May, 2009

I went to my first ABA (American Booksellers Association) Convention in Washington, DC in 1970. I had just written “The View from Section 111″ for Prentice-Hall, about the New York Knicks’ first championship season, which was going to be published that October. Prentice-Hall threw a party for authors with a book coming that Fall, and among the others the only name I knew was Senator Barry Goldwater.

I started to attend regularly beginning with the 1973 ABA in Los Angeles. Since then I think I’ve missed one, so this year would make number 37, including that first one at the Shoreham.

The ABA at the Shoreham was in the basement of a not terribly huge hotel. It was probably a bit bigger than this, but it felt like it was about the size as the exhibition at Book Business Conference & Expo at the Marriott was this year. The 1973 show in Los Angeles was bigger, indicating, I think, that there was growth the Shoreham wasn’t large enough to handle, because the ABA had been at the Shoreham for many years. After that it bounced around: frequently at McCormick Place in Chicago, split between two hotels in New York (before Javits existed) in 1975, San Francisco when they opened Moscone in the late 1970s. 

When I was a pup, the ABA was definitely an order-writing show. The number of independent bookstores who bought a big chunk of any trade list properly presented to them was in the thousands. (Now: what would you say? the dozens? wouldn’t hundreds be an exaggeration?) Only a few of the biggest publishers had sales forces large enough and disciplined enough to really cover them all, so most exhibitors encountered retailers who would do immediate business. Everybody had some sort of show “special” to encourage ordering. I think for many years it was “blue badges” that signified booksellers: you kept an eagle-eye out for them as the traffic streamed by and you knew exactly what and how you were going to pitch them.

Each night at the main convention hotels, several publishers — and all the mass-market publishers — ran “hospitality suites” offering liquid refreshment and munchies very deep into the evening. You’d make the rounds of those after you had gone to whatever events, dinners, and parties had taken place in other locations. I always found the time in the hospitality suites to be a highlight of the convention.

The show floor for many years was open all day Saturday, Sunday, Monday, and Tuesday morning. Friday was set-up day. On Tuesday night was the ABA banquet, and people stayed and went to it!  Those who know me that banquets aren’t my cup of tea, but for some reason I was at the one at the San Francisco ABA in 77 or 78. I remember it well because I was seated at a table with Jill Krementz, the noted photographer and wife of Kurt Vonnegut.

Roysce Smith was the longtime Executive Director of the ABA and he was the Major Domo of the burgeoning convention. Toward the end of his career Roysce’s legs couldn’t carry his large-ish body around the growing acreage of convention floor, so he cruised the aisles in a motorized vehicle.

Daisy Maryles was one of PW’s key reporters then. Daisy didn’t work from sundown Friday to sundown Saturday, so she really worked the hall on Friday while people were setting up. In those days, of a smaller industry and smaller companies and the ABA being a very important annual event, the executive team (maybe the CEO, certainly the sales execs) was in the hall in blue jeans on set-up day making sure everything was shipshape. So Daisy actually got much more bandwidth and information by working the hall on Friday than she would on Saturday, when the publishers’ attention turned to the booksellers.

The Walden and Dalton chains grew fast in the 1970s and 1980s, but the independents continued to thrive as well. So the ABA Convention continued to just grow and grow. I remember there was a point when there were only a handful of places in the country that could host it because the convention hall acreage required was so great.

Then in the 1990s, new ABA Director Bernie Rath, who had replaced Roysce when he retired. sold the show to Reed Exhibitions. First Bernie sold Reed 49% of the show in 1992 and then the additional 2% that gave Reed control of the show in 1996. After that, its name changed to BookExpo America.

Although “education” had become part of the show during the ABA’s tenure, Reed set out to expand that aspect of things and to make the show bigger and better. But their timing was terribly unfortunate. The long expansion of the US book trade, which had continued pretty much unabated from World War II until the mid-1990s, stopped and started to reverse in the internet age. Even worse for the industry trade show, consolidation of both big publishers and retailers accelerated. That meant fewer publisher customers to buy the booth space, and fewer retailers walking the aisles to make the booth space valuable.

