Internet and Books (1) Dilemma of Online Publishing

Be it physical or virtual, well-known writers lukewarm to online publishing.

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[+] A controversial digital library project

At the end of 2004, emerging online company Google planned to scan book collections in New York public library as well as libraries at four universities - Harvard, Stanford, Michigan in the U.S. and Oxford in England - and indexed the material for online search. The Google Print project immediately caused a stir.

By stir it means that competitors (e.g. Microsoft) followed suit at once, and copyrighters rallied against what they thought massive copyright infringement with the Authors Guild and the Association of Authors Representatives in the U.S. raising an action respectively against Google.

Amid waves of criticism, Google announced that it would suspend the digitization of copyrighted books and would like to hear publishers' opinions and find out which books to be excluded from the digitization project. On the other hand, Microsoft sought to pace up and overtake Google in similar plans.

Libraries are the hubs of human knowledge and wisdom. Domestic or abroad, we have been seen destructive attempts in wars to burn book collections, which distressfully cause cultural faults. The digitization of libraries not only makes preservation easier, but facilitates the distribution of ideas.

If it is a right thing to do, it is to our common interest, and the competitors exclaimed, "Why we never thought of this before? Now let's follow suit," it is strange that the project did not get on well. Behind the scene it's actually a struggle of an industry.

[+] Selling books as a stepping stone to e-commerce

The development of the Internet has been tangled with words like "books" and "publication". First it was Amazon which initiated the fashion of online bookstores, and no sooner we'd seen successful eCommerce, starting as e-bookstores, emerge from the world over. (And those successful ones began to expand their selling lists with no surprise.)

Why can selling book be a stepping stone to eCommerce? Firstly, there is the demand from consumers. Secondly, the low unit price of books helps to lower the entry barrier to online shopping for consumers. In addition, there is little risk of damage caused by crashing during the shipping of books, and loose requirement for timeliness. All these conditions make it an ideal product for online shopping in its early stage.

For hardcopy books sold online, there is always an issue of delivery of physical goods, which is contradictory to the virtuality of the Internet. The margins for books are already thin, and profits are further eaten away by logistics cost. This is causing headaches for these online businesses. That's why we saw an upsurge for eBooks in around 2000.

In March 2000, the famous US horror writer Stephen King released his new novel on major online bookstores. This 66 paged short novel was priced as low as USD 2.5 and available in electronic version only. No paper books. This new release by the horror master had triggered a rush among fans.

For the sake of copyright protection, this book can only be read via specific software GlassBook. Even with the restriction, still there were a total of 400 thousand books sold on Amazon within 24 hours after its release. Afterwards, however, Stephen King publicly expressed his disappointment over the development of eBooks and declared that he would never publish any book in electronic version.

[+] The dilemma between virtual and physical publication

We may not be able to perceive the discontent of the horror master, but we can surely imagine what it means for a ordinary person like you and me to sell a volume of 400 thousand books online - this would very much equal to a reputation as a "popular online writer" and a royalty of USD100 thousand (estimated as 10% of the sales).

Yet this is exactly where the problem lies. Had Stephen King not been famous in the physical publishing world, there wouldn't be any interest in his eBooks. EBooks have long been a must on the sales list of online bookstores, yet you can hardly find a book by well-known writers on the list.

For if it is a book by a renowned author, you would rather pay for a hardcopy for its better reading experience. (It goes without saying that a computer monitor is not an ideal reading interface, which proves to be the hardest obstacle to the expansion of eBooks.)

And there is another trend that goes the other way around. In 1999, "Slicker Tsai", a writer, vaulted into prominence across the Taiwan Strait for his online novel "The First Intimate Touch," which had stimulated the birth of a new breed of online writers. So it seems likely to first grow publicity by writing free novels online and then to reap profits through selling paper books.

Across the Strait, we've also seen many websites for literary online communities, such as Yoshow.com in Taiwan and rongshuxia.com in China. But you can't trade articles for money in the virtual world. At the end of the day, you can only make money through the business of traditional publishing. All this must have made many business owners very exhausted.

[+] The old system encroached, the new one yet to be seen

It is no easy task to nurture a well-known online writer to the extent that her/his fame can be transformed into profits in the physical publishing world. For an article that has been posted all over the Net, it is questionable how much one would be willing to pay for it. And for writers that make a name for them on the Net, most of them will choose to turn to the physical publishing business for good.

