The Shatzkin Files

For the book business, VMI in warehouses might happen before VMI in stores


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The sales-and-returns convention by which most books are sold by most publishers to their retail and wholesale accounts is too often described as “consignment”. It actually isn’t. Actual consignment terms would give us a quite different supply chain, and we may be closer than most people imagine to shifting to it.

Although major trade accounts do purchase their stock from publishers with the rights to return unsold stock for full (or nearly full) credit, this is quite different from true consignment in a number of ways.

1. The publisher’s customer is on the hook for at least some freight cost for shipping the goods. Most customers would pay the shipping cost to receive the books in the first place and almost all would pay the cost to send them back.

2. For almost all their customers, the publishers are paid faster than the customer recovers their investment (which would be by selling to the end customer for a retailer or by selling to and then collecting from the next holder of the inventory or a final customer for a wholesaler). So the publisher receives cash which is an actual capital investment by their customer. True consignment would not require that investment.

3. Because the retailer or wholesaler is providing the capital investment for the books on the store or warehouse shelf, the customer decides on prices and quantities. The publisher has to “sell” the customer on parting with some of their limited funds for inventory investment. True “consignment” would see the publisher deliver the inventory (pay the freight) to the customer and, if they subsequently wanted it returned, pay the freight to bring it back. The customer would be responsible for receiving the inventory, shelving it, paying for anything sold or lost, and packing it back up when asked to return it. But it wouldn’t be commercially practical for the account to determine titles and quantities if they were at no risk or penalty for taking in excess stock. Overstocking, which ultimately would require the publisher to overprint and eat inventory on every title, would be routine if the accounts decided what to receive on consignment. If there’s no cost, why should they risk being out of stock?

So, if the terms were “true” consignment, where the inventory risk and investment remained with the publisher, it would also require that the publisher decide on the titles and quantities to be consigned.

Since the most important metric to determine the profitability of a wholesaler or retailer is GMROII (gross margin return on on inventory investment), a shift that sharply reduces the investment required from them could — should — produce a much healthier supply chain for publishers. If inventory were zero, GMROII would be infinity. Perhaps the more sophisticated measure for the future would calculate the cost of the space and shelving to hold it as the “inventory investment”, but that would still be providing a tiny denominator for the calculation and a massive positive result if there were any kind of sales volume.

From the publishers’ perspective, consignment would not represent much of a shift in “risk”, or even a dramatic change in cash flow. It would postpone revenue recognition on the balance sheet, but that should only matter if there is public reporting of the numbers. The shfit in the cost of the freight could be covered by a small adjustment to the discount which would, for the massive improvement in GMROII the accounts would gain, be a small price to pay.

This is a topic worth considering because we as an industry could be on the cusp of switching to this kind of commercial arrangement. For publishers today there are three major accounts which drive the business for most of them: Amazon, Barnes & Noble, and Ingram. Amazon has had an “Advantage” program for years that entices smaller publishers to offer consignment terms. Barnes & Noble has, with limited success, been pushing publishers toward consignment inventory in their distribution centers for years. And Ingram already holds a ton of consigned inventory through its largest-in-the-industry distribution business. They are already a very progressive company and would undoubtedly see the benefits of consignment for all their wholesale inventory as well. While, by the definition of consignment I’m positing here they would “give up” the ability to determine titles and quantities, they would also “give up” the need for as large a buying staff to make those decisions!

From the accounts’ (Amazon, B&N, Ingram) perspective, there are two big “risks” in going to consignment and ceding the inventory decisions to publishers. The less expensive one is that they might actually have to physically hold (warehouse, but not invest in) more books to achieve the same sales level. I say “might” because the publisher could conceivably operate with leaner inventory on many of the fastest-moving titles when replenishment inventory can be supplied without the bureaucratic need to get to a buyer and get an order.

The more serious risk would be of not having books that would sell that their own buyers would have put on their shelves. But, of course, any publisher would want to put in the most likely to sell, so as long as the account didn’t totally lose its ability to know what it could sell, that information could find its way to the buying decisions.

This all boils down to the practice of “demand planning”, which could also be called “sales predicting”. The word “planning” conjures up certainty; “predicting” implies guessing. In fact, demand planning is an imprecise exercise based on using the best information available to forecast what books will be needed from the warehouse in the days or weeks to come. (Almost never would it matter to predict further out than the reprint time required, which is a week or two for domestic straight text — books that Amazon and Ingram could certainly replenish with their print-on-demand capabilities — and perhaps as much as a couple of months for illustrated books brought in from overseas.)

The demand planning exercise is, indeed, totally different for the three accounts but, in all cases, what the account knows and the publisher doesn’t is much easier to incorporate into a publisher decision than it would be for the publisher to keep the account’s buyers abreast of all the publisher knows (which is the often-frustrating situation we have now, and have always had).

For Barnes & Noble, the information the publisher has about its own marketing efforts and how the book is doing in general in reviews and in cyber-discussion — or even how it is selling in other locations in the marketplace — is almost always secondary to internal B&N merchandising information. Is the book on model stock, an automated reorder capability where the sale of a copy triggers replenishment? Is the book displayed prominently in the stores, or, at the other extreme, is it in the stores at all? Is the book distributed across all geographies and store sizes? All of these elements have a big impact on the demand B&N distribution centers will see, whatever the other signals say about a title’s inherent appeal and marketing experience.

At Amazon, the internal picture also matters, although the bottleneck or accelerator affects of store placement and display are much less prominent. Amazon varies pricing; that matters. Amazon puts books in front of more or fewer of their shoppers; that matters. Amazon recommends some books to buyers of other books; that matters. Although Amazon does not know what a publisher might about a review or feature article to come, a piece of news that could affect public perception of a book, or about a promotional effort the publisher or author might undertake, there are decisions and actions Amazon takes that will affect sales, all other things being equal.

For Ingram, the publisher knowledge is the most important knowledge of all. And sometimes they have it. Ingram does not vary prices and Ingram does not, as a wholesaler, much attempt to influence which titles any store chooses to buy. Ingram’s job for wholesaling is to have the books stores want to order and deliver them quickly.

However, Ingram is also the trade distributor for hundreds of publishers and, for those, definitely influences (and knows about) store purchases through their 60-person sales force. For their distribution clients, Ingram has the publisher’s knowledge of any book’s marketing and promotion and it knows what is already on store shelves, the second most important piece.

For those books for which Ingram is exclusively a wholesaler, they are dependent on publishers’ reps to try to transfer that knowledge and understanding to Ingram buyers to do the demand planning, which is something considerably less than an efficient method.

There are few, if any, publishers today who are equipped to make the decisions to manage consignment inventory effectively at their accounts’ warehouses. But there are compelling reasons for the industry to shift to doing things that way. Fortunately, doing many of the right things will come naturally to the publishers if the tables get turned. It takes instinct more than genius to keep quantities lean if you’re on the hook for the freight in and out and you don’t need anybody’s permission to ship more copies in when they’re needed.

Guessing how soon Amazon, B&N, and Ingram might push, or even demand, this change in industry practice is beyond my predictive power. But every publisher should see this possibility as an opportunity. I’m pretty sure that anybody who tries to push the door open for this conversation with any of the three will find that it is unlocked. The opportunity is here now to shape the consignment future for those who see its possibilities.

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Digital marketing and coping with Amazon are the two big challenges for publishers as we begin 2017


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I am getting ready to attend my first Digital Book World as a “civilian” (having programmed and moderated the first seven), Thinking about DBW entails recognizing how different the book publishing world today is from what I expected three or six years ago. Be that as it may, the big challenges for the industry — how to change marketing to hit customers who are mostly learning what to buy online (which, as you’ll see, is well covered) and how to cope with the steadily growing market share that is Amazon’s — remain the ones I would have anticipated.

Although I do actually know other people who, like me, consume just about all their books on screens, we’re a minority who are not really looked upon by those who have stuck with paper as the avant garde. Whatever market share ebooks achieve by evolution (and the data suggest that share has plateaued in the past couple of years), the expectations of revolution are at least temporarily over. I thought we’d be clearly on a path by now to most people reading most narrative books digitally. We aren’t, even though the one precondition I thought was necessary has been met: most people carry screens all the time that would work fine for ebooks. This clearly demonstrates that there is a limit to how much the appeal of convenience changes reader habits when the comfort level with a form is a competing consideration.

But a flattening ebook share has not prevented the market from consolidating in the way I thought was worth worrying about when I mistakenly saw a more accelerated ebook future. By anecdotal information gleaned from publishers, Amazon appears to be booking half or more of the print sales for many publishers and many books.

(I told this fact to a former CEO who has been out of the business for 20 years last week. He said, “you mean, if I sell 40,000 books, Amazon will sell 20,000?” I said, “yes”. He said, “wow.”)

One informed estimate I heard is that Amazon constitutes upwards of 95 percent of online print sales. Kindle has outrun its ebook competition, gaining share consistently from Apple’s iBooks, B&N’s Nook, and Kobo and Google. Amazon probably has an ebook share in the mid-60s for most publishers. However, with the ebooks they control and keep off other platforms — Amazon Publishing and many of their top indie authors — and with additional impetus compared to the other vendors from their subscription business, their overall ebook market share is perhaps 10 or more points higher than that.

That anecdata is supported by a December 29 Wall Street Journal story that says that only a diminishing minority of Americans does not shop at Amazon!