Last year’s convention in Los Angeles was the first where it really felt slower and sparser. At the time, BEA was scheduled to go to Las Vegas in 2010 and it seemed to me that, if they did, it would be the last convention. Things had evolved to the point where publishers were paying good money for booth space to be sitting targets for consultants and new tech propositions to put forth their propositions. How long, I wondered, would publishers pay good money to make prospecting for work efficient for me and others like me?

The BEA got the same message. It has been announced that the show is in New York from now on. That makes sense in that the publishers who pay the most for booth space can now, at least, avoid the great expense of flying New York staff somewhere else in the country and putting them up. That forestalls Armageddon, but it can’t be permanently avoided. New plans have been announced to make the trade show run mid-week, rather than across the weekend. That anticipates what will be this year’s embarrassment, which is that hardly anybody will be there on Sunday.

The BEA of today isn’t the ABA of old. The booksellers are just about gone. The late-night hospitality suites don’t exist anymore. And hardly any publisher goes to the show expecting to write orders. It is time to organize a betting pool where the question is: how many more BEAs before, like its Canadian counterpart, it simply ceases? Three? Four? Hard to see more than that.

Elisabeth Sifton has a long and thoughtful piece in the current issue of The Nation. I disagree with the fundamental premise — that the woes of the book business are primarily due to bad decisions or judgments by the leaders of the business rather than large forces that are changing the ground on which the book business walks. Nonetheless, there’s a lot to like in the piece and some interesting history in it as well.

I was reminded of a story my Dad used to tell by these words from Sifton:

“Publishers and writers have for centuries conspired and fought over words, sentences, chapters, fonts, illustrations, paper, trim size, binding materials, jacket design…G.B. Shaw insisted on a specific typeface…Edmund Wilson on an unusual trim size…”

In the 1950s, Len Shatzkin was in charge of manufacturing for Doubleday before he got a much larger brief as “Director of Research” (and how that happened is a story I have promised to tell and someday I will.) Doubleday owned its own presses in its Garden City plant. Each printing press works with an optimum size paper (a sheet size with two dimensions if sheet-fed; a roll width if a web press) and that optimum paper size delivers an optimum trim size. By optimum, I mean the trim size that puts all the paper into the book, not trimming off and wasting some of it. For example, the trim sizes that worked best with the sheetfed presses I was familiar with early in my career were 5-1/2 x 8-1/4 and 6-1/8 x 9-1/4. If you used a size that was slightly smaller than that in any dimensions, you just cut off paper and threw it away.  But if you wanted a trim size larger in either dimension, you couldn’t print 64 pages on one side of a sheet, so you would throw away even more paper and would increase your costs of folding and binding at the same time.

Being a very practical man and one who hated waste long before any green movement pointed it out to him, Len set about to standardize trim sizes at Doubleday to deliver only the most efficient sizes. Those efforts in the early 1950s constituted the first time trim size standardization was attempted in the trade publishing business (although it had already been done for rack-sized mass-market paperbacks.)

One of Doubleday’s top authors — Len told me it was Eudora Welty; my Mom told me after Dad died that it was somebody else, but I can’t remember who she said it was and now she’s also not available to be asked — had, her editor pointed out, always had her books of a particular size, which was about 1/8 of an inch larger in one dimension than the maximum the sheets could efficiently deliver. The editor insisted that it would be simply impossible to live with a change in the trim with such an established and successful author. Publishing then being not so dissimilar from publishing now, the editor (presumably also speaking for the illustrious author) carried the day.

Now you’re going to find out why my incredibly smart, charming. and accomplished father might not always have been the most popular person in any company he worked for.

A few months later, Dad invited the editor in question up to his office. The new Welty (or whoever…) book had just been printed and Len put two copies on his desk, one on each of the corners facing his guest, the editor. The editor was excited to see his important author’s new oeuvre delivered and he picked up one of the copies. Of course, he quickly noticed that there were two copies.

“Take a look at both of them,” Dad said.

So the editor did. He opened each of them. He flipped through the pages of each. He looked at them together and said, “is there anything different about them?”

“Yes,” Len said. “This one is the one I wanted to manufacture, but you told me the size would be unacceptable. And this one is the size you insisted on, which we have delivered at an extra cost to the company of X cents per copy.”

It became considerably more difficult after that for editors to persuade management to deviate from the standard trim sizes.

One frequent topic of Len’s derision was publishers printing for margin rather than strictly for need. He was very fond of making this point: “It isn’t the unit cost of the copies you print that matters; it is the unit cost of the copies you sell.” The point is: avoid printing books you won’t sell. So don’t print for margin, print for need.