From Google's digital library project to online publishing, my purpose is trying to point out that, while it is inevitable to go digital in terms of the distribution of books, there is a growing concern of publishers and authors that their rights will be sacrificed because they haven't seen any sustainable new business model.

Actually it is a common plague for all forms of digital content: Old rights are being encroached, while new income is far from a sure thing; only it's more so for music and movies and less for literary works. Yet, such phenomenon is expected to become more common with digitalization tools getting more popular.

Google's digital library project attempts to generate revenues by selling keyword advertisements. It seems to suggest that, to some extent, rights are always associated with money. If authors can be benefited from Googles' advertisement sales, will they become less resistant? (
2005/12/04 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : Google's Choice (2) Lessons for the Software Giant


Next : Internet and Books (2) the Supply for Content Exceeds the Demand

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- Today in History

Mobile TV Market (3) Terminal Manufacturers & Content Providers - 2007/12/02

Great Future of Wireless Broadband (4) WiMax, 3G and 4G - 2006/12/03

Internet and Books (1) Dilemma of Online Publishing - 2005/12/04

VoIP (2) Who Depends on Whom - 2004/12/05

VoIP Gives out the First Cry - 2003/12/07

Another Picture of Digital Home Market

The home server will not be so marvelous as manufacturers have imagined.

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[+] Mistake an industrial demand for the consumer demand.

Marketing staff in high-tech industry often have this headache: when a new product is introduced, it might create user experience which consumers never had before. How do you know that consumers will accept and buy it?

Because of that, however, the development of high-tech products is full of fun (of course, for manufacturers involved, it might be a tormenting life-and-death bet). Whatever it might be, the least a manufacturer should not do is to mistake a demand of the industry itself for the demand of consumers.

One example is the WAP Mobile Internet in 2000. In the midst of the dotcom tide, telecom equipment and handset manufacturers, in an effort to stop their sales from further declining, successfully persuaded telecom operators to enter the mobile Internet market. Eventually, an industrial demand is disguised into the demand of consumers, who won't come to pay the bill.

Today, another industry-hyped high-tech sector is about to move. The sector is called digital home, whose mobilization has extended to the hardware/software manufacturing, as well as the media sector, and caused the opposition and alliance of the traditional consumer electronics industry and the IT industry.

While manufacturers involved believe firmly that the vision is eventually going to become true, there are arguments about how it looks like. Here I would like to warn once again: it is dangerous for businesses to mistake their own demands for the demands of consumers. It is impossible to get a look at the real picture of the future development without knowing the difference of the two first.

[+] Now, the demand for the digital home is just from manufacturers.

The origin of the digital home sector is very simple: the slowdown in the market growth of the IT hardware and software industry. The practice of driving the market performance with product functions, which was effective in the past, is at a standstill, at least for now.

Consumers are no longer desperate about the CPU speed or upgrading software. A desktop with Windows XP would be good enough for at least two or three years, so long as it could enable Internet access and offer Office software.

Manufacturers, however, are trying to create space for consumers to buy their second computer, for example, a desktop at home and a notebook for use on the move. Essentially, the digital home is an attempt to create a market segment of a second computer in the sitting room.

For traditional consumer electronics manufacturers who have been tied to sitting rooms and kitchens so far, the market has been saturated for a long time. If, in this new digital home tide, they could booster their sales, or even introduce new changes to the long-stagnant sales rank list, that would be a good opportunity, wouldn't it?

For every additional computer installed in the sitting room, Intel will be able to sell one more CPU and Microsoft one more Windows system, not to mention all the other suppliers—the graphic card, sound card, hard drive, and memory manufacturers can all benefit from a share.

[+] Does the digital sitting room need a control center?

Hence the concept of the home server is proposed, holding that, in the future, all digital appliances will need a host computer, which can not only access the Internet, but also connect all the appliances (through wired or wireless links), store and deliver digital contents. The home server, of course, will allow remote control.

Obviously, this seemingly inevitable vision is a demand of manufacturers. The question is: is it a demand of consumers too? So far, there has been such user experience of connecting all other appliances into one, which is the TV set (it connects the audio system, the DVD player and the game player).

Is the home server going to take the place of the TV set, or becomes a peripheral product of the latter, or to turn the TV set into just a display panel? If it is the first case, the home server must have a built-in TV. So far many products have been introduced with the aim of integrating the TV with the computer, but none is successful because of the problem of the operating interface.

