Monday, December 19, 2005

Why Writers Should Care About the Time Warner Deal

A long-time friend emailed me last night, asking why my blog was so "obsessed" with the proposed Time Warner deal with Google.

After I finished laughing, I wrote her back. Her email happened to arrive at a time when I'm in the middle of writing an article for my RWA chapter's newsletter on "Industry Matters." One of the points I make in the article is that the great divide that has existed for the last decade between print publishing and e-publishing is rapidly shrinking. I would venture to say that, in the next two years, it will completely disappear.

Yahoo, MSN and Google have all aligned themselves with initiatives to begin digitizing the world's books. They are not doing this for altruistic reasons. Their hope is that, by expanding the resources available to consumers, they will capture a larger share of the search (and advertising) markets.

All of the big Internet companies are jockeying to position themselves for a bigger piece of the advertising revenue pie. Audience size is critical. According to Friday's Internet News, Nielsen/NetRatings' latest stats indicate that the top Internet brand is Yahoo with a 103.8 million audience. Next is MSN with 91.3 million. Then comes Google with 85.5 million and finally AOL with 74.3 million.

According to the Wall Street Journal (WSJ), one of the important outcomes of the proposed--but not yet finalized--partnership between Time Warner and Google is that AOL's salespeople will be able to sell ads on Google's network. At the same time, the New York Times reports that AOL's Web properties (including, AIM and Mapquest) will receive "special placement" on Google's site along with Google's search results. You can see the advantage to AOL which can now promote to Google's audiences the same way Google has been accessing the AOL audience for the past three years.

Google is already the most popular search engine online. According to Mediapost, in October, Google accounted for 48 percent of all searches, followed by Yahoo! at 21.8 percent, and MSN a distant third, at 11.3 percent." Google's motives for expanding the partnership with AOL are both defensive and offensive. On the defensive side, they retain their position as AOL's search engine and protect the ten percent of their revenue attributed to AOL at present. On the offensive side, they keep MSN from muscling in on the search engine business.

The big publishing houses have begun to digitize their print books themselves. I applauded the recent move by HarperCollins to keep their digitized files in house rather then trusting to a Google or MSN to scan their assets. By doing so, HarperCollins has strengthened their negotiating position. Now, when they talk to Google or Yahoo or MSN, they control the discussion about advertising and selling their books.

The publishing industry is changing very rapidly. I believe writers need to pay attention in order to understand the potential impact on their own future contracts. With whom the publishing companies align themselves and how the deal is structured is an important part of understanding your sales potential.

What if I write a paranormal book in which crystals are an important feature of my story, and what if the search engine runs an ad for a shop selling crystals on the same page? In return for making the digitized file of my book available, will the publisher receive a small percentage of the advertising revenue every time a consumer clicks on that crystal ad or buys an actual crystal? If so, will I receive a percentage of that revenue, or only the royalty from the actual sale of my book?

As most authors' deals are currently structured, whether a publisher makes a digitized copy available for "Search Inside" or "Book Search" is entirely at the discretion of the publisher under the rubric of "marketing." If the search engine and publisher make a revenue-sharing arrangement, that changes the nature of the publishing equation. The publishers' income would no longer be solely based on book sales. In the same way that movies have tie-ins to action figures and other merchandise, the Internet makes it feasible for publishers (and authors) to participate in such arrangements. It could be as simple as a reader wanting to buy the same brand of perfume that a heroine wears, or to sample the wine that a couple is drinking during a romantic scene. The potential for readers to have an interactive experience is real.

In my opinion, writers need to understand how the Internet is changing (including the basics of search engines and advertising revenue) so that we can be prepared to understand what rights are at stake in future contracts before we relinquish them.


For The Trees said...

Um, Maya, never thought of it that way. The money pile just grows and grows, and who gets it nobody knows. Except the lawyers.

I've heard about "vertical marketing." I still don't under stand the difference between "horizontal marketing" and "vertical marketing," or why they're different. Do you have an idea?

Thanks loads for your instructive blog. I read it with great interest.

Maya said...

Vertical marketing is focussed on a specific industry or niche. Horizontal marketing is wider--may be across several industries.

Yasmine Phoenix said...

You get nothing for free. I hope RWA addresses these issues as they will affect our bottom line as writers. How much control will we eventually end up give up, without even knowing we're doing so. Thanks Maya.

Anesha said...
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