(There is one big caveat about any observations about Amazon “share”. Like Ingram, Amazon is a domestic U.S. account that sells what it buys here all over the world. Probably the third biggest topic-of-interest for publishers is how to take advantage of the increased export opportunities promulgated by topics one and two. But one must take note of the fact that some of the dollars that flow through Amazon should not really be considered part of the U.S. market share. That varies by publisher, by book, by time of the year. It is also not transparent to any vendor or statistical analyst.)

When I went fulltime into the business in the 1970s, publishers were concerned because Walden and Dalton combined threatened to become 20 percent of the business between them.

But even percentages as large as what Amazon owns and what share ebooks get are worthy of closer and more granular examination. It is always worth remembering that the 6-foot tall man drowns walking across a river that is an average of 3-feet deep. Using aggregated averages is an engraved invitation to mistaken analysis.

So my expectation this year is that the most important information DBW is going to have to deliver will come from Data Guy, Hugh Howey’s collaborator on the Author Earnings website, whom Michael Cader and I introduced to the DBW audience last year. (We put Hugh Howey on the DBW stage when “Wool” became an Amazon bestseller many years ago.)

Data Guy has broadened his remit, which was originally about understanding ebook sales, by joining forces with Nielsen Bookscan. That enables him to analyze print, audio, and digital sales through online and physical store channels, and to look at the books both by source (indies, Amazon-published, and “traditional”) and by genre. DBW has published a mini White Paper, available now, that tips to a lot of this information. It is particularly readable and informative with an introduction by Porter Anderson.

But the big payoff — the examination of data broken down in 44 discrete categories and genres — will be delivered at the show. That should provide a great deal of value and insight for all of us.

I am hoping that there will be price breakdowns as well. I have noticed that the last four or five ebooks I’ve bought have been pretty pricey — well above $9.99. These books are all non-fiction and they are relatively serious and nichey, not aimed at mass audiences. I’m pretty certain that both the publisher and the author are making more profit on those sales than they would on a print sale of that book. The information already revealed by Data Guy through the White Paper would support conjecture that the biggest ebook sales are going to much cheaper ebooks published in high-volume-per-reader genres (like romance, mystery, and sci-fi).

We have had a bifurcated publishing business before. In the 20 years right after World War II, mass-market paperbacks did “originals” that were sold primarily through magazine outlets and not much in bookstores. (One cultural note: at that time, one of the key genres was “westerns”.) Authors could “migrate” to a hardcover life, but there were many who didn’t. It took years for the established houses to buy up the mass-market houses. That — plus changes in the economic structure of mass-market (caused by an allocation system for placement that resulted in ever-increasing returns of the covers of unsold books) that made the books go up in price — over time blurred the line between the two separate production-and-distribution systems.

If the same thing is happening today, it won’t lead to the same result. There are no returns from ebooks.

There are a number of other items on the DBW program that pique my interest besides Data Guy. My Optiqly partner, Peter McCarthy, is on a panel about “what sells books now” that is increasingly important to keep reconsidering as the market shifts and consolidates. And as the reviewing of books and conversation about them moves from the book review pages of newspapers to an increasingly diverse collection of blogs and influencers. Susan Ruszala, who recently ran NetGalley, is talking about “influencer marketing”, which is largely replacing the relatively static list of reviewers that NetGalley was originally created to address.

“The Changing Role of the Agents” is definitely one of the continuing evolutions we all need to keep track of. My sense is that agents three or four years ago were really frightened that indies would keep surging and their role would be highly challenged. I’ll want to hear what this panel, which includes Ginger Clark and Brian Defiore, has to say, but my sense is that that the once palpable-fear has really dissipated. Whatever Data Guy says about the direction of the market, and the data already revealed says he sees the share of author revenue going to indies going down for the first time, that fear no longer seems to be present. What I want to get a better grip on is how agents view the author-publisher division of responsibility for marketing and, if they’ll tell us, which publishers “get it” on that front and which don’t.

There is also a panel about “taking control of the channel” which promises conversation about vendor-managed inventory, a subject that has gotten too little attention from the industry forever and should become more important in a time when we’re going to want to sell books in non-book retailers that can’t afford the buying expertise books require. That was a challenge we never addressed when I was programming. I am glad it is on this year’s agenda and I look forward to getting a picture of how it is viewed today.

And Peter Hildick-Smith of Codex, who was on our programs frequently over the years, has two sessions that will make my list. One is on “converting book browsers to book buyers”, which is the holy grail. The other one is on pricing strategies on a panel that includes Dan Lubart of Iobyte, another longtime friend who has been mining online data for many years (while he also served as an executive at two Big Five houses). I suspect I’ll get some confirmation that the higher pricing I’ve observed for niche non-fiction is part of a widely shared strategy at the moment.

DBW keynoter and Macmillan CEO John Sargent fingered “maintaining ebook prices” as a key challenge for the industry in a session I saw him do at an agents’ gathering at least six years ago. He was right. How pricing strategies have evolved is something we all need to understand.

The one big missing piece for me in DBW 2017 is Amazon. I know from my own experience that they only come and talk when they’ve got a message they want to deliver to your audience, which makes them no different from any other big company.

The big “get” for DBW 2017 is Sargent. Perhaps he intends to use the time to highlight an announcement or initiative. Not that that’s necessary! Sargent has a refreshing and original take on things, whatever he’s discussing. And DBW has added a nice wrinkle by soliciting audience suggestions for the questions Sargent will answer after his talk. *That nicely finesses a challenge I recognized when I was running the show. It is cumbersome to take questions in the plenary sessions: too many people, too big a room, and too much of an invitation to host an unwanted speech. This way, they get audience participation without those problems. Nice innovation.

(*Turns out I got this wrong when I first posted. The answers to the 7 questions ARE the keynote! So I guess if Sargent has any topics he really wants to cover, they could make sure they get a question for them.)

The Data Guy analysis will certainly produce some Amazon-centric insight. But considering their mushrooming importance to everybody in the book world, that’s a subject about which we can’t get enough information. At least there will be ample opportunity to talk about Amazon and how different publishers are looking at them with the other attendees. I suspect there will be a lot of such conversation. At least I’ll be having some!

One big innovation at DBW 2017 is that they’ve added a third day which is an IndieAuthor conference. They’ve lined up some great speakers including Pete McCarthy. One of real interest will be Jon Fine, whose career in publishing encompasses both Knopf and a long stint at Amazon. The agenda for that one is, as it should be, aimed more at the indie author I’m not than the publishing-establishment-analyst I am, but it will be very interesting to see how successfully they can pull an indie author audience to midtown Manhattan. 

And, in conclusion, a hat tip to Ted Hill who took over the reins at DBW this year. The author day and the questions for Sargent are two of a number of innovations he’s introduced. I first met Ted in 1993 when I was programming my first conference — Electronic Publishing & Rights — in partnership with Publishers Weekly. Ted was selling “electronic rights” for Simon & Schuster and making a LOT of money for the company from sources they never knew existed before. Over the years, he’s seen publishing’s digital change from a number of angles, some on assignments we’ve worked on together. He put together a good team of vertical captains to help him. I’m looking forward to an enlightening couple of days.

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Conferences are thermometers recording the level of fear about publishing changes


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In the latest sign that the need for information about digital change in publishing has undergone a sea change in the past few years, it was announced today that Nielsen will not stage an independent conference in London this April, but will instead join forces with the London Book Fair to do an event there in March.

This reminds me that the best salesperson I ever worked with had a mantra 40 years ago that is proven over and over again to be true. “I never sell with logic,” he said, “unless I find no way to sell with fear.” Nothing demonstrates that more clearly than the rapid ups and now apparent downs of the digital change conference business in our industry.

We had done conferences intended to be profitable about digital change in the early 1990s in conjunction with other consultants and sponsored by industry publications, first Publishers Weekly and then Knowledge Industry Publications. (KIPI published the newsletter BP Reports, back when you could make money selling printed newsletters!) Then we worked on a series of conferences sponsored by VISTA Computer Services, now part of Ingenta. Those were free events which VISTA staged to promote their services. Before the enterprise giant SAP entered the publishing space in the late 1990s, VISTA was the dominant provider of enterprise software to book publishers in the US and UK. They decided they needed to learn about digital change, driven by fear.

As their then-chairman Denis Bennett said at the time, “we sell software to help publishers keep track of books in warehouses. What if there are no books? What if there are no warehouses?” He decided his customers needed to explore the same questions, so he funded a team led by Mark Bide of the UK and me to do research on digital change. First the findings benefited VISTA’s strategic planning and then they were turned into conference presentations to help publishers.

Meanwhile, Amazon grew, Barnes & Noble — first with Bertelsmann and then on their own — competed for online sales and ebooks reared their head through initiatives by Sony, Palm, and Microsoft. It became evident to many people that the industry might change a lot. And the era of digital conferences throughout the publishing calendar began. We did a conference at Frankfurt in conjunction with the Frankfurt Book Fair in 2001. Soon every industry gathering had to have some sort of digital show. Tim O’Reilly, a publisher of computer books, launched the Tools of Change conference in 2007. It was geeky, but opened the door to discuss business change, not just tech change.

Then in 2009, David Nussbaum and Sara Domville of F+W Media conceived Digital Book World and recruited me and then Michael Cader of Publishers Lunch to program and market it. That began a run of seven years for us, which had a bit of a bell curve. The first few years we were up and the last few years it got increasingly difficult to maintain the level of success we’d reached.

And that was because publishers lost the fear. This was for a variety of reasons. One is all to their credit: they hired in people who knew digital even if they didn’t (yet) know publishing. But it was also that circumstances changed. The surge in ebook sales taking share from print slowed down, then apparently stopped. New marketing procedures, still driven by major accounts but also now using new tools like NetGalley and ever-improving techniques and software assistance to find the right keywords for discovery, were developed to address the new marketplace.

