Perhaps the most significant issue emerging in 21st century publishing is the tension between copyright protection and a general sense of entitlement expressed in the motto, “Information Wants To Be Free.” Though we’ve tried to take a balanced view, it’s hard to be neutral in the face of blatant, institutionalized piracy. As the legal and moral issues come to a head in a trial that has just commenced, E-Reads’ Michael Gaudet analyzes the cynical and contemptuous justifications given by the operators of one website trafficking in copyrighted work. Unnamed and unindicted in the Swedish proceedings are, in Michael’s words, “millions of tempted, anonymous Internet users in homes around the world.” Would one of them happen to be you?

– Richard Curtis

This week in Sweden, the people behind the infamous website ‘The Pirate Bay‘ are going to trial again for facilitating copyright infringement among file sharers. It isn’t the first time Sweden has tried to take them down on behalf of plaintiffs like Warner Bros and 20th Century Fox. But this international group has proven to be a lot more slippery than past violation targets like Napster in the United States.

The defendants have launched a full blown new media campaign they call “#Spectrial” to promote their defense, speak about their motivations, and mock the proceedings. After the first day at trial, the prosecution decided that half of the charges probably wouldn’t stand up against The Pirate Bay (reported by the UK Register) and the defendants began to boast more loudly that their movement won’t be stopped (“EPIC WINNING LOL,” was what one of them commented on Twitter).

Even though The Pirate Bay doesn’t distribute any illegal files itself, its website is essentially an enormous pirate map that lists millions of user-generated shared files, so that visitors from all over the world can quickly find music, movies, pictures, and e-book texts that their internet peers are sharing. Most of the listed files are ripped from purchased media, and in some cases they are leaked material that has yet to be made available at retail.

The Pirate Bay Makes No Apologies For Promoting Theft

The Pirate Bay’s advocacy for unrestricted file sharing is one of the most confounding issues for modern publishers with digital distribution. Evangelists for piracy appeal for protection by evoking moral outrage at the injustice of governments policing private communication and hindering fair use. And they raise some difficult questions: does DRM curb our most basic liberties to communicate and creatively manipulate new ideas? Is copyright unlawful? Is copyright infringement fair retribution for inefficient corporate distribution practices? Should governments keep all internet traffic private? A grassroots movement to protect the opportunity to share pirated files says the answer to all of the above is an overwhelming “yes.”

All the defendants (Fredrik Neij, Gottfrid Svartholm Warg, Peter Sunde and Carl Lundström) sincerely believe they’ve done no wrong in ignoring all the requests from copyright holders to prevent the copyright abuse rampant among the Pirate Bay users (see their page of dozens of spurned “takedown” notices and Pirate Bay retorts – “Legal Threats Against The Pirate Bay“).

When asked if they felt like “defendants, or defenders of technology,” Peter Sunde replied: “I think it is something in between actually. We have a personal liability for this, we have a personal risk which has some impact on our feelings. But definitely it’s not defending the technology, it’s more like defending the idea of the technology and that’s probably the most important thing in this case – the political aspect of letting the technology be free and not controlled by an entity which doesn’t like technology.” (sic, via TorrentFreak)

A screen grab of the “Top 100 Audio Files” at The Pirate Bay (click for larger version)

If you’re relatively unfamiliar with The Pirate Bay, keep in mind that it’s a short but important part of the file-sharing wheel using a technology derived from BitTorrent software. BitTorrent, Inc. is the San Francisco-based company that helped develop the technology to assist everyday users in distributing files more efficiently, and while they now have partnerships with many of the plaintiffs, BitTorrent and the similar companies designing software based on BitTorrent have no control over how The Pirate Bay operates.

As More People Share A Seed, A Torrent Gets Faster

When users want to share a file from their computer, they create a “torrent”, which is a small proxy file that is “seeded” to the internet, allowing anonymous users to find and download the master file. The benefit is that download speeds typically increase when many users are sharing the same file. If you download without sharing, you’re identified by the system as a leecher (to encourage reciprocity). The Pirate Bay servers are what is known as a torrent tracker, a website where torrent seeds are listed by anonymous users like classified ads. Visitors can sort through pages of organized listings for seeds of the latest television shows, albums, and movies that users dare to share. A quick glance at today’s “Top 100″ listings showed that the most popular movie to download at that moment was a pirated version of The Day The Earth Stood Still (2008), with over 16,000 people actively sharing the file at any given moment, meaning that the whole film could likely be downloaded in less than half an hour.

Even though The Pirate Bay is the most famous destination, other popular torrent tracker sites exist, frequently below the radar of Google and other internet search engines because they list files that break copyright laws.

Keeping It Off The Record

With a name like “The Pirate Bay,” no one believes the group’s intentions were entirely legitimate to demonstrate freedoms. The Pirate Bay was designed to harbor pirate traffic safely from government authorities. Individual torrents communicate across the users’ computers, not over The Pirate Bay servers, which makes the technology so popular with anonymous users anxious to avoid obvious digital trails that could turn up on court seized computers. Anonymous tracker websites are usually expensive to maintain, because the visiting traffic requires remote servers and extensive bandwidth that can cost a small fortune each month to keep online. The Pirate Bay sells advertising space on its website to offset these costs, however it’s unknown what their revenue really is.

