Book Wars. John B. Thompson
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It also won a Children’s BAFTA in the Interactive: Adapted category, and the Best Adult Digital Book in the Bookseller’s FutureBook Innovation Awards. In terms of critical recognition and awards, Disney Animated could hardly have achieved more: this is about as close as you can get to a clean sweep in the world of the book-as-app.
And yet, despite all this, Disney Animated was not an unqualified success in commercial terms. Given the costs involved in developing the app, the number of staff that was involved over a period of more than eight months, the extra effort and expense that was put into marketing, and the distribution of revenues between the partners, Touch Press needed to sell 100,000 copies to recoup their costs, and needed to sell considerably more than this – 300,000, maybe even 500,000 – to make a real financial contribution to the company. The app did well, but not as well as it needed to do to demonstrate that the business of developing premium apps of this kind is viable and sustainable in the medium to long term. ‘Disney Animated was a critical litmus test for us because it was a beautifully produced app into which we poured our soul, people worked nights and weekends and we couldn’t have made it better. It’s also on a popular subject that has deep roots in popular culture – the history of animated film is a subject that should interest lots of people. And, by God, it had Disney behind it – a bigger marketing machine it would be hard to find. And yet it ended up selling 70,000 units in the first five or six months. What this tells us is that our business model doesn’t work’, reflected Max. ‘We built this company and secured investment on the assumption that we could repeat The Elements. You make a beautiful title, very difficult to make, you sell large numbers and that’s a profitable, exciting business. You rinse and repeat, you scale up and you have a company that’s worth a lot. No.’ The sense of disappointment, conveyed by the hard reality of the ‘No’, was palpable. Max and his colleagues had spent four years embarked on an ambitious project committed to the invention of a new kind of digital book, building a team of around thirty talented staff who were able to exploit to the full the new media of the app and the iPad, and now they were faced with the stark realization that it could all be in vain. Nice idea, but it just doesn’t work.
Why not? ‘It’s partly because the ground has been moving under our feet as we’ve been working’, explained Max. ‘When The Elements came out, it was one of the very few games in town. And if you really wanted to see what your iPad could do, that’s what you got. Now there are over a million apps in the App Store and most of them are free.’ The number of apps was increasing and the average price was getting lower over time. The numbers bear him out. In January 2015, Apple reported that there were more than 1.4 million apps available in the App Store, and more than 725,000 of these were made for the iPad. Around 40,000–50,000 new apps were being added every month. Most analyses show that the vast majority of apps in the App Store – over two-thirds – are free. Many free apps contain In-App Advertising and offer In-App Purchases of various kinds – what’s commonly referred to as the ‘freemium’ model – but they are free at the point of download. After free apps, the most common price point is the cheapest one, 99¢ – they account for just under 50% of all paid apps. Apps priced at $1.99 are the next most popular tranche, and they comprise nearly 20% of all paid apps. Apps priced at $1.99 or less account for 89% of all apps available in the App Store, and they account for 66% – two-thirds – of all paid apps.10 From the consumer’s point of view, buying an app is a risk: if you pay $10 for an app and don’t like it, in all likelihood that’s $10 down the drain. ‘Because of that’, explained one app developer, ‘apps tend to be either lower priced and you try to sell more units or tend to be free and use In-App Purchase as the way to get money from people.’
For publishers like Touch Press, these developments posed two big problems. First is the problem of visibility – or ‘discoverability’, to use the term that is often used in publishing circles. How do you get your apps noticed in a world where there is only one store which is filled with over a million apps, and to which 40,000–50,000 new apps are being added every month? Book publishers often complain about how the dwindling number of bricks-and-mortar bookstores, with the loss of shop windows, display tables and front-of-store browsing space, is making it harder and harder for their books to get discovered, but compared to the challenges facing app developers, the retail environment of book publishers looks like an embarrassment of riches. App developers are launching their app in a world where there is only one store with only one storefront controlled by one player that selects and features a few apps each week entirely at its discretion, and tens of thousands of new apps are being added every month to this store which already holds over a million apps. You have to hope and pray that your app will get featured in that storefront and, better still, get selected as Editor’s Choice because without that, you’re screwed – a tiny speck lost in an ocean of content. Sure, there are some places where you can get reviews of a new app that will help to get it noticed, but these are nowhere near as numerous and varied as the review spaces still available to book publishers. And then there’s the problem of price: with two-thirds of all apps downloadable for free, and nearly 90 per cent of all apps priced at $1.99 or less, how do you persuade consumers to spend $13.99 on one app? In a world where information goods are increasingly free or very cheap, how do you overcome the risk factor and get consumers to pay for quality?
These two problems – visibility (or rather invisibility) and price (or rather the downward pressure on price) – worked against a publisher like Touch Press, which positioned itself at the quality end of the app marketplace. Touch Press was committed to developing premium apps, which require a great deal of time, expertise and expense to produce – in the case of Disney Animated, around ten people worked on this app pretty much full-time over a period of eight months, with a development budget of £400,000. They had to be able to sell this app in a quantity that numbered in the hundreds of thousands, and at a price that was well above the very low prices at which most apps are sold. They had everything going for them on this occasion, and they simply couldn’t generate enough revenue to cover their costs and provide the additional funds you need to make a business work: ‘We tested the model exquisitely well and it doesn’t work.’
So where could they go from here? What were their options? One was to scale back, let some staff go, produce apps of much lower quality, charge a lot less for them and hope you can make the business work on a smaller budget. But to Max and Theo, that felt like an admission of failure. They started this business in the belief that they could create something genuinely new, help to invent a new kind of publishing and a new kind of book – the book-as-app – that would bring important works to life on a digital device as a rich audio, visual and textual experience. To scale back now would almost certainly mean that their ability to produce apps of this kind and quality would be seriously compromised. They might be able to make small savings here and there and produce their apps for less – maybe 10 or 20 per cent less – but they couldn’t cut more than that and still produce apps of the kind of quality that was their trademark. Producing cheap apps that got the job done but had no real aesthetic value was not the kind of business they wanted to be in. They would also risk losing their best staff, who may not want to stay at a company that was downsizing and couldn’t afford to pay top rates.
Another option was to try to re-orient the business – to ‘pivot’, as they say in the world of start-ups. They could move more into agency work, for example, selling services to other businesses rather than, or in addition to, developing apps for individual consumers. They’d developed a set of technical skills that could be used to develop apps for companies and other organizations that were seeking to promote a product or build their brand. This had the potential to generate significant revenue and produce good margins, provided that your negotiating position was strong enough to enable you to charge a fee based on a substantial mark-up of 50 per cent or more from your actual costs. They could build on the reputation they’d established as a high-end app developer – ‘cash in’ their accumulated symbolic capital – to try to turn the company into a profitable business. The potential gains would be financial: it might enable them to generate sufficient revenue at a sufficient margin to turn the organization into a profitable business. The downside would be the loss of creative control. ‘I know that once you take on one of those commissions you find that you have absolutely no freedom of choice but to deliver the project to the highest possible quality on time, and you have to put