When Pottermore launched their ebook store at the end of March, the publishing industry stood still and watched in amazement. Pottermore did something that no one had dared trying before: they forced Amazon to send customers to their site to buy their ebooks.
Some publishers had been thinking about it in the past but concerns about the consequences this could have created to their revenues in case Amazon disapproved and retaliated proved too big to overcome. Controlling the purchasing stage of the user journey is extremely valuable not from a financial but from a strategic point of view: who sells the ebook owns the relationship with the customer.
Pottermore showed that if you are big enough you can actually do it. This precedent is extremely important as it has shown to publishers that if they were to go down this route they could potentially succeed in shifting the power form the retailers back to them.
The ‘Riddikulus’ Spell
In Harry Potter, Professor Lupin teaches his pupils how to control a Boggart, “a shape-shifting creature that takes on the form of the viewer's worst fear. The Riddikulus charm requires a strong mind and good concentration. The correct way to perform the charm is to push past the fear, and concentrate on something that will make the boggart look amusing. The charm does not, in fact, repel a Boggart; it just forces it to assume a shape that the caster will find comical, inspiring laughter, which will defeat a boggart”.
In a similar way, Pottermore transformed Amazon from a fierce ebook retailer into a tame ebook shop window. Pottermore uses Amazon (and all other ebook retailers online) as an affiliate which attracts customers to their ebook store in exchange for a finder’s fee. Thus, Pottermore gains direct access to the end user details (alongside Amazon as both companies know that the user has purchased the ebook).
This ‘charm’ is really transformative as it really shifts the power from the retailer to the publisher. The publisher gains are significant:
- they gain direct access to the user/reader for marketing purposes
- they have total and final control on the price of their ebooks as they are the only place where the ebooks can be purchased (they own the ‘check-out gateway’)
- this approach does not affect the retailers as they could still earn healthy ‘introduction fees’ and also retain data on the user (they know who they are sending to the publisher and if the transaction has taken place)
- the publisher controls how much they pay the retailer who has procured the customer in a sort of ‘extreme agency’ model without the legal implications of the current agency structure (this is an affiliate scheme!)
- they build a customer base which is going to be extremely valuable when trying to attract new authors (this also helps answering the difficult question of what’s the role of a publisher in the future)
- they gather invaluable user data for statistics and future planning
These are all pretty valuable points but the most important one is that by gaining control of the relationship with the people who read their ebooks, publishers are going to be in a much stronger position in the future. The two biggest risks for publishers in the future are the lack of control on how much their ebooks will cost and the inability to attract authors.
The new iPad, starting at £399 - everywhere
If you create a product, there is nothing wrong with deciding how much you want to sell it for. If you want the new iPad, it will set you off at least £399 wherever you are going to buy it. Search if you might, but you won’t find a new iPad for less anywhere. Get me one if you do and I’ll pay you back.
Because of the way the book market has evolved, the only way for publishers to make sure they can sell their latest ebook for £6.99 everywhere is to concentrate all the sales into a single hub: their own ebook sales platform. This is technically feasible (see Pottermore) but the challenge is ‘discoverability’ as not many people would naturally go to the publisher’s own website to look for a book (this is because of the weak association booktitle+author+publisher).
But because of the way the web works, it’s very easy to give every ebook retailer the necessary data to enable them to show these books in their own ‘shop windows’ so that users could find the ebook on their favourite book site. The only difference is that when the user decides to buy that ebook they will need to complete the transaction on the publisher’s site (or via a publisher’s supplied payment system - see note below for more on this)
Technical note: for the more technically minded, it’s clearly also possible for the publisher to offer the retailers an API which deals with the transaction; the key is for the publisher to have the transaction data rather than actually fulfilling the delivery of the ebook file itself which is not a valuable action in its own right. Imagine a sort of ‘EbookPal’ service which is used as a form of payment alongside Visa, Mastercard, etc. The user experience could be made very smooth and could require a single, one-off sign up process. Not a big price to pay for a user who wants a book.
No pain, no gain
The biggest challenge with this approach is that only the larger publishers would have the ‘muscles’ to impose this on retailers, especially Amazon. If the main retailers didn’t like this approach they could retaliate by removing all books (including paper books!) from their catalogue. This is a cat and mouse game we have already seen a few times. Publishers would have to write off the losses they would incur until they managed to get out of the ‘slump’ in sales. These could be significant but the board of their companies could take the view, in my opinion quite sensible, that is better to go through a measurable and controllable amount of pain today rather than having to face unknown and uncontrollable pain (losses) in the future. But I also think that book retailers need bestsellers on their shelves as they can’t retain readers by selling self published books or 99 cents titles alone!
So, the game is balanced and the outcome could be actually in favour of the publishers as the retailers have more to lose. In the era of Google, if I want to buy The Hunger Games it won’t take you long to find a retailer who sells it.
Pottermore has shown that the key elements of this approach are feasible: ebooks on third party retail sites, centralised sales, getting people to buy on their site and not from the retailer. Like Professor Lupin with his young magicians, they have shown the publishers how to cast the Riddikulus spell on Amazon. Who will be brave enough to cast it too?
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