Under the Ebook Covers

Amazon and Barnes & Noble are obviously engaging in a war over the ebook market, and there are new dimensions to the battle emerging every week.  In the latest move, B&N announced a new gray-scale Nook that’s conceptually between the older dual-screen eInk Nook and the color model that’s grabbed attention as a poor man’s Android tablet.  Amazon countered with an ad-subsidized model of its 3G Kindle.  I’ve already noted the rumors that Amazon will launch a line of 7- and 10-inch color tablet/readers in the fall.

One dimension of this is easy to understand; Amazon’s own sales data shows that ebooks now outsell printed books.  For Amazon that’s a clear indication that you want to be in the ebook space, but it’s even more a wake-up call for B&N.  They have a chain of bookstores, after all, and they not only have to transition to an ebook format in a reader world, they’ve got to figure out how to utilize their retail presence.  They’re ramping up their in-store specials, adding hands-on groupie meetings among new Kindle users, etc.  But for both companies the key is not just having the “best” reader but having the most readershare.  Your reader customers are yours alone to exploit; PC and tablet readers can be installed on any device and so don’t lock your customers into your own format.

For both B&N and Amazon, the Android devices are a risk because these can be “rooted” or pulled out of their native restricted mode to run a general version of Android.  That, for example, lets you install Amazon’s Android reader on a B&N Color Nook.  But both companies think this is a minor risk; the big problem is just getting their little devices into everyone’s hands.  The lower-end Nook, which has touch-screen overall and not just in a ribbon at the bottom, is a formidable challenge for Amazon; Kindle navigation was harder even before this in my view, and the new Nook makes even a low-end reader very “tablet-like”.

Microsoft’s Skype deal has pushed the issue of service-enablement via an appliance to the forefront in areas outside the ebook market.  Microsoft just said that the Mango version of Phone 7 will have Skype calling, and while it’s not yet clear if that capability will be left in place by partner operators, those I’ve talked with say it will.  We’re moving away from an ARPU model driven by voice anyway, they say.  If tiered data pricing generates the same ARPU, so what if voice becomes a part of the data picture?  It only cuts down on what you have to capitalize.

The network is what enables this, of course, but that’s not enough to make “the network” the value leader in the new ecosystem.  The average user of an ebook reader has no idea what network service gets the books onto the reader, and that’s even in today’s relatively early market phase where nerd count per hundred users is higher.  In the future, people really will see a kind of “service aether” that pervades their world and somehow links their desires to fulfillment.  That’s the market everyone is fighting for, and Amazon, Apple, B&N, and Microsoft are only showing us little chunks of it.

That the lower-layer delivery process isn’t where the action is has been demonstrated by Cox’s announcement that it’s abandoning its notion of being a wireless carrier on its own and opting into a relationship with Sprint.  Don’t be surprised if players like Amazon and B&N end up being MVNOs themselves, and for sure don’t be surprised if Apple makes that move; the rumor they’re looking into branding a service of their own is already circulating.  At some point, that kind of move may be necessary to insure Apple can control the whole value chain, and of course that would also be true for Google and the rest.

Another place where the ecosystem may be changing is in the OTT-TV space.  The Netflix success is showing everyone that OTT video can be sold, and that implies that TV Everywhere can both undermine Netflix and others with “free-ness” and also present a potential incremental revenue opportunity.  If the right to multi-screen content is tied to the fact that you have a TV delivery of that same content, then advertisers are less worried about the credibility of online ads as a substitute for commercials.  This kind of deal also lets the network operators who deliver the stuff insure they get some profit for their infrastructure investment.  Thus, it may be more important to watch TV Everywhere than Netflix.

That’s particularly true in the appliance sense.  Imagine if Apple were a “TV Everywhere” broker for its i-Stuff?  The mind boggles at the changes this could bring.

 

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