For the second and third cases, the home server is nothing but a network hub plus a keyboard. It doesn't matter at all whether it is placed at the sitting room or not. Let's take another viewpoint. It is better to connect the computer in the study with the TV in the sitting room through wireless links, isn't it? If so, there's no reason for consumers to buy a home server.

In addition, we all believe that digital appliances should be networked. Yet there is another scenario: the digital appliances are networked, but not through a host. In other words, if there's a standard that enables the networking and data exchanging among the digital appliances, there's no need for a host.

[+] The imagination of a digital home

IT manufacturers have made a lot of efforts to make the computer an essential part of the sitting room. In the first place, the interface is reduced to contain only icons. And then the keyboard and mouse are replaced by the remote controller, in an assumption that this would be easier to use and fit better with the habits in the sitting room.

Yet underneath this mindset is a fundamental contradiction: to become the control center of the household, the home server should have powerful function, far more powerful than what a remote controller could handle. Too simple to enable the complicated functions, remote controllers have become a big trouble for digital appliance users.

One crucial challenge is the fact that the user will have to handle the computer two meters away, which makes it difficult to read things on the screen. I tried such a product before and was very eager to throw away the remote controller and grab a keyboard. But I found soon that I had to look down at the remote controller and up at the screen two meters away again and again. That is enough to drive the user mad.

There are two possible solutions. The first is to move the host back into the study, give it the keyboard and mouse back, keep it at an appropriate distance from the screen and get it wirelessly connected with other appliances. The second is to make a full-functional remote controller with a keyboard, a wheel (to replace the mouse and be handled with a finger), and a LCD display, as a mini-sized PDA.

In other words, consumers may control other digital appliances by looking at the display of the remote controller. As a matter of fact, we have seen such remote controller interface on air conditioners, and they fit perfectly with consumers' experience of using the appliance. The key of the digital home is the remote controller in consumers' hands, not a host at a remote end.

The home server will not be so marvelous as manufacturers have described. They will be nothing but a carrier capable of storing digital contents. It does not matter where they are placed. If digital appliances could be networked without a host, what consumers hold in their hands would be the real control center with preliminary computing powers. (
2005/10/16 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

The Web 2.0 Revolution (7) Death of the Intermediaries - 2006/10/15

Another Picture of Digital Home Market - 2005/10/16

Corporate Website a Handful (3) Strategic Alliance Why? - 2003/10/12

Three Musts of Digital Content Biz (4) Pricing by Consumers' Budget

The essence of digital content business is to turn fickle income into a stable one.

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When a certain type of digital content is finally equipped with three musts of digital content business that are the monthly fees, the community, and the real-time connection, most clients will choose to pay a monthly fee, but that doesn't mean that a company is denied the options of a multitude of pricing strategies.

The most vivid example is online game. At this point most gamers pay US$10-12 for a monthly fee card to store value in and play within 30 days of depositing of value. This makes more sense to hard-core gamers who play the game as frequently as they can, usually daily.

For less addicted players, they have the option of paying US$5 for a card carrying 150 points of playing rights. For every entry of the game, 20 points will be deducted for the right to stay logged on for one day. Consumers will do the math. For a player who habitually logs on 18 days a month, buying a monthly fee card is the better deal.

By providing these two different ways of paying for log-ons, game companies have proposed the distinction between frequent gamers and less frequent ones and treat them accordingly. Frequent players are credited with guaranteeing constant income for game companies and are therefore rewarded with lower fees than that of less frequent players.

This is the beauty of the digital content business. It used to be that game companies needed to develop standalone game one after another and have then packaged in a box and sold on the market. As there was telling a particular game would be a hit or not before launching, game companies were subject to very unstable inflow of revenues. Here is where new online game business can come to their aid. That is, the whole point of converting to digital content is that such business can help induce a periodic, say monthly, cash in-flow.

This is an idea that must sink in for the digital content business to make sense. By selling digital music song by song and digital publications book by book, even digital content business can not bring in stable and sustainable income. Therefore, digital content operators must endeavor to increase the number of monthly subscriptions so that they can rake in monthly income the way telcos do.

But for those who aren't willing to pay a periodic fee, we should have something for them. Take the IT home newsletter from the previous article for example. For people who are only interested in certain standalone articles and won't pay US$50 for an extended subscription, IT Home newsletter service offers them the option of calling a number (not toll-free) to get a temporary set of account and password, with which one can log in to read one article. The phone bill will cost you about US$ one cent per minute. To read a second article, of course, you'll have to dial again.