What had been been a disruptive and frightening pace of change became a much slower boil. As the metaphorical frog in boiling water demonstrated, not feeling a change doesn’t mean one isn’t happening. But feeling the change drove the fear and fear drove the need for education and validation.

Now the challenges are more subtle. Amazon is past 50 percent of the sales for many publishers. That’s comprised of a lion’s share of online print sales and almost as much of the ebook sales. Not only does Amazon have a multiple of the biggest share of the book business any prior account had ever achieved, they aren’t shy about using their clout to claw back margin.

(Old joke of mine from a few years ago, but still true. “Amazon is every publisher’s most profitable account. That was never their intention and they’ll be inclined to change that fact as fast as they can.”)

If Amazon has consolidated the path to reaching half the US domestic market, Ingram has done very much the same thing for the global market. But while Amazon’s build-out has been largely at the expense of an ecosystem US publishers already reached (the most notable fatality being the Borders chain, which expired in 2011), Ingram has created a market expansion for many publishers by providing ready access to offshore sales opportunities that were previously very hard to access.

Global marketing channels — which is any way you use the Internet — and ubiquitous use of English means that the potential customer base for English-language books extends far beyond what US (or UK or any other English-language) publishers consider their home territory. Ingram has long been a supplier to bookstores and libraries all over the world. They distribute ebooks globally. They’ve complemented their capabilities with a growing print-on-demand network, making it even more efficient for them to put the books of their vending publishers anywhere there’s demand.

So, in 2016 publishers can literally reach most of the customers in the world through two intermediaries, Amazon and Ingram. Obviously, a publisher who calls on stores locally and around the world will stimulate sales that the best relationship in the world with Ingram can’t deliver entirely on its own. It still definitely “pays” for a publisher to push to get books in stores in the US and around the world on their own. And it is likely that books on display and selling in brick-and-mortar stores in the US and elsewhere actually stimulate sales at Amazon as well. But a publisher with no more organization than relationships with Amazon, Ingram, and a talented digital marketing team can publish successfully in today’s world.

One example is Diversion Publishing Corp., created by Scott Waxman, composed of Diversion Books, EverAfter Romance and Radius Book Group, which has developed a real business and marketplace presence working closely with Ingram’s organization for its brick and mortar distribution reach and Amazon for online sales. And it is worth noting that O’Reilly Media is among the companies that has for years reduced its fixed overhead by publishing its books leaning on Ingram.

The fear that is left in the marketplace can’t really be addressed by a conference. That would be the fear many publishers have about what Amazon will do to claw back margin in the future. Probably the greatest comfort publishers have is that they will be “even-handed” about it; looking for pretty much the same concessions from everybody. At the same time, there is fear around the other biggest domestic account for most publishers, Barnes & Noble, which is experimenting with ways to turn around their declining business but also has its hand out looking for more support. New independent stores continue to open, but others also close and, anyway, all of the indies apparently amount to about 8 percent of the total business, according to anecdata provided to us by a number of publishers.

So Amazon and Ingram, for different reasons, are the most reliable accounts of any in a publisher’s account base to grow. Increasing their understanding of how to make the most of the opportunities those two accounts present is the most important commercial task for publishers for the foreseeable future. That should be driven both by logic and fear.

Maximizing Your Potential With Amazon and Ingram. Now, THAT is a good topic for a conference!

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Newspaper publishers face very different and much more immediate threats than book publishers


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The business news has been very painful for newspapers lately. A piece we saw a couple of days ago says both the New York Times and the Wall Street Journal are going to cut back sharply on their arts coverage. The advertising simply isn’t there to support it.

And recently before that, we read a piece suggesting that perhaps newspapers should have just ignored the whole digital thing (a frighteningly obtuse suggestion) and then right afterwards a Times story documenting the collapse of advertising dollars available for print which pretty much obviates the “just skip digital” idea. (One wonders if the people advocating that solution are not aware that overall ad budgets are reviewed by all advertisers regularly and the budgets are routinely reallocated to put more into digital and less into print! This is not a “secret” trend.)

I have been sharpening my understanding of book publishing economics with real experience for 50 years. My view of periodical media is purely as a consumer and fan, but a very longtime consumer and fan. I got the first magazine subscription of my own 60 years ago when my parents gave me my wish of a Sports Illustrated sub for my 9th birthday. Shortly thereafter, I talked them into getting The New York Times by home delivery and that started my daily habit of looking at the front page and the box scores before breakfast. When I went to UCLA, the first thing I did was get home delivery of the Los Angeles Times.

At one point or another, I got subscriptions of my own to Newsweek, Time, and US News & World Report. And Business Week. And Sport. And The Sporting News. And the Nation, the New Republic, and National Review. And New York and the New Yorker and, for a while, New West! When there was a sports daily called The National, I bought it at my newsstand along with the News and Newsday.

But that’s all done now. I have two print subscriptions left: The New York Times and The New Yorker. I have recently found that their online prompts through emails and digests have led me to read most of what the print edition offers on my phone before the print edition arrives! (Still, I have no plans to cancel either because digital-only isn’t that much cheaper and I still get a bit of value out of the print.)

While I think the book business still has years of viability in front of it, I can’t see a way to sustain the periodicals. It isn’t just about consumption in print versus consumption in digital. There are two massive differences between the businesses.

1. Newspapers (and magazines) depend on advertising in their business model; book publishers don’t.

2. Newspapers (and magazines) are aggregates of content while many books are themselves a single unit of content. You can get the box scores or the weather or the national news headlines from a variety of places, no matter how unique or distinctive are other parts of the newspaper you buy. You wouldn’t find an acceptable substitute for the sixth chapter of a novel you’re reading.

The first point was one the periodical publishers could figure they had covered because their online offering would pick up digital advertising for support as print declined. They could see that they could reach a much bigger audience with digital than they could with print. So there was room for optimism that moving the whole kit-and-caboodle to the web could work synergistically with the print edition. Of course, we’ve learned since that each recorded eyeball earns less online than each theoretical eyeball did when it was delivered by the print edition. And then there’s the way Google and Facebook have swept up all the online ad dollars.

But that wasn’t the bigger problem. The other one was.

The aggregation created by each newspaper was intended to compete as an aggregation. In the 20th century, a consumer didn’t have the choice of reading the Times’s op-ed page and the News’s coverage of the Yankees unless s/he bought both newspapers. But, even with the paywalls that are up today (and weren’t up at the beginning), there is a lot of competition for almost every single individual piece of content in every newspaper. And it has also become just about impossible for a printed newspaper to deliver you any “surprises”: any news that is important to you personally that you won’t have seen first in an email or an online aggregator (including that own newspaper’s web site.) Any “scoop” will be “reported” by competitors and the information itself would be in the public domain very quickly after it is released.

So, the fundamental distinction between the businesses is that publishers often sell an indivisible unit and newspapers (and magazines) sell aggregates of content nuggets, each of which is valued differently by different readers of the paper and each of which has its own array of competitors.

It occurred to me more than six years ago that there would be trouble when the consumer’s “unit of appreciation” did not equal the publisher’s “unit of sale”. The most dramatic example was offered by the recorded music business which sold albums (unit of sale) to satisfy its market’s appreciation for songs (unit of appreciation).

Both the “whole” newspaper and the record album made sense in a physical world. It would simply not be practical for the newspaper to deliver recipes and box scores on your lawn and national news and TV listings on mine. Record companies “stamped” records and CDs, and it was approximately the same cost basis to them whether they gave you one or two songs when they did that or twelve. Both business models were built on aggregations when physical requirements made the aggregations sensible and the consumer readily went along with it.

Book publishers certainly have serious challenges in front of them. In the short run, they are learning that novels work better as both print and digital products than cookbooks (where the unit of individual content appreciated is the recipe, although for the printed version there are rewards in the entire presentation). They are dealing with consolidation on the distribution side which threatens their margins at the same time that increased competition from indies forces down retail prices. There is reason to believe that long-form reading itself may diminish as our attention spans are increasingly shaped by mobile consumption with many built-in distractions. The commercial book business is already shrinking and it will continue to do so. But the core business model by which publishers acquire units of content, develop and refine them, and then market and distribute them, is currently only eroding. The advertising-based model for printed newspapers and magazines appears to be collapsing.

Newspapers and magazines have already diminished sharply and now seem to be doing so at an accelerated rate of speed. I don’t see any way to save the status quo ante. Newspapers and magazines aren’t “coming back”. But I do have a few thoughts that perhaps offer insight to the current owners and workers in an anachronistic paradigm about how to focus most effectively on the challenges they face.

1. Stop thinking about the overall business — The New York Times or Business Week or Sports Illustrated — and start thinking about the individual pieces of content created on a regular basis and the competition for each piece.

2. That leads pretty quickly to recognizing what’s “unique”. In the case of the Times, that’s likely to be the in-depth reporting by very solid intellects. I’d be figuring out how to broaden and deepen that and sell it in segments. There should be a global audience for Times reporting on Washington, on New York City, and on finance, for example. These should be built out at as subscription products. It is even possible that foundation or grant money would support them as well as subscribers.

3. Most local newspapers’ biggest unique asset is their local reporting. It is also what is most in society’s interest to maintain. But they really add very little value with a lot of their content, much of which comes from wire services and syndicators. Getting local support for local reporting will be harder in some places, easier in others. But building a local subscription base for local news coverage has shown signs of being a sustainable model; continuing to sell a locally-branded and -curated aggregation of information ubiquitously available elsewhere clearly is not.

