultimately, it doesn't create a great customer-vendor relationship. There's a lot of fractures in the market where that exists. Business Insider August 26

These thoughts chimed with mine because we have in the last few months been seeing some RFPs (Request For Proposal) from larger magazine companies that we would love to work with and are to an extent already working with. It seems that the major magazine companies are now fully realizing that that they need a comprehensive digital magazine strategy and the Chief Information Officer who is often (but not always) charged with framing the strategy is inclined to look for a single contractor and a comprehensive solution from one supplier.

The perplexities we have with RFPs are quite instructive. The RFPs that we see are almost always too detailed (in one case 12 features are required for iPad app deployment). They omit crucial elements (no mention of search, subscription terms, or compliance with Apple iTunes policies in one RFP). They envisage a solution that is much more expensive and more front-loaded than one we would supply. They underestimate the absolute necessity of instant and rapid improvements to web or app services (an RFP that asks for timetables between software releases and 'support policies' for previous releases is thinking in years and quarterly release mode, when app developers need to plan month by month and web solutions have to respond within days to a new requirement). An RFP that covers the range of options that a digital magazine strategy now needs to address is fundamentally flawed if it does not take advantage of a modular development and deployment strategy. RFPs often have a 'completion date' in mind. Remember that this is a consoling fiction (put there for the benefit of Finance Directors and CEOs), successful digital development does not complete but builds for the next stage. Modular development and deployment can be guided by an RFP but it cannot be ruled by it.

We will continue to see RFPs and we will continue to dutifully respond to them, but we are increasingly finding that a bottom up strategy works best for us and the larger companies that we are working with. This means:

• Start with one or two magazines
• Start with one or two modular services (universal subscriptions or branded iPad apps for individual magazines)
• Work with a contract which allows the publisher to give notice on the service whenever they choose. Software as a service means that the service can be terminated by the publisher/customer whenever they choose. In the medium term a service provider does not build a good relationship by 'keeping customers captive' with an exclusive contract.
• Continue to develop and improve the services in response to environmental changes (iOS 5 or Android or Twitter or HTML5 or whatever comes along next....)
• Minimise up front charges and have the accent on 'shared success', which means payment by results.
  
• Respect the needs of the end-user first and foremost, and then provide close attention to the requirements of the publisher or the content owner.
• Don't try to do everything and avoid customised solutions for individual publishers. That principle guides scaleable solutions but makes it hard to cater to individual RFPs!
• Focus on the resources and integration that we can provide through web services (ours and those provided by other companies: Google, Twitter, Facebook, Dropbox, Amazon, Apple and yes Salesforce and Box.net)

In short the API and the app store matter more to our publisher partners than the RFP.

Now that Google is a Phone Company...

Will it also become a tablet company? Google plans to buy Motorola Mobility, the mobile phone part of Motorola, for $12.5 Billion and a $2.5 Billion breakup fee (what Google has to pay Motorola if the deal does not go through). Shrewd comments on the strategic reasons for the acquisition are coming from MG Siegler and Florian Mueller.

This is a big deal -- a lot of money, and a lot of employees and mind-share. Google says that they are going to run Motorola as a separate business, but they are going to own one of the big phone makers and it will condition the way that they and all their competitors and collaborators look at Android. One of the interesting consequences of such a big shift is that it will lead to everyone in the technology space re-assessing their position in relation to Google and to other competitors. The wash from this wave will be felt even in the shallows of the digital magazine space. I offer three predictions from this perspective:

1. This deal makes it more likely that there will soon be a competitive Android tablet. Soon means "not very soon", but one year to eighteen months from now there will be a much better successor to the Motorola Xoom, which was one of the better Android devices but nothing like good enough.
   
2. The first good-enough competitor for an iPad that comes from this alliance will be a low-end Google tablet, one that is very good with all standard Google stuff (Maps, Gmail, Google+, Picassa etc) but it will not be strong with consumer media. Google is too far behind to develop a decent competitor for iTunes in the next two years. So Google will increasingly push for free media and web apps for paid stuff, their development and engineering talent will focus on the hardware integration for a device that is brilliant with web services, web apps and the web. Google/Motorola will be in a good position to produce a competitor to the iPad which is not like the iPad, and which is not dependent on media licensing and app developers. A tablet for commodities and utilities at $99. Digital magazines will work well on this device as web apps, but the tablet(s) will not be tied to an e-commerce solution or an app store. This deal does nothing to remedy Google's weakness in retail and support and direct consumer experience.
   
3. So this makes it less likely that iTunes will face an effective Android competitor for media consumption. The wild card here is the strongly rumoured Amazon Android tablet. Amazon need this as a replacement for their eInk Kindle, but I wonder whether Amazon regard Google's embrace of Motorola as a helpful step or an increased threat? Is there still scope for a Google/Amazon alliance against the Apple dominant media player?

About one thing I am sure: Apple are happy. Apple will not see the Google move as a significant threat; Apple strategists will be thinking that Google is boxing itself into a challenging situation and undergoing an identity crisis: running a manufacturer, trying to align developers, losing existing allies, facing increasing regulatory concerns, channel conflict and patent wars. Google now has a lot of problems that Apple has largely solved.

Apple Knows Plenty

Apple is poised to become the biggest company in the world by 'market capitalisation'. It maybe briefly inched ahead of EXXON yesterday in chaotic market trading, but it will very surely be well ahead of the pack by the end of the year. Apple's sales and profits are rocketing and the value of the company is still being significantly underestimated by the markets.