At one point in the early 1990s, I happened on the information that there had been paper rationing right after World War II when Dad was production manager at Viking. “Boy, that must have made them smarter about what they printed,” I said to him. “I’m thinking how painful it would be that you couldn’t reprint Book A because you had overprinted Book B and you didn’t have any more paper to allocate.”

“Oh, they were smarter then,” Len said. “But that’s not why.”

“Then why?”

“When I was a young man at Viking, it was Harold Guinzberg’s company. The money to print things was his money. If he spent money in September to print books he didn’t need until next June, he might not have the cash to take his family to Florida in the winter. The money wasn’t theoretical, like it is in these big corporations with MBAs making the decisions. It was real.”

I saw this effect a few years later when I was consulting at Sterling just before they were bought by Barnes & Noble. Like Harold Guinzberg, Sterling’s principal owner, Lincoln Boehm, made the printing decisions and took home about half the cash profits at the end of every year. Lincoln also made extremely conservative printing decisions, perhaps aiming for a year’s supply, but being rigorous in not printing more at any time than he was pretty sure he could sell in the foreseeable future.  During Boehm’s tenure, Sterling did second printings of virtually every book they published — more than 90% of them — and hardly ever had a significant quantity to remainder. 

More publishers would be more prosperous if they had a greater respect for the value of cash and were less zealous about pursuing illusory margin that is purchased by tying up their dollars and escalating risk. Since we are in a time when de-leveraging is occurring throughout the economy, these truths are likely to be rediscovered even without the advantages of owner-management.

I’ve got three BEA appearances coming right up. “Stay Ahead of the Shift”, a speech about publishing’s future at 11 on Thursday. “XML for Editors”, a panel with Brian O’Leary and Laura Dawson at 3 on Thursday. And “Digital Debuts Tool Time” with BookOven, Smashwords, Cooler Reader, and Filedby at 9:30 on Friday morning.

Michael Cairns has a really good post today that distills a lot of thoughts I have had over the last several years into a clear formulation: that the publisher needs to serve as a “digital concierge” for its author.

Three years ago, Brian O’Leary, Ted Hill, and I did a study of marketing spend for a mid-sized trade house. At that time we articulated the notion of a “new marketing partnership” between publishers and authors. We urged then that publishers do what is necessary to make it easy for authors to promote themselves on the web because, in the modern world, that marketing energy would be indispensible.

What was a fairly forward-thinking suggestion in 2006 has become a common understanding by 2009. Harper has launched several author-centric initiatives. Sourcebooks just unveiled a suite of tools and advice for authors to promote themselves effectively. And, of course, I’m a co-founder of Filedby, Inc., and the filedby web site is all about delivering web promotion capabilities to book authors, photographers, and illustrators at scale.

I guess it won’t surprise any frequent readers to hear that I believe that the success of this concept depends on…verticalization!

The swingeing volume of detail that Michael points out is impossible for authors to navigate (Twitter, Facebook, and Friendfeed are just the start, really) is also really impossible for publishers to navigate as well. I believe that is becoming increasingly obvious in many houses. The web worlds of knitting and beading are quite distinct, even if books on either subject would go into the crafts section at Barnes & Noble. The web world of parenting is one thing; the web world of parenting an autistic child would be quite another. Publishers who don’t specialize, focus their specialization, and learn the web world for the fields they are in are trapped in marketing that is massively labor-intensive and yielding no advantages of scale.

Publishers (anybody, really…) gains expertise by repeated use, involvement, familiarity. Publishers have had credibility telling authors what will work with a B&N buyer, a NY Times book critic, or the booker for Oprah or Today. They’ve worked with these outlets many times before and the author hasn’t. The digital concierge, in order to really help me, has to be able to tell me which of the sites for my book on summer night stargazing will take my posts, link to my blog, generate followers on Twitter. Otherwise they’re just giving me general advice a bit more easily, but no more personalized, than I could get from a web site dispensing advice. Or a book.

This is very much a transitional need. Ten years from now, most authors will have arisen from the ranks of the digital community for their subject. We’re very much in a transitional time (one very important point that will be made in my “Stay Ahead of the Shift” talk next Thursday), and the concierge will be characteristic of the transition.