“We know that about 80% of all the traffic on the internet is torrent related. About half of these 80% are our traffic . Therefor, 40% of all internet traffic is passing through The Pirate Bay.” (sic) - Peter Sunde

If that’s truly the case, then it’s safe to assume they’ve had the opportunity to capitalize on their traffic, benefiting them more than covering basic infrastructure costs, which is why MGM, Microsoft, and the others feel they will be compensated for the requested $14 million in damages by The Pirate Bay with this latest trial. The defendants insist they haven’t become rich and they won’t be able to pay any possible court ordered payments – another reason they believe the whole case against them is misguided.

“It is legal to offer a service that can be used in both a legal and illegal way, according to Swedish law,” said their lawyer, Per Samuelsson. (The Local)

The effort to shut down The Pirate Bay website and stem the flow of illegal material is unlikely to happen with this court case (or ever, because of their server fail safes – Wired, 2006). The Pirate Bay has been dodging legal bullets for many years by disrespecting lawsuits, hiding its practices, and cleverly documenting that it is not actually ever in possession of the offending material. As difficult as it is to prosecute individuals who are caught with illegally obtained files, it’s actually much more complex to argue that the network technology itself is partially liable, especially when the technology is constantly evolving. It’s much like trying to shut down the entire English language so that individuals can’t utter offensive (or proprietary) words, especially when the individuals are using Morse code.

But the underbelly of this incredible defense of technology is that the primary use of The Pirate Bay is to traffic valuable media for free without the consent of copyright owners and to obfuscate the thieves’ trails. The prosecutors are hoping to make it clear that The Pirate Bay’s intentions are malicious, and eventually someone will succeed.

Theft Prevention Vs. Freedom On The Internet

The current trade-off for a marketplace that employs copyright is that some usages will be unfairly prohibited and some theft is to be expected, but the marketplace is broader because of the overall financial incentive to content creators. If the courts should ever decide that an individual’s right to privately communicate over the internet, even if it’s to share stolen material, is worth more to society than copyright protection and Draconian preventative measures, most digital media would be rendered worthless to retailers and there would be a dangerous upheaval for most industries. Luckily for publishers, the file sharing crisis isn’t seen by authorities as the “freedom” case The Pirate Bay wants it to be. But nervous industries are still trying to placate disgruntled internet users by finding acceptable common ground, like cheaper, DRM-free MP3 sales, to keep their content from being further devalued by theft.

Companies that are slow at adapting to new market demands to ease theft prevention are facing the worst of the backlash from consumers. Many of the anonymous users of The Pirate Bay are also quick to complain that they can’t afford the high prices of the latest entertainment media and software tools, or that they can’t buy it in the formats they want (high bit-rate audio files, DivX, etc.). They also feel that “free” acquisition contributes valuable mind share and publicity for companies, which turns into revenue in the future; the popularity of a hit album in file sharing circles might mean more long-term sales because the number of satisfied listeners increases (although the correlation is a dubious one outside of the most exceptional scenarios, such as Radiohead’s release of In Rainbows). Some file sharers gloat how they enjoy “sticking it to the man” as retribution. And more and more are arguing that copyright itself is an unfair hegemonic practice that has evolved into a monster (see Richard Stallman’s “Misinterpreting Copyright“). This attitude hasn’t diminished any in the 8 years since the court rulings that shut down Napster. But it’s unclear how many people tacitly understand that these arguments are all being used in defense of negligence to pay what content creators have asked for their work.

Ultimately, The Pirate Bay is quickly becoming more than just another famous example of how the internet offers temptations to transgress social taboos and ignore local authority. Its enormous scale indicates that it has become the latest spearhead of a generation’s full-on war against copyrights and preventions against theft. And, what’s worse is that today’s court battles can’t represent the best defense when the real fight takes place daily in the minds of millions of tempted, anonymous internet users in homes around the world.

- Michael Gaudet

With the Authors Guild getting angry at Amazon’s Kindle 2 for read-aloud technology (see their statement), many readers (and writers like Neil Gaiman) are wondering how a robotic-sounding voice reading is an infringement on the rights of a published book. And if that’s an issue that requires prevention, then why haven’t other non-professional readings been restricted (like when you read a bedtime story to your kids), and could they be in the future? And what about the sight-disabled readers and their legal right to access text in this manner?

I seriously doubt the Authors Guild is going to sue moms for reading Dr. Seuss, or sue the blind, or sue publishers for allowing that to occur. What’s of concern is who’s making money from the added value of the reading performance, whether it’s a digital voice or not, and the Authors Guild is trying to make sure that a line is drawn in the sand now before an income stream (audio “performance” rights) dries up, because new technology often gives distributors a chance to make extra money before the author realizes how valuable it is.