As far as content producers are concerned, all the production cost are calculated on the basis of a book, a song, a movie, an article, a speech, so on and so forth. This is in stark contrast with consumers' demand to be charged by the month. How can this difference be reconciled?

To locate the answer, we must look into the value chain that threads up the entire digital content industry. As illustrated below, the answer to the problem is division of labor. That is, the role of content producer and that of content distributor should be assumed by separate enterprises.

As indicated by the illustration above, an Internet book renter can charge a monthly fee of US$10 or so for unlimited access to its book collection. Every time a book is ordered and read, the renter will pay about US$30 cents to the author or the publisher. By adopting this division of labor, the issues of charging the consumers and rewarding the producers can at gotten around at the same time.

Even so, websites might be worried that a system that grants free access to all the books all the time by charging only US$10 a month might leave the business vulnerable to consumers who set his heart on taking advantage of the website. But let's now forget that there are only 24 hours in a day. How many books do you suppose one can read in a month?

The monthly fee of US$10 is but an assumption of mine. Websites in their real operations have the liberty of setting up price they find reasonable. But this liberty is as much a curse as it is a blessing for such websites, because if one charges too much, consumers would find it too expensive and won't come, but if one charges too less websites will not be able to profit as planned from the business. To find the right price, there are a number of strategies.

As illustrated above, the rates are one book for US$4 and unlimited access to the entire book collection for US$10 in this particular instance. However US$10 a month on books might pose as a burden for many. That's when US$6-7 for two books of choice comes in as such rate is in the midst of two extremes and should serve as a good compromise.

The figures here are but examples. They are to show that when setting prices for digital contents, we need to first make out the target price range on the basis of consumers' average spending on the commodity. Also, we should help ourselves to some distinction of users of varying frequencies. Such strategy can be of use to operations of other digital contents than eBooks.

The introduction of monthly payment and real-time connection can help us break the chains of selling containers but it also sets us up for the crisis of price war. Image a competing eBook rental service charges only US$8 a month when it sees you charge US$10. Once such price war begins, it will not stop until people get hurt.

At a time like this, let's not forget that once digital content business adopts the monthly payment model, its success hinges upon maintaining long-term relationship with its subscribers. That is, how can the website make consumers stick around in the fact of price competition by peers? To do that, website operators must really put their hearts to their businesses. More importantly, they must resort to the force of community to make consumers stay.

Besides, the uniqueness of the digital contents is also a key. That is, even TV news broadcasters know that nothing beats a scoop, an exclusive piece of news. The same applies to digital content business. How can I give what other can't? How can I give the same thing faster than other? These are the things that should be on the mind of digital content sellers.

Post Script: This article uses eBook as an example. But the bottleneck of eBook operations lie not in the pricing but in the fact that PC monitors have too low a resolution to serve as an appropriate platform for an extended time of reading. That is what results in its low market acceptance. But we won't touch upon that issue here. (
2004/10/03 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : Three Musts of Digital Content Biz (3) Redefining Ownership


Next : A Word of Advice for Small Online Stores

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- Today in History

The Web 2.0 Revolution (6) Struggle of the Press Industry - 2006/10/08

It All Boils Down to Brand Names - 2005/10/09

Crime and Punishment of P2P (2) Fire of Greed - 2005/10/02

Three Musts of Digital Content Biz (4) Pricing by Consumers' Budget - 2004/10/03

Corporate Website a Handful (2) Division of Labor How? - 2003/10/05

Three Musts of Digital Content Biz (3) Redefining Ownership

What does it mean to own a file?

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The traditional thinking of selling the "container" has everything to do with consumers' psychological need to "own" something. I own a car-race game software when I can buy it and take it home. I own a music CD when I can buy it and stash it at home.

The seller offers the container for consumers to purchase for ownership. In an equation like this, it's only natural that the seller/producer will hold the completeness of the contents in the container in very high regard. For a music album that has ten songs, the ten songs must be in uniform in style and be arranged in a specific order, not to mention the design of the CD case and the wardrobe choice of the artist him/herself.

The same is true of newspapers, magazines, movies, PC games, curricula, you name it. The effort on the part of producers to edit or, if your will, compose the content and then have it wrapped up nice and neat in a package serves to endow the product with commercial appeal to consumers, who whip out their wallet when whey find the commodity standing as an indivisible item and a keeper.

