Jim Bankoff, Chairman and CEO, Vox Media

Data helps destroy containers, and that’s a good thing. Data creates new content and information experiences and helps bring an end to the notion of content silos, Betaworks’ John Borthwick said: “The moment you start thinking about it as information, you start to think less about the package and more about the users.” Forrester’s James McQuivey pointed out that it’s not just a “tablet or iPad world,” but an “everything world” — and millions of people are consuming content not on iPads or e-readers but on gaming systems like the Xbox 360.

Digital storytelling is a native art. Stories on the Internet are not a new form of magazine or newspaper stories, but a medium in their own right — just like radio or TV. Publishers should develop their platforms accordingly rather than just repurposing other print vehicles. When Wenner Media released Us Weekly on iPad for the first time, it figured out a way to enable the “passalong” that’s so popular with the magazine’s print edition. As Vox Media CEO Jim Bankoff told us, George Lucas had to build a new story-telling platform called Lucasfilm so that he could tell the story of “Star Wars.” And don’t say blogging is dead: “That’s like saying creativity is dead, or personal expression is dead,” said WordPress founder Matt Mullenweg.

Om Malik interviews John Borthwick, founder and CEO, Betaworks.

Not all “media” are created equal. Union Square’s Fred Wilson and Betaworks’ John Borthwick gave a rude awakening to Big Media executives, urging them to give up control of their content — and even to stop calling it “content.” But declaring new digital networks victors over somewhat different traditional print and broadcast operators after simply labelling each “media” can sometimes seem counterproductive and insufficient: What’s being created now are entirely new kinds of information vehicles. The industry is truly “at the crossroads” suggested by the paidContent 2012 conference’s subtitle– but technologists and information producers may now be heading in different directions, as well as speaking different languages.

Publishers have to sell their brands directly to consumers. “Publishing companies need to understand that the thing [companies] like Amazon, Barnes & Noble and other retailers really respect is a brand,” Pottermore CEO Charlie Redmayne said in an explanation of why those companies agreed to send customers directly to the Pottermore site to buy e-books. “If we’ve demonstrated anything, it’s the power of a brand,” he said, noting that over half of Pottermore’s e-book sales result from readers coming directly to the site instead of being referred there by the retailers. Not every brand is Harry Potter — but “need to understand that their role in the future is creating these brands,” Redmayne said.

It’s time to toss CPM as a yardstick for online advertising success. How can Facebook be so inept at advertising? Because it’s handing advertisers a sledgehammer not a scalpel. Betaworks’ Borthwick and GigaOM’s Om Malik say it’s time to discard old-fashioned display ads as the basic unit of online ad success. Instead, it’s time for advertisers to adapt their ads to the evolving nature of the internet itself. That means forgetting about CPMs and focusing on data and social dynamics. On a broader level, it means re-imagining basic precepts of advertising and product discovery in a world where Web pages are being eclipsed by new types of online discovery and interaction.

If you didn’t make it to the TimesCenter yesterday, you’ll find video of all yesterday’s panels here (registration required). And let us know your takeaways from the day in the comments.

“Rapidly converging technlogies accelerate the benefits of consumer delivery,” McQuivey said, and that benefit is digital content and entertainment. “It’s all about the software,” he said, because software services make the content easy to access across a wide number of devices, such as the 35 million e-readers also owned by consumers. “The big thing happening is a platform promise between device makers,  service providers and consumers.” That’s why the iPad is a hit: It’s a solid blend of hardware, software and ecosystem support.

This “platform promise” is bringing unprecedented use of devices for content, particularly with the iPad. Consumers are looking for a full package; not just a nice piece of hardware. And until others can offer that full, “everything” package, Apple will continue to lead. But don’t count out Microsoft, McQuivey said, given the 70 million Xbox 360 devices connected to televisions.

“The platform is the new throne where content reigns and content is king,” he notes. “And the platform promise can make or unmake a king at any time.” The iPad might be sitting on the throne now, but as competitors build up the promise of their platform, the game of thrones rages on.

Tablets: Not Just an iPad World

Check out the rest of our coverage of paidContent 2012. Full archived video on livestream (registration required).