The remarkable fact is that although Apple is now a large company by any standards (annualised sales of over $100 Billion) its profits and its sales turnover are still growing at an amazing rate. Big companies can be very profitable, and big companies can sometimes grow revenues quickly, but Apple is doing both of these things consistently, quarter by quarter. As can be seen in this chart produced by Horace Dedieu


















For fuller discussion of the chart see Asymco's note on Apple's growth scorecard for second quarter 2011. In Asymco's deadpan style these sales and profit growth stats are dubbed merely"exceptional" or "very good". But Asymco is being too phlegmatically Finnish, it is frankly unprecedented for a company with annual sales of approaching $100 Billion to be growing year on year at 82% (and in the preceding quarters 83%, 70%, 67%, 61%, 49%, 32%, 6%). You have to go back to Q3 2009 to find the merely respectable figure of 6% annual growth!

The crazy thing is that there are some very strong planks in Apple's growth strategy that we still cannot infer from reported figures. Only Apple knows, or can guess, how strong a part of the growth story will come in the next decade from the sale of music, film, books, and apps all coursing through iTunes and all generating a 30% turn for Apple. This IP-derived cash will become an important part of Apple's revenue streams and even more of its profits, because the marginal cost of selling more digital media through iTunes is very low.

We dont know much about Apple's revenue from apps in iTunes, but we do know, from a press release, that Apple had cummulatively paid out over $2.5 Billion to app developers by July 2011, which means that Apple has retained $1.1 Billion from its share of sales of apps through iTunes (over the 4 years that apps have been for sale in iTunes). At the iPad 2 launch event in January Apple had announced 2$ Billion in payments to app developers, so it is probable that Apple sales from apps will comfortably exceed 1$ Billion in 2011.

Buried within these gross figures, that are reported in bald outline, there will be an amazing amount of detail that is available to Apple only. Apple now has a good deal of insight on the relative buying patterns of owners of iPhones and iPads (now 150 million and 30 million owners in each case). Apple has a lot of information on individuals buying habits for music, film, and for apps, for games, productivity tools, ebooks and magazines and newspapers. Very little of this information is aggregated or understood outside the confines of Cupertino. It would be very interesting to know what the average iPad owner spends on media in the first quarter or the first year of 'ownership', on games, music, ebooks and periodical subscriptions. If the 'average' iPad owner spends $6 per annum on magazine subscriptions through iTunes there is already an annualised market for nearly $200 million in magazine subs. That figure may be too high at this stage when there are so many 'experimental' magazine apps out there doing their publishers experiments. But it is not outlandish to suppose that periodical subscriptions spending could soon head towards $10 or $20 per owner, which will mean that the market will soon be measured in billions. It would be informative/encouraging to know whether expenditure on various classes of media tends to increase or flatten out? There is a widespread belief that app purchases tend to focus around the very low prices on the Apple pricing matrix: 99c or $1.99. That stands to reason, but many publishers and developers would like to have more information, more guidance on pricing at higher levels for more sophisticated offerings. I suspect, and we have smidgins of data that bear this out, that iTunes is now selling relatively big ticket items well (by 'big ticket' I mean items priced at $15 or over, even $50 and over) Apple does not currently have a way of guiding developers and publishers on these issues: except through reporting sales on specific apps -- which Apple does well, promptly and fairly, in my opinion.

I suspect that the information that the market-wide information Apple now has on some of these issues is both quite surprising and also of minimal use to Apple's competitors. So I expect that Apple will find ways of conveying more information that will help to guide the deliberations of its developers and publishers.

From the snail's eye view that we have at Exact Editions one can say with confidence that Apple's potential for revenue generation through iTunes and the app store in particular is extraordinary. Here are four things that we have learned since Apple introduced its automatic renewals within iTunes:

(1) Renewals are good. We have limited data (less than three months) but there are indications that subscriber renewals through iTunes will be over 75%, possibly over 90%. Month by month. If annual renewals are also good, Apple's and the publishers revenues from digital magazines enter a virtuous spiral.

(2) Any special interest consumer monthly magazine with a paid annual circulation over 10,000 print subscribers will make good money from deploying a branded app in iTunes. The revenues from iTunes, even after Apple's commission, taxes, and Exact Editions development charges, will significantly exceed the costs (there must be some exceptions to this rule of thumb, but we have not seen them yet). A magazine that has 10,000 subscribers in print will find 1,000+ subscribers in the 200 million consumers that have iTunes accounts. Next year that proportion will be higher, when there are 250 million iPads.....

(3) The gap between appreciation of magazines on the iPad ("I love my magazine") and appreciation on the iPhone is widening ("the page IS small"). Most iOS magazine apps are being bought by iPad owners. The new iPad 2 is also clearly better than its predecessor for magazines. We think that the iPad 3 may mark another step change, especially for highly visual magazines.

(4) A significant proportion of users who subscribe to a magazine in iTunes will choose the expensive option of a 12 month sub, rather than the easy option of a 30 day sub. Though all our publishers offer discounts for annual subs when they price their subscriptions for iTunes, in nearly all cases the reward for the 12 month sub is small -- 10/15%. So we have been surprised to see 20%, 25% even 30% of subscribers opting for the bigger ticket (it varies with different magazines). Surely the adoption rate will be even higher when magazine publishers decide to start experimenting with promotional annual subscriptions in iTunes. This is excellent news for publishers who wish to maximise subscription revenues on the digital side, it is very good news for Apple also, though it is going to be another 9 months before we start to find out how good the annual renewal rate in iTunes is!

So What is the Business Model?

In looking to the promising digital future for magazines it is essential that publishers separate out two questions:

1. What is the best consumer format for digital magazines?
2. What is the appropriate economic model for the digital magazine business?

These are very different questions. But the answers that we come up with are going to have a bearing, the one on the other. And vice versa. The magazine publisher has to get both right!