I’m working hard at BEA. Please join me. “Stay Ahead of the Shift”: Thursday 5/28 at Javits Center at 11. “StartWithXML for Editors”: Thursday at 3. And “Digital Debut Tool Time” Friday morning 5/29 at 9:30.

There has been a lot of discussion about ebook pricing lately. I did a post following Motoko Rich writing about this in the Times, but Rich’s post itself was a sign of the discussion taking place, not the catalyst for it. Today in Publishers Lunch, Michael Cader runs through some calculations to demonstrate that when publishers shed the costs of printing the books they sell as well as the costs of warehousing them, printing books they don’t sell, and handling returns on books they thought they’d sold, they can reduce retail prices by 40-50% and still be taking in the same number of margin dollars.

Cader points out that there is a different problem of unintended consequences: if a lot of business shifts to ebooks, then the critical mass requirement for many brick-and-mortar stores might not be met and we’ll develop a downward spiral of printed book exposure and sales. That’s an accurate point, but I can’t see too many people trying to slow down the growth of ebook sales to address it.

We have suggested here that publishers should be reducing the discounts offered to retailers because, as much as publishers’ costs go down moving from print to digital, so do retailers’. And because retailers have a (sensible) penchant for turning excess margin into consumer discounts, the discounts being offered lead to a very tenuous situation for publishers. Many retailers are living with just the margin they probably need, but they’re doing it voluntarily.  The low price the consumer is getting is because of retailer policy, not publisher policy. If the publisher sells downloads directly at the same price, the retailer is (justifiably) going to say “hey, the discount you offer me is supposed to be off the publisher’s price, so if you sell at discount, don’t you owe me some money?

The widely-remarked on Amazon Kindle pricing underscores this point. Amazon is buying ebooks (for the most part) at 50% of the publisher’s suggested retail. But then they’re giving away much of, all of, or even more than that margin to give the consumer a lower price (often the billboard price of $9.99.) Nobody expects Amazon to sustain this sell-at-a-loss strategy forever. And few expect Amazon to raise prices to the consumer. That leaves one alternative: use the leverage of all those Kindle owners to get reduced prices from the publisher.

And that’s why, in their own interests, publishers have to reduce retail discounts across the board.

Authors are facing a different margin pressure. Publishers generally find it easier to reduce the author’s take than the retailer’s so, even before putting pressure on retail discounts, they have been reducing author royalties. Just a few years ago, there was bold talk from the author side that a 50-50 split of ebook revenues between publisher and author made sense. But it seems that the “standard” for ebook royalties has settled in at 25%, or even 15%, of publishers’ receipts. Since discounts are about 50%, that amounts to 7.5% to 12.5% of retail, which is hardly a bonanza for the authors. And remember, many informed voices are clamoring for that suggested retail price for ebooks to come down!

It is because the market is young and the flux is still great that I suggest that publishers should be rethinking intermediary discounts. For the same reason, it is also time for authors and their agents to be rethinking the royalty rules. Expressing royalty as a percentage of either retail price or net receipts is a concept that makes a certain amount of sense in the physical world, where the cost of manufacturing creates an anchor for pricing. There is a certain minimum price below which publishers won’t go when they have to pay to print books. And bigger, fatter books, which cost more to print and would drive up both retail price and royalty, also imply a greater contribution of IP by the author. 

But in the virtual world, perhaps it would work better for everybody if authors negotiated to get a flat number of dollars (or cents) per unit sold. Publishers should really have no problem handling this: they’ve been working with pricing with a known cost-of-goods higher than zero for a very long time. And, for authors, it would eliminate the possibility that diminishing ebook prices will lead to royalties which by historical standards are laughable and for an author trying to make a living are unsustainable.

This practice will probably arise when agents see the need to negotiate a mimimum dollars or cents royalty per ebook sold to protect against overly-aggressive promotional pricing, which is already proving to be a temptation for publishers with no physical cost of goods and with author royalties that decline with price. With Scribd offering 80% of the retail price and Smashwords offering 85%, authors will calculate very quickly how low their prices could be to yield the same return (or maybe, twice as much return) for each copy sold than what is the standard offering now. When Scribd and Smashwords files are as easily secured for the iPhone as anybody else’s, the agents will have a very hard time convincing their authors to accept things as they are.