No changes until June at the earliest

Simon & Schuster, Hachette and HarperCollins agreed to settle with Justice. If the settlement is approved — following a 60-day comment period — those three publishers must terminate existing agreements with Apple’s iBookstore within seven days. In addition, as the Competitive Impact Statement on the settlement explains, the three settling publishers must terminate contracts with other retailers (like Amazon and Barnes & Noble) that contain any “restrictions on an e-book retailer’s ability to set the retail price of any e-book” and any most favored nation clauses. Those MFN clauses — which can be found in all agency publishers’ contracts with retailers, not just the contracts with Apple — state that no other retailer can charge a lower e-book price.

Publishers must terminate the contracts with retailers other than Apple “as soon as each contract permits” — i.e., when the contract expires — but the retailers also have the option to terminate the contracts “on just 30 days notice.” After the original contracts are terminated, the settling publishers may enter into new agreements with retailers (including Apple).

Under those new agreements, for the next two years, retailers may set, change or lower e-book prices and may offer discounts and other promotions “to encourage consumers to purchase one or more e-books.”

After two years, the settling publishers may once again enter into agency pricing agreements that restrict retailers from setting, changing, or lowering e-book prices. However, price MFN clauses are prohibited for five years.

OK, I just want to know what it means for e-book prices

Readers are likely to see lower prices on e-books published by HarperCollins, Hachette and Simon & Schuster — at least at Amazon, which expressed its glee over the settlement. But you won’t see those lower e-book prices until at least June — remember there’s that 60-day waiting period, and then publishers and retailers have to enter into new contracts. It’s in Amazon’s best interest to enact the new contracts as quickly as possible so that it can start discounting the settling publishers’ e-books, as it has said it plans to do. Other e-book retailers, like Barnes & Noble and Kobo, are likely to want to enter into new contracts quickly as well so that they are on a more even playing field with Amazon. They may not be able to afford to discount a wide range of e-books as deeply as Amazon can, but they will want that option.

As soon as the new contracts are in place (and Justice will be holding onto a copy of each of those contracts), let the discounting begin. Forrester analyst James McQuivey told Digital Book World last week that he expects Amazon to discount e-books slowly and strategically, starting with bestsellers. Publishing industry consultant Mike Shatzkin, on the other hand, believes Amazon “will do the splashiest discounting they possibly can, making the point as loudly as possible that they deliver the lowest prices to the consumer and daring their competiton to match them.”

McQuivey and Shatzkin may both be right. Amazon may not deeply discount all of the titles it carries from HarperCollins, Simon & Schuster and Hachette, but I wouldn’t be surprised to see some shockingly cheap bestsellers from those publishers — think massive summer promotions where big titles by authors like James Patterson, Jodi Picoult and Nicholas Sparks are $1.99.

Bundles, buy-one-get-one-free and more stuff you haven’t seen before

Justice notes that agency pricing “prevented e-book retailers from experimenting with innovative pricing strategies…such as offering e-books under an ‘all-you-can-read’ subscription model where consumers would pay a flat monthly fee,” bundles or buy-one-get-one-free promotions. The settlement opens the door for those types of promotions on Hachette, HarperCollins and Simon & Schuster titles.

For example, retailers could bundle frontlist and backlist titles from those publishers for a flat fee. They could offer a free e-book with the purchase of a print book. They could offer, say, romance or mystery bundles with titles from multiple publishers. They could even give e-books away for free. And, presumably, Amazon can start including Hachette, HarperCollins and Simon & Schuster titles in the Kindle Owners’ Lending Library for Amazon Prime members — if it does what it did with titles from some other publishers and pays the wholesale price each time an e-book is borrowed. (In other words, the three settling publishers wouldn’t have to agree to offer their books in the KOLL. Amazon can now just go ahead and do it.)

What about Apple’s iBookstore?

