“I’ve discovered the secret of how to make a billion dollars!” I gush, as I practically sprint into the room.
Eran looks up from his computer, unimpressed. He’s heard my bragging about impending fame and fortune before and he’s almost as sceptical about it as Csilla, his beautiful – and currently pregnant – Hungarian wife.
“Zimbabwe dollars?” he asks, raising his eyebrows, Roger More style.
“US man!” I say, ignoring the sarcasm. “Good ol’ Greenbacks! Or maybe even sterling!”
He looks at me blankly, like he’s waiting for me to try Euros. I don’t know why he’s waiting. He knows I never will. Euros is a word that’ll never pass my lips – at least not in the context of even my most hare-brained of money-making schemes.
“What is it this time,” he asks, the voice dripping with his all-too-familiar sarcasm. “Dehydrated water? Floodlit sundials? Self-sharpening razors?”
You’ve probably guessed that this is not the first time Eran and I have had this conversation.
“Audiobooks,” I say, with unabashed delight. “Downloadable audiobooks to be precise.”
Eran looks at me like he’s been pole axed. For a few seconds he’s lost for words. This is rare for Eran. But he recovers his wits quickly.
“What downloadable audiobooks as sold by Audible, the company that already has the lion’s share of the market?”
“Exactly,” I reply, pleased that he’s grasped the nettle. But he hasn’t quite finished yet.
“Audiobooks as sold by Audible, the company that was recently taken over by market monolith Amazon?
“Yes,” I say, not liking where this is going.
“Audiobooks as sold by Audible, the company that has exclusive rights to use Apple’s proprietary Fairplay system for Digital Rights Management for the iPod?”
“Yes,” this time unable to hide the irritation.
“Digital Rights management being one of the key requirements that authors’ agents and publishers insist on as a prerequisite for selling their books as audiobooks?”
“The iPod being the personal audio device that has seventy five percent of the market?”
“Yes,” I say through clenched teeth.
“And you think you’re going to succeed without DRM – and thus without any titles from major publishers – to compete with a company that was taken over by Amazon for three hundred million dollars?”
He was looking at me now with his unremittingly smug “I’ve won the argument” smile.
This was, no doubt, payback for all those jokes I made about his driving in my Best Man speech at his wedding.
“Eran,” I say, suppressing the irritation in my voice. “If I didn’t know you better, I could have sworn that you were being sarcastic.”
“Who me?” he asks, straining to hold back the tone of aggrieved innocence.
“I think perhaps I’d better start at the beginning.”
“That would be a good idea.”
I take a deep breath.
“According to the Royal National Institute for the Blind, only two percent of published books are brought out in a form that’s accessible to the blind or visually impaired. That can mean anything from Braille to audiobooks to large print. That means that even less than two percent come out in audio format!”
I am stopped in my tracks by Eran making a “Time out” sign with his hands. This is remarkable self-restraint from Eran. When he wants to say something, he usually just blurts it out.
“I thought that only twenty percent of audiobooks are bought by the blind.”
I am surprised this – not the fact itself, but the fact that he knows it. I have known it for some time, but how does he? Then I remember that this is not the first time we’ve talked about audiobooks, just the first time we’ve done so in the context of one of my financial schemes. I brought it up in a conversation with him a week ago, when I cautiously sounded him out about the industry. He doesn’t know audiobooks, but he’s worked for ten years in retail.
“That’s true ,” I say. “But that just proves my other point that the market for audiobooks is growing. It’s become axiomatic in the industry that many people are buying audiobooks, not because they have to, but because they want to. The point is that only a tiny fraction of titles make it to audio and most audiobooks are bought by people who can also read regular books. And the market is growing at a rapid rate.”
“From a small base.”
“Yes but that just means it’s the right time to jump in. A small base, a rapidly growing demand and a huge untapped potential supply. What better time is there to join a market?”
Eran thought about this for a moment.
“It’s an excellent market. But not necessarily for YOU. The fact that the market is potentially huge doesn’t mean that you’re in any position to grab a share – at least not a significant share. I mean you’re not exactly overloaded with capital.”
I had thought about this already and knew it would come to this. Shortage of capital was my one handicap. But I had done the math and I knew that it wasn’t an insurmountable obstacle.
“I don’t have to go after the bestselling titles – at least not initially. There are loads of mid-list authors who’d love to bring out their works in audio format. And then there’s all those thousands of unpublished writers who show their work in writers’ groups.”
“You mean those untalented wannabes?”
I recoiled at this, although it was typical of Eran.
“Is it? You’ve said so yourself on more than one occasion.”