Decades ago, audio rights were pretty unpopular. They were sorted into many publishers’ contracts as ancillary, or completely left out – that is to say, unless it looked profitable for more than just rare radio adaptations. (No one really even tried to distribute novels performed and recorded to LP records–who wanted to flip a record every 30 minutes for a ten hour reading?) What changed all this was the age of the cassette tape: car radios with cassette players and the Sony Walkman. With the new convenient medium that lent itself well to long listening sessions, there was a new market. And publishers eventually started making extra money from the potentially lucrative books-on-tape edition of their texts, often without having paid authors any additional advance for the audio rights. This was good gravy for the publishers when the audiobook was a hit, even though the books-on-tape market was relatively tiny compared to book sales. By the time that CD technology increased the quality and cost efficiency per unit further, authors and agents already knew it was worthwhile to negotiate better terms and payments for the audio rights, to make sure that this commodity was now compensating everyone properly. In some cases, the rights were starting to be reserved by the agents so that they could be sold to the growing field of specialty audiobook publishers. In the last 8 years, MP3 file distribution of these recordings (especially through iTunes or Audible) has only made the market more competitive. So, unlike 40 years ago, today everyone is aware that the audio rights can make money when handled properly.

The primary distinction of the audio rights is not so much that a real human voice is involved and compensated; it’s more that a publisher consented reading or “performance” of the book has controlled distribution (each copy is accounted for), and that the proportionate value of this performance makes money for the publisher and author. This is why parents reading to their kids isn’t an issue, or even teachers reading in a classroom. In those cases, the average reader is adding a negligable value (commercially speaking) to the book by speaking it aloud themselves, and that’s fair use. Now if that reader wants to go on stage (or the web) and sell their reading performance without publisher consent, it’s another story.

With computer assisted reading, the value added is a bit more contentious. First of all, there are disabled readers who require text to be spoken aloud, and digital voice reading is a welcome technology for them. This service is valuable to those people, sometimes at a premium. However, the typical expectation is that disabled readers are adding the value themselves through assistant technology, and that they haven’t paid inclusively for that assistance when they purchased the text. For example, you don’t pay an additional $1 for read-aloud service offered to you from the book you’ve bought. You paid $357 for the Kindle 2, which adds that service to the book.

The cost of the digital voice application is a moot point to publishers, agents, and authors. What worries them is that in the future the voice applications are going dramatize the text too well, and that the additional exceptional value isn’t compensated to them in any way under current contracts. Amazon’s Kindle 2 was developed with the read-aloud function to add value not only to the Kindle, but to make the books themselves a better commodity–to sell more books.

Picture the future, when you’ve got an e-book of the latest bestseller and you ask your little e-book device to read it to you. Right in front of you pops up a digital hologram of John Houseman (licensed to the device by the actor’s estate), and he proceeds to read the book to you in his nuanced dramatic voice (recreated through excellent programming). He reads Chapter 4 to you while you prepare dinner in the kitchen. He sits in the passenger seat, delivering chapter 14 as you commute to work the next day. This is essentially the benefit of read-aloud, although the Kindle 2 or Apple’s Text-To-Speech isn’t quite that far advanced yet. However, I’m sure you can see that a good digital voice has the future potential to add a lot of value to the reading, enough to give today’s properly recorded audio books something to worry about.

The issue is that this value added isn’t accounted for in current distribution contracts between the publisher and e-book retailers like Amazon, and potential publisher revenue might be getting lost (or cheated away from the future), and that’s what rankles the Authors Guild. I’m not a fan of sword waiving tactics, but there needs to be new descriptive contract language that pertains to the read-aloud service. I’m not sure how accounting for the read-aloud service in financial terms can be done until there’s a proven track record for consumer habits with this technology. Those numbers aren’t available yet. But Amazon and other companies are investing in the technology more and more, so someone sees there’s money to be made there in the future.

In many ways, it’s an issue not unlike protecting song performance rights so that companies like YouTube can’t make money off “free” performances of copyrighted material. (I’m not sure an amateur 8 year-old singing Miley Cyrus songs for YouTube has much value, but aggregate all the entertainment from thousands of such videos and it starts to paint a different picture until it appears obvious the songwriter is due some small increment of YouTube’s revenue from distributing those clips.) Publishers don’t want to chase after innocent people, but they also don’t want to encourage wholesale ripoffs with loose legal terms. So maybe it isn’t a bad idea to start new discussions with all the major players now about the audio rights for e-books and bring the agenda to Amazon’s Jeff Bezos or a company like Google. I’m looking forward to having David Niven read me Sherlock Holmes stories on my Kindle 4 and I’d hate for anything to stand in the way.

