DO NOT DISTRIBUTE - Faculty Directory · Copyright 2000 Andersen Consulting DO NOT DISTRIBUTE 9 DO NOT DISTRIBUTE © 2000 Andersen Consulting Proprietary. All Rights Reserved 17 Authors/Agents

Copyright 2000 Andersen Consulting

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1© 2000 Andersen Consulting Proprietary. All Rights Reserved

A Bright Future for eBook Publishing: Facilitated Open Standards

Washington, D.C.March 22, 2000


One where...

What kind of eBook market would we like to create?

? It’s easy for consumers: any book, any source, any device

?Author and publisher copyrights secure, protected

?Device, software providers invest without risk of obsolescence

? Innovation and competition encouraged? Lower costs, maximum market growth? Strengths of existing players utilized?Monopolies and new intermediaries avoided


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3© 2000 Andersen Consulting Proprietary. All Rights Reserved * Focusing initially on the consumer book market

How do we get there?

?What’s the market potential for electronic books*?

?What are the best alternatives for developing an attractive market?

?What overall strategic approach should the AAP and its members adopt to help make the best option a reality as rapidly and efficiently as possible?

AAP Commissions

eBook Project...


A Joint AAP/AC Initiative...

Conduct eBook Project

November,1999

START

January 10, 2000 January 28, 2000 February 10, 2000

Prepare for Annual Meeting

Conduct Steering Committee Meetings

March 22, 2000

TODAY

What kind of project have we undertaken?

Conduct Consumer and Other Research

Preview AAP Board Members

AAP Commissions

eBook Project...


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Jill Sansone

Mark Cummings Jane Isay

David SteinbergerChris Palma

Richard C. Gershon

Buena Vista Books

Grolier, Inc. Harcourt Trade Publishers

HarperCollins Publishers, Inc.Harvard University Press

Houghton Mifflin

Ginny Moffat

Richard SarnoffMichael Cairns

Greg VoynowAlan Aldworth

Susan Driscoll

The McGraw-Hill Companies

Random House, Inc. R.R. Bowker

Time Warner Trade PublishingTribune Education Company

Bedford, Freeman and Worth

Publishing Group

Sponsor

Peter Jovanovich, AAP Chairman, Pearson Education

eBook Steering Committee

Pat Schroeder, AAP President and CEO, Chairperson

Who’s been involved?


Device Manufacturers? Everybook? Nuvomedia/Gemstar? Softbook/Gemstar

Software Developers/Services? Adobe Systems? Glassbook? Infinite Ink? Intertrust? Microsoft? Overdrive Systems? Natwest Magex? Preview Systems? R.R. Bowker? PeanutPress? Reciprocal? Night Kitchen? Versaware? Xerox

Authors and Agents? The Aaron M. Priest

Literary Agency? Author’s Guild? John Grisham’s Agent? Leta Nolan Childers? Suze Orman

To whom have we talked?

ePublishers? Books 24x7? Fatbrain? iUniverse? Mesaview? Netlibrary

Other? Baker and Taylor? Gartner Group? IDC? R.R. Donnelley? Ingram? Jupiter Communications? Pearson Technology? Rolling Thunder

Publishers ? Buena Vista Books? Grolier? Harcourt Trade? Harlequin? HarperCollins? Houghton Mifflin? John Wiley & Sons? Library of Congress? McGraw Hill? O’Reilly & Associates? Penguin Putnam? Random House ? Reader’s Digest? Rienner Publishers? Scholastic? Scientific American? Simon & Schuster? St. Martin’s Press? Time Warner Trade


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Our conclusions...

? The market potential is vast, under certain conditions? The AAP leadership and Andersen Consulting recommend

an Open Standards Solution? Standards for digital rights management, numbering

systems, and metadata structures should be set as quickly as possible

?Ongoing support for continued innovation in a secure environment will be needed

? If publishers fail to take the lead in working together to define standards, market development will almost certainly be slower, more chaotic, stunted and less profitable


The market potential is vast...

…62% likely to

purchase eBook

reader...

In projected future environment*…

…at “fair and reasonable” price

Source: Andersen Consulting, Hase Schannen Research

38% not likely to purchase

eBook reader

* Among moderate to heavy readers

Projected 2005 Retail Revenues($ Billions)

$3.4 Billion

? eBook Readers

? Ancillary Sales

? PC’s/Other

Low Case

$2.3 Billion Expected Case

$1.0 Billion

High Case

Estimated 28 Million eBook Reading Devices


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* Underlying projections are illustrative onlySource: Andersen Consulting, Hase/Schannen research; IDC; Jupiter Communications; Veronis Suhler; BISG

Total 2005 Consumer Book Market: $21.9 Billion

Consumer eBook Content Revenue Projections (2005)

$2.3 Billion Electronic Content

10% 90%

$1.6 Billion Incremental Sales (70%)

$0.7 Billion Replacement Sales (30%)

…with our “expected case” suggesting that eBooks will represent almost 10% of the total consumer book publishing market...

$19.6 Billion Printed Content


Required Conditions for Market Growth

…but only under certain conditions.

?Broad-based content availability ? Improved device features?Greater consumer awareness ?Attractive “win-win” business model for

participants


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Major Online Book Retailer

eBook Sellers

Publisher

Service Providers

Digital Rights Clearing

Providers

Digital Asset Management

Providers

eBook Services

Publisher

Directory Service

Providers

Other Online eBook retailer

Special -Interest Web Site

Consumer

Reading Software Providers

Platform Providers

Publishers/Directory Service Providers

Open B2B

Market-place

Conversion & Translation

Service Providers

eBook Standards AuthorityeBook Repositories

An open standards environment will facilitate development of competitive markets in each area...