Now it’s my turn to gather my wits.
“I know there’s a lot of rubbish out there. But if you sift through the dirt long enough, you always find a few gems. How do you think new talent gets discovered?”
“Your usual whinge is that it seldom DOES get discovered.”
“Then this is my chance to make a difference.”
For the first time since this conversation began, Eran swivels his rotating chair away from the computer and gives me his undivided attention. Now let me quickly explain that Eran rarely gives anyone his undivided attention. He prides himself on his ability for multitasking – one of the legacies of his Israeli military background.
So the fact that he is giving me his undivided attention now means that I have said something interesting – not necessarily intelligent, just interesting.
“Sift through it, presumably being the operative word,” he says finally, meeting my eyes – yes, I’ll use the cliché – implacably.
“Please elaborate,” I say, fully aware of which way this is going, but for once fully prepared for him.
“I was just wondering who was going to do the sifting? That’s what agents and editors are for.”
“And reviewers,” I add. “They’re the last line of gatekeepers between the publishers and the public.
I didn’t specify whether I meant professional critics or the amateurs who review books at the retail websites. I was leading up to that. Eran wasn’t the only one who could play games.
“So you’re proposing to become a gatekeeper?” he ventured.
“No, I’ll leave that role to the customers themselves, through customer reviews. What I intend to become is an aggregator.”
“Whatever. My question is, are you going to be reading thousands of manuscripts and selecting material? And are you then going to shell out shed loads of dosh that you haven’t got, buying the rights and paying for voice artists and recording studios?”
“I just said I’m not!”
By now my irritation was well past the “fall out with your best friend” level.
“An aggregator” – I continue – “is one who provides a platform for publishers – or even self-publishing authors – to sell their works.”
“What, you mean like Amazon letting authors publish their own works for the Kindle?”
“Exactly – except that we’ll only take a small commission.”
“Well in our case it’ll initially be forty pence plus ten percent.”
“Why the forty pence?”
“Transaction fee from the card services company. It’ll leave us with a modest profit, but not much.”
Eran paused for a moment. Something about the look on his face reminded me of an aeroplane just before the engines roar and it starts to rumble down the runway for takeoff. The feeling was that he was about to storm forward with full power, not physically, just with his high velocity rhetoric.
“Okay, not we won’t go into the how you’re going to compete with Amazon when it comes to getting people to visit your site,” he says – meaning we will but later – “But assuming that you get them to visit your site in the first place, what about all this sifting through the rubbish? What makes you so sure that your customers are going to sift through the garbage in order to find those gems that you can’t be bothered to seek out yourself?”
“They won’t all have to sift through everything! We’ll pool their taste using the Wisdom of Crowds principle.” He looks at me blankly. I had lent him a copy of the James Surowiecki book a while back, but he hasn’t read it yet. “Customer reviews!” I add.
“That merely shifts the customer burden from reading the cover copy to reading the reviews,” he says.
“We’ll aggregate the results not just concatenate them.” By this stage I am ruthlessly taking advantage of the fact that English is not his first language. But seeing the blank look on his face, I relent. There’s no point saying something clever if he doesn’t understand it. “We’ll create a series of rating indices. Not just overall star ratings but rating indices for things like value-for-money, gender bias, sound quality, narration quality. And of course, in the case of fiction there’s also characterization, pace, dialogue quality. We can do that for eBooks too.”
“And you think customers are going to want to wade through all that?”
“Like I said, we’ll AGGREGATE them. We’ll create an average for each index. The customer will be able to see the collective averages for every title at a glance.”
“Okay, well let’s see now,” he says, in a matter-of-fact tone, waving his pen like he’s conducting the Royal Philharmonic. “Fred Bloggs writes a book, records it as an audiobook – or turns it onto an eBook. Then he uploads it to your site, creates a series of identities and writes a load of favourable reviews giving it maximum rating and gets his family and friends to do likewise. Other people buy it on the strength of these misleading reviews and either don’t bother to write how bad it is – so other people are taken in – or they do write about how bad it is and it causes irreparable damage to the credibility of the entire customer review system.”
Eran has a broad grin on his face when he rounds off, because he knows that I was not averse to using precisely this bogus review strategy to promote my own books on Amazon. But I am smiling too because for once I have anticipated him.
“We’ll use the eBay model for reviews, not the Amazon model.”
Oh very clever, I thought of my own response, because Eran is an eBay seller, and he believes in the eBay ethos with an almost religious fervour. But I can see from the blank look on his face that once again he isn’t with me.
“Customer feedback,” I explain. “Customers will only be allowed to review an audiobook or eBook if they bought it from US.”