Posted this originally without a reminder about Thursday, May 28 at BEA: “Stay Ahead of the Shift.” AND there are two panels I’m moderating you’ll want to see. On Thursday at 3, Brian O’Leary, Laura Dawson and I are doing “XML for Editors.” And on Friday morning at 9:30, I’ll moderate “Digital Debuts Tool Time” with the leaders of at least three great new propositions on the stage with me: Hugh McGuire of BookOven, Mark Coker of Smashwords, and Peter Clifton of Filedby.

I love and value The New York Times. But I have to admit that every time they write about something I know a lot about, it makes me wonder whether they’re complete and accurate when they write about the things I don’t know a lot about.

There’s nothing wildly inaccurate in Motoko Rich’s “Week in Review” article of May 17 headlined “Steal This Book (for $9.99)”, but there sure is a lot left out. And more that is misinterpreted.

We start out with an eye-catching but pretty phony premise: that author David Baldacci took it on the chin from his reading public because Amazon briefly priced his new $27.99 list hardcover for $15 instead of $9.99. In sadly typical fashion, a few posts from protesting readers become an undocumented “hundreds more” who have joined an “informal boycott” of “digital books priced at more than $9.99.”

Most customers for most products understand that the retailer sets the price they pay. For those who think they know more about the publishing business and think beyond the retailer, they would know the publisher sets the suggested retail price (which is one reason it is to the bookseller’s advantage that publishers have traditionally printed that price on the book itself so the publisher can take some of the blame.) I won’t say there is nobody in the world that wouldn’t blame Baldacci (or any author) for his book’s price, but that would be an ignorant and relatively rare reaction that shouldn’t be suggested as a widespread fact in any story’s lead, particularly not in The Times.

Rich does a superficial analysis of the economics. She is accurate in saying that Amazon is taking a per-unit loss on many titles in the Kindle store because doing so a)  helps them sell more devices and b) helps them “lock in” their Kindle audience. And she accurately reports the publisher’s fear — and the common-sense likelihood — that Amazon will, at some point, insist that publishers bring the prices they charge Amazon into line with what Amazon is charging the consumer. The choice for publishers then would be painful: either give up a growing army of Kindle owners as customers for a book or lower prices to a point that would make ebook margins a fraction of the print book margins they are replacing.

From that point on, we need to add facts and nuance that the article didn’t cover, and we have to discourage one pretty peculiar suggestion that is floated as though serious from a professor of economics.

What the article misses is that, because of the iPhone and App Store — and similar environments that will soon surround the Google Android phones and Blackberries, as well as just about all smart phones from just about all carriers — Amazon has already had to adjust its strategy in ways that will wean people off of their devices! A month or two ago, Amazon distributed a Kindle reader for the iPhone. That meant that Kindle owners could immediately access their entire Kindle library through their iPhone as well as their Kindle. There are two serious consequences of that action:

1. It exposes people who had formed the Kindle habit to reading on a different device, the iPhone. And, if they get an iPhone reading habit, then Kindle is no longer the only game in town. There are at least three other formats (Stanza, Scrollmotion, and eReader) that work just fine on the iPhone and we can be sure there will be more, just as we can be sure that what works on the iPhone will soon have to work on most, if not all, other smart phones.

2. It “unlocks” the content from being chained to a single device. That means that one “copy” of an electronic book can now be read by two people simultaneously: one on a Kindle and one on an iPhone. 

How does this work in practice? Here’s one man’s true story. I bought a Kindle in December 2007. I read on it almost exclusively until Kindle released their iPhone app. Then I started reading on the iPhone because I was reading the same book on two devices. That was in February. Last week I gave my Kindle to my wife and I am reading on the iPhone exclusively. But I’m not reading Kindle exclusively anymore. I have four books open in the four different readers I referred to above. And my wife is working her way through many of the 40 or 50 books I had purchased on the Kindle for myself over the past year. And when she buys a book (I just introduced her, ironically, to David Baldacci), I can read it too.

So this article misses the importance of the iPhone, and its strategic importance particularly in relation to Amazon and Kindle.