Over-simplifying wildly, there are currently three views on the appropriate format for digital magazines battling for the attention of the consuming public.

1. In some ways the simplest solution involves converting the magazines existing web site into an RSS feed which packages the contents of the web site for delivery in through a browser or an RSS aggregator. Many of the early magazine and newspaper apps were in effect re-packaged RSS feeds. In this view, digital magazines should aim at maximum topicality and a streaming delivery through which each story (or article) is delivered to the audience in a self-contained capsule, when it is ready and whenever it is updated, in a continuous flow. The RSS format has been leveraged and improved upon by Flipboard (Zite and Pulse are aggregators in the same category). This is a radical format change as a consequence of which the print magazine loses the 'rigidity' both of the 'issue' and of the 'page'.
   
2. More of a 'half-way house' is the trend to develop digital magazines which although they drop the 'integrity/rigidity' of the printed page, maintain the edition-driven, periodical, grouping of the dated issue. Magazines which are delivered as digital editions to the Kindle have this re-flowable format and step away from the pagination of the print magazine, they probably also 'lose' the advertisements which form a part of the print version, but they continue to adhere to the serial clumping of the magazine associated with a publication date, and temporal sequence in the magazine archive. We can think of these re-flowable digital magazines as similar to ebooks. It is no accident that magazines delivered through Amazon's Kindle (a dedicated ebook reader) have this structure. But there are plenty of similar ebook-like apps in iTunes. The Economist's iOS app is a good example.
3. The alternative model for digital magazine deployment, works from the supposition that consumers really want a virtual magazine. The digital magazine retains its print 'look and feel' with pages and settled issues, but the magazine becomes a virtualised object, at once familiar and flexible, browseable, searchable and linkable; a magazine which can be read on a mobile phone, a web-connected computer, or a tablet in analogous ways as the print magazine would be read as a physical product. Declaring an interest: this is the route to digitization employed by Exact Editions, but also by Zinio, and with some variations by Adobe. Commentators sometimes refer to these solutions as 'PDF magazines' or 'Page Turning' solutions/platforms, but such characterizations miss the point that virtualised digital magazines can be much more than mere replicas. Because they are virtualised replicas, they can have layers of additional purely digital functionality superimposed on the replicated structure. Obviously 'search', enhanced 'linkage' and integration with web services, multimedia elements and episodes can be stirred into the format and tablet-specific interactions work well on a digital object.
   

There really is no uniformity of opinion about which of these models for digital magazine delivery is the most suitable and attractive. Speaking for myself, as you might predict from my statement of interest, I have a strong preference for the virtual magazine model (type (3)), but I also enjoy Flipboard and can see why some readers may prefer an Economist-style app. We may also feel that the RSS magazine solution works better in the format constraints of a mobile phone, and in contrast the virtual magazine, which needs to handle fully designed pages, plays to its strengths within the scale of an iPad.

Consider this: if the best format for a digital magazine were a completely settled question, we should not be seeing so many experiments with differing formats and delivery services. It should also be noted that all three types of format are the subject of steady evolution and improvement: RSS-style, ebook-style, and virtualised page-based, digital magazine readers are all getting better. It is not as though the magazine industry has decided with a herd-like mentality that one digital format is clearly the winner -- whereas the book publishing industry, by contrast, appears to be reaching a consensus that ebook formats (such as for the Kindle or for ePub) are a settled choice.

Since there is a certain amount of confusion or disagreement about what digital format makes for the most pleasing and sustainable digital magazine experience, then it is hardly surprising that there is a lack of consensus about the appropriate business model around which magazine publishers should build their digital solutions. The problem here is that print magazine publishers (also printed newspaper publishers) have developed a twin track approach to revenue and profitability, through which advertising and sales (newsstand or subscription) both contribute. Magazine publishers are nervous about a digital future in which subscription sales would be the primary pillar of their magazine revenues. When a publisher looks at the digital distribution options for magazines in relation to actual or potential business models for a magazine business, the choices become rather constrained. The RSS model really has to be an advertising-led or even an exclusively advertising path for monetisation. The ebook approach clearly forces the pace on subscriptions, and since most ebook-style magazines actually drop the advertising component its actually inimical to the advertising revenue stream. Any play for digital magazines where ads and subs are driving the revenue line has to come up with a solution through which advertisements and subscriptions are working jointly through a digital medium. The virtual magazine looks as though it might carry this two track approach.

Ken Doctor, over at the Nieman Journalism Lab, has posted an intriguing analysis of the parallels between film distribution (as managed by Netflix) and the digital transition confronting newspaper and magazine publishers. In Doctor's view:

These economics of transition have a second, big piece for publishers that Netflix doesn’t have to worry about: advertising. With advertising accounting for 70 percent of newspaper revenues worldwide, the huge question for publishers is how much ad revenue they can make from purely digital customers. In the U.S, newspaper publishers know they make more than $500 a year on a Sunday print subscriber. With reduced digital product cost (like Netflix’s reduced cost of streaming), newspaper and magazine publishers won’t need the same level of revenue, but they will need a substantial part of what they are getting today. Those economics are just being modeled now in 2011, as the promise of higher-priced and higher-value tablet (and smartphone) advertising looks like it may be real and buildable.

Magazine and newspapers aren’t yet ready to more forcibly shift the audience in the direction of digital-only. The Newsonomics of Netflix and the Digital Shift.

Doctor reckons that the periodical business has perhaps one to three years to prepare for an accelerated shift to digital. I am not sure about the higher-priced and higher-value tablet advertising metrics that Doctor discerns, but from the rate at which iPad subscriptions are motoring there is a growing perception that the digital shift with magazines has certainly begun and it is subscription led, and iPad shaped.

