Tim O'Reilly Unplugged: The Kindle 2 And Transforming Industries

Last week, after shooting my video coverage of the launch of Amazon's Kindle 2 in NYC, I sat down with O'Reilly Media founder and CEO Tim O'Reilly, who was producing the Tools of Change For Publishing Conference across town. The book publishing industry is going through a massive, and in some cases very painful, transition. In my podcast interview with O'Reilly (full transcription below), he discusses Amazon's decisions from his perspective as a book publisher, how this transition actually began centuries ago, and where it's going. Is it a case study that your industry can learn from?

There's actually a bit of irony in Amazon's choice of the Morgan Library in New York City to launch the Kindle 2, as well as the choice to have Stephen King do a reading from his new book Ur which, when it first comes out, will only be available to owners of Amazon's Kindle e-book reader.

The Morgan Library is home to the largest single collection of Gutenberg Bibles (three). The Gutenberg Bibles are considered to be "the first substantial printed book in the Western world" and in my interview with O'Reilly, he refers to their printing in the 1400s as perhaps the beginning of a revolution that's still underfoot.

The industrial significance of the Gutenberg Bibles was really about scale. Whereas human scribes were most often used to "print" books, the Gutenberg Bibles were printed using moveable type. Characters and symbols were cast as reusable metal types (similar to what you'd see in an old typewriter) that could be rearranged to facilitate the printing of different pages. Once a page's types were set, all that was needed next was ink and paper to print multiple copies of that page. It was a revolution in scale and quality control, compared with using human scribes.

But almost as significant was the openness of the format. To read a Gutenberg Bible in the 1400's or Time Magazine today, there really were no technical boundaries. You just needed to know how to read. Although it will no doubt be available on paper at some point, the Kindle-only availability of Stephen King's Ur sets an interesting precedent whereby access to a book first requires the ownership of a $359 piece of specific technology (Amazon's Kindle). The proprietary format in which Ur will be stored prevents it from being read by competing electronic book technologies.

In the nearly 600-year old continuum of a publishing industry in transition, is there a disconnect between the visions of Johann Gutenberg and Jeff Bezos that rendered the Morgan Library malapropos of the launch?

Part of the book publishing industry's pain is, in fact, the number of electronic formats in which books are available. In addition to the Kindle's format, there are others like MobiPocket (also owned by Amazon), ePub (essentially, a derivative of HTML), and Adobe's Portable Document Format. Not all e-book readers can read all e-book formats, which, in turn, ends up limiting our access to information.

Some time from now, my guess is that there will only be one format and, like the paper that the Gutenberg Bibles are printed on, it will be open with no economic or proprietary technical boundaries as barriers to access. The same intolerant forces that lead to common form factors in other industries (e.g., the outlets in our walls) will eventually cast their vote here and 20 years from now, we'll be having a different, but no less exhilarating, discussion about industries in transition.

In my podcast interview (just click the play button to hear it), O'Reilly shares some of his own observations about the Kindle 2, the need for openness, and how the time-honored role of publishers as "bestowers of status" is changing as short-form publishing rises to prominence as a currency of influence. As I re-listened to the interview, however, I realized how much is in there for those of us who publish now, as well as for those of us in other industries that, sooner or later, may face the same painful transitions that the publishing industry is now experiencing.

You are, of course, welcome to listen to (and download) the interview. But given some of the great insights he shared, I've gone to the trouble of transcribing the entire interview for you here:

David Berlind: I'm here with Tim O'Reilly. He's the founder and CEO of O'Reilly Media and he's producing the Tools of Change conference here in New York City. Just yesterday, Amazon announced the Kindle 2. Jeff Bezos was here at the Morgan Library showing it off to everybody. Stephen King did a reading from it. He's got a book coming out exclusively on the Kindle 2 before it comes out to the general public.

But I want to ask you about really is Amazon's model. They have what is essentially a proprietary system. They have an electronic bookreader that reads books that are downloadable from Amazon's own bookstore. In recent weeks I have had a chance to experience some of the bookreading technologies, particularly Lexcycle's Stanza technology on the iPhone. It makes me think back to the days of Wang Labs when they made dedicated word processors and then when the PC came out, all of the sudden, you saw software coming out for the PC. The PC was more of general purpose device that you could customize to your own liking. I just can't help but wonder if we're on the same path here and what, in general, the book industry is going to end up doing over the long run.