The second big thing the article misses is the sheer complexity of the ebook supply chain. There is this proliferation of formats and points of distribution. There is the fact, that Rich mentioned, that Barnes & Noble has bought Fictionwise (a big ebook retailer) and therefore now owns eReader, Fictionwise’s ebook platform. B&N has been the Sleeping Giant of the ebook space: the biggest brick-and-mortar book retailer, probably still the biggest player in the consumer book business, but not a participant in ebooks. The purchases they made were mentioned, but the strategic implications were not. B&N is rumored to be launching their own reader this Fall. Whether or not they do that, they are certainly going to be doing something to compete in the ebook space. That’s potentially a signficant counterweight to Amazon, but it isn’t mentioned in this article.

And if the looming problem for publishers with ebooks is their margins (and I think we can agree on that), then why not mention the ultimate solutions: publishers selling digital downloads directly to consumers and, at the same time, reducing the discounts off retail (the margins) offered to intermediaries? Rich does a nice job of enumerating how the publishers’ cost structure changes with ebooks; she neglects to mention that the costs for retailers evaporate as well when they don’t have to invest in inventory or handle physical goods (and handle many physical goods twice — purchase and return — without any revenue to show for it!)

The proliferation of ereading delivery options is not only not spelled out in this piece, its absence is magnified in importance by the article’s close. Some anecdotal evidence is introduced to suggest that lower prices might increase book purchases. Brian Murray, CEO of HarperCollins, is quoted as saying “if the overall market is bigger, then we should be O.K.”

Then Rich concludes with the punch line that sales might rise not just because of lower prices but also because of the ease of purchase. So we conclude with a former book editor who, after buying the first of Stephenie Meyer’s “Twilight” series and finishing it at 1 am, bought “the next installment on her Kindle from her bedroom”. Well, here’s my conclusion. She could have done the same thing from many different online locations and in many different formats using her phone. I think the Times should tell you that.

Oh, yes, the professor. Professor Fiona Scott Morton of Yale did entertain a market coming from Apple, based on the new Kindle-sized tablet they are reputed to be about to introduce. Morton says: “then the book publisher of Obama’s next book can say, ‘O.K., which of you is going to offer us the best deal?’”

Uh, probably not. That’s not how publishing works. Publishers don’t put their books up for bid between Barnes & Noble and Borders, and they won’t between Amazon and Apple, either. But what is true is that B&N and Borders are aware of their “market share” on major books, and neither wants to be without a book the other is successfully selling. That, ultimately, is the publishers’ protection against pressure from Amazon. Kindle got where it is largely by offering the best selection of any ereading platform. It is in the retailer’s DNA to try to get some exclusive product, but it is in the publisher’s DNA to put everything they have in front of the consumer in every way they can.

May 28 at 11 am: “Stay Ahead of the Shift”, at the Javits Center. A 20-years out view provides a context for viewing the changes we are likely to see along the way, and what publishers should do about it. 

I have been a baseball fan since the middle of the 1955 season. I have written books about baseball. I have a web site dedicated to baseball. I have built whole life adventures around baseball. My wife and I spent the 2000 season living across the street from (what was then called) Pac Bell Park in San Francisco, and I went to every Giant game except five (when a client insisted I be in London to speak…) I wasn’t a Giant fan; I did it because I love baseball and a “walking life” and I realized when I saw where the new SF ballpark would be that one could comfortably live right in the vicinity.

That summer, Barry Bonds, the Giants leftfielder, became the favorite player of my adult life. This was the year before he started hitting home runs like a machine. From my seat in the stands, I admired his batting eye and plate discipline; the fact that he never threw to the wrong base from leftfield; the fact that he only attempted stolen bases in late innings of close games and was almost always successful. Ellis Burks, the Giants rightfielder, was our upstairs neighbor that year. Ellis told us that Bonds was an unbelievably hard worker. The press couldn’t stand Bonds, but that’s because he wasn’t particularly cooperative or friendly with them. As a fan, I couldn’t have cared less. What was there not to like? 

Well, we all know now, don’t we. STEROIDS!!! CHEATER!!! The sporting press has made an industry of ferreting out these miscreants. We know who they are.

I wasn’t a Giant fan, but I am a Yankee fan. ARod is another great favorite. Yes, he’s a recent additon to the steroid dungheap.

And this past week we have Manny Ramirez. I’m getting sick of this. Nobody can tell the truth.

What’s the truth?

