Recently, Apple rejected a digital book application from Sony. The disagreement here is over how and when Apple collects for its services. Apple is playing a dangerous game.
In theory, Apple has the right to insist, under its terms for developers, that any app, which offers customers the ability to purchase books outside of the app, offer the ability for customers to purchase within the app at the same time.
Here is the rub. In its application, Sony sends customers to its own web site where they complete the purchase of a book. By routing the customers to its own web site, Sony is able to avoid a payment of 30% of revenues to Apple.
Others, including Amazon, with its Kindle, and Barnes & Noble, with its Nook, have been able to sell e-books by sending users to the companys’ own web sites. Apple simply was not enforcing its policy requiring developers to use its in-app purchasing feature to buy new content.
A 30% charge on revenues is a high price to pay Apple. Apple may be setting itself up for future loss of market share by enforcing this policy. If the Android platform does not put the same requirement on its app developers, the developers will have a strong incentive to avoid the 30% charge by encouraging customers to purchase using an Android device rather than an Apple device. Alternatively, the application developers may charge a higher price for purchases through Apple.
Apple’s unique strength has been its superior list of available applications. Apple’s enforcement of this requirement to purchase inside the app so that Apple can collect 30% of the revenues puts at risk its major advantage. Apple needs to compromise here by charging a lower price or no price at all. After all, it already makes high profits on its hardware and software product combination. It also makes profits on many of the downloaded apps. The application developers are customers too. Why make their life difficult? Does the benefit Apple provides a seller justify 30% of revenues? Sounds pretty rich.
Showing posts with label Barnes and Noble. Show all posts
Showing posts with label Barnes and Noble. Show all posts
Thursday, February 17, 2011
Monday, May 24, 2010
Convenience and Reliability Innovations in a Fast-Growing Market
In a rapidly growing market, one growing faster than 15% a year in units, Function innovations tend to dominate market share movement. That is, Function innovations move more market share, on average, than do innovations in Reliability and Convenience. Often, the second major driver of market share movement in a fast-growing market is Price. Low prices and low-end competition often expand the market and cause significant market share shifts at the same time.
That is not to say that there aren’t Reliability and Convenience innovations. There are. The electronic reader market offers illustrations of these innovations. Barnes & Noble has an electronic reader called the Nook. This electronic reader is lagging in the market today, especially against the Amazon Kindle and the Apple iPad. To build awareness for its Nook product, Barnes & Noble has returned to T.V. advertising for the first time in several years. It wants to distinguish itself in the babble of noise from the many emerging eReaders and Tablets.
Advertising is both a Convenience and a Reliability innovation. It’s a Convenience innovation in that it helps the customer think of the product and know where to look for it. (See “Audio Tip #92: How Do We Add Knowledge to the Customer?” on StrategyStreet.com.) Advertising is also often a Reliability innovation because advertised products have stronger brand names and the aura of Reliability among consumers in a market. So advertising for Barnes & Noble should help the Nook gain some traction in the market. Will it be enough to overcome its laggard status? Probably not, due to its limited Function benefits in the form of attractive book titles. (See “Audio Tip #64: The Objectives of a Performance Improvement Program” on StrategyStreet.com.)
The leader in the market, Amazon’s Kindle, is also innovating its product in the form of Convenience. In the past, Amazon sold the Kindle only through its Amazon.com web site. This policy was in keeping with Amazon’s effort to get consumers of all products to purchase online, rather than through bricks-and-mortar retailers. Amazon has thought the better of this policy, though, with the advent of the Apple iPad. In part as a response to the availability of the iPad in Apple’s stores, Amazon has allowed Target to begin offering the Kindle at Target stores. Offering the product at Target is primarily a Convenience innovation. A customer can pick up the product faster at a Target store than by ordering online. In some ways, it is also a Reliability innovation. The customers can hold the product in their hands and see how the product works. Primarily, though, this is a Convenience innovation. Its main benefit for Amazon will be to prevent some loss of customer market share to a more Convenient iPad product. (See “Audio Tip #93: How Do We Reduce the Resources Used With Our Product?” on StrategyStreet.com.)
That is not to say that there aren’t Reliability and Convenience innovations. There are. The electronic reader market offers illustrations of these innovations. Barnes & Noble has an electronic reader called the Nook. This electronic reader is lagging in the market today, especially against the Amazon Kindle and the Apple iPad. To build awareness for its Nook product, Barnes & Noble has returned to T.V. advertising for the first time in several years. It wants to distinguish itself in the babble of noise from the many emerging eReaders and Tablets.
