Launching the 'mashup' book genre

Published: Nov 7, 2005 7:49 p.m. ET

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Commentary: Can 'a la page' expand the book market?

By

BambiFrancisco

(Editor's note: Bambi Francisco's Net Sense column now appears twice a week, and she's just launched a weekly video product highlighting key interviews, The Bambi Francisco Files.)

SAN FRANCISCO (MarketWatch) -- Amazon.com's plan to sell individual pages from books will test whether the online retailer can do for publishing what Apple's iTunes has done for the recording industry.

Whether it can bring new vitality to the book trade is an open question, but what's clear is that the Amazon.com AMZN, -0.05% scheme will unbundle books in much the way Apple AAPL, -0.92% has broken down albums.

It is a novel idea indeed, or at least little-seen since the days when the writings of Dickens and others were serialized, even if it's difficult to imagine anyone wanting to buy a great literary works in snippets. I can't even conceive of buying my coffee-table books -- on art, architecture and top golf courses around the world -- by the section.

Yet I can see the utility in purchasing pages or chapters of travel books, recipe books, self-help books, textbooks, manuals on trading strategies, and books on how to renovate your house to play various games of poker. If you want to play a cruel joke on someone, you might even buy them each successive chapter of a crime thriller, except for the very last one.

The question is: Does this type of "a la page" or "a la chapter" book vending expand the market for books? Digital single sales, recall, aren't expanding the market for music, nor are they helping to offset shrinking CD sales. Basically, Apple's iTunes store has done more for Apple AAPL, -0.92% hardware sales than sales at major record labels.

But I think Amazon's effort will ultimately expand the market for books for a couple of reasons: Consumers can use it to create their own personalized books, and they can discover new ones.

Your imprint

Let's look at the personalized-book concept. What if you were only interested in creating the ultimate cookbook for foie gras recipes and wine pairings? You might peruse all cookbooks and grab favorite foie gras recipes and wine pairings (not just Sauternes) from each. What if you wanted to create a personalized travel book consisting of the highest mountain peaks, with excerpts from books that speak about each one? You might buy chapters from different sources to create that book.

This kind of creative splicing and dicing is called a mashup, and it's all the rage across the Internet these days as users deploy their own creative approaches to design their ideal final priduct.

Consider this key finding in a recent from Pew Internet Research & American Life report: "Teens are not content to consume online content passively." About 19%, nearly one in five, are content re-mixers, as are 18% of adults.

My favorite mashup -- which I pointed to some time ago -- is Paul Rademacher's combination of Google GOOG, +0.23% maps and housing listings from Craigslist, part-owned by eBay EBAY, +0.21% Last week, Yahoo's YHOO newly enhanced Yahoo Maps included "mashup" possibilities as well.

As for discovering new books, Amazon's collaborative filtering technology already does a great job of suggesting books to me based on my previous purchases. Now, Amazon.com can offer me excerpts or chapters from undiscovered books based on certain pages or chapters I've purchased. Additionally, the more a person can see inside a book, the more sales are generated, if Amazon is any guide. More than half of the Seattle-based retailer's book sales are of books that consumers can search inside.

The potential 'Apple' effect

To be sure, this mashup, or personalized book, idea might be more appealing as a physical book.

If these are pages that are just available online, you're tied to your computer, and therefore you have the option to search for information that's free on the Web -- which is always psychologically appealing, even though "free" always comes at a cost.

Additionally, there is also the potential "Apple problem" - namely, that publishers and book vendors might not sell enough pages or chapters to make up for the lost sale of an entire book.

That is, in fact, the case with Apple's AAPL, -0.92% iTunes, which has changed buying habits to one-track purchases from 10-to-14-song-album purchases.

Yet, despite its undeniable popularity, iTunes isn't moving enough tracks to offset the steep decline in CD sales that record labels are suffering from.

The biggest change in the recording industry is this disaggregation, according to Larry Kenswil, president of eLabs Universal Music Group. "We sold 12 to 14 songs for $10 wholesale," he told me in a recent interview. Today, digital singles at 99 cents apiece are far more popular, but the volume isn't there.

