Tuesday, 26 May 2015

"And with one leap he was Unbound ...": a Jolly perspective on subscription publishing

One of the most interesting items to appear in the Authors' Licensing and Collecting Society (ALCS) newsletter in recent times is "Crowded House: Why I Crowd Funded My Book", this being an informative and (inevitably) well-written account by writer Alice Jolly of her reason for taking the crowd-funding route when seeking to publish her forthcoming memoir Dead Babies and Seaside Towns, through the agency of Unbound.  You can read Alice's piece in full here. Of particular interest to readers of this weblog are the following comments concerning the financial side of the publishing equation:

" ...  I raised £10,000 for the publication of my book. Was it worth it? Would I recommend the experience to other writers? With publication over a month away at the time of writing, the jury is still out. Overall, however, my experience with the crowd-funding publisher Unbound (“a new way to connect authors and readers”) has been positive. Not just positive, actually, but also fun, frightening and exciting.

... Unbound was set up by three writers who were fed up with all the moaning ... Their model is generally hailed as innovative and modern. In reality, what they have done is to use the internet to revive the ancient practice of publishing by subscription. This is the way that Dr Johnson published his Dictionary and it is also the way that many novels were published in the 18th and 19th centuries.

... Unbound has to decide whether they want your book. It guards its gate as carefully as any traditional publishing house. Equally, however, it can afford to take a punt on a risky book in a way that other publishing houses often can’t. This is because, before Unbound publishes, the writer has raised the money in subscriptions (in my case that £10,000) to cover the production costs of the book. Unbound might not always win but it can’t lose. Clever, isn’t it? The financial deal they offer to authors is also attractive: once the book is published, the author gets 50% of royalties.

... I needed approximately 500 people to each pledge £20 in order to raise the £10,000 required. In return, these subscribers will get a beautiful hardback copy of the book with their name in the back. People who contribute more money can get other benefits such as an invitation to the book launch or lunch with the author. To help a writer raise the subscriptions, Unbound makes a video about you and your book, and sets up a web page with an extract from the book and a biography. ...

It can be embarrassing emailing your friends and neighbours again and again. You have to become adept at using social media, and you need to go to any writing-related event to which you are invited and market yourself shamelessly. ...  The whole process is hard work – sometimes frustrating and sometimes bruising. You know exactly who has signed up and who hasn’t. You learn not to take it personally ... 
Once you get the subscriptions you need – in my case, it took six months of hard work – Unbound operates as any traditional publishing house would, dealing with editing, proofreading, cover design and publicity. ... 
... how does Unbound go about selling the book to a wider audience? Unbound has recently signed a deal with Penguin Random House, who will now deal with the distribution of Unbound books. This is a huge coup. For Unbound writers, it means the possibility of a small, personal publishing service with access to big publisher distribution. Isn’t that what most writers would like?  ...
Unbound believes that its subscribers will keep pledging. It is now publishing the second books of some writers, and reports that those authors are finding it easier to raise the subscriptions a second time around. That should be true. After all, you already have an email list of all the people who signed up before.

I would now be loath to return to traditional publishing, even if I could. Unbound was there when I needed it, while the mainstream publishing industry certainly was not; it just didn’t have the nerve for my book. And I won’t forget that fact. Other than the question of raising the subscriptions, I can’t see any downside to the Unbound model at the moment. ...
This blogger recalls the large number of people who have urged authors and publishers to come to terms with the internet and new technologies and to come up with new business models rather than demand reforms of copyright law.  This approach to publishing has the attraction of using the internet and the social media to good effect while adapting a model, based on subscription publishing, that is centuries old.

Monday, 25 May 2015

A battle without winners, as Spain examines early results of its "Google Tax"

From Míchel Olmedo Cuevas and José Luis Caballero (both of ECIJA) comes the following guest post, on a subject that Míchel has already written about (see "Copyright in Spain: a month without Google News", here, "Exodus 2.0: pirate sites and the seven seas", here, and the finally "Spain: Did the “Google Tax” really change the market?" on the IPKat here) -- royalty rates paid in Spain by news aggregators for indexing news published in Spanish newspapers:
Spain: A battle without winners

Aside from being chosen as a location for filming part of the 5th season of the HBO series “Game of Thrones”, Spain has also hit the headlines because of other IP-related issues, like the recent modification of its Spanish Intellectual Property Act (an analysis of its implications can be found here), that includes the approval of royalty charge, to be paid by news aggregators indexing news published by Spanish newspapers (comments on the implications of this measure can be found here and here), that caused Google to cease offering their news aggregation services in Spain.