- Michael Gaudet

The Morgan Library is the most museum-like library in New York City, and so it was fitting that Amazon’s Jeff Bezos (pictured above) took the stage there this morning to announce the latest version of his book antiquifier known as the Kindle. His grand vision, often repeated throughout the hour long presentation, is that Amazon wants to see nothing less than every book ever published available to all Kindle owners in less than 60 seconds. Is the Kindle 2 going to be the device with enough popularity to create such a seismic shift in readers’ habits that the world of publishing bends its back to make this happen? Well, maybe. Just maybe. Apparently e-book sales have jumped to 10% of all Amazon book sales in just one year thanks to the first device, after years of staying well below the radar, and now Amazon wants us all to see the writing on the, err, Kindle. I expect word of mouth and adoption to be stronger this time around because the product deserves it.

The new Kindle 2 ($357 and shipping Feb. 24th) offers enough improvement from the original that I can now recommend it strongly to friends and family:

• It has 3G wireless for faster download speed (especially for browsing the Kindle store).
• It uses Amazon’s latest ‘Whispersync’ service to keep your Kindle’s books and notes backed up on the internet cloud and synchronized to other Kindle devices you may own.
• Its shape is now thinner than an iPhone (less than half an inch thick) and perfectly symmetrical, with rounded corners and softer buttons.
• The latest e-ink screen redraws slightly faster (20% over the original) and now does 16 shades of gray instead of just 4.
• 2GB of built-in storage.
• Charging via USB mini-port (everyone has these cables by now).
• It has longer battery life (now up to two weeks between recharges).
• It has implemented a pleasant text-to-speech computer voice reader for any text (it’s better than Stephen Hawking).
• It has a new 5-way button navigation instead of the old up-and-down wheel.

Now, none of these things represent bleeding edge technology and are probably a little more anemic than what most of us dream about in a best possible e-book device. For example, any page-turning lag is still annoying (especially in the age when Google has taught us that people can’t bother to wait even 0.5 seconds more than they have to for a page to load). 3G service isn’t going to make a huge difference in speed for most people downloading new books that are typically 900K. And grayscale screens? Don’t even get me started. But what Amazon is offering that makes the Kindle 2 so appealing is their dedication to the book delivery service. Jeff Bezos wants the device to disappear in your hands while you read it, because no one pays attention to the paper or binding of a book when they get wrapped up in the story. They don’t want distractions. So, the device itself is really just something meant to be unpretentious, transient, and replaceable. What they are selling is access to published books in the most convenient manner yet possible. Amazon is dedicated to helping readers find and download books quickly, and the Kindle 2 serves that purpose better than anything else. And for that I think they have a winner.

What makes the Kindle 2 experience more likely to win people over is that Amazon still seems to be letting the Kindle ride its tide of popularity instead of hard selling customers. More and more e-book content is being converted and added to the Kindle online store every month. The incremental technical improvements in the Kindle 2 are the type that give consumers confidence that the company has a long term investment in their satisfaction, and that more improvements will surely come downstream. Original Kindle owners are even being given a two day opportunity to jump to the head of the queue for pre-ordering the Kindle 2, and what better way to spread the word than allow the converted the first opportunity to evangelize. Instead of a discount or trade-ins, this means hand-me-down first-generation Kindles are going to be circulating amongst friends and families.

Stephen King, at Jeff’s invitation and previewing his new Kindle exclusive short story “Ur,” read a passage where students confront a teacher who has never seen a Kindle before. The teacher likes to think of himself as “old school” and defends the tactile properties of the trusty paper book, such as the musty smell acquired with age. The Kindle-familiar students counter that the words are still the same, no matter what old school or new school device is being used to read them. And that’s the epiphany that many readers are similarly experiencing thanks to e-books. We want ideas and stories foremost, and the digital experience is helping us get the access to texts that generations before us never had unless they lived with a very deep library. Jeff and Stephen have understood this for years. They’ve both been trying to get more people interested in the digital distribution of books for as long as the e-book industry has been around and they can feel rightfully proud that the Kindle phenomenon is really taking off.

- Michael Gaudet

Although it was only alluded to once by Mobipocket in public, the Mobipocket iPhone application is potentially Amazon’s best weapon for indoctrinating more Kindle customers and pulling the Mobipocket format away from obscurity. So, where is it?

At the IDPF conference in May, 2008, I watched Martin Gorner of Mobipocket state to the audience that they had plans to release the Mobipocket reader for more platforms, including the iPhone, before the end of the year. Mobipocket is tightly leashed by their owners, Amazon, so this was great news for Mobi fans. Mobipocket has never really supported any Apple OS before, and my brain enumerated the possibilities of a Mobi iPhone app. My first thought was that this could be the start of some really wonderful synergy for Amazon’s Kindle, because they’d be foolish not to join forces in a new application. And besides adding Apple support, maybe they planned to really update the Mobipocket Reader software and create a user experience on par with the Kindle’s user-interface or Adobe’s Digital Editions.