Tim O'Reilly: Well, I think you've said it all in your introduction. I think the Kindle has gotten a number of things tremendously right. I think the experience of buying a book is seamless, beautiful... it's one click and that is very very powerful. You have to wonder why Amazon is so set on tying it to single device. After all, looking back to Web 2.0, one of my key principles was software above the level of a single device.

I'm sure that they looked at what Apple accomplished with the iPhone, or the iPod, rather, which of course led to the iPhone, and they said "Wow... a device gives you this possibility of lock-in and attractive profits." The problem was that there was a huge loophole that made the iPod possible and that was called MP3. People could rip their own music. So, there was this huge ecosystem of effectively free music where people could load in the music they already had from CDs and then they could start to buy. I don't think the iPod would have taken off at the same level if people had to buy everything from the get-go. There's nothing like that for print books. Or, there hasn't been anything like that for print books.

Now what's really interesting is that it's starting to happen for print books. Google released its Google book search -- released their service for the iPhone. Stanza from Lexcycle has lots and lots of public domain books. Of coure, the Kindle does, too; it certainly has a collection of public domain books. But, even though the form factor [and] the battery life of the smartphone is nothing like the Kindle, even though the buying experience is far inferior, I think you have to place a bet on the general-purpose device. If we look at the history of computing, [the general-purpose device] tends to win. And when a special-purpose device has worked, it sort of worked because it provides other functions as well -- it somehow tied into that bigger ecosystem.

Now there is something that Jeff Bezos said. He said that "We want to give you access to every book ever published." That would suggest that either they're going to make a deal with Google on the Google Library Project and get all those books in there or they think that'll just eventually happen. But they may have something else up their sleeve. But it didn't show in [the release of the Kindle 2]. They also made hints leading up to this announcement that they were going to be making some kind of announcement of the Kindle as software platform available on other devices. We didn't see that, either. But those would, I think, be very very powerful plays in my mind.

How do we combine what Amazon did well with what they haven't done yet well. I think a very concrete example of the difference for us at O'Reilly is in the fact that the Kindle does not support many of the formatting features that we need for our books. We use a lot of tables. We use monospace fonts for code. And none of those things are available on Kindle. They are available in the open format ePub, which is basically a variant of HTML, and that's why all of our books are available for the iPhone. We're putting almost everything out in ePub and that's a real challenge because it's easier for us to do the right thing on the open platform. It's hard for us to do the right thing on the closed platform and Amazon is telling us "Well, you guys are a specialty publisher and there's not enough demand for those features for us to put them in." It's the old open source vs. proprietary model again, where open source just outperforms.

So, in some sense, there's this big strategy tax on the Kindle that says we have to have a proprietary format and we have to have proprietary hardware and it's a gamble. I wouldn't necessarily bet against Jeff Bezos. He's a brilliant guy and has done so many things right and has enormous strategic staying power. So, I'd hate to bet against him. I'd love to be on the Kindle. We are on the Kindle, to some extent. But so many of our books, we just can't have a good user experience with because of the formatting issues. But I do have that concern, the open vs. closed.

DB: When you look at some of the other devices that are coming out that are iPhone-esque in nature... so we see, for example, the Android phone (a very programmable device)... we see the new BlackBerry devices; the iPhone doesn't really have that much of a strategic advantage from an industrial design point of view. Maybe from the frictionless process of acquiring content it does because Apple's got that right, much the same way the Kindle has got that right for buying books.

When there are just going to be so many general-purpose devices out there on the planet, do you think, at that point, Amazon will have no choice and they'll have to come to grips with that and they'll either (a) come out with a software version of the Kindle that can read Kindle books or (b) start to work with the existing book readers that are on those devices?

TO: I guess what I would say is, in addition to the smartphone, there is this netbook phenomenon. And the Kindle in many ways is a kind of netbook; similar price point, just a different heritage. I would actually start to imagine the Kindle merging into a converged device with the netbook and the tablet; the netbook tablet, so to speak. It clearly has advantages in terms of battery life. The eInk technology is way superior to traditional laptop technology. That being said, it lacks color and the ability to do some of the things that people have come to expect on their displays. But I would think that that form factor -- something that's a little more immersive and special purpose -- will in fact survive and be an important tool.