This way of handling content, however, are being seriously challenged in the Internet age. After all, this is a time when a consumer will demand the option buying any three out of the ten songs from an album. By making such a demand, the consumer is rejecting the seven other songs that's not music to his/her ears as well as the CD case. However, by setting the music files free from the CD, people are making it possible to file owners to share them on the Internet at will, sometimes illegally.

What's being described here is a scenario in which consumers have narrowed down their unit of ownership to a song, instead of an entire CD album. With this change, the ownership of the songs tends to be diminished. It's so easy get hold of these three songs in electronic files via the Internet that people succeed in doing so won't think much of the transfer.

It used to be when a famous singer released an album that featured unique appearance and a set number of CDs released around the world, fans will go all out to get one. Even if the songs are bound to fall out of the Billboard rankings in due course, such CD will still appeal to collectors.

However, it's a far cry from that with the digital content, which can be copied an infinite number of times and then spread as far as the Internet can go. Compared to tradition existence of music on CD and movies on DVD, music and movie files, even when protected by copyright, can seem so ethereal that its ownership feels like nada.

The music downloading service has become a hit in Europe and US because it sells every song for US$0.99, which is considered cheap in Europe and US, and the files sold there are protected by copyrights. However, such a business model should run into trouble pretty soon.

How did you handle the old music CDs in your home? Those has-beens that were popular at the time and bought on the spur of the moment almost always ended up alone in a corner, never to be listened to again. Before you know it, there is a mountain of such CDs in you home, and you don't know what to do with it.

In a parallel universe, where you paid for ten music files by three recording artists every time, you will also soon become the owner of hundreds of songs in digital form. Again, new songs will keep on coming out to inundate your hard disc and push your old songs under wraps of memory, will you simply erase them or just leave them alone?

Same question, Alternatively put. If you are not a collector or someone whose heart is set upon starting a digital library since digital files hardly qualify as collectibles, what's the point of having the music download into your PC hard disk to take up storage?

Let me refresh your memory of the three musts of digital content business. They are monthly fees, community, and real-time connection. Image a place on the Internet where you can pick out songs to hear whenever you want, all the while no music files are downloaded onto your PC.

That is, all the songs are stores in a remote server, which delivers the songs you order to you only on request. When you're done listening to them, no files will be left behind in your PC. For such an all-you-can-hear service, one might be charged an annual fee of US$13 or so.

As a subscriber to such a service, you will always have the newest songs to hear and you will never need to buy any CDs, download any files, and clean out you hard disc again. ADSL broadband connection is already a household fixture now. Music is almost automatic whenever a PC is turned on. That is, it makes no difference if you have the files on your disc. They are yours on request.

This is what real-time connection is capable of. Scraping the obsession of selling containers started with giving up selling the compact disc and went on to giving up selling the files. At a time when bandwidth is no longer an issue, when music files are available through several mouse clicks, selling the music files seems simply pointless.

Earlier on, other types of digital contents have been revolutionized. Take audiovisual programs for example. Right now, Internet TV operators in Taiwan have all launched monthly fees that come in US$8-9 for an all-you-can-watch subscription. They have almost all turned profitable.

Subscribers do not need to download these programs onto their hard discs. Instead, they watch via video streaming. When they're done watching, there will be no digital leftovers in their PC. For one thing, audiovisual files are too big to be downloaded. Sure. But the truth is eBook and digital music can also find this mode of business applicable.

Only in one situation will the consumers want to download the files. That is, portable device owners might sometimes want the music files on their MP3 players or eBook files on their PDAs.

Even that may soon become redundant as future portable devices improve in capability of being connected to the Internet. In fact, almost all PDAs are Internet-ready, some via WLAN, other via GPRS nowadays, rendering it unnecessary to download digital contents on PC and then transfer them onto PDAs, as PDAs have Internet connection of their own.

When digital content is at one's fingertips any time on request, consumers virtually own the content. For people who still find this virtual ownership unacceptable, they can still fall back on CDs, books, DVDs, whose value as collectibles remains undeniable. (
2004/09/26 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : Three Musts of Digital Content Biz (2) Stop Selling "Containers"


Next : Three Musts of Digital Content Biz (4) Pricing by Consumers' Budget

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- Today in History

The Web 2.0 Revolution (5) Search 3.0 - 2006/09/24

Crime and Punishment of P2P (1) Liberalization of Power - 2005/09/25

Three Musts of Digital Content Biz (3) Redefining Ownership - 2004/09/26

Corporate Website a Handful (1) Accountability Where? - 2003/09/28

Three Musts of Digital Content Biz (2) Stop Selling "Containers"

No business beats printing bills to collect fees at set internals.