Reading Device Manu-

facturers


…and would offer several attractive features...

?Consumers would be able to buy any eBook from any authorized source and read it on any authorized device

?Authors/agents, retailers and publishers would retain present roles

? Transactions would be visible to publishers– Ensure Security– Understand market trends

?An ongoing standards authority to support growth and innovation (e.g., like WAP forum) would be established


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Publisher

Repository Service Provider

…one key to which is facilitating the development of B2B directory services...

Smaller Retail Store

Digitized eBook

eBook Repository

Larger Retail Store

Search System

Outsourced Index & Search Service

Search System

Listing DatabaseNumbering

Metadata

Content

Update

Store’s Catalogue

B2BDirectory Listing Service Providers


…providing the best outcome overall for market participants.

Authors/Agents? Access to new consumers, with

new products in all retail markets? Secure copyright environment? Maximize growth/sales

Publishers? Maximize market growth? Copyright security? Low technology investment risk? Visibility to market patterns? Increased profit potential

Platform and Service Providers? An open playing field: multiple

providers in each market? Ability to invest confidently? New, larger market opportunities

Consumers? Increased content

availability/choice? Convenience, ease of use? No risk of device obsolescence

due to proprietary standards? Potential for lower prices

Retailers? Continue role as consumer

aggregator/community builder? Access to full range of commonly

formatted electronic content? Metadata facilitates 1:1 marketing

A “Win-Win” Formula...


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Consumers? Increased content availability/choice?Convenience, ease of use?No risk of device obsolescence due

to proprietary standards?Potential for lower prices









? Consumers? Increased content



Authors/Agents?Access to new consumers, with new

products in all retail markets?Secure copyright environment?Maximize growth/sales




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Retailers?Continue role as consumer

aggregator/community builder?Access to full range of commonly

formatted electronic content?Metadata facilitates 1:1 marketing













Platform and Service Providers?An open playing field: multiple

providers in each market?Ability to invest confidently?New, larger market opportunities




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providers in each market? Ability to invest confidently ? New, larger market opportunities




Publishers?Maximize market growth?Copyright security?Low technology investment risk?Visibility to market patterns? Increased profit potential




? Hard copy versions will likely support vast majority of consumerdemand for the foreseeable future

? While “printing” related costs disappear for eBook versions, other costs continue to be required or would even be duplicated

? Likely to be downward price pressure at the consumer level for electronic versions

? Potential for incremental profitability does exist in offering value-added services (e.g., audio, video)

• Editorial costs• Advances• Marketing/merchandising

costs

• Administrative and fulfillment costs

• Advertising and selling

Importantly, potential publisher profit improve-ment would come primarily from market growth.


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What’s the alternative? Learning from the music industry...

? WAP Forum (started 1997) establishing open standards for interoperability and Internet data access (“frictionless” for consumers)

? WAP-based services would be convenient, universal, and secure, boosting market growth

? Participants will have competitive opportunities in each market space, without fear that investments will produce proprietary, “dead end” obsolescence

? Ongoing certification and testing tools being established

? Pervasive violation of copyright; lawsuits in progress

• Napster• My MP3.com

? Competing standards technological consortiums creating win-lose (or lose-lose) environment

? SDMI standards-setting effort started late and continues to face major challenges

?X

VS.

Notes: (1) Security issue more challenging for digital music than eBooks(2) WAP significantly more complex technologically than eBooks

Wireless Application ProtocolDigital Music


Content

eBook Metadata

?Encryption

?Usage Rights & Rules

?Bibliographical

?Promotional

?Value-added metadata

Digital Rights ManagementPublishing Standard Area Comments

?Critical to ensure open market

?Simplifies indexing and search

Critical areas

Other priority areas already being addressed

? Leave to reader and hardware devices

? Already covered by OEB

? OEB being extended to cover packaging

? Presentation

? Structure

? Packaging

?Adopt numbering system for eBooks?Unique Identification

Going forward, open standards development would focus on three key areas.


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What’s next?

Establish ongoing standards authority

Mobilize EffortDefine

Strategy

Begin process of incorporating…?Other forms of content (esp. Education,

Magazines)?Other geographies (esp. English-speaking

regions)

TodayCommission task force on staffing and funding

11/99 – 3/00(Completed)

3/00 8/00(Tent.)

9/00 Ongoing

Develop Standards• Create working solution• Work with service providers• Syndicate solution

The Go Forward Process


?Have the courage and fortitude to sustain the commitment – providing both leadership and resources –throughout the standards-setting process and beyond

?Move fast, but have the patience to do it right?Begin as soon as possible to embrace the broader view;

develop standards that can be applied to electronic publishing of educational texts, magazines, and other relevant content, while beginning to develop a global perspective

?Avoid creating an environment of competing standards and proprietary solutions

What must publishers do for this effort to succeed?

Documents

DO NOT DISTRIBUTE - Faculty Directory · Copyright 2000 Andersen Consulting DO NOT DISTRIBUTE 9 DO NOT DISTRIBUTE © 2000 Andersen Consulting Proprietary. All Rights Reserved 17 Authors/Agents