Just imagine that you could have a similar Kindle experience on your iPhone, shopping for books wirelessly, using a built-in dictionary, taking notes, etc, and at the end of the session all your book data would be sync’d with your Kindle account and back to your Kindle (through the Kindle’s wireless connection), if you had one. Amazon would sell more books, people might upgrade to Kindle devices for the larger screen real estate, and the Mobi format would really come alive, too, if its DRM was supported. It would just require Mobi and Amazon to allow readers to keep both their Mobi and Kindle purchases in the same library and allow for note/bookmark data in the cloud (on Amazon’s internet servers), so that customers’ libraries could be re-downloaded and synchronized across devices. Add special location aware services (via the iPhone’s GPS), special note export features (for bibliographies and personal footnotes), and then I’d be impressed.

Well, by the end of 2008 this never materialized. In December, Chris Meadows of the blog TeleRead surmised that Amazon put the whole project in the deep freeze so it wouldn’t undermine Kindle sales (“The mysterious case of the missing iPhone Mobipocket reader” and “Is Amazon sitting on the Mobipocket iPhone client after all?“). An anonymous source apparently told Chris that “Mobipocket had its iPhone reader complete and ready to ship as of August—but Amazon.com did not permit them to release it.” That isn’t hard to believe, but I hope there’s more to that story. I’d like to know why. Does Apple have secret ebook plans that Amazon is aware of?

In the meanwhile, other contenders have stepped up to the plate, offering E-Book software for the iPhone that comes close to the full potential, but not without limitations. For readers who take the time learn how to crack the DRM on their purchased E-Book files, BookShelf is an iPhone application that can read Palm .PDB and Mobi .PRC files, as well sync with “Shelf Servers,” which are libraries of content on the internet or on your computer (there are E-Reads’ books at Baen Webscriptions‘ Shelf Server). And, of course, there’s the popular Stanza iPhone application, that is a wireless Fictionwise storefront (with access to your Fictionwise eReader library bookshelf), as well as a terrific E-Book reader for growing ePub format. Yet despite supporting over a dozen other formats, too, eReader’s .PDB is the only DRM that works with Stanza, at the very least because of Fictionwise’s support.

Has Mobipocket lost too much time? It’s hard to tell. E-Book sales are still ramping up across all the major platforms (Sony, Kindle, eReader). Our expectations are that iPhone readers are adding to sales, not cannibalizing from other devices. The iPhone has something that the Kindle and Mobipocket should be envious of: popular mindshare with 18-35 year-olds. Every day Mobipocket or Amazon isn’t a part of that zeitgeist, it sets them as outsiders and it counts as lost revenue in the current quarter. Maybe Amazon is gambling that when they do enter Apple’s market, it will make up for all their time hemming and hawing. Maybe they just don’t see the money there, yet (but I doubt this). However, no one has delivered the perfect E-Book reader application for the iPhone yet, either. Let alone for Google’s Android or the new Palm Pre. It’s still Amazon and Mobipocket’s game to win or lose. At the very least, they can sell some ebooks. They just have to show up.

- Michael Gaudet

For the last year, the Kindle has been quickly selling out of its limited production runs, thanks in no small part to endorsements from Oprah (NYTimes: “Will Kindle get an Oprah Bump?”) and countless excellent reviews in magazines and online. The Kindle is as much a status gift to adults this year as the iPod was 6 years ago to teenagers.

Jeff Bezos and Amazon’s Heather Huntoon have claimed that the Kindle manufacturing end is doing their best to keep up with demand, while at the same time no firm numbers are being released to the media for us to see just how many units comprise a production run or how many Kindles there are in the wild (NYPost: “Amazon Hope to Re-Kindle Sales After Supplies Run Out”). We have to believe their nebulous shortages are the result of a happy accident: they underestimated the popularity of a hit product. And right now, 3 weeks before Christmas, the Kindle is back-ordered at Amazon until February (E-Reads: “Panic in Kindle Park”). In a season where most companies want to stock as many of their popular units as possible into their retail channels, Amazon is proudly claiming to have completely sold out of their season’s stock a whole month early. We read this and believe it must be a hot item, right? And so the status buzz gets perpetuated even more. However, I have my suspicions that this is orchestrated for a crescendo sales effect, similar to the old Broadway adage “keep ‘em wanting more.” Aka. Supply and Demand. Not that I blame Amazon for manipulative tactics, because these moves just happen to be part of a de rigueur consumer technology marketing technique perfected by successful companies like Nintendo and Apple. I call it “the shortage.”

For example, in 2006 Nintendo released their Wii gaming system in the U.S. in such short supply it sold out instantly at retailers lucky enough to get any units around Christmas time. The very same thing happened to the Wii a year later for Christmas 2007, even though by then, after 12 months of sales, Nintendo was surely aware from its metrics that the limited availability had actually increased consumer awareness and fueled the desire for plenty of consumers who wanted to get their hands on a hit product. Nintendo CEO Reggie Fils-Aime even held a press conference (Gamespot: “Nintendo, GameStop address Wii shortage”) to let the media know that they were doing everything they could to produce enough Wii units to meet demand, but that it was not going to be enough: “There was no ability for us to stockpile systems in the summer for the holiday rush.” Nintendo has always been adamant they’ve always manufactured the Wii at peak possible volumes, and that they’d never strategically limit supply to increase demand. The best they can do is make 1.8 million units a month, with a 5 month lead up time (Brandcurve: “Wii Shortage: Manufactured or Real?”), which are the kind of numbers that CEO’s don’t usually get embarrassed about. Christmas 2008 promises to be the same story (Forevergeek: “Wii shortage this holiday season faced by US shoppers”).