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In the digital content industry, PC game companies are among the first to stop selling the "containers," realizing what the Internet is all about. Earlier on, PC game companies made and sold games for playing on a standalone PC. That was a time when consumers got carton-packaged games, had the game installed, and played it by themselves at home.

Like I said, it could cost quite a lot to dispatch the containers through the retail network. A game software could thus easily cost up to US$30 or more, a price pretty daunting to students that made up the bulk of game consumers. This then gave rise to an army of pirated softwares circulating on campus for students to "share."

In the online game era, a software disc sells for only a tad more than US$1, meaning the game company practically gives away the disc free of charge as the price barely covers the costs of distribution and packaging. But the disc contains only software for consumers to install at home. To play, they must pay for connection to the game server by purchasing stored-value card or a monthly-fee card.

Since emergence of this business model, piracy has been snuffed out, as in this case, the purchase of the packaged game discs marks not the end of a transaction but the beginning of what should be an extended span of stable monthly fee inflow. Such customer relation can go a long way in helping pay for game development and content updates.

In fact, the new online game business model is a picture-perfect example of the convergence of the three musts of successful digital content business, which are a monthly fee, a community, and a real-time connection. The monthly fee helps companies rid themselves of the habit of selling containers; the existence of a community helps make players stick around, and the real-time connection helps consumers get over the obsession of tangible ownership.

Among other examples of success, Global Chinese Competitiveness Foundation (GCCF), founded by Dr. Zi-yi Shi, specializes in the provision of corporate management know-how to newsletter subscribers who pay an annual fee of US$80 or so for the right to search and read from a pool of over 10,000 continuously updating articles. This service has been in existence for over four years.

As to the question of whether newsletter makes a profitable business, many creative attempts have been made to find out. It'd be hard to argue against the reasoning that if a newspaper can be sold for a price, there is no reason why newsletters can't. However, any one who has tried would tell you that it's really difficult, if not impossible, to profit from sales of newsletter, especially when you try to sell them on a copy-by-copy basis.

Just imagine. If GCCE had attached a tag price to every single digital copy of newsletter, as in US$3 for a copy of newsletter on the topic of "six-sigma" and another US$3 for a copy of newsletter on "paradigm of leadership", you do the math, this business would not have gotten this far.

Another case in point is the IT Home newsletter that goes back a long way in Taiwan. Previously known as PC Home newsletter, IT Home newsletter's subscriptions hit 380k at one point before tapering off. What made the difference was the presence and absence of charge.

Following the traditional way of newspapers, IT Home newsletter should have been charging a daily fee the way daily newspaper charges US$30 cents a copy. But IT Home knew better and charged an annual fee of some US$50, which guaranteed daily delivery of newsletter to the subscriber's appointed e-mail account.

The annual-fee strategy proved a success as IT Home newsletter broke even in 2001. Other than the annual fees, IT Home newsletter also profited a great deal from leasing out ad spaces. IT Home newsletter's prevail corroborates my forecast five years ago. That is, I have foreseen that only newsletters that charge for reading can only boast ad spaces that are valuable. The rationale is simple. Only when the viewers are paying to read will advertisement clients take this media seriously.

Can news stories be sold on the Net for a price? If past experiences are any guide, the answer is yes. In 2001, UDN.com, a website maintained by a widely-circulated newspaper United Daily in Taiwan, launched a pay-to-use database service that provides access to back-number newspaper stories for an annual fee of some US$70. For that much money, subscribers can try your luck at finding reports and photos that might be of interest to you during the past 15 years in Taiwan.

What most consumers are not aware of is that while a newspaper contains many stories, there is inherent logic as to how these stories are arranged and picked as headlines. That is, a newspaper in print form is an integrated existence that can not be randomly.

These stories, once close-knit on conventional paper carrier, have to be broken apart on the Internet. When stories concerning earthquake during the past 15 years are retrieved from the UDNdata.com, they all stand independent of the daily edition of newspaper to which they originally belonged.

Given this nature of digitized existence of news stories, charging an annual or a monthly fee is the only plausible option for digital news newsletter business. Since consumers are looking after a standalone story instead of a whole digital copy of newspaper which contains many other stories that he/she doesn't want, selling an entire digitized newspaper to him/her would be out of the question.

