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?

Apple's Terms of Trade Finally Win Acceptance with Magazines

Suddenly the dam seems to have broken and the major consumer magazine publishers are lining up for iPad editions sold on subscription through iTunes.

In the last ten days, Time Inc, Hearst and Conde Nast have all announced moves towards selling their leading consumer magazines as subscriptions on the iPad. They are also offering free iPad access to their existing print subscribers, a simple and very necessary step as we have been emphasizing for months.

In disclosing these new offerings the major consumer magazine companies have been stressing that Apple has been willing to make concessions and to grant flexibility (see reports of such by Peter Kafka at AllThingsDigital). I expect some modest concessions have been granted, but on matters of detail and to help with 'bedding in'. Apple has not had to modify its developer contract or bend on its commission terms. Apple has the whip hand and, more to the point, Apple will not make concessions on issues that put obstacles in the way of the successful operation of the iTunes service. Apple will not make concessions which force it to re-write its end-user license agreements. Apple will not make deals with magazine companies on its 30% commission when it has been completely impervious to the pleadings of the music publishers on royalty rates. The bald and uncomfortable truth for these giants of consumer publishing is that Apple is not going to do deals. Apple is not going to cramp the economy of iTunes for the sake of the magazine business. So what follows?

1. Magazines will sign up to the iPad service in a growing avalanche. Now that the big 3 of the US consumer magazine business have moved over to the Apple way of doing business, we expect that most major magazine companies will move over to producing iPad apps for their key magazines.
2. Within 12 months iTunes will contain many more iPad magazine titles than has ever been collected in one physical kiosk or emporium. Finding titles in such a rich product mix will become more of a problem. But magazines are better placed than most categories to thrive since magazine titles are (usually) so clearly branded and so distinctive.
   
3. The magazines in iTunes will be offered primarily on a subscription basis. Hitherto iPad apps were being offered on a single issue basis.
   
4. The major consumer magazines in all the major national markets will soon be offering iPad apps through iTunes and they will also be offering free digital access to their existing print subscribers. Magazines will do this because in that way they retain more control over their subscriber base and can avoid having all their subscription services handled by Apple. They retain, indeed enhance, the crucial relationship that they have with paying customers.
5. The prices for digital magazines within iTunes will be pitched at increasingly aggressive levels, Bloomberg Business Week costs $36 per annum. The Esquire iPad app will apparently cost $19.99 pa. Apple's pricing rules mean that international pricing will level-down to the best home market subscription offers (US subscription prices for consumer magazines are low in comparison to European prices).
6. These recent announcements have all been focussed on the iPad. Conde Nast and Time Inc are committed to producing iPad apps, it is not clear whether the iPhone market is being by-passed or merely temporarily left behind.
   
7. Android apps also appear to be taking a back seat. It will be interesting to see whether this week's Google I/O, now in its second day, has any mention of digital magazines. Not much sign of them in the opening sessions.
   
8. The apps that are being produced for the iPad bear a remarkable similarity to the print product. The idea that a magazine app needs to be something radically different from the page-oriented, highly designed and issue-based package that we all know, is losing ground. Most magazine publishers cannot afford to run two parallel design, production and editorial processes.
   

There is no question that the iPad is a very good device for reading digital versions of print magazines. The magazine publishers have, of course, realised this from the outset. They are now beginning to realise that Apple's terms for trade are not so bad. When Amazon brings out its Android tablet I suspect that these same magazine publishers may find that the Amazon terms of trade for digital magazines are just as unyielding, and perhaps in some ways worse than those that Apple have set before them. My first take on the Amazon app developer rules certainly caused me to blench.

Measuring Digital Engagement

Mediaweek has a report on a lively panel discussion of digital magazine auditing at yesterday's PPA annual conference:

...during the ‘Magic Numbers’ panel session, Tye (James Tye, CEO of Dennis) called for industry measured data to be produced faster rather than waiting on the "perfect", multi-platform measuring solution for brands.

Tye said that despite the iPad "being around for a year now", Dennis has not been able to tell its commercial partners officially how many readers download its magazine iPad editions, such as Mac User.

"My worry is we have a system built on the past five decades, we need to build it faster and more reactive to what the customer want," he said.

