Publishing noob

Notes and observations from the world of book publishing

Archive for the category “Business”

iTunes Partner Program for publishers aka iBookstore

I was happened to be involved in the process of acquiring an publisher account for the iBookstore since they are now expanded to Finland as well. And boy it was not was easy. First of all, you cannot use your existing Apple Developer Account, but instead use another one already registered in iTunes. For this I had to use my personal account.

Another woe is the requirement to obtain an U.S. Tax ID called Employer Identification Number or EIN even for foreign entities that have no business in the United States. They use it for the sign-in process and it has nothing do with actual taxes, since all payments will come through Apples subsidiary located in Luxembourg. The process took quite a while, since foreign entities cannot receive the EIN instantly over the phone. Not to mention faxing documents all over, that is so 90s.

This makes it interesting for European publishers, since in Luxembourg e-book taxation is way lower than most of the EU countries. I have wrote about this European taxation issue earlier. Seems like now in things are happening around this issue, since Luxembourg will drop the VAT rate for e-books to 3% and in France it will drop to 8% from the earlier 20%. Amazon.co.uk is registered in Luxembourg, so we might even see this reflecting to the e-book prices. In any case this means better margins for the authors and publishers.

There was also an interesting set of questions presented for the publisher during the registration process. They asked non-binding information about the amount of active titles in the print catalog, how many e-books we have published so far and how many e-books we have not published, even though we have the rights. This was probably just to give  some idea about the publishers potential, but probably also to promote their Apple-approved aggregators who do ePub conversions and so on.

Now after I have registered to the Apple AppStore and iBookstore, I would ask Santa that those backend services would have the same great UX as in Apples consumer devices.

Taxation on ebooks

One thing I completely forgot to mention in the post “Why is Europe lagging behind?” was the complexity of taxation for e-books in the EU. Here in Europe, we have this thing called Value Added Tax. Basically the value added tax is added to the price of the product and then the seller remits the tax back to the government. The difference to sales tax used in the United States is that the in VAT the consumer ends up paying the tax.

For historic and cultural reasons, printed books and newspapers have been granted a lower VAT rate in almost every EU member country. Here in Finland, for newspaper and magazine subscriptions the VAT has been 0%, where books have 9%. Ministry of finance has proposed that the VAT for newspaper and magazine subscription should be set to 9% as of year 2012. Some magazine publishers have to cope with this situation, some by laying off their staff. Google Translation for this finnish news piece is poor, but basically one major finnish magazine publisher has to layoff 80 people out of 500 because of this new increased VAT.

The strangest thing is somehow it has been decided in the EU that an e-book is “an electronically transmitted product”, which means that it is assigned a higher VAT than the printed version of the book. Below are examples of book taxation in some European countries:

Country Printed VAT e-book VAT
Finland 9% 23%
Belgium 6% 21%
France 5.5% 19.6%
Germany 7% 19%
Ireland 0% 21%
Spain 4% 18%
UK 0% 20%

Personally I think it is ridiculous that basically the same product in different delivery method has been punished with higher taxation. Specially in value added taxation, where the buyer ends up paying the difference. No wonder consumers are complaining about the high prices of e-books compared to the printed counterparts.

I have not followed this issue too much lately, but The EU Director General for Education and Culture, Jan Truszczynski, has commented in the march of 2011:

We believe content should be taxed the same way, whether printed or in tablet.

I cannot agree more. Different book publisher organizations here in Europe have said for a long time that is an issue that needs to be tackled.

Just for curiosity I tried to find out information about how this is handled in the United States. Seems like there the problem is not the unfair taxation, but rather than the complexity, since sales tax can vary by county and municipality. So if Europe is lagging behind in e-book adoption, so are the tax rules on electronic products in this new e-commerce era where geographical location should not even matter that much.

I feel lucky that I am an engineer, not a tax accountant.

Growing Up Geek

Commodore 64 computer (1982). Post processing:...

Image via Wikipedia

Engadget has run this series of post called “Growing Up Geek“, where the editors tell their story about becoming a geek. It has been interesting to read those stories, because they have a lot of resemble to mine. So here it goes.

I was just around five years old (1985) when a local appliance chain in my home town decided to sell “real computers” for a really cheap price. For reasons unknown, by parent decided to get one. Maybe because my mother had worked with hole cards and mainframes in the 70’s. The computer was called “BASIC 2000“, which had a 3,25 MHz processor with 1 kilobytes of memory. Just to give some perspective to non-technical persons, I have a memory stick in my pocket, which can store 32 billion times more information and my iPhone has probably over one million times the calculating power.