The Wii stands out as an underdog gaming console in a very competitive arena. In 2006, the Xbox 360 and Playstation 3 were new systems with more features than the Wii, but the Wii’s advantage was that it had a lower price and an innovative, wireless motion sensitive joystick (the Wiimote, pictured above) which attracted families and gamers looking for new experiences. It was never expected to be a sales leader, but Nintendo played their cards conservatively and the Wii became the little console that could, because word of mouth created consumer demand that couldn’t be satiated quickly. By the summer of 2007, Apple was ready to try a similar conservative move with the release of the iPhone, and they hoped word of mouth about shortages would create magic, too.

Apple announced the iPhone in January of 2007, six months before it would be available in the sales channel. The pre-sale buzz on blogs created a nickname for the iPhone: the Jesus phone (CNet “Can the iPhone live up to the hype?”). When the iPhone finally hit AT&T and Apple stores in late June ’07, there were line ups like no one had ever seen before for a handheld gadget. It was a blockbuster event. People camped out a whole week in advance at some Apple stores to secure a place in line to be among the first with an iPhone. As fast as Apple could manufacture and ship them to the U.S., the iPhone’s demand outpaced the delivery and all throughout the summer and into the fall, the status of the iPhone was secured for those lucky few who managed to find one. Again, like Nintendo, Apple quickly waved its hands to get attention and tell everyone that the limited availability was the byproduct of a slow manufacturing process that takes months and months to ramp up. With the iPhone 3G, a year later, Apple experienced the same availability problems (Techcrunch: “Foxconn Building 800,000 iPhones A Week”), which in turn spiked demand again (Engadget: “iPhone Lines Form at Apple Flagships” – pictured above).

How can we not be skeptical about a company’s claim that they are making as many units as possible when manufacturing is still lagging behind long after a product demonstrates its demand in the marketplace, sometimes for well over a year or two? Why does it continue to take so long? Clearly, someone is making the choice to conservatively manufacture units so that the life-cycle of the product can be maintained over a longer period, which means more sales overall.

The shortage gambit is that you don’t flood the market too soon and that the sales you lose due to lack of availability get picked up down the road because the product maintains its caché longer in the marketplace. A product can have two years or more of great sales (like the Wii) instead of just one hot season followed by backlash. The shortage requires a delicate balance of just enough available units so that once demand rises, sales don’t drop precipitously once units are easier to come by. Every parent shopping for the Christmas toy of the year knows that by March stores are practically giving them away. Sellers of limited editions also know this to be true: the value drops when it’s too easy to come by.

So, is the Kindle just a lucky tech product that won the sales jackpot because of word of mouth/buzz and its limited availability cult status? That definitely has something to do with it. But I’ll bet the Kindle is a long term product that Amazon doesn’t want to jump the shark too early and they’re plotting this very carefully. The whole publishing world benefits from Amazon taking this long-term status object approach, because e-book sales are the growth area of the book industry, and we should all support any marketing that whets readers’ appetites for digital content, even if it’s an artificial shortage. The long haul is what counts.

- Michael Gaudet

A few weeks ago, Amazon was telling the rumor mills to stop buzzing about the next generation of Kindle and that if a Kindle 2.0 was coming at all it wouldn’t be until next year. But now that Sony has announced their new PRS-700 Reader and it’s getting all sorts of press, Lo! What should appear the very same weekend? Leaked spy shots of the next Kindle. Coincidence? Nah.

Granted, these are the sneaky tactics you expect in an election year, when it seems everyone is doing their best to play a game of one-up-manship. Presidents, banks, and reality TV contestants are all queuing up to see who can fail the most spectacularly in their efforts to win the hearts of all the Joe Sixpacks and hockey moms. However, we at E-Reads don’t want to see either the Kindle or Sony Reader products fail. We love them both. They both deserve the limelight.

But the possibly fake/likely real Kindle 2.0 spy shots by “Boy Genius Report” make me think the device isn’t yet up to par with the latest Sony Reader, and I’m sure Amazon isn’t entirely pleased with seeing these pictures getting blogged at heavily trafficked Gizmodo.com. The revised Kindle in the spy shots has cleaner lines, but it looks more like a Star Trek medical tablet than ever before, and I assume all those buttons mean that it won’t be a touch screen, like the new Sony. But it is reported to be sturdier and recharge via USB cable. Maybe Amazon is still playing catch-up, maybe they’re simply refining a low cost alternative to the Sony Reader. Who knows what’s really going on. All I know is that when your product has rumors and buzz, it’s going to take on a life of its own in the public’s mind. And anything that puts ebooks in the public’s mind is good by us.