It's sort of like this idea ...again think about paper. We have little books that we can put in a pocket. We have big sheets of paper to write on and interact with and, I think in some sense, I imagine the future Kindle that allows input a lot more. I think we'll get there through a number of means. It may be that voice recognition gets good enough. It could be we have more stylus-based interaction. Or it could be that you have the keyboard mode as an option.

I guess I would say that I think that there's certainly something there. No question. It's hard to tell because Amazon is so closed-mouth about their numbers. It makes it very, very hard to have visibility into how they're actually doing. I do know, for example, on the iPhone is that we real numbers. The story we're telling very clearly is that we released a book as an iPhone app. To be sure, it's about the iPhone: it's iPhone: The Missing Manual as an iPhone app. It's actually out-selling the print book. In fact, it's outselling every print computer book since it's been released.

So, that's a pretty compelling message versus what we're hearing from Amazon and the Kindle; it's 6 or 9 or 12 percent upsell. [The Missing Manual] is literally in terms of units more than 150% upsell. And it hasn't hurt the print book sales at all, either. We're saying "Wow. We can see that as a pretty powerful platform for us." I guess I would say it's an interesting time.

DB: Perhaps Amazon is seizing this opportunity to get some advantage in the marketplace up to the point at which they're going to have to back off a little bit. Sort of the same way that I think Apple is realizing that the music has to have the DRM removed and that lowers the barrier for everybody else?

TO: Yeah. I don't know. I could be wrong. I think that Apple's DRM was always much looser. It always looked much more to me like they were trying to provide DRM that satisfied the music companies. You could always sort of get around it. All you had to do was save it as an MP3 and then you could pass it on to someone else. You could do it for multiple computers. It was perforated DRM. Whereas Amazon seems pretty serious about of it.

Now, that being said, a lot of publishers are nuts about DRM. It could be that this is a response to demands of publishers. But if that was the case, I think they would have taken a leaf from Apple and tried to make it porous; fig leaf DRM. Instead, they seem to be taking it very seriously as a method of vertical account control. So, I tend to look at it as a ploy to do vertical integration and domination of the book market.

In fact, if you look at what's happening out there, most of the independent bookstores are gone. Barnes & Noble and Borders and Amazon, at least in the U.S., are the bulk of the market for many kinds of books, and Borders is on the rocks financially. So, you look at it, and Amazon may be saying "Look, we're going to be the last man standing. We're going to be the sole source. We're going to have market power. We're going to be the Wal-Mart of the industry. So let's position ourselves for that."

DB: Amazon also has a unique position in the supply chain in the book industry where some companies don't. For example, I compare [Kindle] to my experience with Lexcycle's Stanza client and I go out and buy a book through Fictionwise and that book costs me the same amount of money that it costs to buy from a bookstore. Whereas when I go to Amazon to buy that book, it's $6 cheaper. I'm assuming that their ability to charge less money has to do with their position in the business.

TO: No, they're actually subsidizing that lower price.

DB: Is that sustainable?

TO: You'll have to ask them.

DB: We're at an event that you're calling "Tools of Change." It strikes me that this whole book industry is one of those major industries that's just going through an incredible transition right now. Some of the topics we were just talking about indicate the pain of that transition; major booksellers on the rocks, independent booksellers out of business. A lot of books moving to an electronic business format where only the strong survive. Where does this end? How long is it until this transition is over? What does the industry look like? And even bigger questions, what should other industries be looking at and learning from what's happening to the book industry?

TO: Well, let me ask you this: When Gutenberg published The Bible with moveable type, the industry began an enormous transition. When was that transition over? It wasn't. It was the beginning of something that's going on until this day. Certainly many of the elements of that transition happened reasonably quickly.

We're on an accelerated timescale. Now, things that would take only a few years may have taken decades or longer back then. But it was a huge change in the democratization of information -- the number of people who could read; the expectation that literacy was something that wasn't just for scribes and scholars. It changed our whole world.

I think we're in the middle of a similar revolution where there has never been better access to information. What is publishing about after all? It's about spreading information. It's sharing information and entertainment. That's not going away.