The computer’s operating system was only a simple BASIC-interpreter, which meant that only thing you could do was simple  programming. As you can imagine, this was quite hard for a five-year old who could barely read and write. Somehow I managed to copy the code listings that came with the manual. One of them was a racing game, which took few hours to type in and even the smallest  typo could mean that you would lose of hours work. At one moment I had an eureka moment, noticing that the track was repeating itself and I found it hidden somewhere in the code. Then I made the track completely straight to get perfect score. But the learning curve was a bit deep.

Then two years later, Commodore 64 came to the markets in Finland and I got it as a christmas present. It was technical leap. External tape or disk drive, more powerful processor and a separate SID chip to produce sounds. It had the same BASIC interpreter. But the games, oh my god they were amazing. I remember waking up early on weekends to put in the game cassette in, typing LOAD “*”,8,1 and watching the hypnotic loading screens. Eventually you would spend the loading times reading comic books like Donald Duck.

Then around 1990, I got the Commodore Amiga 500. It was another leap in home grade computing. It provided my first experience with a window based user interface, called the Workbench. It had some cool tools for drawing, like Deluxe Paint which resembled Photoshop of the early days. Mostly it was gaming again, but I learned managed to create my tool diskettes with necessary utilities with disk copiers and antivirus tools. Somehow the computer started to feel a useful tool, in which you could write documents, spreadsheets and do creative stuff like music and graphics. I really do not know what happened to Commodore. Maybe I should get this book about it.

Rest of my geekdom is boring PC stuff with some Mac on the side. I was not much of an Apple fan, but the first iPod Touch kind of impressed me. It happened to be today when Steve Jobs passed away. I would say that Apple has clearly been the absolute trendsetter since releasing the first iPod and Mac OS X back in 2001. My guess is that Apple will have some hard times ahead, because lot of the products culminated to Steve Jobs and his visions.

During my 17 years playing around with computers I have also quite radically changed the way I see information technology. Before I would interested in technology itself but now when I see something new, I immediately start to think “what is it good for” or “what useful things you could do with it”. I think that information technology in general should help people to do mundane tasks efficiently to let them concentrate what they are good at, not wasting their valuable time.

Spotify for books

These discussions around subscription based business models have boomed lately. Customers have been already rejoicing around Netflix and Spotify which satisfy all their needs for movies and music for a fixed monthly payment. Personally I just love Spotify. For a mere 15 euros per month, I can listen to good choice of artists as much as I want. They also have put effort for usability, so all the songs are also available in offline mode for my phone. So no pesky DRM’s to hinder my user experience. I would probably go for Netflix too if they were operating here in Finland.

It is quite easy to understand why some people prefer subscription based models. They like predictability of the fixed monthly fees and the fact that in some models you can engorge the products in all-you-can-eat style. It is also pretty convenient, there is no need to whip out that credit card every time you want to do a micro scale transaction. So in another sense, people including myself are insecure, greedy and lazy. And businesses are abusing this fact. For them it also means more predictable business with steadier flow of income and some motivation to actually develop the product. Because buyer can just cancel the subscription if he/she is not happy with the service received. At least I hope it is so.

From here on, lets concentrate on subscription models in publishing. This week it was being rumored that Amazon is probably going to offer a subscription based service for its Prime customers. Also an interesting spanish version of the same idea by 24symbols have just popped up.

Finnish publishing company Otava launched this kind of service “Luekirja” or “Readbook” with a HTML5-based reader earlier this year. This decision to create their own reader  is probably made to avoid Apple/Android app market royalties. Otava has created a pricing model where you can buy one month subscription for 20 euros per month with a limit of three books. Another option is three books for two months for 25 euros. I have not tested out the service for a while, but in the beginning it was filled with technical problems. But kudos to them for at least trying. It would be interesting to know how it has proven to be business wise.

So When you think about media consumption there are tons of subscription based services selling magazines, newspapers, movies and music already out there and doing just great. Now when you think about it, we have had these so-called book clubs for decades here in Finland. Now e-books and online reading devices just make the delivery part now so much more cost-effective.

This is not without implications too, this will need a lot of work on the publishing contracts and how the revenue is trickled down to the author. There has been some nasty comments around Spotify, like Lady Gaga getting played over one million times and getting royalties for 112 euros. As you can imagine, a lot of artists then quickly pulled their songs from the service. But I have not heard such news for a while, but seems like there is still a lot of debate around this subject. I think if done properly and in honest sense, it is possible to create a subscription based model, where all three major participants (service, publisher, author) benefit from it.

I have no doubt in my mind, that there will a Netflix or Spotify for books. But by whom and when, that is the question. Amazon has a pretty good chance, unless they mess it up somehow.

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