The Real Reason Why eReaders Succeeded as a Disruptive Innovation in the US, but not in Japan
A couple academics at the London School of Economics tried to explain why ereaders took off in the US but not in Japan, only they stumble around the primary causes without actually naming them or really understanding what lead to the rise of the Kindle.
For example, this is mostly true but still misses the most important detail:
In part, the limited availability of e-books in Japan reflected industry perceptions of Amazon’s critical role in the success of the Kindle. Our informants did not believe any single Japanese company could play an Amazon-like role in Japan, in the sense of developing a Japanese e-reader and securing a supply of hundreds of thousands of e-books for that reader. For this reason, publishers and retailers were unwilling to invest large amounts of money developing e-book editions of popular Japanese books.
The availability of Japanese e-books has also been influenced by the interdependence among book retailers, wholesalers, and publishers in Japan. Japanese wholesalers were most likely to be hurt by the introduction of e-books. Publishers and retailers were heavily dependent on the two major wholesalers for sales of paper books. These concerns were amplified by pricing concerns. In Japan, publishers had the legal right to set the prices of paper books, which eliminated price competition for new books. Although the resale price law does not affect the pricing of e-books, Japanese publishers worried about the potential impact of e-book discounting on the performance of wholesalers and other industry players. For this reason, many publishers were reluctant to offer discounts on e-books, despite the success of Amazon’s aggressive discounting in the US.
First, Amazon did not launch the Kindle with "a supply of hundreds of thousands of e-books"; the Kindle Store carried "more than 90,000 books" when it launched in November 2007 and was, in fact, missing the entire catalogs of major trade publishers like Macmillan.
Now that I think about it, Macmillan is a good example of US publishers being as much of a stick in the mud as Japanese publishers. Macmillan didn’t actually get serious about ebooks until well into 2010. It wasn’t just their backlist; Macmillan was publishing new titles print-only in mid to late 2009.
The simple fact is Amazon was not able to sign most trade publishers until after the Kindle took off. But that is a nitpicky detail; the important point is what happened before the Kindle launched.
Amazon was only able to launch the Kindle because it arrived after decades of disruption in the US book market.
Starting in the 1970s, big-box bookstore chains disrupted the market by buying in large quantities and discounting as deeply as they could afford. This forced small bookstores to close, and as a result consolidated much of the US book market in a double handful of companies.
That disruption and consolidation enabled Amazon to come along in the late 1990s and work out deals with publishers (rather than dealing with wholesalers). Amazon used its contacts with publishers to convince _some_ of them to put their titles in the Kindle Store.
That disruption and consolidation did not happen in the Japanese book market, and so it did not set the stage for a company like Amazon to come along and launch a platform like the Kindle.
Next, the economists also misunderstood the impact of contracts:
Copyright law has also influenced the availability of e-books in Japan. Since the 1990s, American publishers have typically secured the rights for paper and e-book publication at the same time. In Japan, however, books are often published based only on verbal agreements. Moreover, even with a written contract, authors generally retain the copyrights to their works. As a result, the publication of an e-book edition of a paper book typically requires a separate agreement with the author or authors. One publisher told us that in most cases these agreements must be negotiated in face-to-face meetings. Moreover, concerns about piracy often make authors reluctant to permit the publication of e-book editions of their works. As a result, relative to the US, the process of bringing an e-book edition to market is often more expensive and time-consuming in Japan.
That contract issue was still a problem in the US book market even after the launch of the Kindle; in fact, the paranoia about piracy was also true long after the launch of the Kindle.
And those are not the only similarities between the two book markets which the researchers misunderstood; they also failed to grasp basic details about file format incompatibilities:
One example of a technological factor that influenced consumer adoption decisions was the existence of two incompatible file formats, both designed to accommodate unique aspects of written Japanese. As a result, files designed to be read on a Sony e-reader could not be read on a Sharp e-reader and vice-versa. This incompatibility decreased the perceived value of e-readers for many Japanese consumers.
When Amazon launched the Kindle Store, there were six primary ebook formats in the US book market: Adobe PDF, eReader, eBookwise, Mobipocket, Sony Reader, and MS Reader.
Thanks to the quirks in Kindle DRM and other technical details, the Kindle format was the seventh ebook format in the US ebook market.
The US ebook market was even more balkanized than the Japanese market, and yet Amazon somehow overcame the technical problems and quickly dominated the market.
O O O
The blog post discussed above was based on a recently published paper. I can’t see the paper (it’s behind a paywall), but I hope the researchers were more thorough in their investigation and analysis than their blog post suggests.
If not then the world would benefit from the paper being retracted and fed through a shredder.