Reactions to the so-called “Google Tax” (that has nothing to do with the British legislative project to tackle tax avoidance by multinational companies) have been mostly negative, with even editors for online Spanish newspapers siding with Google on the issue, stating that they wonder how long it takes some traditional publishers — victims of their own initiative — to ask Google to reopen Google News”. The position held by the ones criticizing the reform is not baseless, considering the recent example of Germany, where all newspapers ended up asking Google to take them back into the system.

November 2014 (thousands)
In Spain, we have had to wait some time for AIMC (Asociación para la Investigación de Medios de Comunicación or Association for the Research of the Media) to release the data reports for the traffic fluctuations in the past three months, so we could observe what the real impact of the “Google Tax” has been in the online news sector.

March 2015 (thousands)
First, we must look at what the data was before and after the reform of the Intellectual Property Act came into force, on 1 January 2015, looking at the unique online visitors the top three Spanish online newspapers had on November 2014 and on March 2015.

Leaving aside the eruption of Twitter (that was not included on previous reports), there is an undeniable decrease in the number of visitors of up to a 12.4% in the worst case (the almost 360K visitors lost by sports newspaper As.com), meaning that there has been an impact on viewership of online newspapers, but not so big, especially when we take into consideration the growth curve of the penetration index for the last years.

Since 1999, there has not been a year with a growth level lower than +2.5%, remaining over the +3% from 2006 onwards, but suddenly, from April 2014 until today, there has been a clear deceleration in the growth rate, as it has only been able to jump +1,7%, way below the expectations of the market.

Notwithstanding this, the slowdown in growth has not affected dramatically the outcomes of the major Spanish media companies. As recently featured in the Spanish media, the PRISA Group, which includes newspapers such as Elpais and AS, made an overall profit of 8,68 million Euros in the first quarter of 2015, while it closed the previous year with a high consolidated loss. Additionally, Unidad Editorial Group (Elmundo, Marca) has reduced its losses to 2.5 million, whereas in the same quarter of 2014 they exceeded 20 million Euros.

Nevertheless, the previously mentioned improvement of the results is due to multiple elements and the revenues from digital media are only a small part of them, so a possible decrease would not have had a great significance on the overall picture yet. Actually, as data for number of subscriptions or revenue by advertising will not be shared by the owners of the newspapers until the summer, we can only speculate with the shortage of profits that this situation has caused, but it is undeniable that there has been a negative impact on the market, even though not as negative as in Germany. 

In this sense, we should take into account that revenues from online advertising are getting more relevance by the day, so any decrease in the number of visitors as well as subscriptions could have a negative effect in the future. Accordingly, this reduction of visitors will probably be significant for the coming media industry results.

As we await for CEDRO and the Ministry of Culture to determine the “fees” associated with this “tax” and the process collect to them, the first obvious consequence is that all visits that came from users who accessed the websites of Spanish newspapers after searching with Google News will not generate any payable sum, inasmuch as the Google News aggregation service has been replaced with a mere search engine, that does not fall within the services subject to the “Google Tax” regime. 

Masterminds Discuss Fair Play, Equitable Rewards and Market Success in Patents and Standards

I had the great privilege of presenting and debating on the topic of “IPR & Standards – Market Failure or Market Success (FRAND Commitments, Obligations of Licensors and Licensees)” at GCR Live’s IP & Antitrust Asia-Pacific conference in Seoul, South Korea, last week.  Distinguished speakers at the event included locals and those from organisations around the world in government agencies (e.g. the Korean Free Trade Commission and the U.S. International Trade Commission), industry, academia and legal practice.
With a legal and economic backdrop, and focus on my specialised subject of standards and patents, the event provided an ideal opportunity to present updates on the rude health of the smartphone and mobile services markets. These are clearly the most SEP-intensive product and service markets in existence: including cellular, other wireless, video and audio compression technologies.

Theories of dysfunctionality and abuse in patent licensing, with SEPs in particular, predict that alleged hold-up and royalty stacking will affect and harm markets and consumers in various ways by reducing R&D, slowing innovation, extracting excessive aggregate royalty payments, stagnating consumer prices, impeding or foreclosing market entry and increasing vertical integration.
I racked my brains to identify and measure all conceivable factors driving good, bad and neutral effects in smartphones and cellular service markets. However, in these “poster-child” markets for (F)RAND-based SEP licensing evidence shows opposite effects to those predicted above, at least since the introduction of 3G technologies 15 years ago and with mass-market smartphones and mobile broadband since around 2007. Everything seems very healthy and, if anything, improving:
  • Consumer adoption and consumption increasing
  • Innovation and technical progress accelerating
  • Cellular technology R&D up 74% to $46bn since 2009
  • Time-to-market for new standards shortening
  • Technology/device OEM vertical integration collapsed
  • Market entry downstream in smartphones burgeoning
  • Concentration in handset OEM supply low and declining
  • Smartphone prices falling on average, and dramatically so, on a quality-adjusted basis
  • Patent royalties are a very small proportion of prices for consumer products and services
“Problems”, therefore, remain no more than unproven threats, after all these years of market success…
Click here for my presentation deck with the supporting facts and figures. 