This last makes it clear that I’ve elided one key reason for the shrinkage of the newspaper business. It no longer requires a local production-and-delivery system to hand you most of what that local production-and-delivery system sold — with what was usually really just a smattering of local customization — for the past 100 or 150 years.

My friend, Michael Cairns, saw the local angle years ago and well before that figured that The New York Times would be selling tech to enable better local reporting to other newspapers. Too bad that didn’t happen and it could have been (perhaps still could be) a great revenue stream for the Times.

There is developing public concern for the loss of journalism through the loss of newspapers. Contributions support the efforts of ProPublica, for example, although their stories may come to light through conventional vehicles like the New York Daily News. It has been suggested in serious circles that government should support independent journalism.

Each large and (historically) successful newspaper is a large business on a one-way path to oblivion. Within each of them, though, are a number of seeds for smaller businesses that might survive and thrive in an environment where they weren’t shackled to large overheads performing redundant services.

So while newspapers and magazines should continue to pursue events and any ecommerce opportunities they see, they should also recognize that they are riding on a seriously dated business model. If there’s still cash to extract from it, that’s fine. But it is like a mine that has been worked for years or a machine designed for years of use that has now performed for decades. Efficiency will continue to decline and eventually it won’t be commercially productive at all. Lots of perfectly competent and capable blacksmiths couldn’t adjust to a world that needed fewer of them and more auto mechanics.

The obvious exceptions to both my experience and my generalizations are the most niche-y specialist magazines, except the bigger they are, the more they would be subject to the problems I’m describing. But the more focused their audience’s interests, the more their advertisers are likely to be loyal and the more that other things like events might add measurable revenue. The critical mass requirements for print remain a challenge, but the chances of converting to a workable web-only proposition might be better if there’s a strong brand.

And intensely local works just like niche-y. It is ironic that many local newspapers have cut back on local coverage, which is precisely what can work for them commercially because the most local advertisers (restaurants, health clubs, local elections) don’t have a lot of other choices. And local coverage can attract other support.

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What the Riggio interview in the New Yorker tells us


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The New Yorker did a very provocative story dated October 21  about Barnes & Noble that included a great deal of information gained from a phone interview by writer David Sax with B&N significant shareholder and chairman Leonard Riggio. B&N is a subject of obsessive interest to book publishers and their friends, family, and ecosystem. About two months ago, I wrote a post trying to pinpoint the source of their biggest challenges (lots of titles in a bookstore isn’t the magnet for customers that it once was) and suggesting a way to attack it (put bookstores in places the customers already were, which are retailers of other things, not books).

Because I lived through a story I told in that piece, it hit me between the eyes when Riggio was quoted in the New Yorker saying he favored doing smaller stores in 2000! It was 2002 or 2003 when I saw clearly, from B&N data, that the big store magnet was already an outdated relic. I then suggested to a fairly highly placed executive there, “you guys have to use your fabulous supply chain to make the 25,000-title store work”. The response was that such an idea couldn’t even really be broached internally. “Mike,” my contact said, “we’re thinking about the MILLION title store!”

So if Riggio was thinking what he remembers thinking back at that time, the word never got to some of his most trusted executives.

The second thing that jumped out at me from the New Yorker piece was Riggio’s analysis of why people shop where they do. It’s very simple in his view. If you have a bookstore close to you, you buy your books there. If you don’t, you go to Amazon. Oh, the many things that analysis oversimplifies and elides!

The first is that it totally lets BN.com off the hook for 20 years of uninterrupted failure to deliver an acceptable online shopping solution. Since the late 1990s, when Amazon started discounting heavily to discourage indies from delivering a competitive online solution, “the problem” has been that Amazon was willing to discount their books aggressively and B&N, trying to “protect” their store business, was not. But while that may have given Amazon an early edge, it doesn’t explain why B&N has lagged Amazon in every functional way from the beginning. Their search isn’t as good. Their checkout isn’t as good. Their metadata is inferior by miles.

The woman of principle I’m married to would, for years, search and shop for her books on Amazon (where she could find what she wanted) and then go to BN.com to order them (so she kept her dollars in the book business). For the same reason she bought Nook instead of Kindle. That lasted for some years. She’s now a Prime customer. Staying loyal to B&N was just too hard; the stuff didn’t work.

As it happens, people who worked at B&N Publishing and Sterling, the formerly independent publisher B&N bought, did the same thing. I’ve been told by several people that they routinely used Amazon to gather the data they needed to support internal discussions about a book or a category. The internal alarm bells should have been deafening!

Riggio’s view of how customers choose their vendor ignores another important nuance. Those decisions depend both on the customer and what they’re shopping for. The key realization I had from B&N data in 2002-3 that led me to suggest smaller stores was that professors were clearly not buying their academic and professional books at B&N anymore. It wasn’t hard to figure out why.

Professors are smart people. They were well aware from years of experience that their local bookstores (B&N or any other) almost never had the most recent academic or professional book they heard about. When the Amazon alternative became available it was a clearly superior choice if your expectation was that you would just go to the store to special order and then have to go back to pick it up! Before there was an Amazon, the store with the most titles was the logical place to go look for something obscure. After Amazon was established, they gradually — quite logically — became the default for that use case.

What the professors had figured out by 2002, the whole world knows today. The savvy consumer will likely order any title s/he thinks is at all obscure from Amazon rather than expecting to find it in a local store.

Another nuance that segments how book purchasers make those decisions, besides obscurity, is the nature of what they’re shopping for. If you want to buy “The Girl on the Train”, you don’t need to see it or touch it. If you want to buy an art book for your best friend’s birthday, you might well want to look carefully at a few before you decide. Even with access to “Look Inside” capability (which is far more built out at Amazon than at BN) online, seeing the physical book in a store would be preferred for logical reasons by many people.

Then there’s the weight of the book which you might not want to carry around or the possibility that you want it just shipped directly to somebody else. Where you live in relation to a bookstore isn’t going to make much difference in those cases.

In fact, an industry veteran who started in book clubs reminds me that we knew all this decades ago. Outsiders thought mail order book clubs were for people who couldn’t easily get to bookstores. But, in fact, the people running book clubs knew that the zip codes where they had the most customers also had lots of bookstores in them.

I have one more conjecture from reading the New Yorker piece, which is that, as smart as Riggio is and as obsessed as he certainly was with the way his business ran, it is possible he doesn’t fully understand why B&N was so successful. You have to do a lot of things well to run a big bookstore chain.

It could have been because of the intelligence and care they put into selecting locations for the stores. It could have been their internal store design and layout. It could have been the the authority they gave their managers to customize their stock. (Despite the notion, true and emphasized in the the New Yorker piece, that the stores are necessarily standardized in many respects, it has always been B&N’s ethic that the store manager should buy what is needed locally that the New York buyers might miss.) It could have been the skill of the buyers in picking the books.

But I always thought the key to B&N, differentiating them from Borders and other chains and heavily advantaging them over independents, was their supply chain logistics. They built warehouses and systems that enabled them to replace many of the books they sold today by tomorrow or the day after. Stock turn is the most important metric contributing to bookstore profitability, far more impactful than discount (how much margin they get from the publishers). B&N’s supply chain was what gave them the edge.

After reading his quotes in this piece, it occurred to me that Len Riggio might not know that. He certainly said nothing to David Sax to indicate that he realized that was a critical lever for his company and exploring how he might use it. That was, of course, the foundation of my suggestion in the last B&N post I did suggesting they place B&N Book Departments in as many stores as they can.

And if Riggio does come around to that point of view, he might also revisit his concluding thought that, whatever happens, it will “play out over a long period of time”. The B&N supply chain capability, which has given it enormous leverage for decades, will also deleverage very quickly as volume and the number of stores being served goes down. It is the sales in the stores and on dotcom that pay for that supply chain. And even just reducing its size will be an expensive undertaking. That’s something for all of us to worry about.

A publishing veteran friend who recently pocketed beaucoup bucks from an “exit” speculated to me recently that Barnes & Noble would be a great company for somebody with fresh eyes and a fresh approach to do something with. He’d love to be part of a new owning group. That thought may be right, but the stock looks pretty expensive right now. I’m personally skeptical that the new “concept stores” with better food is a winning idea. Do you know anybody who picks their bookstore by the menu?

While this piece was being worked on, Barnes & Noble announced that they were closing their only store in New York’s borough of the Bronx.

And for those who can’t get enough on this subject, here are posts I wrote as long ago as 2009 (some of the linked speeches are much older than that!) and as recently as a year ago making the point that smaller bookstores were the future.

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The latest marketplace data would seem to say publishers are as strong as ever


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This post began being written a couple of weeks ago when I recalled some specific misplaced expectations I had for the self-publishing revolution and started to ponder why things happened the way they did in recent years. It turns out a big part of the answer I was looking for provides clarity that extends far beyond my original question.

For a period of a few years that probably ended two or three years ago, we saw individual authors regularly crashing bestseller lists with self-published works. Some, like Amanda Hocking, parlayed their bootstrap efforts into significant publishing contracts. Others, like Hugh Howey, focused on building their own little enterprise and tried to use the publishing establishment for what it could do that a self-publisher couldn’t. (In what was certainly a very rare arrangement of this kind with a major indie author, Howey made a print-only deal for his bestseller, “Wool”, with Simon & Schuster. And he made foreign territory and language deals and Hollywood deals as well.) And we know that there were, and are, a slew of indie authors who self-publish through Amazon and don’t even bother to buy ISBN numbers to get universal distribution under a single title identifier, effectively keeping them out of bookstores.