Jazzwise a new app with Bonus Media

We have a new app in the iTunes app store with some cool bonus media. I have also been experimenting with Google+ and Webdoc (first impressions: very useful and cloud-based) to see how we can give a few glimpses of the magazine apps that are coming through from us in increasing profusion.....

Some screenshots from the Jazzwise app. There is some music in the magazine app, but I have used the Webdoc tool to grab a fragment of Archie Shepp and Joachim Kuhn.

Disruptive Paradigms

There is a fascinating confusion now reigning in the higher reaches of the Microsoft empire.

Steve Balmer and his team are convinced that tablets should be viewed as PCs, and that there is no need to put a mobile operating system on Windows tablets ("iPads and tablets are just a different form factor of PC"). They appear to have completely misread the reasons for the success of Apple's iOS and its iPhone and iPad devices. As Horace Dediu notes:

Summed up, the real challenge for Microsoft is whether they can keep their business model (selling OS licenses to hardware vendors) as PCs become more device-like. Not only is iOS setting the benchmark for performance but Android is potentially ready to take share if the market turns slightly more modular. Microsoft’s differentiation looks to be primarily its legacy of PC software. Asymco: is the tablet computer a new PC or Post PC?

Horace Dediu clearly thinks that Microsoft are completely missing the point of the shift to a Post PC model of computing: deep integrated development from hardware through system software to applications; a new model for developer engagement; and novel challenges for manufacturing and distribution in which incredibly high levels of device standardisation and reliability have to be met. All of this Apple gets, and Microsoft apparently does not get it. They are stuck with an outmoded paradigm and it is preventing them from engineering a competitive challenge. Microsoft will not build a competitor to the iPhone or the iPad because Microsoft thinks that its future lies, as its past successes have lain, in licensing its desktop operating system (and a separate mobile operating system) to manufacturers. Microsoft will not be competitive because Balmer does not want to be in that competition to build an integrated device that works across all device formats and layers media on applications, on transaction engine, on operating system and finely engineered and integrated device. And it may already be too late.

These shifting paradigms, are everywhere in the technological landscape. The shift from a PC oriented workstation to tablet and sundry mobile computing devices is just a particularly extreme and decisive example. I think we can see another disruptive paradigm shift working its way through the British newspaper industry this last week. The abrupt closure of the News Of the World was an extraordinary and rather shocking event. But as the ongoing fallout shows the real damage that is being done to the newspaper business is self-inflicted. The News of the World was paying bent investigators and cosying up to policemen because the business managers believed that it was only by delivering a stream of edgy/dodgy stories that they could persuade people to buy the paper. As the (mostly digital) competition got fiercer the methods became dodgier. Newspapers are hoping that their old business model can be replicated digitally, and they are not confronting the deeper problem which is that the package of business strategies and features that supported newspapers 10/15 years ago is no longer going to work (exclusives, classifieds, daily editions, ABC audits, bulk deals, tombstone ads, stock price listings).

Some magazine publishers are also desperate to hang on to the old business model in the hope that it will continue to work. Jan Wenner the founder, owner and publisher of Rolling Stone is such and had an alarming interview with AdAge a few weeks ago.

Ad Age: What's your take on selling magazines on the iPad and other tablets?

Mr. Wenner: It's the same pretty much as I've said about the web. The tablet itself is a really fun device. Some people are going to enjoy it a lot and use it. Some people aren't. On this plane one person's traveling with a tablet, one's not. There's a certain trendiness to the thing. And it's a great thing. But is it a good magazine thing?

It's a good magazine reading device, absolutely. And where it becomes more convenient to read the magazine on that, that's got the advantage. But that's more convenient only if you're traveling, if you're away from home. Otherwise it's still easier to read the physical magazine, which is widely available on newsstands, at airports, and everywhere. You can still subscribe to get it and get it on time. You still get all the value of the magazine.

I don't think that gives you much advantage as a magazine reader to read it on the tablet -- in fact less so. It's a little more difficult.

From the publisher's point of view I would think they're crazy to encourage it. They're going to get less money for it from advertisers. Right now it costs a fortune to convert your magazine, to program it, to get all the things you have to do on there. And they're not selling. You know, 5,000 copies there, 3,000 copies here, it's not worth it. You haven't put a dent in your R&D costs.

So I think that they're prematurely rushing and showing little confidence and faith in what they've really got, their real asset, which is the magazine itself, which is still a great commodity. It's a small additive; it's not the new business. (Jan Wenner interview with Nat Ives in AdAge, May 30)

Wenner is a smart publisher but he is too much like Steve Ballmer and he is failing to grasp the opportunity that a new paradigm will give him. He wants to carry on selling double page spreads for $60,000+ dollars to big brands ("They're going to get less money for it from advertisers."), as Ballmer wants to keep on selling $40 Windows licenses to laptop makers. But that may not be a feasible opportunity for a digital magazine. The iPad at least is shaping up to be a good proposition for selling subscriptions to magazines, but there is no guarantee that it will be as attractive to high-spending consumer brands and their advertising budgets.

I hope that Jann Wenner takes a closer look at the way iPad subs are working. Some magazines are making real progress on the iPad, and the simple truth is that you need to sell 3,000 copies, and then 5,000 copies before you can sell 50,000 and then 100,000 subscriptions. But selling copies is not the point, gathering iPad eye-balls is not really the point either, selling subscriptions is. Subscriptions can be and will be repeat business on the iPad. They will be a phenomenal business, outstandingly profitable for Apple and also a very good business for magazine publishers who have lots of advantages when it comes to selling subscriptions. Their product is a periodical (so repeat business is 'built in'), their product appeals to highly identifiable consumer niches, they already know how to sell direct to consumers (contrast with book publishers, music publishers and TV producers), their product can be delivered through multiple channels (including print). Consumer magazines are finding one part of their business (advertising) sorely disrupted by the internet and digital devices, but another strand to their business (subscriptions) appears to be ideally placed to work through the iPad and other tablets. Go for it!