He nods approvingly and gives my answer some serious thought.
“Still,” he says, “it’s not difficult to get a few friends and relatives to buy the book and review it – if you’re really determined. Remember, you said most of the money goes back to the writers or publishers. So they can afford to make a few extra sales, just to be able to bolster their positive reviews.”
“But they’ll be drowned out by the genuine reviews.”
“You’re assuming that a lot of people are going to review it. When was the last time you checked out the reviews on Amazon?”
Cue for more of Eran’s famous sarcasm.
The straight man in the act never falters on his lines.
“Have you seen how many reviews the average mid-list or back-list book gets?”
“Maybe one or two. Sometimes half a dozen. Rarely more.”
“Yes but if a book starts to pick up sales, it’ll also get more reviews.”
Eran shakes his head.
“Not necessarily. With all those indices and complex choices the reviewer is going to have to make, many people will be put off from reviewing books you sell. You’ll probably get even less reviews.”
“If anything we’ll get more.”
He smirks. “Ah, you’ve discovered the secret elixir.”
“Three for one!”
And this time I see for once – with delight – that I have well and truly silenced him.
“For every three audiobooks or eBooks that they buy and review, they get a fourth one free – in their favourite genre. And if they review the free one and also buy and review another three, they get another free one.”
“So it’s an ongoing offer.”
“That’s right. With an incentive like that, loads of customers will review the audiobooks and eBooks they buy and the ones they get free.”
Eran sits forward. I can tell from the change of facial expression that he thinks he’s back in the driver’s seat.
“It’s an incentive to cheat,” he declares flatly.
“In what way?”
“Number one, most of the reviews will be perfunctory. They’ll just fill in random numbers in the indices and write in a few generalizations about the book”
“Why would they do that? If they’ve already listened to the audiobook or read the eBook, they must have formed some opinion. If they have to fill in the index fields anyway, why would they not just put in whatever represents their true opinion? And remember, it’s the average rating that counts – the Wisdom of Crowds principle, don’t forget.”
“Okay, but number two, if people get a free book and don’t like it, they might not even listen to the whole thing, or read the whole thing in the case of an eBook.”
“But if they want to continue getting free books, they’ll have to—”
“That’s what I mean about cheating. If they don’t like the free book, they won’t be bothered to read it or listen to it and then to carry on getting the free book, they’ll cheat and fill in any old rubbish in the indices. The same goes for books that they buy and don’t like.”
“We’ll use integrity checking.”
“Remember Project Greenlight?”
“That competition to discover new screenwriting talent?”
“What about it?”
“To get your own screenplay reviewed, you had to review three others. And to make sure that the reviewers had really read the screenplays they were reviewing, they used a system of test questions. The person who wrote the screenplay submitted seven questions and the person submitting the review had to answer at least five of them correctly.”
“And that’s what you’re going to do?”
“Yes. Self-publishing authors or publishers in general will submit seven questions and four answers to each. The reviewer will have to get at least five right or the review is rejected.”
“Does he get a second chance?”
“He gets as many chances as he likes, but he isn’t told how many he got right or which ones were wrong.”
“And what about books that don’t get any reviews?”
I keep a straight face, not wanting him to know that he is about to fall into a trap.
“How do you mean?”
“Well you often see on Amazon: ‘Be the first person to write a review of this book.’ But that can only happen if some one buys the book. And in your case, they have to buy the book from your site. So if no one buys the book, then no one will write a review. And people don’t want to read books from new authors unless they’ve got at least the assurance of a few favourable reviews. And you’re going to have a lot of new authors. So it’s a chicken and egg question. Lots of books from new authors with no reviews, no one wants to buy the book and so they never get reviews. So no one buys them and the cycle continues.”
I smile. Once again I’ve got him. I’d already thought this one out.
“Before any book goes live – that means before it goes on general sale – we’ll send out twelve free copies to random customers – it’ll be part of the same three for one offer. Only when a book has received seven of those twelve reviews will it go live. That’ll ensure that potential customers will have some way to judge it.”
“And do you think the publishers will agree to that?”
“They’ll have to. It’ll be one of the conditions. In any case, it’s a small price to pay.”
“And what about the other books in the three for one offer? Where are they going to come from?
“That’ll also be part of the Terms and Conditions. For every three copies sold and reviewed, a fourth is given out free to a random customer who qualifies after having bought and reviewed three other titles. That’ll ensure—”
He makes another Time Out sign with his hands.
“That may work with self-publishers and maybe even some of the small independents. But do you think the majors will agree to it?”