The honors of pioneering in the field of pay-to-read digital magazine in Taiwan goes to cite Publishing's electronic magazine publishing net, which works by digitizing contents of paper-based magazines and having consumers pay to download these digital contents to read via reader software.

As these digital magazines are merely intangible copies of the real magazines, consumers are therefore offered the options of buying a whole magazines' worth of contents or subscribing to the digital magazine service for six months during which time one can search the texts and make personal notes on the virtual magazines, something not allowed by reading the paper-based magazines. The one thing that these various digital magazines have in common with their real-world twins, besides their variety, is that they cost about the same. That is, just because it weighs nothing does not mean that it costs nothing.

Interestingly, the electronic magazine publishing net also sells back-number magazines. Like in the real world, these outdated digital magazines also come in lower prices than the latest edition. I must point out that the whole idea of selling back-number magazines on the Net is a bit ridiculous if your memory of what I mentioned earlier is still fresh, because there is no reason why the news stories printed and stapled together as a magazine in the world still need to remain in one another's company now that they do not take up physical space any more, unless the seller is still bound by the belief in containers.

Something that also should not hold back digital magazine sellers is inventory. The paper-based magazines can take up a lot of space in the warehouse if they remain unsold till the end of the month. That's why sellers sometimes go on sales to clear them out in cheaper price. But in the case of digital magazines, the hassle of inventory simply does not exist if you ask for one. Given that, the thought of selling back-number magazines, at a lower price, makes little sense.

The reality that there is a demand for old magazines is due in large part to the fact that readers need access to one of the articles in a particular issue of a magazine that he or she missed. If this is true, then forcing people to buy the whole thing, especially a digital one, is undesirable, even if there is a discount. The sales of past issues of magazines, if necessary, should consider having the contents broken down into individual articles and then regrouped into one big database to which the access will be charged for a fee.

Old-school content businesses relied so long and so hard on selling via such hardware as paper and compact discs as content carriers that it never occurred to them that they had the option of dividing content into smaller units for sales. They have been in the company of the hardware, which can't be divided and cost a price to make and transport, for too long, that they treat content the same way one the Net.

If the aforementioned examples have taught us anything, it's that digital content sellers should give up the mentality that their products must be sold packaged in a "box" or "container." Sellers of any type of digital content, music, movie, book, course, you name it, must help themselves to the freedom of Internet, and the sooner the better. (
2004/09/19 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

The Next Step for Web 2.0 (3) Collective Will Is the Cornerstone of Everything - 2007/09/16

The Web 2.0 Revolution (4) the Google Paradigm - 2006/09/17

The Web 2.0 Revolution (3) Advertising Revenue is Not Enough - 2006/09/10

Envisioning China's 3G Market (3) Systems & Markets - 2005/09/11

Three Musts of Digital Content Biz (2) Stop Selling "Containers" - 2004/09/19

Three Musts of Digital Content Biz (1) Content is Cheap - 2004/09/12

Three Musts of Digital Content Biz (1) Content is Cheap

Producers of digital content, despite their key roles, are seldom sufficiently rewarded.

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If I dare say it out loud that "human wisdom is valuable but can not be put on sale for a price," I might be laughed at, lashed out at, or left unnoticed. Enlighten me on which is worse. However, with the following analysis, I intend to convert some of the readers into my believers.

Ever since the dawn of the Internet age, when all were looking for a viable business model, I have reasoned that one can not charge for information disseminated on the Internet, since throughout the history of human consumption, we have never really paid much in exchange for information.

At a free-access seminar, where a world-renowned guru had been invited as the inaugural keynote speaker, two thousand people applied for admission, which, thankfully, was not a problem as the organizer had prepared for a capacity crowd.

As there was no charge for admission, the venue, the cost of flying the guru in including board, lodging, and traffic, the remuneration for the speech itself, the compensation for the staff, not to mention advertising, including newspaper ads and print materials for on-site distribution, were almost entirely paid for by a number of corporate sponsors.

A closer look shows that of all the sponsorship, only about 10% went to the guru's speech, meaning venue, wages, ads, and travel took up 90% of the sponsorship. Considering that the guru's wisdom was the only thing that justified all the trouble of holding such a speech, this cost structure didn't really make much sense.

