Are Books Services Not Products?
What happens if we think about entertainment in a completely different way? What happens if we think of entertainment as a service not a product?
Open the Valve
Valve Software began in 1996 after co-founders Gabe Newell and Mike Harrington left Microsoft to go into game development. Cue hilarity right? Some people might have been laughing, but in 1998 they released their first game: Half-Life which was viewed as a breath of fresh air in a stale genre.
10 years later, Half-Life had sold 9.3 million copies.
So your first hit is a colossal hit. No pressure for game 2 right? Arguably though Valve's biggest hit hasn't been a game, but a software platform called Steam. This enables anyone who registers to buy games. It comes with a whole host of other features, but its core is the selling and updating of games. Initially just created for Valve games, Steam now has over 3700 titles and over 100 million active users. With Valve receiving a cut of everything that's sold on Steam, and Steam accounting for approximately 75% of all online sales for PC games, it's easy to understand how Valve grows by about 50% a year.
Yes, you read that right: 50% a year. Consistently. So what is it that people with no background in gaming (one of their early programmer hires was manager of a waffle house) were able to do that established players were not? Valve has been able to be extremely productive and engender productivity in others. In practical terms, Valve has a flat employee, no title, structure in which every employee is free to get involved in whatever project they want. They just have to be productive. So at the time of the video above, January 2013, two Valve employees weren't working on a game or on Steam or any other entertainment service. Instead, they were designing a desk suitable for Pair(ed) Programming. The price though is that you've got to be serious about what you're doing on every level. Absolute freedom requires absolute responsibility. Also, they don't just allow users to create content for their own games, they encourage it by giving them the freedom and means to sell it on Steam, and then just take a cut. As the video reveals, one user earned $500,000 in a year doing this! No wonder Valve has much higher revenue and profitability per employee than Google, Apple, or Microsoft, according to Gabe Newell in the video.
Steam itself isn't a product, it's a service. When millions of PC gamers all over the world switch on their PC, Steam runs automatically. It's become a near default service, almost as synonymous with buying games online as Hoover has become with vacuuming.
Services are things that we take advantage of in order to get certain things done. When something works, we keep going back to it. It doesn't matter whether it's a particular shop, healthcare professional, or café, if it gives us what we want, how we want it, we'll keep using it. Valve then, growing about 50% year after year, are obviously doing a lot right, especially as publishers have struggled for years to catch up with them.
A New Deal
So is there room to view books in the same way, as another form of entertainment service that could be delivered by a platform similar to Steam?
Some people might say that a platform for providing books as a service already exists: libraries. This overlooks the key component which every service needs, which is success. Over 200 libraries closed in the UK in 2012 alone. A viable platform needs to be something that people return to almost by default. It makes more sense to view that default as Amazon, who command 67% of all ebook sales and 41% of all book sales. So are Amazon/Kindle the new Steam? No. Steam has become an open platform for the selling of games and content for games, and has given independent developers freedom to publish their own games. Whatever Amazon does right, it's hard to view it in the same light.
So is there anything out there doing with books what Steam does with games? Not really. There are multiple independent companies with their own platforms for releasing books, but none of them have caught on as Steam has. This means that there's diversity, but risks leaving some of these smaller players as targets for bigger fish. It also means that no new service or company has emerged as a breath of fresh air, like Half-Life and Steam, to take on a stale industry that's populated by both corporate sharks who want in, and gate-keepers amongst publishers who want to ensure that their club remains members only.
What Does the Future Hold?
The worst-case scenario for the 'books as a service' approach is old-time print publishers signing more authors up to small percentages like 7.5% for a paperback and 15% for a hardback, and I've seen worse than that. If their ebooks are then sold solely as Kindle files (meaning they can only be read on one of Amazon's devices or through their software), or are sold in some other form locked down by DRM (Digital Rights Management), and there are further exclusives in terms of book-sellers, then the downward spiral is complete. Exclusives are great for publishers, distributors, and booksellers because it means if a book starts selling, you have to go to them in order to get it. This is the absolute opposite of books as a service though because it's not focused on what the customer wants, but on what most benefits the status quo. It leaves power in the hands of the old guard, who use things like DRM that can leave you being unable to read books after you've bought them. This approach also leaves books and authors vulnerable to consumer activism if they feel annoyed or alienated by a company's or seller's approach or methods. It also means that the author's book is only narrowly available. If that particular service isn't available in a particular country, or if that bookstore isn't in an area, too bad. For independent authors, or authors who don't already have a name and reputation, making your books available only narrowly is a hell of a risk.
Better than this would be a rise of a platform or service that's willing to think radically and take on challenges to ensure that the worst case doesn't happen.
Best is diversity of publishing in the wake of such a new service shaking up the industry. Independent or smaller authors could then release books in an era of new opportunities and wider releases. Part of this picture is available now. Authors can already have polished websites that ensure compatibility with customers accessing their site on Android, iPhone IOS and tablets enabling them to sell their own books directly to customers and retain over 90% of the sale price. Let's say an author receives 15% of a print book priced at £10 that sells 100,000 copies. This leads to the author receiving £150,000. You can then subtract from that any advance, the take of the author's agent (10% - 20%), and tax. If that same author sells 17,000 ebooks at £10 and receives 90% of the sale price, they'll get £153,000. Yes, they'll have had to pay for their own cover art, editor, and possibly formatting too. However, they'll won't have lost a chunk of that under royalty contract requirements, or to an agent, as people selling books this way are more likely to be independent. How appealing does that 7.5% - 15% look now?
Without someone to take the lead, someone prepared to solve problems simply because they're going unsolved, then we risk living in a future that's been created purely by the biggest shark. Either that or by an old guard excited by print-on-demand, which is a bit like being excited about broadband in the fibre era.
You might argue that books are more than services. In terms of what they evoke in us, then that can be true. However, I found at the London Book Fair that it's a view that's exploited by the status quo, capitalising on a human tendency to stand still because it's safer to go on living with what we already know. If the argument about books you can hold in your hand being better than ebooks is correct, as some people at the London Book Fair said, then why are so many books so unappealing to hold? 'Pulp' used to be an insult, but isn't it now the norm? Books are printed by the lowest bidder, farmed out to people who don't give a damn about books, and in many cases are doomed to be pulped when they don't sell. Books that are truly made by people who love books and want to create books that people will love to hold, like Ludlow Bookbinders, are few and far between. I wonder if we're heading towards a future in which 'pulp' books are exclusively ebooks, with print books being works of art, or commodities. Maybe that thought fills you with horror, but it's no more the end of books than the invention of the car was the end of horses.
Has entertainment changed from a consumption to a service model? Tell me what you think in the comments.