Last week we announced an interesting project over at our Step2 crowdsourcing site, in which Darrell West of the Governance Studies program of The Brookings Institution was seeking feedback on a number of different items to include in a possible report on an "innovation agenda" for the next administration. There's been a fantastic ongoing conversation over there, with people voting various items up and down, discussing the different items and many adding their own suggestions as well (some of which have received quite a few votes). It's been really fascinating to watch, but it's not over yet. If you just checked it out last week when it was announced, you've likely missed many of the ongoing discussions and additional items from other users. Go check it out.

Some of the more interesting discussions, from my perspective, aren't necessarily those that are based on ideological differences, but those that focus on just what makes sense to be in an innovation agenda. Does it need to be clearly measurable? If you can't determine if something succeeds, does that belong? I think these are good and useful questions. We'd love for you to join in as well with your own thoughts. If you already have a Techdirt account, it works on Step2 as well, so no need to create a new one. If you don't have an account... well, it's quick and easy to set one up.

Bundling. It works in other industries. Many AAA game titles are released in Collector's Editions, packaging physical goods with the digital product. Nearly every band releasing on vinyl packages a digital download code with the album. DVDs aimed at kids do it all the time, adding stuffed animals or Christmas ornaments to the package as an incentive to buy. Your new razor comes with two "free" refills. Trial size bottles of new healthcare products are bundled with the stuff you usually buy. Facebook gives you a crappy email address you'll never use, free of charge.

But for books, not so much. At least not here in the US. But elsewhere, bundling ebooks with physical copies is showing some promising returns.

The Digital Reader details a trial run by publishing imprint Angry Robot, which hands out a free ebook download for every physical book purchased:

FutureBook yesterday featured a piece on an experiment in the UK between Osprey publishing imprint Angry Robot and independent bookshop Mostly Books to bundle a free electronic edition of an Angry Robot novel with each print copy of it sold. After just two weeks, Osprey’s CEO revealed that the bundling initiative had tripled the publisher’s sales at that store, and plans are in the offing to expand it to other independent bookstores.

It's a clever way to bump up flagging brick-and-mortar sales. Get them in the bookstore before giving them a digital bonus. It plays to the strengths of the indie bookstore: personal interaction and expertise. Even the ebook transaction has a personal touch.

The premise is simple. You buy an Angry Robot book, write down your email address at the till, and receive a free ebook edition of the book you bought, DRM free, by email.

It makes sense. Other publishers have experimented with this, but no one seems ready to make it the rule, rather than the exception. Angry Robot looks at this as win-win: it brings people back into indie bookstores and provides them with the convenience of a easily-transported ebook. Considering the costs are already sunk into the production of the physical product, bundling a digital file adds nothing (or close enough) to the overall cost. So far, the experiment (currently limited to one bookstore) seems to be a success.

At the beginning of July Osprey imprint Angry Robot launched a bundling experiment, Clonefiles, through the independent bookshop Mostly Books. The scheme offered the digital version of Angry Robot novels free to customers when they bought the physical paperback. Two weeks later Osprey chief executive Rebecca Smart told The Bookseller, that the initiative had trebled sales of the publisher’s titles at the trial store. The scheme has been supported in-store with a window display and signs explaining how it works. There is now an intention to roll it out in other independent bookshops.

Sales manager Roland Briscoe points out why this is working so well in this venue:

First and foremost, it allows us to leapfrog the competition in the value stakes. By offering dual-format, we suddenly have a hugely attractive offering that changes the focus from price and 'paper v digital' (for which there will only ever be a single winner, no prizes for guessing who) to added value.

Suddenly indies are able to take their traditional strengths - edited and curated choice, personal service and recommends - and stick a 'plus digital' on the end. It is genuinely a game-changer.

Clonefiles allows us to start a conversation with them, and it is amazing how customer have responded. From a slightly-embarrassed "let's all pretend eReaders don't exist" awkwardness, customers have opened up to us about their eReading experience - and in the process are actually telling us what we need to offer to stay relevant - and survive.

Part of what's holding this back from being offered by mainstream publishers is the feeling that bundling leaves money on the table. As Chris Meadows points out, major publishers are still hung up on monetizing every single iteration of a product:

Publishers have long had a problem getting over the mindset that every individual “copy” has to be paid for individually. (I remember, in the good old days when they were allowed to talk to people, the Pendergrasts of Fictionwise and eReader bemoaned the fact that publishers insisted that each different encrypted format of e-book sold in their store had to be sold separately.) And yet, given that Angry Robot’s experiment sold three times as many books as normal, that means they took in as much money as they would have if they’d gotten paid for the normal number of print books, that many e-books, plus the same amount extra.

Judging from the success of this experiment, it could certainly be argued that keeping the products separate is leaving a bit of money on the table as well. Considering the ubiquity of tablets, e-readers and smartphones, it just makes sense to reward someone who's willing to purchase physical items with a convenient copy to take on the move. This sort of bundling becoming more prevalent (especially among major publishing houses) may hinge on the Department of Justice decsions. Meadows points out that one of the stated goals of this settlement is to make this sort of experimentation easier and far more common.