Friday, 22 May 2015

'Breakdown and Transformations in Innovation Economics: a webinar

IP Finance's friends at Oxfirst have another webinar coming up next week -- on Wednesday 27 May, to be precise. It's hosted by Patrick Terroir (right) on the subject of 'Breakdown and Transformations in Innovation Economics'. According to Oxfirst's explanation:
"IP is on the brink of becoming a consistent, transparent transfer instrument and there is a need to explore how these ‘versatile articles of trade’ (McClure 2008) can be leveraged in more open and efficient markets for innovation.

The introduction of new market mechanisms related to IP such as securitizations, pooled patent portfolios, public auctions and a financial exchange offer new opportunities to diffuse and reward inventors. Alternative IP market techniques have the potential to promote enhanced transparency, security and liquidity in markets for technology that cannot be achieved through bilateral licensing agreements.

In this talk Patrick Terroir addresses the opportunities and pitfalls associated with efforts to establish markets for IP".
The registration URL is https://attendee.gotowebinar.com/register/6259358435034874369 (it's also accessible by phone). Good news is that Oxfirst no longer require registrants to have a business or corporate email address: your personal one will do.

Wednesday, 20 May 2015

When iconic may not be enough: the saga of FAO Schwarz

"Iconic".  The Merriam-Webster dictionary defines it, inter alia, as follows: a: widely recognized and well-established" such as "an iconic brand name", or" "b: widely known and acknowledged especially for distinctive excellence", such as an iconic writer", or "a region's iconic wines."

What happens when an iconic store name is intertwined with one of the most iconic scenes in all of moviedom? Surely this must be a sure-fire recipe for brand success. Sadly, however, even being iconic is not enough—just ask FAO Schwarz, which announced last Friday that it was vacating its famous toy store on Fifth Avenue in Manhattan for a presumed relocation to a less pricey site.

I don't think I am unusual in saying that, when I first visited New York more than 50 years ago, one of the top destinations was the FAO Schwarz store. My aunts made a bee-line for several near-by retailers offering clothing that they could never afford. For me, however, there were only three places in Manhattan that I wanted to see—the Empire State Building, the Stature of Liberty and FAO Schwarz. I don't know how I came to know the saga of the store, growing up as I did many hundreds of miles away in a small town in Ohio. But so I did, as did all of my friends. By the time that I made it to New York, I knew that there were all kinds of toys in the store that we could never afford. No matter—it was enough to be able to enter and look at them, secure in my belief that the sons and daughters of the famous and wealthy would provide the custom to support the store.

If that were not enough, the store was the setting for the unforgettable scene in the 1988 movie—Big, in which Tom Hanks joined the boss of the mythical toy store (having been filmed at FAO Schwarz, something that we all recognized), as they played a duet on a foot-operated electronic keyboard, performing "Heart and Soul" and "Chopsticks." If any US toy store was iconic, it was surely FAO Schwarz, where the movie scene merely validated what I had long-known as a child—FAO Schwarz was a toy store like no other.

It was against that backdrop that I was so taken aback by the Reuters report that the store was leaving Fifth Avenue due to the high rent being charged and the other costs of operating the store at the Fifth Avenue location .By July 15th, the company, which was acquired in 2009 by the much less up-scale toy company, Toys "R" Us, will take an early exit from its lease. The exact financial details were not disclosed, although the store did state that it was looking for a new Manhattan location. Previously gone were the FAO Schwarz locations in other cities. At the most, the store advised, in addition to the relocation of the Manhattan site, it will maintain an online presence as well as some boutique presence in various stores of its parent, Toys "R" Us. The next day, Saturday, the store was packed with shoppers, many not even aware of the announcement of the previous day. Typical was.Laurent Orne, visiting from France with his family. He took a number of pictures of his six-year old daughter, aside the well-known toy soldiers adorned in red uniforms, observing that "we wanted to come here because this store is mythical".

Reflecting on all of this, it gives me pause to ask—what exactly is the value of such an "iconic", "mythical" name? True, the store is not apparently shutting its doors, but it is taking a step that will seemingly impair the aura of the name. Indeed, the question can be asked: is FAO Schwarz in the throes of a death-spiral, where the new store location struggles to find the combination of merchandise plus price points that will provide it with sufficient revenues? Will the typical customer in a Toys "R" Us store seriously consider paying the higher price tag of the boutique FAO Schwarz merchandise? However one looks at it, it seems to me that the brand is a fight for its long-term survival, no matter how iconic it is as part of American culture.