- Michael Gaudet

According to the latest statistics reported by the IDPF (here), the momentum of new ebook titles added by major publishers this year and the popularity of the Kindle and Sony Reader have had a big effect on E-Book revenues in the publishing industry.

“Trade eBook sales were $4,900,000 for June 2008, an 87.4% increase over June 2007. Calendar Year to Date Revenue is up 43%.” – IDPF, Sept. 4, 2008

Looking back a bit farther, in the last 2 years the ebook sector has doubled its revenue; more publishers and more titles have come into the marketplace creating a huge surge. This is what we at E-Reads are proud to see. For many years it seemed E-Books were a sleepy little industry, but the boom in consumer awareness has come from a lot of publishers seeding the growth by adding more and more mid-list and back-list titles, with digital versions finally coming out of the shadow of their print counterparts. Popular proprietary platforms like the Kindle and Reader have assisted publishers in making the decision to invest more in digitization and good DAW (Digital Archive Workflow) practices, because the big names of Sony and Amazon carry a lot of weight in boardroom decision making.

Knowing that the E-Book tide continues to swell, has that given you more confidence to try ebooks or buy a new reading device?

- Michael Gaudet

The excitement for the next generation Kindle, fueled by lots of speculation at Wired.com, was quickly doused with some cold, wet reality from Amazon spokesman Craig Berman. Even though he didn’t deny Frog Design were up to something special for the Kindle 2.0, he’s quoted as saying “a new version will come out sometime next year at the earliest,” in a recent interview with Dow Jones.

So, that leaves another key player in the ebook device market, Sony, some nice wiggle room in the months leading up to the holiday season. Sony has yet to make any announcements about what might be coming down the pipe, but they have just started expanding into Europe, most notably by partnering with Waterstone’s, one of the UK’s biggest book retailers.

From September 2008 onwards Waterstone’s will be selling the Reader itself in over 200 of their High Street bookshops. And the product is available to pre-order for September delivery now via their online store. – From Sony’s Website, here.

It’s very likely that this is just the tip of the iceberg for Sony’s competitive march against the Kindle. Of course, E-Reads wishes them both the best of success, so we’re currently prepping many more titles to be released in both Kindle format through Amazon and as Sony ebooks (and Reader compatible ePub) this fall, supplementing the over 450+ titles we have currently available at the Sony Connect eBook Store and Amazon.

- Michael Gaudet

The launch of the Kindle is the stuff of technology pundits’ nightmares. It’s not that Amazon has done anything too aggravating with their initial marketing, because they pretty much went by the defacto protocol for glitzy new devices (summoning up every media outlet, declaring a watershed milestone has been achieved for humanity, celebrities delivering tearful thanks for such a perfect device, etc.) and it was more or less a success. Mind you, Steve Jobs is legendary for creating these kinds of reality distortion fields that permeate every aspect of his Apple launches with an overwhelming perfume of delicious mystery and lust. But at the Kindle event Jeff Bezos was less Mesmero! and more like a self-praising high school valedictorian. There wasn’t enough magic, or rejoicing fanboys, to mask the concern a lot of us are feeling.

Before Bezos had an opportunity to work his charm and share his vision, I was already wary. My first gut response was that it won’t be too long until someone has hacked the Kindle to use the EVDO service for other purposes, stealing the “free” data service from Sprint. It was also another E-Ink based device without a backlight. And the fact that the Kindle has a keyboard seems less interesting once you factor in that E-Ink conserves its battery life by screen refresh limitations that don’t coopertae well with keyboard usage: slow page refreshes for every keystroke (typing a 200 word email on the Kindle would probably take more patience and battery power than you’d like).

Jeff Bezos at the launch of Kindle

Then the air went out of the balloon as soon as all the hidden-cost caveats were revealed.

The Kindle is actually an ebook and RSS pay-for-content service that’s only available for the Kindle. And if it were a service offered for other devices, like the iPhone, I still don’t think it’s what consumers want. But like it or not, this is how the road forward is being paved.

The logic, like most digital media sales, continues to be dumbfounding. Other than recently-published books, most of the content you can get for the Kindle is arguably text you can either read for free or get cheaper through other channels. And any content you buy for Kindle can’t be read on anything but the Kindle. So, let me ask you to forget about the device for a moment and to consider just the service: Are you the type of person who likes to pay for every document you want to read, regardless of whether it was offered to you free or even that you wrote it yourself?

Because it’s unable to support the common document formats of .doc, .rtf, and pdf, you’ll need to email any of those files to Amazon’s Kindle service to have them converted to a proprietary format at 10¢ a pop. Let me say that again in more simple terms. You have to pay to read your own stuff on the Kindle. The Sony Reader doesn’t have that mentality, neither does the Blackberry or the iPhone. Second, if you want to subscribe to certain websites’ RSS feeds, or one of Kindle’s many pre-formatted newspapers and magazines, you’ll have to pay a monthly fee.