The truth is that — whether it was 30% or 50% or 80% — a huge number of players were using PEDs (that’s “performance-enhancing drugs”) for many years. The owners knew it and encouraged it. The players were relaxed about it. The union did nothing because the union’s job is to fight with management and there was nothing to fight about! Management loved it because PEDs create home runs and (when pitchers take them) strikeouts. Home runs and strikeouts put fans in the seats.

So can Bonds or Tejada or Palmeiro or ARod or Clemens or Manny or any of them tell the truth? “Yes, I used these drugs. But, frankly, everybody was using them. I was competing against players who were using them. Nobody seemed to care or mind.”

No, they sure can’t. If they did, everybody — the Commissioner’s office, their ownership, their teammates, and the leadership of their union — would be down on them like a ton of bricks. If there is a “crime” here,  just about everybody’s guilty. So everybody’s much more comfortable letting the unlucky ones be consecutively outed, each one being treated as an isolated example of immorality. The collective hypocrisy — including on the part of the sportswriters who strut their purity — is nauseating. It’s really just pandering to an anti-drug hysteria which, if we give it a chance, might prove to be as passe as a lot of the other mistaken political and social ideas of the past three decades.

From Joe Torre’s current bestseller (I’d cite the page number, but I’m reading it on my iPhone in eReader so that wouldn’t mean anything):

Said one former All-Star and steroid user who competed against those Yankee teams, “Everyone around baseball did what they could possibly do. It was the survival of the fittest.”

…The player said that everybody in the game just understood that attitude was acceptable. “Now whether it was right or wrong, now you’re talking about a moral issue, but there were no rules. You did what you did. It was the wild, wild west.”

How should we regard performances during an era when steroid use was, as a practical matter, allowed and encouraged by the entire baseball establishment? Remember that when Mark McGwire was hitting 70 home runs, he had “andro” in plain view in his locker and it was written about during the season. Lenny Dykstra showed up one at Spring Training one year looking like he’d been inflated with a bicycle pump. Brady Anderson went from a gap hitter to a 50 home run guy in 1996. Suddenly lots of players were hitting 50 or more home runs in a season, which used to be a rare accomplishment.

The era is going to define itself statistically. As the dead ball era did. As the 30s (an era of very high batting averages and low strikeout totals) did. As the stolen base era ushered in by Maury Wills and extending to Rickey Henderson did. But it is really unfair to judge the people of the 1990s and early 2000s by a a standard that was developed when people noticed the size of Barry Bonds’s head in 2003.

If the Truth and Reconciliation Commission concept ever came to baseball on this topic, the list of villains would be far more extensive than the ones whose drug tests were leaked.

May 28 at 11 am at Javits Center: “Stay Ahead of the Shift.” Publishers are chasing their tails trying to figure out how to keep getting paid adequately for content. It will just get harder and harder to do. Use your content to build community. That’s where equity is in the long run. The good news? This shift will take a while. And publishers are well equipped to stay ahead of it.

Motoko Rich was on the front page of Tuesday’s NY Times business section with a story headlined “Print Books Are Target of Pirates on the Web”. She documented growth in piracy at the front (a quote from David Young about increased vigilance from Hachette’s lawyers and from Wiley’s lawyer with stats about a 5-fold increase in takedown notices.) And after an explanation of why the increase might be (people can read ripped files on devices now), she closes with a quote from DRM’s most savage opponent, author Cory Doctorow, repeating the line (which I believe originated with Tim O’Reilly) that he preferred piracy to obscurity.

But what was missing from this piece was any evidence that piracy is negatively affecting sales.

But in the past 24 hours, two reporting efforts have surfaced that seriously looked at that problem.

One is by doctoral student John Hilton and reported on Bloggasm. Hilton tried to track sales before and after an ebook giveaway. He found a lift in sales on books Random House had given away but a decline in sales for books given away by the science-fiction publisher, Tor.

The other study was done by my colleague Brian O’Leary in conjunction with O’Reilly Media and Random House. The methodology was similar to what Hilton employed and was reported by O’Leary and Mac Slocum of O’Reilly at Tools of Change last February. Now they have published a Research Paper with O’Leary’s findings which is available from O’Reilly.