Apple's Mega Newsstand

At its World Wide Developer Conference at the beginning of the month, Apple introduced iOS5, a close integration with Twitter and its plans for a Newsstand within iTunes. There was a brief overview of the Newsstand service in the presentation and this mention in the Press Release:

Newsstand is a beautiful, easy-to-organize bookshelf displaying the covers of all your newspaper and magazine subscriptions in one place. A new section of the App Store™ features just subscription titles, and allows users to quickly find the most popular newspapers and magazines in the world. If subscribed to, new issues appear in the Newsstand and are updated automatically in the background so you always have the latest issue and the most recent cover art. Apple Press Release, June 6, 2011

There is quite a lot yet to be decided about the precise shape and operation of the Newsstand but what we know looks promising. We know that its coming in the fall, which means that it must be near completion; we know that it will enable background downloading; and that it will present the front pages, front covers, of newspapers and magazines in a more topical and attractive way. We know that Twitter will be available as an omni-present system-call in the new iOS. We also know that Apple's newly introduced in-app subscription process, with automatic iTunes renewals is working well, many mainstream publishers have announced that they will support it. This is a separate but important development. We also know that Apple has relaxed its previously announced, but over-restrictive policies on pricing of subscriptions "outside" the App store. Apple will not be 'leaning over' and requiring publishers to charge no more for digital subscriptions on the web or on Android than they charge within iTunes. Apple is loosening up a bit.

This really could be the very best news for the digital magazine and newspaper industry. Here is why:

1. Apple sold nearly 20 million iPads in the year to April 2011. We do not know how many they will sell in the second year, but it seems reasonable to expect a very large number. Another 50+ million units seems probable. Three years after its launch the iPad could certainly have a 200/300 million installed base. That is scale.
   
2. Apple has decided to bring some marketing and retailing focus to periodicals within iTunes. This is what the Newsstand announcement really amounts to. Apple will arrange focus and in-store presentation and highlighting. It is as though Tescos or WalMart announced that they were going to have a big newsstand kiosk in a prominent place within all of their retail outlets. The Newsstand will be a sales focus and it will attract masses of titles. Since periodicals have never been aggregated and retailed at remotely comparable scale, it is quite hard to envisage the potential for a newsstand which has tens of thousands of titles in all the main languages. Apple would only be doing this if it considered that newspapers and magazines could be a big category. Apple is building a platform from which it can sell billions of news and magazine subscriptions.
3. It would appear that Apple will be going for a very 'format' neutral Newsstand. Apple has not said that all magazines and newspapers should have a specific file format, as happens with iBooks. It has not said that newspapers and magazines should or should not be 'interactive', though it seems certain that interactivity will be there (see most newspaper apps). This is ingenious because it allows/encourages publishers and developers to experiment with different sorts of delivery format. Apple is offering a sales platform, a payment platform, a cloud-based delivery and access platform. But it is not dictating the format or precise implementation of magazine services. This is ingenious in two directions. It encourages publishers with the advantages of a genuine platform (scale in distribution, and simplicity in payment and licensing for customers) but does not constrain publishers or developers in the services that they may offer. The platform does not appear to constrain the potential for innovation and diversity, except perhaps that these periodicals will of necessity have issues and front pages (even that limitation may be negotiable). Since magazines and newspapers have extraordinary diversity in their appeal and in their production processes, this is a masterstroke for Apple. And it is also clever in a second way since it enables Apple to be quite agnostic about how magazines and newspapers should be delivered. Apple does not have the heavy responsibility of managing content and dragging timely editions from publishers' workflow. Apple allows innovation within the iOS guidelines and will benefit (to the tune of 30%) from not having to do the experimentation or day to day content management on their publisher's behalf. Apple does not even expect to host the titles (as it does for iBooks).
4. Publishers will complain about Apple's 30%, and although I have some sympathy for the complaint, one notes that Apple's recent loosening of its pricing rules, has given publishers an enormous opportunity. Magazine publishers especially. Magazines know how to sell subscriptions to consumers. They have been doing that for years. Magazines have a business model which encourages them to sell direct and they should certainly use that to build direct relationships with their subscriber base. But they should also welcome Apple as the cornerstone of their digital promotion. Apple is not telling its book publisher partners or its music industry partners that they should sell direct. Furthermore, there is little chance that Jeff Bezos will echo Steve Jobs when he said: “Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing.” (Apple Press Release, February 15, 2011) Replace 'Apple' by 'Amazon' in that sentence -- and I am not sure that Jeff Bezos would even recognise it as grammatical, he would certainly stumble if it were included in the Kindroid press release.

There is only one thing clearly wrong with the Apple, iTunes, Newsstand as far as I am concerned. Do you think there is any chance that they could move away from that rather corny idea of presenting magazines on a pine bookcase? Would it not be better if the Newsstand felt more like an Apple retail store? Not pine, but steel, marble and clean, abstract lines. Putting tens of thousands on pine book cases makes no sense at all.

Now that Apple Owns the Tablet Space .....

When the iPad was launched, there was a widespread view (and I shared it) that soon, and not more than a year or two later, there would be some highly competitive and lower-priced tablet alternatives for customers to choose from. The iPad had opened a new hardware category, but competitors would quickly crowd into this new opening... there would be lots of choice and most of it would not be for Apple hardware.