That is, has the organizer spent too much on things other than the wisdom of the guru? Think again. Ninety percent of the sponsorship went to facilities and advertisement, leaving only 10% as rewards to the key figure that made the whole even possible.

However, this anomaly is hardly rare in the realm of education and training industry . In fact, people have gotten so used to this anomaly that they have started to see it as normal. For a training course that lasts 36 hours for 30 trainees, its common for every one enrolled in must to pay a fee of US$600-700, of which, again, only 10% is headed for the lecturer's wallet.

Where has rest of the money gone? One must ask. The answer is the venue, the printed materials, and the advertisement. These costs and compensation to the lecturer deducted, the organizer is still left with some slim profits. Things have always been this way in the world of training and education industry .

An even more convincing example is with the publishing industry, in which a writer has to rack his brains to get a book out and be rewarded with a royalty of 10%, give or take, depending on the level of fame this particular writer enjoys. That is, if the book sells for US$6-7 a copy, the author will be cut a share of less than US$1.

That brings us back to the same old question of where has the rest of the dough goes. A closer look will reveal that there is the cost of print materials, the cost of paper, the wages of administrative staff with the publishing company, the cost of advertisement and promotion, the cost of transporting book (yes, no such thing as a walking book), the cost of warehousing (unless you own the warehouse), and finally, the publishing company would not say no to some profits.

The same situation is true of the recording industry, where lyricists and music writers get the smallest shares of the big pie, as most of the US$10 tag price that consumers pay to get the CD album goes to the compact disc, the packing, the transport, and ads before the little that's left can trickle down to those that make the product even possible.

The movie industry is no exception to the rule that content is cheap. Do you think that by buying tickets at cinemas you are being supportive of the cinematic creation? Pardon my French, but…you wish. The cruel fact of life is that most of your money is used to rent the movie theater, maintain the facilities and pay for the utilities.

For hundreds, if not thousands, of years, people have grown accustomed to such uneven distribution of profits. They don't feel a thing any more. Content might be "priceless," but there is a price for content, a low one, on the market. In the worst case, when detached from the container, content becomes really priceless, this time literally.

We have encountered too many examples of this on the Internet. At the dawn of the Internet age, someone made the first ever attempt to sell news stories on the Net, the first time in human history when news was completely detached from its paper-based carrier. The result proved disastrous as plenty people would pay 30 cents for paper, but no one would pay anything for news on the Net.

Right now, around the globe, governments are encouraging development of digital content, which is good, because once content in books, music albums, movies, and educational curricula is digitized, the transfer of it can be done through the Net to save a great deal on hardware.

Companies will no longer need to dispatch CDs over to retailers and save on packaging and transport by adopting sales of digital music; neither do companies need to ever print the wisdom of authors on paper again as there is the convenience of eBook. For educational event organizers, venue will stop being a source of cost; instead, they can channel what financial resources they have into getting as good lecturers as they can afford by providing digital learning.

However, one little thing still stands in the way to that digital paradise. Consumers' emotional attachment to containers, that is. In a world where things without something wrapped around them can hardly have a price, how can one convince consumers to whip out their wallet and pay? For people who have learned to appreciate music only contained in a CD, how can we teach him to give music in files as much credit?

The absence of hardware cost means that price can be driven down. But this is hardly enough to induce change in consumer behaviors. In fact, in an age when content is removed from containers to be sold as pure electronic files, people in the content business must have themselves undergo a makeover of thought by flushing the idea of selling things in a container down the drains and embracing a business platform built upon monthly fees.

The take-off of digital content industry hinges upon consumers' will to pay. And for consumers to pay, three pieces must fall into place. They are monthly payment, online community, and real-time connection. All three must start with online businesses' willingness to quite the obsession with selling stuff put in containers. (
2004/09/12 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : PDA in Siege (2) Bottlenecks of the Smart Phone


Next : Three Musts of Digital Content Biz (2) Stop Selling "Containers"

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- Today in History

The Next Step for Web 2.0 (3) Collective Will Is the Cornerstone of Everything - 2007/09/16

The Web 2.0 Revolution (4) the Google Paradigm - 2006/09/17

The Web 2.0 Revolution (3) Advertising Revenue is Not Enough - 2006/09/10

Envisioning China's 3G Market (3) Systems & Markets - 2005/09/11

Three Musts of Digital Content Biz (2) Stop Selling "Containers" - 2004/09/19

Three Musts of Digital Content Biz (1) Content is Cheap - 2004/09/12