Universal Music Group, which is 90%-plus owned by Paris-based Vivendi Universal, posted a 1.5% decline in sales in the third quarter. Sure, there was growth in digital activity, but it was offset by a decline in physical sales of CDs, which constitute 94% of UMG's revenue.

According to SoundScan, album unit sales in the first nine months of this year fell 10.4%. Meanwhile, digital music sales in the U.S. have been running steady at 6.6 million downloads a week through May.

Indeed, I've only downloaded one album via iTunes. But my library is filled with a number of CDs purchased throughout the years and recently burned. Kenswil said his PC is also loaded up with a number of CDs he's burned.

Essentially, the digital revolution hasn't motivated people to buy more music -- just more iPods. Apple recorded $241 million in third-quarter sales from its iTunes music store, and iPod accessories combined, but $1.1 billion in sales from selling 6 million-plus iPods.

Mashup books

Since Amazon.com is still in the development phase of this service, it's unclear how it will ultimately offer such pages or chapters. So far, Amazon said it's selling pages for a few cents a page, and they'll only be available on the Web.

I asked Amazon if it was considering allowing consumers to buy a physical version of a personalized book and wrap it up with a beautiful cover and a big fat bow, and if Amazon's Jeff Bezos thought a la page selling would expand the book market.

Amazon didn't responded to my physical-book inquiry and said in an e-mail only that Bezos hasn't made any statements about whether this initiative will expand the overall book market.

Book retailers and trade groups representing authors apparently don't see any harm with the book-mashup idea. They also think selling by the page might expand their market.

It's another way of allowing people to discover new works, and that discovery process has helped build demand in the past, said Anne Roman, a spokeswoman for Borders Group BGP, -1.23% which partners with Amazon to handle online sales, including fulfillment and tracking of inventory. (Borders reports its latest quarterly results Nov. 15.)

"The concept seems fine," said Paul Aiken, spokesman for the Authors Guild, represent more than 8,000 published writers. As to whether it would expand book sales, it might increase royalties for authors. ... It's a potential new stream of income."

It's about the non-hits or the tail

Indeed, the Internet is already expanding some parts of the book market. At the very least, it's helping to keep overall sales from declining. Overall book-publishing-industry sales rose 1.3% in 2004, decelerating from 4.6% in 2003, and 6.4% in 2002, according to AAP.

Yet within overall retail sales of books, used books have been surging -- thanks to Amazon and eBay EBAY, +0.21% Sales of used books rose 11% to $2.2 billion and accounted for 8.4% of total book sales in 2004, according InfoTrends Cap Ventures. What's more, within the used category, non-education books jumped 25%.

The growth and popularity was due largely to the Internet's providing "transparency into the industry inventory" and to consumers "becoming more comfortable buying them," according to InfoTrends.

Underscoring the potential market for undiscovered books and the vast inventory of books never given the time on physical bookshelves is this little tidbit from Chris Anderson, who is writing a book about this so-called long tail. (Read Chris Anderson's The Long Tail blog for more insight into this phenomenon.)

According to Anderson, more than half of Amazon's book sales come from outside of the top-selling titles carried by the average Barnes & Noble BKS, -0.83% store, suggesting that the market for books not currently sold in even the largest physical stores is much bigger than for those that are.

Finally, we've learned that the Internet consumer typically gets what he or she wants. So, if individual pages or chapters are in demand, it doesn't matter if this way of selling cannibalizes book sales or not. It's what the consumer wants, and no publisher or book retailer can fight that. They just need to adapt.

And, at the end of the day, what does the book industry have to lose?

As Borders Group's Roman said: "Book [sales] are flat to down slightly. ... May as well try something."

You can receive this column via e-mail. Sign up for Bambi Francisco's newsletters.

Of note, of approximately 1,800 respondents through Monday to a MarketWatch reader poll, 45% think shares of Google will end November at between $400 and $450 a share. Cast your vote here.

Sound off: Would you buy Google at its current price? E-mail: Bambi.Francisco@dowjones.com or visit blog at Bambi.blogs.com.

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