Whilst dissecting a review of one of the best Android competitor's to the iPad, Marco Ament notes:

Translation: Android tablets have managed to copy the iPad’s hardware well enough — the easy part — but have failed to provide good software and significant third-party app choice — the hard part. The Android Tablet Problem

For any 'head-to-head' competitor tablet to get into the market for a face off with the iPad there is the possibly insuperable problem that the new tablet lacks a coherent body of developers and of tablet-primed media. Apple has been building its iOS developer community and media resources for four years (arguably more). Apple has huge momentum and capability behind its iOS platform and this cannot be matched by any competitor. I don't think that a 'head to head' competitor to the iPad can emerge in the next five years. The competitive threat if it comes, will be from a completely new approach, an external threat not a mid-size device like the iPad. We should look to a paradigm shift as radical and disruptive as the iPhone/iPad surge that Apple has produced to disrupt the mobile phone and the laptop computer.

Harry McCracken reviews the state of iPad competition and concludes that it is very hard to see why anybody in the market for a tablet would buy something other than an iPad 2.

And yet no Apple competitor has started selling anything that clearly answers a fundamental question: “Why should somebody buy this instead of an iPad?” Sure, it’s easy to point at specific things that other devices do better (or at least differently) than the iPad, and some of the people reading this article can explain why they chose another tablet and don’t regret the move. (If you’re one of them, please do!) Still, sales figures for tablets show that when consumers compare the iPad to other choices, an overwhelming percentage conclude that the iPad is the best option. ....Instead of an iPad (Technologizer)

If the 'competitors' to the iPad cannot emerge now, a year after the first iPad was launched, why should it be feasible that the direct competition will be stronger in a year or two's time? The iPad eco-system is getting richer and stronger at an amazing rate and that is the problem any direct tablet competitor faces. The fundamental point about the iPad and the iOS range of devices is that Apple is not really selling a hardware solution; Apple is offering a software and services solution, and it is the whole package that customers are buying into. This is something which no competitor to Apple is plausibly positioned to challenge. Not Microsoft (they don't really do manufacturing), not Google (they don't truly understand selling), not Amazon (who are best placed to have a shot at it, but do not have deep consumer-device engineering DNA).

We will come back to Amazon in a minute. But first let us consider what are the consequences of Apple owning the tablet category for the next three, four years -- by which I mean that Apple has a good chance of being the supplier of most of the tablets bought for the plan-able future.

1. Apple will sell a lot of iPads and will certainly offer a modicum more choice (high-end, low-end, high-res, medium res). Moore's law says that Apple should be able to produce a sub $200 iPad for Christmas 2012. Apple will do that.
   
2. The degree of device choice will be constrained by the requirement that as many apps as possible should run across all iOS devices. So no new aspect ratio, but quad pixel density. The coherence and interoperability of the range of iOS devices is already another source of lock-in. That gets stronger as the differentiation within the range is gently increased.
   
3. The lead that Apple has in the deployment of apps for tablets will grow. Enormously, and become even more of an obstacle to 'internal' disruption from iPad-like competitors.
   
4. Android, or maybe Windows, phones may well provide very strong competition at the 'low end', at the small format end of the market. There will be plenty of apps for non-Apple phones. These non-Apple phones will also be well-placed to produce competitive applications which are not tablet-sized and which do not necessarily require the full range of touch interface.
   
5. Apple's competitors will increasingly throw their weight behind web standards and 'open' technologies.
   

Amazon already has the Kindle platform and has sufficient strength in books, music, film and periodicals to mount a competitive challenge to Apple with its likely Android tablet -- they need to launch it soon or Apple will own the holiday season device market in 2011. Amazon may be able to launch a somewhat credible Kindroid alternative to the iPad, but I think Apple has played a very clever move here in the last couple of weeks. It relaxed its e-commerce terms so that the soft Kindle can stay on the iPad/iTunes platform. This might have looked like a concession to Amazon (and to the millions of iPad owners who run the Kindle app on their iPad) but it was in fact an astute and decisive blow to the hardware side of Amazon's business. Not having your Kindle library on the iPad would have been a decisive reason for many Amazon customers to switch to the Android tablet that will soon be launched by Jeff Bezos. Now there is no compelling reason to buy the Kindroid, no reason not to buy the iPad which will hold your library. Apple will not be getting 30% from the sale of Amazon ebooks, but those books can be used on iOS and Apple's selection of music, film and apps is so much better than Amazon will be able to offer on the Kindroid. Apple will not be letting Amazon deploy film or music apps within iTunes either. So who has the upper hand in that trade? Apple never actually applied the e-commerce rules that it has just relaxed (they were meant to come in force at the end of this month). Perhaps they were told by lawyers that the proposals would attract monopolies sanctions, but rescinding/withdrawing them now was a stroke of genius and a sign of confidence. When push comes to shove, Apple owns the tablet space and there is not a lot that Amazon or anybody else can do about that.

Is Twitter Becoming the Web's Intentional Layer?

Intentionality is a philosophical term of art, and it refers to or 'points to' the directedness or aboutness of much of our mental and linguistic activity. Of much of our action. But 'intentionality' has also been used by web commentators, John Battelle, for one, when he considers the extent to which Google is striving to build a method of search which captures the user's intent and which is at the same time harvesting and modeling intentions and desires:

The Database of Intentions is simply this: The aggregate results of every search ever entered, every result list ever tendered, and every path taken as a result. It lives in many places, but three or four places in particular hold a massive amount of this data ......... This information represents, in aggregate form, a place holder for the intentions of humankind - a massive database of desires, needs, wants, and likes that can be discovered, subpoenaed, archived, tracked, and exploited to all sorts of ends. Such a beast has never before existed in the history of culture, but is almost guaranteed to grow exponentially from this day forward. John Battelle The Database of Intentions, 2003 -- [at that time Battelle gave pride of place in his blog to Google, MSN and Yahoo. I think now he would pick Google, Facebook and Twitter, possibly Amazon and Apple].