Advertising is both a Convenience and a Reliability innovation. It’s a Convenience innovation in that it helps the customer think of the product and know where to look for it. (See “Audio Tip #92: How Do We Add Knowledge to the Customer?” on StrategyStreet.com.) Advertising is also often a Reliability innovation because advertised products have stronger brand names and the aura of Reliability among consumers in a market. So advertising for Barnes & Noble should help the Nook gain some traction in the market. Will it be enough to overcome its laggard status? Probably not, due to its limited Function benefits in the form of attractive book titles. (See “Audio Tip #64: The Objectives of a Performance Improvement Program” on StrategyStreet.com.)
The leader in the market, Amazon’s Kindle, is also innovating its product in the form of Convenience. In the past, Amazon sold the Kindle only through its Amazon.com web site. This policy was in keeping with Amazon’s effort to get consumers of all products to purchase online, rather than through bricks-and-mortar retailers. Amazon has thought the better of this policy, though, with the advent of the Apple iPad. In part as a response to the availability of the iPad in Apple’s stores, Amazon has allowed Target to begin offering the Kindle at Target stores. Offering the product at Target is primarily a Convenience innovation. A customer can pick up the product faster at a Target store than by ordering online. In some ways, it is also a Reliability innovation. The customers can hold the product in their hands and see how the product works. Primarily, though, this is a Convenience innovation. Its main benefit for Amazon will be to prevent some loss of customer market share to a more Convenient iPad product. (See “Audio Tip #93: How Do We Reduce the Resources Used With Our Product?” on StrategyStreet.com.)
Thursday, December 17, 2009
Make Them Wait
Three of the largest book publishers have decided to delay the release of their most popular new books to the e-Book market. This is unlikely to be a successful experiment. But another experiment from a fourth publisher offers promise.
E-Book readers, from Amazon, Barnes & Noble and Sony, among others, are some of this years hottest Christmas gifts. These e-Book readers are more than doubling last year’s unit sales. They are pulling the e-Book book sales with them.
The problem, of course, is money. An e-Book sells for about $10. The most popular hard cover books sell for $25 to $27. There’s the rub. The book publishers get about half of that $27 hard cover price. So you can imagine these publishers are less than excited about the opportunity in the retail price of an e-Book at $10, even if they would get all of that $10, which they won’t. (See “Audio Tip #88: Questions to Determine Your Response to a Low-end Competitor” on StrategyStreet.com.)
So, to try to hold the $27 hard cover market, three major publishing houses have announced delays in allowing their most popular titles to go to the electronic book publication market. HarperCollins Publishers, Hachette Book Group and Simon and Schuster plan to delay a few of the books that carry their highest expectations for profit. The delays will last from four to six months. These delays roughly match the time that the paperback version of a title follows the hard cover version.
On the one hand, these titles are unique Function innovations. Some readers will pay the higher price in order to be first in line to read the new publications. But there are many other unique books. The delays announced so far will cover less than 150 of the total 2000 new book titles issued each year.
The e-Book format is less costly and much more user-friendly. The e-Book is a much less expensive product to produce and deliver. Its digital format allows companies to distribute their product over the internet and to the e-Book readers by wireless connections. The e-Book reader can carry more than 1500 books. The user, then, can carry many books in the space of one paperback. This technology is not going to shrink nor pass away, no matter what publishers decide to do with their most popular new book titles. The cost of book publishing is simply going to plummet. But the revenues available to the industry over time should increase dramatically as new customers enter the market.
This e-Book market is an entirely new market. The e-Book offers opportunities to do things never before possible with hard cover books. The digital format allows companies to provide “special features” that enhance the attractiveness of the e-Book. These special features could include such benefits as interviews with the author, in-person video reviews by some of the country’s best book reviewers and videos of the geographic settings in the book, among others. There will be a lot of these new features (See “Audio Tip #29: Positive vs. Negative Volatility” on StrategyStreet.com). These new features, along with the much lower prices charged, will bring a whole new set of e-Book customers into the marketplace. Many of these new customers are not candidates for the $27 hard cover product. They will be happy buyers of the e-Book at $10 with its enhanced features.
A fourth member of the major book publishers, Macmillan, has developed a more creative and more promising approach. This approach envisions the release of an e-Book version of its best sellers on the same day as the hard cover book hits the shelves. The company envisions a “special edition” of the e-Book. This special edition will cost the same as the hard cover book and will be on the market for only 90 days. The special edition will include author interviews and reading guides, along with other material. At the end of 90 days, the special edition will discontinue and the company will issue the standard e-Book format at the lower standard e-Book price.
