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Commentary: Web requires new publishing business models

Publishers that maintain the old-school thinking will be usurped by new-age publishing models during the next three to five years.

    Traditional publishers see the emerging e-book market as a threat as well as an opportunity. The perceived threat comes from the potential to lose control of copyrighted materials, with people freely distributing materials over the Internet.

    The opportunity they envision is the potential to exert more control over reader "touch points." Although printed books can be passed along to multiple readers, publishers hope to secure e-book content to a specific device and reader, thereby preventing the process of sharing books and, they believe, ultimately increasing their revenue stream.

    See news story:
    Copyright fears make publishers wary of e-books
    This is old-style thinking and clearly the wrong approach. Instead of trying to keep tight control over distribution and imposing the old rules of paper publishing on the Web, companies must create new business models that take advantage of the potential for widespread Web distribution of content.

    Keeping costs low per reader will eliminate much of the need to "pirate" books and will greatly expand the number of readers, thereby compensating for the traditionally high cost per printed book sold (e.g., printing 100,000 books at $20 each vs. selling digital copies to 20 million to 30 million customers at $2 to $3 each).

    Publishers that maintain the old-school thinking will be usurped by new-age publishing models (e.g., Stephen King publishing his books directly on the Internet at low cost) during the next three to five years. For this reason, we believe that all the recent legal maneuvering over Napster is like putting a finger in a dike that is already overflowing. Publishers need to deal with reality and come up with new ways to exploit wide electronic distribution, asking the question, "How can we use the inevitability of wide distribution to our advantage?"

    Of course, customers will need devices to read the new e-books. The concept of what an e-book device will be must be defined. While many have focused on the ergonomics of building a better mousetrap (e.g., a specific hardware device to read books), most people will not be willing to spend the initial $200 to $400 for such a device in the next couple of years.

    Indeed, we expect the market to grow dramatically by way of companies offering e-book software (which includes rights management) loaded onto existing devices (e.g., Microsoft's ClearType/e-book reader), especially as pervasive devices gain wide acceptance (e.g., Palms, mini-notebooks). Most people will not purchase a single-purpose e-book device until prices become trivial, such as a heavily subsidized $29 to $49, in three to five years. Instead, we believe publishers should target (and consumers will employ) multipurpose pervasive devices, already proliferating in the market. These include every PC, laptop, and personal digital assistant (PDA) in circulation as a potential reading device; even MP3 players are potential devices for listening to book recordings downloaded from the Internet.

    Although these devices--particularly Palm PDAs--have display resolution issues, people are reading on them today, as witnessed by the popularity of Web clipping services such as AvantGo. Over time, new technologies will significantly boost screen readability.

    To further make book piracy unattractive, publishers of textbooks and technical manuals should look to a subscription model in which they sell the basic e-textbook at a low cost per copy and include an update/subscription service, supplying regular updates to the text via the Web, thereby significantly shortening book-buying upgrade cycles (such as a school history textbook that includes the latest information on the Bosnian war).

    None of this means that reasonable security is not a good idea. Digital copyright is an important part of electronic publishing. However, digital copyright will be different from traditional copyright, and publishers will need to accept a certain amount of file and device sharing, just as today they must accept the idea that friends loan books to each other and public libraries loan out books for free without paying the publisher a fee for each loan.

    Corporations, like book publishers, must review their publishing policies and materials in light of Internet realities. Once their publications are on the Internet, they must accept that this material will be distributed much more widely than it ever was on paper, and then use this fact to the company's advantage, rather than resisting the inevitable and overprotecting content.

    Electronic publishing can enable companies to update technical manuals and sales catalogs in the field, keeping customers and sales personnel informed of the latest changes--ultimately lowering costs and improving customer satisfaction.

    META Group analysts Jack Gold, Dale Kutnick, David Cearley, William Zachmann, and Val Sribar contributed to this article.

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