My intuitive 'internal model' for thinking about the web is of a constellation of HTML, of piles of content; comparable, and yet exceeding, the largest libraries. But the web is also and quite distinctively a constellation of links, hyperlinks, and these links are intents. Every hyperlink is itself an 'intentional act', a referential act that is also digital, an act that annihilates distance and short-circuits context and time, taking us instantaneously, magically, to the target of the link's intention. Every link that our finger points to on an iPad is the shadow of the intentional act of the author of the link, and the harbinger/blueprint for the intentional act of each user who follows the link. Viewing the web not so much as a static docuverse, but as a dynamic aggregation of usage and process, the intentional power of the web comes from the way it charts and shifts the attention, the intention, and the focus of its users. Google is as much an instrument for choice and for cognitive intent as it is also an engine for search. However there is a case for treating Twitter as a special case, as especially pure and nakedly intentional. Tweets are all about links and intentions and Twitter is building a massive intentional superstructure through the discourse and activity of Twitter users. There are at least three sources for Twitter's pervasive intentionality.

1. Twitter's atomicity. Twitter's brevity hones the sharpness of a tweet's intentional aim. The 140 word limit forces directedness in tweeting. The character limit requires that the user targets with precision and clear reference the subject that is being tweeted. For a medium with such a narrow bandwidth, Twitter has been extraordinarily effective at finding ways of lassooing content with precision. Think twitpic and bit.ly. A picture may be worth a thousand words, but you do not need a thousand words to reference a picture in a tweet. It is not possible to say everything in a tweet (Godel's theorem and The Whitsun Weddings are just too subtle and long), but there is no practical limit to the stuff that one can refer to or touch on with a tweet.
   
2. Twitter's asymmetry. Twitter in a deep way echoes the topology of the web, with the asymmetry of the follower/followed relationship matching the asymmetry of the hyperlink (that which is linked to often does not link back; just as I am more likely to follow Stephen Fry than he is to follow me). This asymmetry leads to a much more interesting network than the symmetrical relationships that were at the starting point of Facebook and Linkedin. Twitter piggybacks on the topology of the web (any url can be linked to as can any place on a Google map) but we should notice that it also escapes the web, since a good deal of Twitter activity takes place without the web, in apps, on SMS and mobile phones. Twitter's capillary vessels can run through the web, but they also allow us to wander off into digital by-ways that are beyond the web. This gives scope for broader digital intent and for a layer of crisp intentional communication which is not bound to the web, though it uses it.
   
3. Twitter's syntactic devices. Twitter has a repertoire of formal devices which allows users to harness and amplify the intentions of others. The 'follow' relationship is a primary mechanism of amplification, since the tweeter with a large audience is like a speaker with a megaphone. Following is certainly not the only basis for collective action in the Twitter domain. Users have plenty of other devices for amplification and message modulation: 'retweeting', recommendations, Twitter lists, locations, and hashtags are all mechanisms that enable and allow the Twitter user to deploy collective intentionality. It might be better to say that these are mechanisms that allow users to participate in collective intentionality in a new and inherently digital way.
   

We should be careful not to give excessive focus to Twitter -- which is just the epitome of many other social internet technologies that enable us to share and focus desires, perceptions, references and approval. But Twitter's pure and naked intentional quality defines its usefulness and attractiveness. There are rumours that next week will see Apple announce that iOS 5 will support system level calls to Twitter. If that happens we will see less talk about the iPad being merely a lean back device.

The Google Books Mess

There were a couple of tell-tale signs last week that Google may be having some pain and problems with its vastly ambitious Google Books project. First, was the news that Google was pulling the plug on its corresponding, open-ended, plan to scan and database masses of historic newspaper archives. Second a report that Google was diverting all its programmers from its eBookstore and perhaps not vigorously pursuing plans selling eBooks.

The problem that Google has, is that there was huge momentum within the company towards its grandiose plan for a comprehensive universal digital library and this vision, with its accompanying class action settlement [ASA or amended settlement agreement] was decisively stopped in March by the opinion of Judge Chin (USDC SDNY)

While the digitization of books and the creation of a
universal digital library would benefit many, the ASA would
simply go too far. It would permit this class action - - which
was brought against defendant Google Inc. ("Google") to challenge
its scanning of books and display of "snippets" for on-line
searching - - to implement a forward-looking business arrangement
that would grant Google significant rights to exploit entire
books, without permission of the copyright owners. Indeed, the
ASA would give Google a significant advantage over competitors,
rewarding it for engaging in wholesale copying of copyrighted
works without permission, while releasing claims well beyond
those presented in the case. (Opinion 22 March 2011)

Chin's decision is styled an opinion, and it might yet be appealed or revised, but most observers would tell you that it has pretty well stopped the Google project in its tracks.

Google has got a lot of figuring out to do:

1. Google is not out of its legal woes, although such a rich and powerful company can probably stall or out-manoeuvre the authors and publishers who are parties to the original suite in the USA. Yet Google will need some resolution to the case or it risks enormous damages for breach of copyright ($3.6 trillion according to one scholar).
   
2. Google will not find it straightforward to avoid legal actions in other jurisdictions. It has ongoing legal woes in France, and if some French publishers win substantial damages, many others will charge through these same gates.
   
