2010: The Year Of The e-Reader Paradox

kk.jpgYou may have been reading books digitally for over a year now, you may have gotten a Kindle in your stocking this Christmas, or you may still be one of the millions of Americans who don’t see the point in purchasing a giant, clunky device that seemingly performs the same functions as downloading a newspaper’s application on your iPhone or buying a book. But no matter which category you fall into, this will be the year of the e-reader: devices like Apple’s much-anticipated Tablet and Microsoft’s Courier herald its arrival in a siren song for newspaper and magazine publishers. Why else would News Corp. be making deals with Sony for exclusive New York Post digital content, or Hearst be working with Skiff to develop its own device and e-reading platform that promises to “create an entity by publishers, for publishers” with its own advertising model. You know, just what consumers are asking for.

Right now, it seems like what consumers want is just an afterthought. Giving readers a rewarding reading experience is only the honey that will lure advertisers to buy space on digital devices, thus supplementing declining print ad revenues. With the print world taking a nosedive in advertising in 2009, it’s seductive to think that new technology will be the salvation of the (former) print media, bringing the money back while cutting down on overhead (like those pesky union drivers that deliver the papers). But is the e-reader technology really on the side of the news industry?

Josh Benton of the Nieman Journalism Lab at Harvard University recently gave a talk at Mediabistro’s ebook Summit on this subject and came to an odd conclusion: e-readers will attract a mainstream audience the moment they become functional Web devices (like a large iPhone, or small laptop!), which will also happen to be the point at which these devices will stop making money for publishers. Not following? Here, we’ll help.

What publishers love about the Kindle, Benton told his audience at the New World Stages two weeks ago, is that it’s a way to regain control over the advertising marketplace that they lost with blogs and search engines. One needs to look no further than Rupert Murdoch’s tiff with Google to see the news companies are wary of their content being disseminated without the organizations getting a cut off the profit. Since Kindles and other e-readers essentially act as a “digital storefront,” and not just a reading device, consumers can ostensibly be attracted to more titles than just the ones they currently read.

But, as Benton pointed out, content producers (the publishers) aren’t necessarily after the same thing the e-reader device producers. One is out to maximize its audience and one is out to maximize its readers’ pleasure. So even though news groups may eschew Internet search engines and fall all over themselves to make deals with these device manufacturers, currently Amazon still keeps 70 percent of the distribution money from whatever publications readers are buying at its digital store. Kindle’s goal is to be the most user-friendly and offer the widest range of products, while news publishers are still in rabid competition with one another. Already, the business model has to be rethought entirely.

The mistake people make when they think about the future of e-readers, according to the people at Nieman, is that this new technology is a market creator, as opposed to a market segmenter. E-readers don’t make more people read more news; they target the people who avidly follow the news (and have their own subscriptions to papers already), and make it easier for them to access it. Nieman’s research concluded that the average age of the Kindle’s readers was over 50 years old — the same market that automatically renewed their subscription to Reader’s Digest every year until a cheaper digital version with bigger typeface came out. So, publishers are actually losing money with their current e-reader deals.

Listen up publishers: while you may think more people buying Kindles will lead to more people paying for your content, you’re lacking the crucial piece of evidence that has made the Internet such a Wild West of copyright law. The majority of people have no interest in ever paying for the news. And e-reader manufacturers don’t care whether people buy a subscription to The Wall Street Journal on their devices as much as they care that consumers buy their reader over another company’s. It’s their job to make their product as pretty, high-tech and user-friendly as humanely possible. And therein lies the problem.

In an email exchange last night, Benton tried to simplify the e-reader versus e-reader content issue for us:

“A New York Times story exists in Kindle format, yes, but also at nytimes.com and in the Times iPhone app and elsewhere. And some of those places tend to be free to the end user. And many of those kinds of reading materials are at their best in forms other than an e-Ink device like the current generation of e-readers.

Meanwhile, the relative success of e-readers (well, relative to what we’re not sure) has been interpreted by some people as a sign that people are ready to pay for content — that the people willing to pay $13 a month for the Times on their Kindle are the leading edge of a wave of people happy to pay for Times content.”

Unfortunately that trickling revenue from e-readers that news companies are seeing isn’t from a crack in the dam before the floodgates open, because the direction these devices are going will be more like the Tablet: Web-driven, with Internet capability. And once that happens, you might as well go to The Los Angeles Times‘ Web site and read content for free as opposed to buying it from your e-reader’s digital store.

“That doesn’t mean that paid content is doomed,” Benton told us. “…it just means that I doubt a device is going to be the prompting point for people to whip out their credit card numbers.”

Then again, who would have thought three years ago that we’d willingly fork over extra cash per month for iPhone apps? We’ll have to check in this time next year to see how this whole e-reader dilemma pans out.

Previously: eBook Summit: Digital Lessons For Journalists, News Organizations, Will The Kindle Save Newspapers? Not Quite