I believe the Kindle is the iPod moment for books. The long-term value of content that can be digitized is approaching its true costs of production, which themselves are in free fall (a GarageBand produced album is pretty damn good even compared to real studio productions). Given rampant piracy based on marginal duplication and distribution costs of zero, content owners are essentially competing with “free”. Neither of those facts are going away anytime soon. Summary: The economics of digital media have fundamentally changed, and with it the next ten years will see value chains and business models changing drastically. On a side note, this is saying that *access* to content has no economic value; it is a far cry from saying content creation has no economic value or judging the value of the content itself!
So here’s a fact: 95% and more of music on iPods isn’t bought through iTunes. It’s downloaded, shared, ripped, bootlegged, remixed, reformatted, torrented and then some. I’m not truly concerned with the ethics of it all - I care about the realities of the marketplace. Those realities are that music is becoming more and more of a promotional tool for artists’ true income sources: tours and merchandise (some artists are cleverly benefiting from the true demand for their tickets by participating in the value created on marketplaces such as Seatwave). Given the complexity of the film and games industry value chains, we aren’t quite there yet. But as investors in DailyMotion we clearly see parts of the video entertainment value chain already significantly altered and we’ve staked a fair amount of money on the belief that free online video is a very strategic proposition in the entertainment business.
So what about my first point, books? Essentially, the economics of the means of production changed long ago, first with WordPerfect, and then with HTML/PDF as common display formats. You don’t need GarageBand or some fancy video editing tools to produce a book and you don’t need a fat client specialized player to consume it. No, what has held the digital book back are essentially two issues: the backlit display, which makes it hard to read long documents on the computer for entertainment (at least for mainstream folks who don’t sleep with their MacBook), and the inability of e-ink device manufacturers to allow internet access and open/standard dispaly formats on their devices, since those threatened the publishing crowd.
The Kindle solves 1.5 of those problems. The fact that it doesn’t support PDFs natively is a shame, but it does take HTML (though how well I don’t know) and in any case things can be reformatted (especially if somone did that automagically). In my opinion iPod supporting MP3 was one of the key success factor of its early years - it didn’t bow to the publishing industry but became a significant player in its own right before also allowing content to be bought and not ripped or pirated. Of course Amazon is in a different place in the book retailing value chain so it has to respect its suppliers and can’t take that route. Which of course opens up a potentially huge opportunity for someone to start serious free distribution of e-books for the Kindle (something pretty close to what Songbird* is vs iTunes today). Be the part of iTunes that’s always been about free - whether it’s ripping, sharing or organizing legal as well as pirated content.
How would one do that? Essentially the idea is to take all the libraries of text content out there and reformat them for easy access on the Kindle. Above all, of course, tackling that wonderful resource of free books, the Gutenberg Project. Become the Napster of the book world - the LimeWire for text. Let young authors come to you to publish free and gain distribution, i.e. MP3.com. Let old authors pale in shame at the download numbers of classics on your platform compared to their latest and greatest “bestseller”, i.e. open access scientific publishing model. Let the social decide what rises to the top over time (instead of the book publishing world casting couches - believe me, they do exist, pasty skin, flush cheeks, nerdy glasses and all!), i.e. Aime Street. Of course, I wouldn’t implement the whole thing as a client app but rather make it a free online service, accessible and readable from any device, with upload/download API and a serious developer platform strategy. Oh yeah, and definitely reformat for Blackberry browser to facilitate venture funding!
I firmly believe the Kindle in its second and third gen will make the e-book as mainstream as MP3s are now. You have the chance to be the person that changes the publishing world by exploiting what Amazon can’t. Please give me a call when you decide you’re going to take Bezos up on his offer and let’s create the first $1B exit in the book publishing business since I don’t know when (Bertelsmann/Random House, maybe?).
* Yup, we’re invested in that one as well. :p
P.S. The latter part of that is a bit incoherent because it’s 2 am, but I think you get the drift. Free books can be as big as free music given proliferation of readers.