The Kindle is a DRM experiment created as the test-tube baby from the DNA of intellectual property laws and the success of the iTunes Music Store. Most of us have been getting used to paying for content that we can’t share anymore, but eventually the ramifications of those restrictions are going to be more severe. The DRM world of the future is a place where parents won’t have music collections or home libraries they can easily share with their own kids without paying for them again and again. What happens to lending books to friends and the flow of cultural learning when every document and every format requires a service fee?

The Kindle formula seems predicated on the logic that if you’re the type of person who wants to read on the Kindle, you’re probably the kind of person who can afford the pay for content service. In contrast, the OLPC (One Laptop Per Child) XO computer is being designed for people who can afford neither. It’s been designed for children so that it can foster learning and sharing information in a humanitarian world that most science fiction readers are familiar with. It’s that world where we build new devices to help each other, not to siphon off nickels and dimes. What we’ve talked about in this office is how cool the XO computer would be as the real “iPod of reading,” and it could be. It’s the sort of device that could actually get kids back into pleasure reading if there was a socially conscious book service for it.

Unlike Richard, who invoked King Gillette earlier, I don’t feel Amazon is going about things the wrong way by pricing the device too high and the books too low. Books should always be made as affordable as possible. In my mind, pricing books too high is one of the reasons there’s a pandemic of youth and young adults preferring console gaming and the internet to reading. It’s actually less expensive to buy a Harry Potter XBox game than it is to buy the hardcover book. Based on the successful model of selling an expensive console that you buy new games for, it’s not out to lunch to assume there are millions of people out there who will invest in a platform if attractive content is there for it. On the surface, the Kindle costs $2,000 less than an iPhone after you factor in the iPhone’s nearly mandatory contract for 2 year’s worth of monthly AT&T data and phone service, so, relatively speaking, it’s a moderately affordable platform. And for the Kindle’s $399, you’re buying a platform for which Amazon seems very committed to consistently delivering a wide selection of new and backlist content.

So, the Kindle does have a good chance of success, as long as Amazon is willing to keep tweaking their formula the way that Apple did for the iPod. Remember, the iPod’s success wasn’t overnight. When it was first released, it was not a huge seller. There was no Windows compatibility. The touch surface was still a physical wheel. There was no iTunes Music Store. But under the cloak of Steve’s reality distortion field, Apple kept refreshing the product with new ideas for 2 full years until they got it right and it took off as a phenomenon for the history books.

The Kindle has a lot going for it because of Amazon’s weight in the retail marketplace, but it has to be ready to evolve quickly based on user response. They need to open the platform up for free content. It needs to be ready for user generated .Pub files. They need to make the EVDO service more useful. They need a more polished, premium design that looks less like a snowspeeder. They need to get E-Ink’s latest color screens. And I think Amazon is probably already planning for that. Even though they took their sweet time getting all their ducks in a row for the launch, I think that they’re not going to shrink back from this vision even if the device sells like a stinker this Christmas (it won’t: it’s already sold out its initial inventory). The Kindle is going to be with us for a while.

- Michael Gaudet

Alongside this week’s announcement that the IDPF voted in favor of the Open Publication Standard 2.0, there’s been good news coming from a number of ebook technology players.

The new Sony Reader?

On Monday, the blog The Reader caught a brief glimpse of Sony‘s upcoming website changes which briefly revealed they’re preparing to release an updated Sony Reader, the PRS-505. The new iteration is expected to have double the internal memory, better control buttons, a more rectangular styling like the original Sony LIBRIé device that was launched in Japan, and should be available as both a dark slate blue or silver finish for the same price as the current model. It’s unknown if it will use the new VizPlex e-ink system. The Reader presently sells for $300 and can be found at Best Buy stores across the U.S. (via Wowio)

Palm is also getting ready to inject some new life into their company by integrating two major players from Apple. Apple’s ex-CFO Fred Anderson will soon be joining the board of directors and Jonathan Rubenstein, a key player in the iPod’s success, will become executive chairman. Earlier this year, a company started by U2′s Bono and headed by Fred Anderson, Elevation Partners, bought a 25% stake in Palm, effectively bailing out the company from financial trouble. The new corporate leadership were demonstrably some of the finest people from Apple’s resurgence under Steve Jobs and its expected that they will focus more on innovation at Palm. Palm is also expected to update their popular Treo line in the very near future, and it will be interesting to see how the new competition with Apple might help improve their product line. (via Gizmodo)

Finally, iRex scored a major coup for the e-ink based Iliad Reader available in Europe. Les Echos is the first European paper to be made entirely available in a daily ebook edition designed for the Iliad and Star eBook device. A one-year subscription is 365 EUR. Also interesting is that among the first articles in the first Les Echos digital edition is news that Amazon may be set to launch the Kindle on October 15th with an announcement at the Frankfurt bookfair. (via MobileRead)

- Michael Gaudet