Apple’s iBookstore launched with agency pricing in effect, and it does not sell e-books from non-agency publishers. (That’s why, for instance, you still can’t find The Hunger Games — published by non-agency publisher Scholastic — in the iBookstore.) So it will be very interesting to see how Apple responds to the settlement. If it simply removes Simon & Schuster, Hachette and HarperCollins titles from its shelves without negotiating new contracts — yes, this would mean Walter Isaacson’s Steve Jobs biography, published by Simon & Schuster, would no longer be available through iTunes — it will be losing a large part of its catalog.

If Apple agrees to negotiate new contracts that don’t require agency pricing, it could also make agreements with the many publishers who have not been able to sell their books in the iBookstore before. That would mean a much wider book selection for iBookstore shoppers.

What will I see at Kobo, Barnes & Noble and other non-Amazon e-book retailers?

Barnes & Noble, Kobo and other e-book retailers will be under immense pressure to discount Hachette, HarperCollins and Simon & Schuster e-books to the same prices that Amazon offers. Keep in mind, though, that these stores have survived so far without always matching Amazon’s prices on titles from non-agency publishers. The settlement puts more titles from big bestselling authors in play, but Kobo and B&N do not necessarily have to match on every price in order to stand some ground against Amazon. (That said, the settlement makes their lives harder, not easier.)

I’d expect to see B&N and Kobo rolling out increased loyalty programs and other perks to try to keep readers shopping with them. For instance, Barnes & Noble could offer two free titles to anyone who buys a new Nook. They could start other membership, loyalty or subscription programs. Barnes & Noble already has the ability to bundle e-books with print transactions from its in-store cash registers and might start offering more e-book specials to in-store shoppers.

Barnes & Noble and Kobo could also turn their attention to the titles that Amazon is paying less attention to — say a HarperCollins backlist book. They could run special promotions or reading groups around those books. (Amazon could do this, too, of course.)

Retailers could have been doing many of these things all along, but non-Amazon players are going to feel the pressure to innovate quickly. They may get added support from the settling publishers (in terms of promotion, marketing suggestions, etc.) to the extent that that is not forbidden by the settlement.

Will DRM go away?

Many — including Ruth Curry and Emily Gould of Emily Books, here on paidContent — are arguing that publishers’ best tool against Amazon is to drop DRM on their titles. Science fiction author Charlie Stross, in a much-read post, writes, “If the major publishers switch to selling ebooks without DRM, then they can enable customers to buy books from a variety of outlets and move away from the walled garden of the Kindle store.” As GigaOM’s Mathew Ingram has argued, publishers see a feasible model for removing DRM in Pottermore.

I wouldn’t be at all surprised if at least one big-six publisher announces plans to drop DRM this year — Hachette’s Maja Thomas hinted at it recently — but the actual implementation of the new policy could take awhile as it would likely require negotiations with literary agents as well as the implementation of more robust direct sales systems from publishers’ own sites.

What doesn’t change

Agency pricing itself has not been declared illegal. Publishers who enacted agency pricing later — namely, Random House — can keep using the model. They don’t have to enter into new contracts. In addition, Macmillan and Penguin are fighting the lawsuit and can continue selling e-books under the agency model until a settlement or decision is reached (unless a judge explicitly forbids them to use the model before that).

Random House could, of course, renegotiate its contracts and remove agency pricing if it thinks that its titles will be at a disadvantage against cheaper non-agency titles from HarperCollins, Simon & Schuster and HarperCollins. But since agency pricing leaves it in Random House’s power to discount books across retailers, we might simply see deeper and more discounts coming from Random House itself.

And if Random House doesn’t deeply discount big titles from bestselling authors — but those titles stay at or near the top of bestseller lists anyway — that will support the belief that readers are willing to pay a premium for books by certain authors.

Some limits

Amazon cannot now, for example, make every single HarperCollins title it carries free (even if it were inclined to do so). When it comes time for Simon & Schuster, HarperCollins and Hachette to negotiate their new contracts, the settlement allows them to “negotiate a commitment from an e-book retailer that a retailer’s aggregate expenditure on discounts and promotions of the Settling Defendant’s e-books will not exceed the retailer’s aggregate commission under an agency agreement in which the publisher sets the e-book price and the retailer is compensated through a commission.” The settling publishers can also negotiate one-year contracts that “prevent e-book retailers from cumulatively selling that Settling Defendant’s e-books at a loss over the period of the contract.”