All of this was enabled by three big changes to the historical book publishing and distribution ecosystem. One was the rise of ebooks, which simplified the challenge of putting book content into distributable form and getting it into the hands of consumers. The second was the near-perfection of print on demand technology, which enabled even print books to be offered with neither a significant investment in inventory nor the need for a warehouse to store it. And the third was the increased concentration of sales at a single retailer, Amazon. Between print and digital editions, Amazon sells half or more of the units on many titles and, indeed, may be approaching half the retail sales overall for the US industry.

(This is very hard to measure or even get reliable anecdata for. Amazon sells globally. Indeed, one of its great contributions to publishers is pretty seamlessly enabling them to reach export markets through a domestic supplier. But it also means that publishers can tend to see all Amazon sales as “domestic”, even when they’re not. US publishers are often telling us that half their sales are coming from Amazon, but how much of those sales are to offshore accounts is not consciously backed out of the numbers.)

What the rush of indie bestsellers told us a few years ago was that things had changed to the point that a single person with a computer could achieve sales numbers that would please a big corporation going after sales with the tools provided by tons of overhead: careful curation and development, sophisticated production capabilities, teams of marketers and publicists, legions of sales people, and acres of warehouse space. This had not been possible before ebooks. And the market reach of the amateur publisher was extended even further as Amazon’s share of print sales surged as a direct result of retail shelf space declining with Borders’s passing and Barnes & Noble’s shrinkage.

For a period of time that was relatively brief and which now has passed, agents and publishers worried that self-publishing could be appealing to authors they’d want in their ecosystem. The author’s share of the consumer dollar is much higher through self-publishing. And the idea of “control” is very appealing, even if the responsibility that goes with it is real and sometimes onerous.

So, I warned with what felt like prescience, entity self-publishing might present an even greater threat to publishers than independent authors would.

I was thinking about the scale value that publishers brought to producing revenue for books. Historically, that had been about capabilities that only a book publisher would have at its disposal, the tools we referred to earlier. With Ingram then adding a turnkey service called “Spark” to reach the half of the market that was not delivered by Amazon in the US, access to other ebook retailers wherever they are, and enabling print sales around the world, a publisher could “rent” all the infrastructure it would need to reach all the audience there is with two stops: Amazon and Ingram.

The entities that I had my eye on from the book publishers’ perspective were those already in the print content business: newspapers and magazines. They all start out with assets that would seem to lend themselves to creating and promoting books. They have access to vast number of writers, on staff and through work-for-hire arrangements. They have editors on staff as well as the knowledge of how to find and hire more for projects. They have direct online access to a large number of consumers, including the opportunity to know their interests in a very granular way. They have advertisers who could be useful for promoting books or even buying them in bulk.

But despite the fact that there was, indeed, a slew of activity 2-to-4 years ago from a variety of non-book publishing content entities to get into ebooks, there have been no apparent breakthroughs. Nobody has cracked the code. Nobody who is not a book publisher has used the rent-a-scale capabilities to build a sustained book business.

It is not that many haven’t tried, or are still trying. Among those who have been or are still in the game are The New York Times, The Washington Post, The Guardian, The Atlantic, The Huffington Post, NBC, the Minneapolis Star-Tribune, and The Boston Globe. They have sometimes worked in conjunction with digital start-ups. For example, the New York Times worked with Vook (now called Pronoun and acquired earlier this year by Macmillan) and Byliner, whose original proposition was “short ebooks”.

There have been a variety of approaches to create the content. Sometimes these publications and websites have recycled their own material or used internal resources. The Boston Globe did an insta-book on Whitey Bulger and some on Boston sports teams, as well as creating a book of photos of Boston that had already run in the paper. (The Boston Bruins’ Stanley Cup championship was commemorated in a book delivered both in print and digital days after they won.) The Star-Tribune used internal staff to execute the mechanics of delivering ebooks. The Boston Globe’s Bulger book, published by Norton in print, showed them that they could do the ebook work themselves.

Obviously, the idea of book programs using magazine brands is not new with the digital age. Decades ago, Hearst, Rodale, and Meredith were all big magazine companies committed to real book programs, which was what it took to support the infrastructure or to form a close relationship with a publisher to provide it. Hearst has had a robust book program for a long time because they once owned the book publishers Morrow and Avon. When they were sold in the mid-1990s, the management saw virtue in maintaining the book program so they teamed up with Sterling Publishing for everything from assists creating the content to all the scaled book publishing functions. The relationship continues to this day, although Hearst also licenses other projects to other publishers. Rodale remains active in both books and magazines, with their own organization doing the books. And Meredith temporarily moved its book program from “independent” to publisher John Wiley. It is now a shadow of its former self.

Even in the simplified age we’re in now, leaning on a publisher with all the pieces in place can be a way to tackle the challenge of having an adequate infrastructure for books. I am currently reading a “Washington Post” ebook on climate change that was published in conjunction with Diversion Books, a digital-first publisher created by literary agent Scott Waxman during the height of the indie publishing ebook fever.

But searching for a surge in this kind of activity generated by the digital revolution consistently takes us back to two and four years ago. In 2012, Random House partnered with the website Politico to deliver four ebooks on the 2012 presidential race. We’re not aware of anything similar taking place this year. The Minnesota Star Tribune was pushing their ebook initiative in 2013. The Boston Globe got into the game in 2011. The Times did a story in 2011 about the phenomenon which covered a Vanity Fair ebook of collected articles about Rupert Murdoch and News Corporation when they were the caught in a scandal. Graydon Carter, the editor of Vanity Fair, loved the whole idea. He loved the idea of publishing articles which had already been fact-checked and copy-edited. “It’s like having a loose-leaf binder and shoving new pages into it.”

The Byliner collaboration with the New York Times was first reported in 2012, and the Times started their initiative with Vook almost simultaneously. At the same time, programs were being announced in the UK by the Guardian and the Financial Times.

All of that inspired the pundit in me to say “watch out”. But there’s been a lot less activity since. It’s worth asking why.

Of course, there are logistical and organizational challenges to just bolting a book publishing program onto an existing content-creating entity. The writers and editors at newspapers and magazines are already fully employed; they’re not looking for additional things to do. And the job specs and incentive arrangements are all about the principal activity. The marketing mechanisms at a periodical publisher are, likewise, fully engaged. So the newspaper or magazine might have more powerful tools for some marketing purposes than a book publisher does, but no book operation inside one of them could get them dedicated to help sell books on anything but the most sporadic and opportunistic basis.

In addition to the fact that the sailors all have existing assignments, a book publishing initiative would also lack a captain. We observed a couple of years ago that one of the great indie publishing successes, a cookbook called “Modernist Cuisine”, carrying a price tag of $625 and published by Microsoft co-founder Nathan Myhrvold, was largely made possible by the leadership of a veteran publisher, Bruce Harris. Yes, Ingram did the “scale” work: printing, warehousing, selling, distributing. And it wouldn’t have been possible without them. But Harris worked out the commercial equations (what should the retail price be, for example) and the marketing campaign that carried it to its success.

There are other veteran publishers like Harris available to be engaged as consultants, but it is also much easier for a single entrepreneur like Myhrvold to make use of one than it would be to have them integrate with an existing organization formed for another purpose.

I asked indie-publishing experts Jane Friedman and Porter Anderson (their weekly “Hot Sheet” newsletter for independent authors is a great resource) for their take on the question I was posing: what happened to all those newspapers and magazine initiatives? Why did it seem that none of them achieved the success I was expecting?

Friedman drew on her experience at Virginia Quarterly Review (VQR), which had publishing ambitions based on ebook economies but ultimately abandoned them. She saw the “complications” falling into three buckets.

Clearing rights for projects with multiple authors, which VQR would have been frequently called upon to do, was challenging, time-consuming, and frustrating.

The organizational structure and staffing was far from optimal for a book publishing operation.

The profit potential was too small to make it worth the effort to overcome the other two problems.

But, even accepting all of that,  I’d suggest that the biggest reason this activity was so feverish 2-to-4 years ago and isn’t so much now was revealed first in a vitally important post by hybrid author and helper-of-indies Bob Mayer and then reiterated by the latest report from the Author Earnings website.

Mayer built an impressive business for himself by reissuing titles of his that had previously been successfully published and gone out of print. He spells out clearly what has changed since the days of big indie success and the plethora of entity-based publishing initiatives.

The marketplace has been flooded. An industry that used to produce one or two hundred thousand titles a year now produces over a million. Nothing ages out of availability anymore. Even without POD keeping books in print, ebooks and used books make sure that almost nothing ever disappears completely. And Mayer’s sales across a wide range of titles — his and other authors whom he has helped — reflect the mushrooming competition. They’re down sharply, as are the sales of just about everybody he knows.

What Mayer wrote tended to confirm that the breakthrough indie authors happened far more frequently before the market was flooded. Authors who struck it rich in 2010 and 2011 (like Hugh Howey) were lucky to get in before the glut. Recommending that somebody try to do the same thing in 2013 or 2014 was telling them to swim in a pool with water of a completely different temperature.

On the heels of Mayer’s piece, Author Earnings made discoveries that seemed to startle even them. For those who don’t know, AE is a data collection and analysis operation put together by indie author Hugh Howey teamed with the anonymous analyst “Data Guy”. The AE emphasis is on what the author gets, (“a site for authors by authors” is what they call themselves) with less interest in what publishers want to know: how topline ebook revenues are shifting.

According to the industry’s best analyst, Michael Cader, the most recent AE report shows, for the first time since they’ve been tracking it, a reduction in earnings for indie authors and an increase for published authors. (Cader may have a paywall; here’s another report from Publishing Perspectives.) But even more startling is the shift in revenue. Publishers have booked 65% of Kindle revenues and Amazon Publishing has 10%. They put self-published authors at 20%, which is down from 25% previously.

