Wednesday, September 28, 2011

After the Fire, What's Amazon's Next Move?

originally posted 5/11/11 under the title, 'Is Amazon Preparing a Cloud Based Book Service?'  

A Cloud-Based Book Service: 
Device Agnostic & Subscription Based
I've never been one to shy away from predicting the future. If asked, I’d say in the next 24-months, Amazon's Cloud Drive, their controversial cloud based digital music locker, announced on March 29, 2011, will evolve  into a book service, with revenue generated by purchases, advertising and subscription revenue.  Lockers and "lock in" are good for digital businesses that are having difficulty figuring out how to sustain a business based on  piracy prone digital downloads.  Amazon, as a player in the music space, knows that only 16.5% of American internet users over the age of 13 purchased music in the third quarter of 2010.  If purchasing digital content is optional today, how do you make it worth someone's while to buy a down loadable book that is otherwise available on a torrent site?  The answer the music industry has come up with is convenience, quality and legal.   

Rethinking the Future of Making Money Online

I believe that what we are watching is Amazon rethinking the future of making money online. Kindle is only a transitional reading device.   It's a stop along the way toward a multifunction tablet, which is, itself, a stop along the way toward a cloud based service -- a service that stores book and music files remotely.

Some believe the Kindle advertising model, announced last month, is a first step toward  a freemium business model.  Marry the freemium model with a cloud based book service, and you have advertising supported books.  You won't just being storing books that you purchased on Amazon's server, but, reading advertising supported ones.  The latter bears some similarity to the way Dickens sold his novels -- serially, in installments or parts over time.   The future of publishing is going to look more "tailored and personalized."   Until the FTC clamps down on America's patchwork quilt of pro-advertiser privacy laws, revenue will flow from targeted behavioral ads.   

As an aside, a cloud based digital book service is a grand idea for readers as they can gain access to their files from wherever they are, and read those files on  multiple devices, e.g., smart phones, tablets, and their PC's.  It also addresses the pesky piracy (DRM) issue, as it is more difficult to pirate a stream, than a digital download

The ambiguous digital book future is getting clearer day-by-day. It's not about ebook reading devices, it's about monetizing ebook readers.  Amazon is poised and ready, as evidenced by their willingness to build a business by selling ebooks below (and ebook readers) what they paid for them.  Google is ready, too.   Free works for Amazon and Google.  It's just bad for publishers.    

The short- to mid-term changes in trade publishing are going to be dramatic.  The music industry were the first movers in the digital space.   Just as technology improved musician's access to customers, it has decimated the music industry.

At the recent "Rethink Music" conference in Boston, one industry leader said cloud services must get past next year.  He was optimistic about Amazon Cloud Drive and Spotify.  His prediction was that the world's 160 million iTunes users will move to the cloud over the next five years.  Cloud services are on the cusp.   It's seems like Amazon is looking to develop a successful business model based on access to content -- not  ownership.   Streaming to one or multiple devices, the ability to sell ancillary services, and social networking features, make cloud based publishing a very exciting prospect.  

[When an earlier version of this post was published, readers expressed concern about the viability of streaming books.  Not to worry!  Amazon will store small pieces of your digital books on your device, even if you use their cloud book service.   So, you will have an offline reading option on your subway ride from Union Square to 34th Street / Penn Station.] 

The legal issues that surround cloud and subscription services are plentiful.  And, then there are garden variety antitrust issues.  For example, whether the Internet giants, Amazon, Google and Apple, should own the content they distribute, and, the subject of recent Senate hearings, the fairness of Google's search engine results.  If prevented from doing so, perhaps, it would usher in a golden age of independent publishing. 

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