The Nikkei newspaper’s report that Amazon will launch a Japanese Kindle service within 2011 ends two years of gloomy speculation across an industry nervous about the impact of the global eBook giant. The leaders of Japan’s publishing industry may wish to consider three questions, the answers to which will indicate how their industry will develop over the next ten years.
1. Will publishers commit fully to digital content?
2. How will eBook stores compete with Amazon?
3. Who will control the self-publishing sector?
Firstly, the publishers. Japan has first hand experience of what happens to eBook initiatives when they are starved of content. In 2003, two competing industry initiatives were formed to either sell eBooks (the Electric Book Business Consortium) or rent eBooks (Publishing Link). Over 30 companies were involved in one or both of the EBBC and Publishing Link, including 15 publishers. Despite this level of participation a critical mass of narrative text eBooks, such as novels, was not made available for sale or rental and both initiatives failed. Despite a four year head start over the Kindle, the 00s turned out to be a lost decade for the development of the mainstream eBook market in Japan.
Today, all of the major publishers have committed to producing eBooks and, indeed, the eBook store of the Electronic Publishers Association of Japan, paburi.com, report around 100 new titles added to their catalog each week. These numbers, though, are only meaningful in the context of how close Japan is to having the critical mass of titles needed for a viable eBook market. Amazon’s Kindle launched in the US with 90,000 titles rising, within a year, to over a quarter of a million. Compare this to Japan’s current inventory of non-manga eBooks of no more than 50,000 titles and it is clear that at just a few hundred new titles per week it will take many years before the industry has the scope of content to entice mainstream consumers. Rapidly expanding the eBook catalog is necessary but, of itself, is not sufficient. Publishers must also not suppress eBook adoption by offering derisory discounts to the print prices or by excessively delaying eBook releases.
Crucially, a lack of mainstream digital content does not merely delay the development of an eBook market in Japan. Indeed, it could be the catalyst for an unprecedented rift developing in the industry. The success of smart phones and tablets has put devices capable of running eReader apps into the hands of tens of millions of Japanese consumers. Foot dragging on the part of Japanese publishers will not stop these consumers from reading on their devices. If the major Japanese publishers do not provide timely and affordable content, the void will be filled by foreign publishers, pro-digital mid-tier publishers, an army of self-publishers and Amazon itself. If this happens, the industry may split into a legacy industry intent on preserving the existing print value chain and a digital first industry with no print revenue cannibalization concerns. In this scenario, the digital first industry reaps the bulk of the profits from the expanding eBook market and the legacy industry is left to nurse declining print sales with little compensation from an underperforming digital catalog. The US publishers’ commitment to digital content prevented such a split and secured their place in a post digital publishing world. The major Japanese publishers have yet to make that commitment.
Japan’s eBook stores are poorly placed to compete with Amazon. Even some respected, well-funded stores have wasted the bulk of 2011 in solving the wrong problem. The stores of Rakuten (a domestic eRetailing powerhouse), Kinokuniya (the largest bricks and mortar bookstore chain) and Sony have pooled resources to ensure that consumers buying eBooks from one of their three stores can read these books on devices or apps associated with one of the other stores. Such interoperability is a nice to have but is irrelevant in a cyber showdown with Amazon. To compete against Amazon, the Japanese eBook stores must improve their services in two critical areas.
1. The service must be drop dead simple for the consumer. The Kindle experience remains the gold standard to which the Japanese stores should aspire. These stores must fix the clunky process that is still the norm when it comes to consuming one of their eBooks. They should allow users to buy books for their existing devices rather the forcing them to buy a store’s dedicated reader; provide a service that does not require the user to be aware of the eBook’s format; provide reader downloads without prerequisite software from other companies; support Macs. Once these basics are in place, stores can then look to interoperability, discovery and social reading.
2. All information relevant to a purchase decision, especially pricing, should be readily available. For big and small purchases alike, consumers want the control that comes from having relevant information before making a decision. Even in countries, such as Japan, where de facto price fixing of eBooks takes place, price comparisons are important. In a price fixed world these comparisons are not, of course, between shops but between print and eBook, hardback and paperback, new and old. Given the opportunity, consumers will fluidly slip between buying digital, print or second hand according to the very particular circumstances of each purchase. Importantly, they will be happier with their decisions and likely to return to that online store. At Amazon, consumers see all of these prices and customer reviews in a single place. To compete with Amazon, the stores with tie-ups to online print stores, second hand stores or seller marketplaces need to integrate these services tightly. Ebook only stores will struggle to break out of niche markets.
Finally, self-publishing. Loved by some, hated by others, self-publishers will be a large influence in any mature eBook market. Industry players would do well not to dismiss self-publishing out of hand since, in non-US markets, it represents one of the few chinks in Amazon’s considerable armor. Amazon, like Apple, administers self-publishers out of the US. If Amazon continues this practice for Japan, as is likely, Japanese self-publishers wanting their work to appear on a Kindle will need to apply to Amazon in English and file appropriate US tax forms. This represents a genuine impediment to individuals and even small businesses. An opportunity exists for a large Japanese company to become the aggregator of choice for the bulk of Japan’s self-publishing market. Any of the twenty plus domestic eBook stores could have taken on this role but, to date, none have provided a free, simple service for the self-publishers. An eBook store or one of Dai Nippon Printing or Toppan Printing could still step up to this role but if left too late another foreign player may make a Japan administered self-publishing platform their differentiator when entering the Japanese market.
Most pundits favor Jeff Bezos’s King Kong over Japan’s various publishing Godzillas and, indeed, the domestic industry is ill-prepared for Amazon’s market entry. Amazon will undoubtedly be successful in Japan’s eBook market. The main unknown is which domestic players will remain standing and who will rise to the Amazon challenge.
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