It is not a big surprise that Amazon Publishing is able to grow its own share of Kindle revenue. But the fact that publishers are holding their own, in the aggregate, while indie authors are not, underscores the challenge that non-publisher books are facing. The title output of publishers has remained relatively flat. The title output of indies has surged. So the per title sales of indie books must be collapsing relative to the publishers’ output.

What this is telling us is that, whatever deficiencies there are in the way publishers are organized for publishing today, they clearly are able to marshal their resources more effectively for book after book than indies can. So, not only does the “entity publisher” have the challenge of refocusing an organization designed for something else to sell books, they’re fighting a tidal wave of competition that enters the market because of the low barriers to entry. In fact, if you were at a newspaper or magazine today and thinking about putting your company into the book business, there would be powerful arguments to follow the Hearst formulation of creating a home inside an established book publisher rather than building a low-overhead operation for yourself. But that option has always been available; it didn’t require a digital revolution to deliver it.

A lot has been made of the fact that big publishers are seeing topline revenue erosion across print and digital. But the ability for readers to consume books has, at best, remained flat (there are so many more distractions immediately available these days) and the number to choose from has exploded. That means the per-title sales are plummeting. Per-title sales are what tell us whether publishers or independent authors can make any money. And the math is clear: it is getting harder and harder to do so, but it seems to be getting harder faster for the indies than it is for the established publishers.

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Changes going on around here


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This post is personal, but it is also business. It’s about the shifts taking place in my personal corner of the publishing world, but which will soon enough touch the marketing of many books.

For the past couple of years, I have been building a digital marketing business called Logical Marketing with Peter McCarthy and Jess Johns. Pete is a real genius at this stuff who got a unique opportunity to refine his knowledge and hone his skills by running a digital marketing lab for Random House for six years concluding just prior to the Penguin merger. Before that, Pete had set up the web and digital presences and ebook businesses for Penguin. He’s been hands-on with digital change in publishing for over 20 years, since his first job working on the bibliographic database for the New York Review of Books. Jess, who has worked with me since 2010, and I undertook the job of “scaling” Pete’s knowledge for wider industry use.

About two years ago, I suggested to Pete that “we need a product, not just services” and he came up with a really great concept for software that would help publishers market their books through online retail channels. The idea was just a little too big for us to forge ahead with on our own, so it sat around for a year while we found a way to execute it.

A year later, just about a year ago, I let Evan Schnittman, then recently departed from his CMO role at Hachette and now working on funding and developing start-ups, know what we had in mind. He and his partner, David Joseph, built a business plan and projections around the idea to go after investors. By last Fall, we were ready to talk to them. Early in the new year, funding was secured and put in place by March. Over the last six months a version of the software ready for beta testing has been built. Schnittman is the CEO of the new company, OptiQly, in which we all share ownership. (And, meanwhile, Pete, Jess, and I continued to work on the business we owned: Logical Marketing.)

The coming months will be dedicated to OptiQly beta testing, refining the product, and bringing the first version of it to market in the new year.

Pete’s knowledge was critical for the software build. But it also turned out that Jess, who has been working with Pete creating and delivering all our Logical Marketing reports and insights (to a gold-plated client list in just two years) and who is both tech- and marketing-savvy, has been a key part of the OptiQly team as well.

Meanwhile, we at Logical found ourselves in a conundrum: the slightly different ownership of the two companies led to some real tactical confusion. And it made it difficult to allocate Pete’s and Jess’s time for the best overall result. Logical and OptiQly shared enormous common ground, but they weren’t 100% aligned. We began internal discussions about how to more effectively share resources and reach both company’s goals.

There was another factor at play as well. For 25 years, I’ve always had a business with some stability running alongside my more volatile Idea Logical consulting practice. In the 1990s, I ran VISTA’s “Publishing in the 21st Century” program (VISTA was an enterprise software provider for publishers now called Ingenta) and then I ran a sports content business (which became a temporarily lucrative but now defunct website called BaseballLibrary.com) feeding features to the new online sports news site, Sportsline. Then, for a few years, we provided a data analysis service called Supply Chain Tracker to a dozen or so US publishers, converting the report feeds they got from major accounts into actionable information. And for the past seven years, we did the programming for Digital Book World. All of those businesses ran their course for me which, in a way, meant that building up Logical Marketing now could be seen as perfect timing.

But, quite aside from the conflicts with OptiQly, it really wasn’t. My primary personal interest today is not about making a living. It is about dedicating my time, knowledge, and connections to the one cause that should interest us all: the effects of climate change. I find myself far more interested in developing the best possible book on coping with the impacts of sea level rise (which I am doing at the moment with an undiscovered sea level rise expert I am about to introduce to publishers) than in helping a publisher market their next big book.

So, as of October 1, my corner of the world has undergone a big change. OptiQly has acquired Logical Marketing and Pete McCarthy and Jess Johns have joined OptiQly as full time employees, heads of product and services and of marketing, respectively, working for Evan Schnittman, OptiQly’s CEO. They’ll be in OptiQly’s office where I will occasionally join them and continue to provide what I hope is useful strategic insight and hurdle-jumping advice for our exciting new business, and I’ll still be on the Board. And the services component of OptiQly, which is what Logical Marketing has become, will grow and thrive with the leadership Evan will provide. He’s a much better executive and business builder than I am.

And I’ll be back to being mostly on my own working from home, as I did for many years until the early 1990s. My interest and involvement in trade publishing is a permanent condition, so I’ll definitely still be consulting, helping fledgling publishers and tech start-ups with a publishing angle as well as a few mainstay companies that value my knowledge and insight. But my “business development” energy will be devoted to working on climate change. That will include some initiatives I’m not quite ready to talk about yet, but it largely means seeking out experts on various aspects of the subject and helping them put together book projects that will spread the messages that are most critical to humanity’s survival, which, unfortunately, doesn’t seem to be the sure thing it was when I started my working career.

One other project occupying me at the moment is a book I am writing about the book business for Oxford University Press’s “What Everyone Needs to Know” series with a longtime publishing friend and colleague, Robert Riger. We’ve had a wonderful time interviewing executives throughout the industry, always intending to do the lion’s share of the writing in Q4. Now my decks are a bit clearer to do just that.

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The reality of publishing economics has changed for the big players


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A veteran agent who was formerly a publisher confirmed a point for me about how trade publishing has changed over the past two decades, particularly for the big houses. This challenges a fundamental tenet of my father’s understanding of the business. (And that’s the still the source of most of mine.) I had long suspected this gap had opened up between “then” and “now”; it was really great to have it confirmed by a smart and experienced industry player.

One of the things that I took from my father’s experience — he was active in publishing starting in the late 1940s — was that just about every book issued by a major publisher recovered its direct costs and contributed some margin. There were really only two ways a book could fail to recover its costs:

1. if the advance paid to the author was excessive, or

2. if the quantity of the first printing far exceeded the advance copy laydown.

In other words, books near the bottom of the list didn’t actually “lose” money; they just didn’t make much as long as the publisher avoided being too generous with the advance or overly optimistic about what they printed. (Actually, overprinting was and is not as often driven by optimism as by trying to achieve a unit cost that looks acceptable, which is a different standard fallacy of publishing thinking.)

The insight that just about every book contributed to overhead and profit was obscured by the common practice of doing “title P&Ls” that assigned each book a share of company overheads. Whatever that number was, when it was calculated into the mix it reduced the contribution of each sale and showed many books to be “unprofitable”. That led publishers to a misunderstanding: perhaps they could make more money doing fewer books, if only they could pick them a little bit better. Trying to do that, of course, raised the overhead, which was neither the objective nor any help in making money.

(Raised the overhead? I can hear some people asking…Yes, two ways. One is that publishing fewer books would mean that each one now had to cover a larger piece of the overhead. The other is that being “more careful” about acquisition implies more time and effort for each book that ends up on the list, and that costs overhead dollars too.)

For years, this “reduce the list and focus more” strategy was seen by my father, and those who learned from him, as a bad idea.

One of the young publishers my father mentored was Tom McCormack, who — a decade after Len worked with him — became the CEO of St. Martin’s Press. There, McCormack applied Len’s insight with a vengeance, increasing St. Martin’s title output steadily over time. And, just as Len would have expected they would, St. Martin’s profits grew as well.

All of this was taking place in a book retailing world that was still dominated by stores making stocking decisions independently from most other stores. In the 1970s, the two big chains (Walden and B. Dalton) accounted for about 20 percent of the book trade. The other 80 percent was comprised of nearly as many decision-makers as there were outlets. So while it took a really concerted effort (or a very high-profile book or author) to get a title in every possible store location, just about every book went into quite a few. With five thousand individuals making the decision about which books to take, even a small minority of the buyers could put a book into 500 or 1000 stores.

But two big things have conspired to change that reality. The larger one is the consolidation of the retail trade. Now there are substantially fewer than 1000 decision-makers that matter. Amazon is half the sales. Barnes & Noble is probably in the teens. Publishers tell us that there are about 500 independent stores that are significant and that all the indies combined add up to 6 to 8 percent of the retail potential. The balance of the trade — about 25 percent — is the wholesalers, libraries, and specialty accounts. The wholesalers are feeding the entire ecosystem, but the libraries and specialty accounts are both very much biased as to the books they take and very unevenly covered by the publishers. In any case, ten percent of the indie bookstores today gets you 50 on-sale points, not 500. That’s a big difference.