The publishing industry will fail at its delay experiment. They would be better off embracing the new technology, with its potential for extra Functions and ease-of-use, and then spending the next few years reducing the scale of the paper-based cost structure they carry today. My guess is that a hybrid version of the Macmillan experiment will eventually emerge. Under this hybrid version, all of the most popular books will be available in e-Book format, along with many function enhancements, like those in the Macmillan special edition, for a price a few dollars above the standard e-Book price, but at least 25% below the hard cover price. This approach ensures a much better value proposition for the e-Book customer, builds the e-Book market, and should allow the industry to make an attractive profit at the lower price, due to the much lower cost of production and distribution. Over time, the higher price of the most popular e-Books would gradually fall to the price of the standard e-Book in the market place so that the publisher may reap the rewards from customers willing to wait for a lower price on a good product.
E-Book readers, from Amazon, Barnes & Noble and Sony, among others, are some of this years hottest Christmas gifts. These e-Book readers are more than doubling last year’s unit sales. They are pulling the e-Book book sales with them.
The problem, of course, is money. An e-Book sells for about $10. The most popular hard cover books sell for $25 to $27. There’s the rub. The book publishers get about half of that $27 hard cover price. So you can imagine these publishers are less than excited about the opportunity in the retail price of an e-Book at $10, even if they would get all of that $10, which they won’t. (See “Audio Tip #88: Questions to Determine Your Response to a Low-end Competitor” on StrategyStreet.com.)
So, to try to hold the $27 hard cover market, three major publishing houses have announced delays in allowing their most popular titles to go to the electronic book publication market. HarperCollins Publishers, Hachette Book Group and Simon and Schuster plan to delay a few of the books that carry their highest expectations for profit. The delays will last from four to six months. These delays roughly match the time that the paperback version of a title follows the hard cover version.
On the one hand, these titles are unique Function innovations. Some readers will pay the higher price in order to be first in line to read the new publications. But there are many other unique books. The delays announced so far will cover less than 150 of the total 2000 new book titles issued each year.
The e-Book format is less costly and much more user-friendly. The e-Book is a much less expensive product to produce and deliver. Its digital format allows companies to distribute their product over the internet and to the e-Book readers by wireless connections. The e-Book reader can carry more than 1500 books. The user, then, can carry many books in the space of one paperback. This technology is not going to shrink nor pass away, no matter what publishers decide to do with their most popular new book titles. The cost of book publishing is simply going to plummet. But the revenues available to the industry over time should increase dramatically as new customers enter the market.
This e-Book market is an entirely new market. The e-Book offers opportunities to do things never before possible with hard cover books. The digital format allows companies to provide “special features” that enhance the attractiveness of the e-Book. These special features could include such benefits as interviews with the author, in-person video reviews by some of the country’s best book reviewers and videos of the geographic settings in the book, among others. There will be a lot of these new features (See “Audio Tip #29: Positive vs. Negative Volatility” on StrategyStreet.com). These new features, along with the much lower prices charged, will bring a whole new set of e-Book customers into the marketplace. Many of these new customers are not candidates for the $27 hard cover product. They will be happy buyers of the e-Book at $10 with its enhanced features.
A fourth member of the major book publishers, Macmillan, has developed a more creative and more promising approach. This approach envisions the release of an e-Book version of its best sellers on the same day as the hard cover book hits the shelves. The company envisions a “special edition” of the e-Book. This special edition will cost the same as the hard cover book and will be on the market for only 90 days. The special edition will include author interviews and reading guides, along with other material. At the end of 90 days, the special edition will discontinue and the company will issue the standard e-Book format at the lower standard e-Book price.
The publishing industry will fail at its delay experiment. They would be better off embracing the new technology, with its potential for extra Functions and ease-of-use, and then spending the next few years reducing the scale of the paper-based cost structure they carry today. My guess is that a hybrid version of the Macmillan experiment will eventually emerge. Under this hybrid version, all of the most popular books will be available in e-Book format, along with many function enhancements, like those in the Macmillan special edition, for a price a few dollars above the standard e-Book price, but at least 25% below the hard cover price. This approach ensures a much better value proposition for the e-Book customer, builds the e-Book market, and should allow the industry to make an attractive profit at the lower price, due to the much lower cost of production and distribution. Over time, the higher price of the most popular e-Books would gradually fall to the price of the standard e-Book in the market place so that the publisher may reap the rewards from customers willing to wait for a lower price on a good product.
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