In addition to the insistence that every version be paid in full, this lack of bundling may also be a perception problem, one that views physical purchasers as completely distinct from ebook purchasers. The overlap is probably more pronounced than most publishers realize. The most voracious readers do both. Even if the person buying the physical book has no use for the digital version, they can always hand it off to someone who does, thus introducing these books to new readers. This activity might rub some publishers the wrong way, but Angry Robot not only realizes this sort of thing will happen, but is completely cool with it:

We therefore believe (and I'm sure that we are only echoing the opinion of the majority here) that there is a place for both, and in actual fact having both formats is of benefit to everyone. So our bundling project, Clonefiles, is an attempt to give our readers what they tell us they want - the beautiful physical copy that they can give as a gift, swap with a friend or keep in their collection, together with the convenience of the digital file that they can read on the commute or family holiday.

It's not as if bundling hasn't worked in other artistic arenas. Most, if not all, albums offered on vinyl come with a digital download code for easier portability. Real life CIP: my brother is a bit of an audiophile and buys vinyl whenever possible. All of his bundled digital download codes end up in my hands, introducing me to bands he likes. (And not to sound like the guy who discovers the Rolling Stone's Exile on Main Street in 1985 and won't shut the hell up about it, but have you listened to Neutral Milk Hotel's In the Aeroplane Over the Sea? Amazing.)

Additionally, the bundled ebook could push the on-the-fence reader towards a purchase of an e-reader, turning them into a customer for digital offerings. How many fans have bought multiple copies of the same thing on multiple formats? (Yeah, that's all of us.) I have no doubt this happens with ebooks as well. Experimenting with price points and bundling has the potential to greatly increase a publisher's customer base, and if they can just get over the hang-up of keeping these products separate (although I would imagine royalty payments on different formats complicates the issue), they might find it easier to sell the physical books they'd obviously much rather be selling.

Last, but certainly not least, it pays to remember that people like getting stuff for free. They may never use the digital book, but they like feeling like they've gotten a deal. Simple psychology. More sales will go to the item that offers extra value, even if the bundled component is never used.

While the majors sort it out (with the help of the DOJ), the smaller publishers and bookstores can start reaping the benefits now. Angry Robot's experiment shows that is can work and as it expands its offerings, it should be able to provide better data on what works best for both the publisher and the bookstore. Either way, the readers will come out ahead.

With the Apple/Samsung case finishing up, James Allworth, over at HBR, has an excellent post wondering why it matters if one company copies from another? A few years ago, we wrote about a book that pointed out that copying and then innovating on the copies is a perfectly reasonable and important business strategy. Allworth points to a new book (one I've been looking forward to for a while) by Chris Sprigman and Kal Raustiala (who we've quoted numerous times) called The Knockoff Economy: How Imitation Sparks Innovation.

He then takes the lessons of that book and applies it to the Apple/Samsung fight, noting that even if we assume they were imitating each other, that seems to have only encouraged further innovation, not less:

If you go back to the mid-1990s, there was their famous "look and feel" lawsuit against Microsoft. Apple's case there was eerily similar to the one they're running today: "we innovated in creating the graphical user interface; Microsoft copied us; if our competitors simply copy us, it's impossible for us to keep innovating." Apple ended up losing the case.

But it's what happened next that's really fascinating.

Apple didn't stop innovating at all. Instead: they came out with the iMac. Then OS X ("Redmond, start your photocopiers"). Then the iPod. Then the iPhone. And now, most recently, the iPad. Given the underlying reason that Apple has been bringing these cases to court was to enable them to continue to innovate, it's hard not to ask: if copying stops innovation, why didn't Apple stop innovating last time they were copied? Being copied didn't stop or slow their ability to innovate at all. If anything, it only seemed to accelerate it. Apple wasn't able to rest on its laurels; to return to profitability, and to take the mantle they hold today of one of the technology industry's largest companies, they had to innovate as fast as they could.

It's the same story we've been explaining for years. History and tons of studies have shown over and over and over again that competition drives innovation, because innovation is an ongoing process. Thus, when others can copy you, that actually accelerates innovation by giving the original incentives to stay ahead in the marketplace, and develop the next great thing. Research has also shown that it's not as easy as you think to "just copy" because you only see the superficial aspects to copy, rather than having the deeper understanding of what works and what doesn't that a market leader often gains.

In fact, when you understand that, you realize that patents can actually slow down innovation by letting a company rest on its laurels, and not have to continue to rapidly innovate. Other companies can't build on what they did first, and so they don't have the same incentives to continue to advance the market forward. And the Apple/Samsung fight in the market appears to support that.

If Apple ends up winning this case against Samsung — and either stops Samsung from releasing their phones and tablets to the market, or charges them a hefty license fee to do so — does anyone really believe that the market will suddenly become more innovative, or that devices will suddenly become more affordable? Similarly, if Samsung wins, do you really believe that Apple will suddenly slow its aggressive development of the iPhone and iPad? It's certainly not what happened last time they lost one of these cases.

Now, if you're with me so far, then I don't think it's a leap to suggest that having these companies duke it out in court over "who might have copied who" is counterproductive. All these lawsuits flying around suggest that everyone is already copying each other, anyway. A better solution? Let's have these companies solely focused on duking it out in the marketplace — where consumers, not courtrooms, make the decisions about innovation. In such a world, the best defense against copying isn't lawsuits, but rather, to innovate at such a rate that your competition can't copy you fast enough. That, to me, sounds like an ideal situation not just for consumers — but for the real innovators, too.

Exactly.