3. Google is continuing to scan without permission millions of works which are not out of copyright on behalf of its library partners. So the liabilities grow.
4. Google will be required to deliver digital library services to some of its core collaborating libraries. The libraries of Michigan and Stanford in particular. To the extent that these services depend on copyright works digitized without permission Google remains at significant risk.
   
5. There will be increasing concern about advantages that may accrue to Google from the works that it has already scanned and databased, and which it may use in ways impervious and invisible to external actors. Perhaps Google will gain enormous advantage in the fields of search, automated translation and semantic technologies through private access to vast amounts of unregistered, unlicensed, copyright material. That putative advantage creates legal risks for Google from competitors and regulators.
   
6. Without a recognized and legitimized settlement Google cannot deliver services of general public benefit, and at some point Google loses good will. Without a settlement Google cannot even be generous.
7. Google has plenty of agreements with publishers and authors for the distribution, display and potential licensing of millions of copyright works. So it could be an active participant in the eBooks market, but it has been strangely hesitant and stuttering in recent years about its commercial activities. Almost certainly because Google's lawyers are anxious about the way such commercial exploitation may play against the unresolved matters in dispute. If Google carries on havering it will lose its opportunity in the digital books market, much as it appears to be losing its opportunity in the market for digital music.

I am not sure that Google has an easy way of stepping out of this mess. But it needs to find, or create through disruptive action, some solution.

The original goal of a universal library designed, built and maintained by a single technical player was hubristic and naive, driven by the enthusiasm and commitment of the founders (Page in particular who felt that he owed a debt to his alma mater, the University of Michigan). Google's best hope now would be to distance its involvement from the prospect of private gain and to place all works not public domain, and not explicitly licensed to Google, in the sole care and control of the public academic institutions from which the original works were taken, and to renounce any commercial advantage through its involvement in converting 'orphan' works. Google will have to pay the authors and publishers something (if only to cover some of the legal bills, that will otherwise be pursued to the bitter end on a contingency basis by the other side), it can afford to finance the first blocks of a Rights Registry, but it should be more open and more public, more consultative, in part foundation funded, than the original design. Google does not need and should not look for special advantages on rights and forward-looking business models. If Google were to do that it could help to promote the cause of orphan works legislation in a disinterested manner. Google needs to get legitimate, beyond all shadow of doubt, fast.

Google often likes to play the 'open' card, but it has been far too closed and 'private' over its books project. It needs to rethink the game-plan and its style of involvement. That way it will retain the good will of the library community and the reading public. By being highly generous and public spirited it looks after the interests of its shareholders also. Page is now CEO and he may need to bite on the books bullet and own up to a change of course, only be being much more open and generous can Google hope to make something like the Google Books project a reality.

Too many Hoops for Hulu for Magazines?

Next Issue Media has launched a 'Preview Service' with seven magazines sold on subscription or as single issues. Next Issue Media has been called the Hulu for magazines and is the creation of Condé Nast, Meredith, Hearst, News Corporation and Time Inc. Only seven magazines currently feature in this Preview Service, but they are top drawer items: The New Yorker, Popular Mechanics, Fortune, Esquire and Time etc. The consortium is advancing on a narrow front both in content selection and in delivery channels, and at this point only the Android operating system, but no phones, and the only tablet device is the Samsung Galaxy Tab. Narrower still: since at this point the magazines are only available via the Verizon WiFi service and an app in the Vcast (Verizon) app store. But more magazines and more channels are promised for the autumn (more details at MediaMemo -- Peter Kafka).

There are plenty of difficulties in running consortia, and I take my hat off to the NIM team for getting something out of the door when all the backing companies will inevitably have very different views on how the terms shall be crafted, and wary of precedents being set. Perhaps for this reason they are at this stage offering 'monthly subscriptions' and 'single issue purchases'. Supporting two very different access/license models indefinitely could get very complicated. Its also complicated for consumers that, depending on the title, 'existing print subscribers are eligible for a free or discounted digital upgrade'. If a subscriber to two print titles gets free access to the New Yorker but has to pay a digital upgrade for his sub to Popular Mechanics, NIM's customer support lines will soon be red hot. Building a system that manages all this reliably, will not be a trivial undertaking. And the consortium will lose its way if the magazine access model is not standardised across all the titles served, when 100s of magazines are on offer. Allowing publishers to set the price of their services is one thing but allowing the publishers to set different access models and subscription rights is fraught with difficulties.

It is going to be a challenge for this Hulu for magazines to achieve the Hulu-style popular momentum that they will need to secure the continuing support of their backers. But they do have a chance, because their backers are strong media players, all with an interest in maintaining some leverage over other players who will be driving digital consumer acquisition. Having a 'tame' Android platform with some market penetration will be useful for all these publishers. But consider the range of devices that Next Issue Media will be playing with or against. These will include:

1. Apple for the iPad (in pole position)
2. Apple for the iPhone (not to be overlooked as its a somewhat different delivery proposition)
3. Amazon for Kindle
4. Amazon for soon to emerge Android App store (and likely Amazon media-consumption Tablet). Amazon may have several tablet form factors.
   
5. Barnes and Noble magazines on Nook and next generation Android tab
   
6. Android app store (ie the Google managed app store, with flavours for several levels of Android phone/tablet). Lets call this 6a, 6b, 6c.....
   
7. Blackberry Playbook platform (with its own set of 'Android' complications)
   
8. HP Web/OS (Next Issue Media say that they will support this before the end of the year)
9. Nokia/Microsoft tablets when they come...

We have at least nine different platforms right off the bat, and the chances are that there are several more, some with a significant spin that we don't know about yet, that could play a part in the digital magazine market next year. Who says strategic planning for digital magazines is a straightforward business?