The thing I try remind publishers of is "what do you really do?" People are so bloody wedded to the form factor. I think of myself: I'm in the education business. I'm in the persuasion business. I'm in the information business. I'm trying to figure out the best ways to perform those roles. Online. Offline. In person. Books are a really valuable tool. But the nature of what is being published and how it's being shared is changing and we've got to get with the program.

We're back in the early days of print publishing and all we're going to print is Bibles? I don't think so! (laughs). There was this explosion of all these different kinds of content. So many of the people who are worried about the future of books forget that many of the formats that they so venerate didn't exist back when books first began being printed. The novel didn't really become popular until the 1700s. There were a few earlier ones. Certainly, they didn't overtake nonfiction until, I think it was even in the 20th century.

So this idea that long-form fiction is the heart of publishing is just bullshit. I look at what's happening. There's billions of people coming online wanting to be educated. When I say online, I mean joining the intellectual world and coming out of poverty where ideas matter more than just getting by day to day. They're wanting to be informed. They're going to want to be entertained. There's this huge opportunity. I just see all these new people figuring out new business models and new ways of delivering content.

Publishers perform an amazing role. That role is still selection and curation and also the bestowal of status. A great example of this is Twitter. If you look at what's happened there, like in everything else, there's some of us who've ended up towards the top of the heap. Those people have the potential to bestow status on others. Now some of the people who are on the top of the heap are really just there because they're celebrities.

Recently, Britney Spears rocketed past me on the top Twitterer list. She's just gossiped about her life and there's people who care about that. But I look at what do I do? I read things. I read the work of other people and I say "oh, that was a good one" and I point to it. Because I'm a publisher and I bestow status. There's actually a great graph -- there's a site called venturehacks and I said [on Twitter] that I just discovered their great collection of quotes for entrepreneurs, bang, you should read it. Babak Nivi, the guy behind the site, wrote on FriendFeed and he showed a graph of the change in the number of followers (Editor's Note: "Following" on the Twitter service is analagous to subscribing to someone in the blogosphere) when I did that and he doubled [his number of followers] overnight. I bestowed status on him.

DB: You're a kingmaker.

TO: No. I'm a publisher! That's what a publisher does! There are a lot of people who think "Yeah, yeah, we can just self-publish."

Well, guess what? When there are millions of people self-publishing, how do people find the good stuff? Yes, there's crowd-sourcing and people discover stuff and they push it up. But guess what? The people who are good at discovering things? They start becoming kingmakers.

You think Michael Arrington doesn't matter? You think Robert Scoble doesn't matter? They matter in blogging. They matter in Twitter because they emerged from the scrum and they are new publishers. They are bestowers of status and attention and people are begging for their attention. Just like people begged for attention of publishers in the old days. "Here's my manuscript. Will you please publish it?"

You could always self-publish. I self-published my own books in the beginning and bit by bit I built up until I had the status where people wanted to publish their books with me. And it's going to be just the same in all the new media. So your ability to recognize good stuff and your ability to publicize good stuff and get attention on things that matter; that's a big part of what we do.

DB: This event is very much about all of those changes that are taking place. "Tools of Change" could apply to any industry. Today it's the tools of change for the book industry. What other industries are going to have their own tools of change event just to help people get through it all?

TO: We deliberately have the name "Tools of Change" as the main title with "For Publishing" being the subtitle to leave open the option of other industries. I don't know. We might do one for newspapers or magazines or we might roll that into this event. There's going to be a lot of industries that need change. Tools of Change for Education is certainly a very powerful meme. We also have other options. For example, you could imagine a Tools of Change for Government. But instead we're calling that Government 2.0 because Web 2.0 has the resonance with that crowd. It's nice when you have brand choices in the events you throw.

David Berlind is an editor-at-large with InformationWeek. David likes to write about emerging tech, new & social media, mobile tech, and things that go wrong. He can be reached at [email protected] and you can also find him on Twitter at http://www.twitter.com/dberlind. If you search hard enough, you can find him on Facebook, LinkedIn, Plaxo, Flickr, and Del.icio.us. He's just too lazy to supply the links here (and thinks that someone can and should solve that problem anyway). David doesn't own any tech stocks. But, if he did, he'd probably buy some Salesforce.com and Amazon given his belief in the principles of Cloud Computing and his hope that the stock market can't get much worse. Also, if you're an out-of-work IT professional or someone involved in the business of compliance, he wants to hear from you.