"The iPad has been around for a year now, yet only now can we start to think about including it in our future auditing certificates", he continued. "As an industry I think we’ve got to learn to move quicker than that." MediaWeek 'PPA 2011: ABC under fire for 'five decades old auditing system'

Rupert Turnball, publisher of Conde Nast's Wired, also had some highly pertinent questions for the magazine audit organizations: "we are interested in measuring engagement and influence and the ability to amplify messages, and that's not measured at the moment." That is certainly something that advertisers and big brands are deeply interested in when it comes to digital media. The problem that the magazine industry faces is that there are plenty of solutions, and an increasingly perplexing range of digital advertising metrics (Google Analytics, Adobe Omniture, Hitwise, Flurry etc), but none of them are specific to the magazine industry. Since none of the digital advertising platforms (Google, Yahoo/Microsoft, Apple, Facebook .... etc) are specific to the magazine industry, none of the digital audit tools that are evolving will be specific to the magazine industry. Perhaps the most useful role that the magazine-specific audit bureaux could now play is to recognise that there is no longer a sensible role for narrowly magazine-based audit functions.

Digital advertising is multiplatform and multipolar and so it follows that the audit role has to integrate with the best tools across the web and mobile marketplace. Digital magazines have extraordinarily rich potential for advertisers, and influencers, but the challenge is to find a way of demonstrating and leveraging this without resorting to the simplifications of the one page audit certificate.

Time Leads the Way

According to the Wall Street Journal, Time Inc and Apple have reached agreement on the provision of free magazine content to print subscribers.

Starting Monday, subscribers to Sports Illustrated, Time and Fortune magazines will be able to access the iPad editions via the apps, which will be able to authenticate them as subscribers. Time Inc.'s People magazine already had such an arrangement, but readers of most publications have had to pay separately for the iPad version regardless of their subscriber status. Time Inc in iPad Deal with Apple

This is a very sensible move, but it is not clear that Apple has had to give any ground. From the get-go Apple has made it clear that it was fine for publishers to sell digital subscriptions which include app deployment, and perfectly all right for them to supply free or 'complementary' app facilities to print subscribers. We have been pointing at this open door here and here and here.

At this point Time's 'free' app access is limited to print subscribers in the US, and Time Inc are not currently offering 'subscriptions' to customers who buy through iTunes. This has perhaps been the one point where Apple has granted Time Inc some leeway. Buying the Time magazine app issues one-by-one is a lot more expensive than buying an annual subscription from the publisher, since there have always been masses of 'bargain' offers for Time print subscriptions out in the market, all of which now include app-rights (for US subscribers), Time Inc is not strictly playing by Apple's rules. Not by a long chalk, since Philip Elmer-DeWitt, at Fortune, can buy a Time sub for 28c an issue, as opposed to the $4.99 per issue available through iTunes. My guess is that Apple's concession was to 'allow' Time a period of grace to get its subscription offering for iTunes customers in place in time for the June 30th deadline that Apple has imposed. Apple might just conceivably have offered Time a month or two additional grace period. But I will be very surprised if Time Inc has not totally fallen in with the Apple way of doing things by the beginning of September. Apple is not kidding around on its rules or its 30% commission. On its iTunes page Time says that 'subscriptions will be available later', though at the moment the app only enables single issue purchase.

Where Time leads, Hearst, Conde Nast, Meredith and the other big players will follow. Competitive pressures will ensure this. Print subscription revenues in the next few years are of major relevance to publishers who see their advertising revenues wilting. The other major consumer publishers will soon understand the tremendous incentive that Time, Fortune and Sports Illustrated are giving to their print subscribers by offering complementary digital access on the iPad (these rival publishers will ruefully compare the brick-bats they are getting on their iTunes customer evaluations with the delight shown by Time's subscribers). At this stage the Time Inc circulation director will wonder whether he really needs to give Mr Elmer-DeWitt an Ultronic Multi-Functional Global Clock Radio when he is also throwing in complementary iPad access with the print bundle? At this stage the potential revenues from digital subscriptions begins to seem interesting and the cost of cheap clocks looks excessive. The second penny will drop when the consumer publishers realize that in offering complementary access to iPad users, they will inevitably have to offer a similar deal to Android users....... and finally, recognition will dawn that these are our customers before they were Apple's; not Android's, heaven help us not Amazon's, and accordingly we have to treat them well on price and access. We have to own them by serving them and recognising them and so long as these customers continue to want our print magazines we actually have an unexpected strength in the market. Time is leading the charge....