In other words, under that type of contract, Amazon (or any other retailer who agrees to the contract) could discount certain titles as much as it wants, or give them away for free. But it could not sell a publisher’s “entire catalogue at a sustained loss.” So if Amazon and a settling publisher sign a contract that gives Amazon a 30 percent commission on each title sold, Amazon cannot discount that publisher’s entire catalogue by more than the total amount of the commission it receives.

Bestselling author Richard Russo, Forrester’s James McQuivey and Barnes & Noble’s Jonathan Shar will be among those discussing the future of e-books at paidContent 2012, May 23 at the TimesCenter in New York, NY. Register here.

The survey was conducted among book publishing executives at publishers across the U.S. that represent 74 percent of U.S. publishing revenues. Forrester will present the full results of the study at Digital Book World in NYC on January 24, but the initial findings are as follows:

– 82 percent of respondents are optimistic about the digital transition, down from 89 percent a year ago.

– 61 percent of respondents believe readers will be better off as a result of the digital transition, down from 74 percent in 2010.

– 60 percent of respondents believe more people will read than before, down from 66 percent in 2010.

– 47 percent of respondents believe people will read a greater number of books than before, down from 66 percent in 2010 — a 19 percent decrease.

“People are generally optimistic still, but that optimism is waning,” said Forrester’s James McQuivey. “Publishers have started to do the hard work of making the digital transition and they’re finding that it is, indeed, hard work.”

These initial findings don’t speculate on the reasons why publishers are increasingly bummed out, but a few thoughts: 2011 was a tough year, marked by the death of Borders; Amazon (NSDQ: AMZN) also expanded hard into publishing. And as the digital transition continues, we’re seeing some statistics that suggest increasing digital sales are compensating for the decline in print sales–but other stats suggesting they aren’t. Combined, those factors–plus McQuivey’s point that the digital transition is hard work–may be weighing on respondents’ minds. An 82-percent “general” optimism rate is still pretty good, but it’s surprising to see how pessimistic publishers are about the companies where they actually work, and how much more pessimistic they are than they were last year.

I can’t think of an obvious reason why respondents are less likely to believe that people will read more books as a result of the digital transition and look forward to getting some more info on that point. Update: Digital Book World covers a few reasons here.

Speaking at the paidContent 2011 conference, Guenther addressed the difficulties in dealing not just with the Google (NSDQ: GOOG) Android and Apple platforms, but the fact that publishers have to choose between offering one or a mix of formats for their content. “Some will want their digital content produced for Adobe (NSDQ: ADBE), some will just want html5,” he said. “The balkanization makes it difficult and challenging as publishers try to reach consumers.”

But in Ongo CEO Alex Kazim‘s view, the mess of choices is actually a good thing. That is to say, the situation for publishers might be worse if there were a seamless, single option at this point. “Balkanization is a good thing,” Kazim told panel moderator James L. McQuivey, VP, Principal Analyst at Forrester. “I can buy my music on iTunes, listen on Pandora, Spotify. If iTunes had been created by the music industry instead of Apple, they wouldn’t have sold individual songs. They would only sell albums. In news, it’s going to be ad based models, subscription based models. Ultimately, that will benefit consumers, and publishers in turn.”

Both Next Issue and Ongo have faced doubters about their models — the former is the magazine and newspaper JV charged with creating a single storefront for digital sales and subscriptions, while the latter aggregates online news. In Ongo’s case, even though it launched barely a month ago, Kazim is constantly asked how many subscribers the company has under its belt. In the case of Next Issue, it has taken some hits for moving too slowly.

“The media industry is a glass house,” said Guenther. “Next Issue was formed 15 months ago and when I got here less than a year ago, there was a lot of focus on research on technology and consumer habits. There was not a lot of execution before I got here. The idea I had was to meld Silicon Valley.. we’re not going to be a system integrator and we were going to develop a product. There were no product people when I got here. I constantly hear, ‘You’re late, Apple owns the market.’ These are still early days.”

Video of McQuivey’s session is here.