“When you do the math it’s still a very good deal for them – especially when you consider how low the commission is. If the cover price is five pounds, we get forty pence plus ten percent, right? That’s ninety pence. They get the other four pounds ten pence.”
“Yes but when you start giving away free copies—”
“Okay now let’s say they sell three copies,” I press on. “That’s fifteen pounds to the customers. That means they get twelve pounds and thirty pence and we get the other two pounds, seventy. Right?”
“Right, but there’s also a free—”
“Yes there’s also a free copy. Now let’s see that from the publishers point of view first. That means there are four copies out there, each one of which carries a retail price of five pounds, so if they had all been sold it would amount to twenty pounds.”
“But they haven’t all been sold—”
“No indeed. Three of them have been sold and the publisher has received twelve pounds thirty against four copies that have a total combined cover price of twenty pounds. So from the publisher’s point of view, it’s as if he’s sold them with a 39 percent trade discount.”
“Well?” Eran comes back hesitantly.
“Well a forty percent trade discount is quite reasonable in this industry. The norm is fifty percent and even sixty is not unknown. In this case, the discount is less than forty percent. That means the publisher is getting to keep sixty percent – something he wouldn’t do if he was selling through the major retailers. Also this three for one gimmick’ll get books to new readers who wouldn’t have bought them otherwise. And once they read or listen to one title by a new author, they’ll read others. So it’s a way of generating more business for them too.”
I stop, exhausted, and note to my delight that Eran is nodding approvingly. I seem to have convinced him that my business concept is sound – not that I’m counting my chickens.
“There’s something that I didn’t understand,” he ventures.
“Yes.” My tone is curious, which presumably makes it encouraging to Eran.
“Well you’ve got all these reviews and you’ve guaranteed their integrity and all that. But how is it going to work from the customer’s point of view. Even if you’ve aggregated the review indices into a series of averages, how is the customer going to FIND what he wants quickly and efficiently?”
“With the advanced search facility. They’ll be able to search for audiobooks and eBooks not only by genre and sub-genre but also by index ratings. For example, they’ll be able to specify, ‘legal thrillers with a 70 percent plus dialogue rating and an eighty five percent value-for-money rating.’ They’ll also be able to search by similar author or similar book.”
“Similar authors or books?”
“It isn’t exactly a new concept. Amazon does it based on SALES; ‘Customers who bought this book also bought X, Y and Z.’ In our case it’ll be based on reviews. The reviewers will be allowed to specify that the book is similar to this or that or these other books or authors. Then potential customers will be able to specify similar authors that they like and the degree of similarity required for a positive result.”
“What do you mean degree of similarity.”
I smile, in my element now.
“Okay well let’s say the customer – doing a search – specifies Dan Brown as a similar author and 30 percent similarity. Any book that 30 percent or more of the reviewers have compared to the works of Dan Brown will show up in the results of that search.”
Eran’s smile has taken on a different look.
“Brilliant!” he says. He doesn’t use that word often – except in connection with his own ideas – and he appears to mean it. “So anyone can upload their audiobooks and eBooks and set the price – new authors, mid-list authors, bestsellers and public companies. You offer publishers the most generous terms on the market. You’ve got the three for one offer to encourage customer reviews. You’ve got the initial 12 free copies and seven reviews to make sure that every book gets a fair crack of the whip. You’ve got the reviewer indices, the search facility and the similar authors facility to help customers home in on what they like. Now all you need is a name and a way of getting customers to your site.”
He looks smug, like he’s thrown the final challenge at me. But I’m still one step ahead of him.
“Once I’ve got a fair amount of content on the site – which shouldn’t take too long – I intend to do some offline advertising with the money I inherited from my aunt. Any writers who already have their eBooks or audiobooks on the site will benefit from the initial wave of publicity.”
Eran looks dubious. He knows that my father wanted me to use the money for a down-payment on a flat.
“Do you think that’s a good idea?”
“I don’t have a choice. Once I’ve got content on the site I have to draw traffic there to buy the content. You’ve got to spend money in order to make money. And you’ve got to take some risks if you want to make a fortune. That’s what I intend to do.”
He nods approvingly.
“So your balls have finally dropped,” he says with an approving nod.
This is actually not sarcasm – but you’d have to know Eran to realize this. He’s genuinely trying to encourage me.
“And have you thought about what you’re going to call this enterprise?”
“I was thinking of calling it Bookstolistento.”
“Bookstolistento,” he repeats, rolling it on his tongue. It has a nice ring to it. Bookstolistento. You’d better register it quick – before some one else does.”