The other thing that has happened is that the houses are much better organized about which books they are “getting behind”. This has the beneficial effect of making sure the books seen to have the biggest potential get full distribution. But it also has the impact of reducing the chances that the “other” books will get full attention from Barnes & Noble (able to deliver more outlets with a single buyer than one would customarily get from the entire indie store network). And, without that, it takes a lot of luck or online discovery to rescue a book from oblivion.

The agent who was confirming my sense of these things agreed that the big houses used to be able to count on a sale of 1500 or 2000 copies for just about any title they published. Now it is not uncommon for books to sell in the very low triple digits, even on a big publisher’s list.

Even before any overhead charge and with a paltry advance, that isn’t going to cover a house’s cost of publication. So there definitely are books today — lots of books — coming from major houses that are not recovering even their direct costs.

This is a fundamental change in big publisher economics from what it was two decades ago. While the potential wins have become exponentially bigger than they were in bygone days, the losses have become increasingly common. And while it is still an open question how well anybody can predict sales for a book that isn’t even written yet (which is the case for most books publishers acquire), there is a real cost to getting it wrong, even when the advance being paid is minimal.

So it is no longer irrational to cut the list and focus. Obviously, every book published is a lottery ticket for a big win, and the odds in a lottery are never good. But the world most general trade publishers have long believed in, where the big hits pay for the rest of the books, is really now the one they inhabit.

I am proud to be part of the organizing committee for Publishing People for Hillary. We’re staging a fundraiser for her in midtown Manhattan on Friday, September 30, at which Senator Cory Booker and Senator Amy Klobuchar will be the featured speakers. You can sign up to join us here. Contribution levels for the event range from $250 to $2500, with a special opportunity to meet the Senators at the higher levels.

And, having NOTHING to do with publishing, but for all baseball fans in the crowd, please check out this story about Yogi’s mitt and Campy’s mitt that you will not have seen anywhere else.

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eBook pricing resembles three dimensional chess


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The current round of reporting from major publishers contains some danger signs. Their ebook sales are declining (in dollars and even more dramatically in units) in an ebook market that is probably not declining. The “good” news for the publishers is that print sales are pretty much holding their own, or even growing. And profits are being maintained, which is probably the most important metric in their board rooms. But the bad news is that total revenues are down. And print sales have been buoyed by the consumer excitement for adult coloring books (now spreading to adult “activity” books), so the combined results for many author-driven titles don’t necessarily reflect growth and total unit sales of print plus digital for many titles are almost certainly falling behind expectations

In a complicated marketplace with large unknowns around indie authors and indie books, particularly those that are Amazon-only, it is hard to be definitive about what the cause of this is. (Author Earnings does yeoman work trying to put the two overlapping markets in context.) Certainly, barriers to entry have come down and there are many more books in the marketplace competing for readers that don’t come from the companies the publishers think they’re competing against. But the publishers’ “success” in establishing agency pricing — where the price they set is the price the consumer pays — combined with Amazon’s decision to “respect” agency (at first with no choice but subsequently, after contracts were renegotiated, with apparent enthusiasm) and offer no pricing relief from their share of the book’s sales revenue is almost certainly a major component of the emerging problem.

Amazon doesn’t need big publisher books to offer lots of pricing bargains to their Kindle shoppers; they have tens of thousands of indie-published books (many of which are exclusive to them) and a growing number of Amazon-published books, that are offered at prices far below where the big houses price their offerings. That probably explains why Amazon can see its Kindle sales are rising while publishers are universally reporting that their sales for digital texts, including Kindle, are falling. (Digital audio sales are rising for just about everybody, but that is not an analogous market.)

This is putting agency publishers in a very uncomfortable place. It has been an article of faith for the past few years that there is revenue to unlock from ebook sales if only the pricing could be better understood. Just a bit more revenue per unit times all those ebook sales units is a very enticing prospect for publishers. After the agency settlements liberated publishers from the price limitations Apple had originally insisted on, the immediate tendency was for publishers to push ebook prices even higher.

And since ebooks are sold in a less price-competitive market than we had before agency, Amazon can devote its marketing dollars to cutting prices on the print editions. This undercuts the publishers’ intention to support a diverse (and store-based) retail network and, at the same time, often embarrasses them by making the print book price (set by Amazon) lower than the ebook price (which Amazon makes very clear was set by the publisher).

The fact that this is reducing publisher revenue and each title’s unit sales is concerning. But it is also making it much more difficult to establish new authors at the same time because lots of competing indies are still being launched with low price points that encourage readers to sample them.

It is maintained by many people that there has been a reduction in the rate of surprise breakout books over the past few years because of this pricing as well. This perception would be explained by the fact that price attracts readers to try new authors, and so the new rising talent would more frequently come from the lower-priced indies. Higher ebook prices reduce the speed with which a book can catch on in the marketplace. It feels like there is a consensus in the big houses now that it is harder to create the “surprise” breakouts. (This is a very difficult thing to actually measure.) The “Girl on the Train” phenomenon is always unpredictable, but big publishers still could count on it coming along often enough to keep the sales revenue trend line rising. That doesn’t seem to be the case anymore.

High ebook prices — and high means “high relative to lots of other ebooks available in the market” — will only work with the consumer when the book is “highly branded”, meaning already a bestseller or by an author that is well-known. And word-of-mouth, the mysterious phenomenon that every publisher counts on to make books big, is lubricated by low prices and seriously handicapped by high prices. If a friend says “read this” and the price is low, it can be an automatic purchase. Not so much if the price makes you stop and think.

This puts publishers in a very painful box. When they cut their ebook prices, they not only reduce sales revenue for each ebook they sell; they also hobble print sales. (Although if they cut prices as a promotion, and they market the promotion, apparently higher-priced print will also benefit from the promotion and see a resulting sales lift.) And singling out some of their ebooks for an ebook price reduction strategy could also raise a red flag with an agent. It is easy to understand a temporary price reduction that is promoted; as an overall pricing strategy it could be seen as a bite out of the author’s ebook earnings at the same time their print sale is threatened with the low-price ebook competition. And while an ebook price-reduction strategy would probably make at least Amazon and Apple, very important trading partners, quite happy, it risks angering others, including perhaps Barnes & Noble but certainly including all the indie bookstores.

On the other hand, the current “strategy” has plenty of risk.

An unpleasant underlying reality seems inescapable: revenues for publishers and authors will be going down on a per-unit basis. This can most simply be attributed to the oldest law there is: the law of supply and demand. Digital change means a lot more book titles are available to any consumer to choose from at any time. Demand can’t possibly rise as fast and, in fact, based on competition from other media through devices people carry with them every day, might even fall (if it hasn’t already). So publishers are facing one set of challenges with their high ebook prices; they’ll create another set if they lower them.

But, unfortunately, lower them they almost certainly must. With more data, we may learn that developing new authors absolutely requires it, particularly in fiction.

Here’s a suggestion for a new pricing routine that might be worth trying in the near term recalling a prior practice from quite a while ago.

There was a period earlier in my career, probably ending in the 1980s, when publishers priced new hardcovers like this: $22.95 until October 1, $24.95 thereafter. The books had the price on a corner of the jacket that could be snipped diagonally on October 1, so that only the $24.95 price would show.

Frankly, in this case the pricing device was not primarily intended to entice the consumer to buy the book before the up-pricing deadline. It was really designed to get the store to place a bigger advance order, for which the applicable discount would be based on the promotional price.

Now big advance orders are not nearly as important as they used to be, nor nearly as common. But there is still a huge dependence on consumers taking a risk on an author, particularly in the first moments after a book comes out. Two or three decades ago, this was the “secret” behind publishers moving an author from a star doing “mass-market originals” (low prices) to a hardcover bestselling author.

So what might be worth a try from the big publishers now would be “promotional ebook pricing” on launch. Make the ebook $3.99 until date X, and then raise it to the “normal” level (which for major publishers, when the hardcover is in the marketplace, would be $12.99 and up.) This is a very painful experiment to try because it will compete against the hardcover at launch, when the publisher is trying to pile up sales to make the bestseller list. It will annoy print booksellers as well.

But publishers have to find a way to put new authors into the market without a millstone of pricing that requires a significant commitment by the reader before they know the author.

Of course, that strategy suggests an even more disruptive reality about ebook pricing: it doesn’t have to remain “set” the way print book pricing does. Because of our convention of printing the publisher’s suggested retail price right on the book’s jacket or paperback cover, it is not really practical to change a book’s price except, occasionally (and less often in these low-inflation times) when a book is reprinted. (In higher-inflation times, we did sometimes employ the practice of “stickering” to increase price, but that was clumsy and impossible to conceal.) But with ebooks, prices can change pretty much as often as you like: up, down, and up again.

In fact, that already happens with promotional pricing such as has been pioneered by the email service, BookBub. The BookBub idea — emailing a subscriber list with notice of price promotions on ebooks — has been copied highly successfully by HarperCollins with their proprietary version, BookPerk, and to a lesser extent by other publishers as well. It is becoming established practice to temporarily lower the price of a title to get it ranked higher and then to raise the price and try to capture higher-revenue sales with the hyped “branding” the promotion created. So far, this is done with a clear game plan, such as discounting the first book in a series, or the most recent book in a series when a new title is about to come out.

But uncoupling the ebook pricing completely from print pricing, which seems to be where we will inevitably go, may also mean — it certainly can mean — all ebook pricing becomes dynamic. All of this definitely raises the bar for publisher knowledge of how consumers react to prices in different situations. It has been a widespread article of faith that retailers “understand” this behavior and publishers don’t. To the extent that retailers do understand it, they see it through a different lens; they almost never care about the impact of price changes on the overall sales curve for a single title. Titles are interchangeable for retailers and not for publishers. So while it is true that publishers have a lot to learn, it is probably not true that retailers already know it.

The points I wanted to make in this post were that publishers should contemplate uncoupling ebook pricing from print pricing, learn more about consumer behavior around pricing, and master the skill of managing (strategically and operationally) LOTS of ebook price changes all the time. There is another point herein, made in passing, that is worth deeper consideration on another day. Big publishers are seeing their revenue decline but their profits rise. Does that point to a strategy? For how long can publishers cut costs faster than revenues, particularly per-unit revenues, decline? Maybe for quite a while…

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Barnes and Noble faces a challenge that has not been clearly spelled out


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The sudden dismissal of Ron Boire, the CEO of Barnes & Noble, follows the latest financial reporting from Barnes & Noble and has inspired yet another round of analysis about their future. When the financial results were released last month, there was a certain amount of celebrating over the fact that store closings are down compared to prior years. But Publishers Lunch makes
clear that store closings are primarily a function of lease cycles, not overall economics, and we have no guarantees that they won’t rise again this year and in the years to follow when a greater number of current leases expire.

With B&N being the only single large source of orders for most published titles for placement in retail locations, publishers see an increasing tilt to their biggest and most vexing (but also, still their most profitable) trading partner, Amazon.

Although PW reported immediate dismay from publishers over Boire’s departure, there has been plenty of second-guessing and grumbling in the trade about B&N’s strategy and execution. Indeed, getting their dot com operation to work properly is a sine qua non that they haven’t gotten right in two decades of trying. But one thing Boire did was to bring in a seasoned digital executive to address the problem. This is presumably not rocket science — it isn’t even particularly new tech — so perhaps they will soon have their online offering firing on all cylinders.

The big new strategy they revealed, one they’re going to try in four locations this year, is what they call “concept stores” that include restaurants. And, although it was a bit unclear from their last call whether the store-size reduction they’re planning extends to these restaurant-including stores, they have said that the overall store footprint they’re planning will be 20-25 percent smaller than their current standard. These two facts both make the point that B&N is facing a reality which has become evident over the last decade, and which questions a strategy and organizational outlook that was formulated in another time. If this new challenge is properly understood, and I haven’t seen it clearly articulated anywhere, it would make the restaurant play more comprehensible. (Note: I have to admit that my own recent post, where I traced the history of bookstores in the US since World War II, failed, along with everybody else, to pinpoint the sea change that makes B&N’s historical perspective its enemy while trying to survive today.)

Here’s the change-that-matters in a nutshell. A “bookstore” doesn’t have the power it did 25 years ago to make customers visit a retail location. Selection, which means a vast number of titles, doesn’t in and of itself pull traffic sufficient to support a vast number of large locations anymore. This changes the core assumption on which the B&N big store buildout since the late 1980s was based.

This has been true before. One hundred years ago the solution to the problem became the department store book department. Post-war prosperity grew shelf space for books, but the department stores remained the mainstays for book retail. The first big expansion of bookstores started in the 1960s when the malls were built out, which put Waldens and Daltons in every city and suburb in America. The mall substituted for the department store; it delivered the traffic. In fact, department stores “anchored” all the malls to be sure they’d get that traffic!

(Here are a couple of additional factoids to illustrate the importance of the department store channel in the mid-20th century. When Publishers Weekly did an article about the Doubleday Merchandising Plan in 1957, the stores they used as examples were the book departments of Wanamakers and Gimbels! When I came into the business fulltime in the 1970s, there were two significant “chain” accounts in Chicago: the bookstore chain Kroch’s & Brentano’s and the Marshall Field department stores.)

Bookstore customers came in many flavors, but they all benefited from a store with greater selection. My father, Leonard Shatzkin, first noticed that selection was a powerful magnet when he was overseeing the Brentano’s chain (no relation to K&B in Chicago) in the 1960s. Their Short Hills, New Jersey store was an underperformer. They doubled the number of titles in it and it became their best performer. Whether the bookstore customer knew what they wanted or just wanted to shop, the store with more titles gave them a better chance of a satisfying result.

Over time, that understanding was followed to a logical conclusion.

By the late 1980s, it appeared that standalone bookstores outside of malls could become “destinations” if their selections were large enough, and that created the superstore expansion: B&Ns and Borders. But, only a few years later when it opened in 1995, the universal selection at Amazon mooted value of the big-selection store, especially for customers who knew before they shopped what book they wanted. Selection as a traffic magnet stopped working pretty quickly after Amazon opened in 1995 although it was not so immediately obvious to anybody.

I had some experience with B&N data that demonstrated pretty emphatically by 2002 that the action on slow-selling university press titles had shifted overwhelmingly to Amazon. (At that time, the late Steve Clark, the rep for Cambridge University Press, told me that Amazon was a bigger account for CUP than all other US retail combined.) It took the further hit of expanded Internet shopping at the consumer level, which grew with increased connectivity even before ebooks, to make what had been a great business obviously difficult. Then, as if to emphasize the point, we lost Borders…

What just doesn’t make it anymore, at least not nearly as frequently, is the “big bookstore”. Although there is no scientific way to prove this, most observers I’ve asked agree that the new indie stores popping up over the past few years tend to be smaller than than the Borders and older indie stores they are replacing. We are seeing book retailing become a mix of pretty small book-and-literary-centric stores and an add-on in many places: museums, gift shops, toy stores. These have always existed but they will grow. And true “bookstore” shelf space will shrink, as has space for “general” books in mass merchants. The indie bookstore share will definitely continue to grow, but whether their growth will replace what is lost at B&N and the mass merchant chains is doubtful. Every publisher I’ve asked acknowledges significant indie store growth in the past couple of years, but they are also unanimous in saying the growth has not replaced the sales and shelf space lost when Borders closed.

Barnes & Noble is clearly rethinking its strategies, but this is one component that I have never seen clearly articulated. Back when I had my “aha!” moment about what was happening with the university press books, I suggested to one B&N executive that they had to figure out how to make the 25,000-title store work.

He said, “that’s not where we are. We’re thinking about the million-title store!” In other words, “we want to manage big retail locations”. This is thinking shaped by what we can now see is an outdated understanding of what the value of a big store is. So now they’re trying to sustain slightly-smaller big locations with things other than books. (Whether they plan to go as low as 25,000 titles in stores that used to stock four or five times that many is not clear. But they did say in their recent earnings call that the new concept stores would get 60 percent of their revenues from books, rather than the 67 percent they get now.) They have added non-book merchandise; now they’re thinking about restaurants. All of that is to increase traffic and to increase sales from the traffic they already get.

But there is another way to attack the challenge that “books alone” doesn’t work the way it used to. Barnes & Noble’s core competency is book supply to retail locations anywhere in the United States. Nobody, except Ingram, does this as well. (Although Amazon clearly is now planning to give it a try.)

Other retailers are suffering the same Internet sales erosion as booksellers, and a properly-curated selection of books can work for just about any store’s customer profile. Might Barnes & Noble complement its own stores by offering branded B&N Book Departments to other retailers? Let them bring in the traffic (although the books will undoubtedly bring in some more) and then B&N could manage those departments. (This is a variation of a tactic I suggested for Penguin Random House some years ago.) Let other retailers play the role the department stores and then the malls played for books in the past 100 years. Let’s not require the retail customer to come to a location strictly to shop for books.

The “trick” would be for B&N merchandisers to adjust their book selection to suit the specific customer base each store attracts. But is that a harder challenge than going into the restaurant business? And isn’t extending the B&N brand for books a more sensible tactic than trying to extend it to food? Or to create a new brand for food? And wouldn’t it be a good idea to get started on this tactic to expand book retail shelf space before Amazon, which keeps showing signs of wanting a retail presence, does?

This is not an easy market to just walk in and take over. There are already wholesalers providing books to retailers who don’t support a full-fledged buying effort for them. Those wholesalers are often getting more margin from the publishers than B&N is now, but that’s actually more of an opportunity than an obstacle. Presumably, a B&N-branded book section is worth something. (If it isn’t, that’s another problem.) Presumably, B&N has buying expertise and domain knowledge that would enable them to fine-tune a selection of books for each outlet’s customer base. And, presumeably, B&N’s supply chain efficiency would be superior to anybody else’s in the industry, except Amazon’s and perhaps Ingram’s.

The big bookstore model is an anachronism. Just making it big doesn’t pull in the customers anymore. So a new strategy is definitely called for. B&N is going part of the way to one by recognizing that they need to do more to bring in customers and, at the same time, they can’t profitably shelve 100,000 titles across hundreds of stores. Taking their capabilities to where the customers already are would seem like an idea worth exploring.

It should be noted that the Indigo chain in Canada, under the leadership of owner Heather Reisman, has apparently successfully transitioned to a “culture” store where books are the key component of the offering. She has apparently found a product mix, or an approach to creating one, that is working for Indigo. Every large book retailer in the world is going to school on what Indigo has done. Because Amazon and online purchasing in general have not taken hold in Canada the way they have in the United States, we can’t jump to the conclusion that the Indigo formula could be successfully applied here. But it sure wouldn’t be a crazy idea for B&N to buy Indigo to gain the benefit of Reisman’s insights and expertise, assuming that a) Canadian law would permit U.S. ownership of such an important cultural asset and b) Reisman herself would sell and then work for somebody else. Two very big assumptions.

It is also worth nothing that the Pocket Shop chain, the small-bookstore concept chain that we’ve written about previously, is going to start opening stores in the UK. 

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