What O’Leary found, using Random House data on ebook giveaways and O’Reilly Media data on books found on pirate sites, was that there was a correlation between free distribution and a sales lift for the books in question. But O’Leary cautions, “correlation is not causality”; the fact that sales rose after piracy and giveaway doesn’t mean sales rose because of piracy and giveaway. Both O’Leary and Hilton say more data is needed to come to any definitive conclusions.

Whatever we find out about the link between free ebooks and the sale of printed books and ebooks will:

1. not necessarily be true for all titles or genres.

2. not necessarily be true for all time.

Although O’Reilly also has a very tech-sophisticated audience and O’Leary found no evidence that piracy damaged sales, one has to wonder whether the difference Hilton saw between a general audience (Random House) and a sci-fi audience (Tor) is tech-sophisticate-specific. Or could it reflect wider use of Kindles or Sony Readers or iPhones among the sci-fi audience?

Cory Doctorow has made a name for himself giving content away and, not incidentally, skewering people who don’t see the virtue to that approach. I share Cory’s opinion that — up to about this moment — sharing of content from narrative books would almost always result in a sales increase. I have always expected that effect to decline when ereading became ubiquitous. When people just don’t want to read on screens, giving them a screen sample could provoke a print-book sale. When people get comfortable reading on screens, then giving them an ebook satisfies their demand.

So the Rich story failed to deliver any analytical data which two other “reporters” managed to construct. But there was another failure in the story and it is really a more serious one.

Rich points to two web sites where pirated material might reside: Scribd and Wattpad. I don’t know Wattpad, but Scribd has been in the news quite a bit lately. Several publishers have made deals to post material with them? Why? Because Scribd is aggressively anti-piracy! If they have cached a copy of a copyrighted text, it will not show up as a pirated edition on their site. So the very best way for publishers to prevent unauthorized posting of their copyrighted material to Scribd is to give them a digital copy. Since several major publishers in New York have made deals with them, which have been reported in the trade press, it is a bit mystifying that this mistaken reporting, potentially quite damaging to Scribd, could have appeared in the Times. 

On a mailing list discussion of this topic, Allen Noren of O’Reilly cited a Norwegian study that indicated that the most frequent downloaders of pirated songs were also the biggest customers for legitimate downloads. In the same list, Jane Litte made the point that pirated ebooks might be available when a legitimate edition is not and, in additon, some of the pirate sites make downloading — acquiring the content — easier than the legitimate vendors do.

The modern thinking about DRM, piracy, and sharing is that lower prices and greater ease of acquisition and use will keep honest people honest without technical barriers. Unfortunately for book publishers, the so-cheap-it-hardly-matters 99 cent unit doesn’t work for us. Record companies are selling albums as digital downloads for a mere 25-30% less than they would cost as CDs, which conveniently translates to 99 cents a song. Selling books for 99 cents a chapter, or 50 cents a chapter, would not produce a similar result because the unit of music appreciation is the song; the unit of book appreciation is not the chapter.

So the fair comparison to music would be books to albums, not to songs. That puts the price at about $9.99, which is exactly where Amazon decided bestseller pricing should be. And that’s a price that could work for publishers too, if they weren’t giving retailers half of it.

The pricing and distribution of ebooks is a complex and moving target, which I’ve discussed in prior posts on several different occasions.  Clearly Amazon, which creates and sells a proprietary reader through a closed system is a different animal than everybody else. They start out with a stronger hold on their customers which could provide leverage to demand  more margin than everybody selling epubs and pdfs that can come from a variety of retailers and play on multiple platforms. That’s perverse from the standpoint of people who believe in industry standards, but it’s probably not an enduring advantage. To exploit it, you have to be willing to pass up titles that don’t meet your margin requirements.

But people who read their Kindle books on an iPhone (and Michael Cader’s recent analysis suggests that the recent Kindle sales spike might be due to that being a large number of people) can readily access other ebook platforms as well. If they have the title and Kindle doesn’t, it loosens Kindle’s grip on that audience. 

Sorry, I’ve strayed a far bit from the piracy question. But you can’t contemplate piracy and what to do about it without analyzing ebook pricing. And you can’t discuss pricing without discussing the mushrooming complexity of the ebook supply chain.

Defending the margins from ebook sales is a big current challenge f or publishers, but getting to a point where they monetize eyeballs rather than IP is the long-run challenge. I’ll be discussing that one in a talk called “Stay Ahead of the Shift” at BEA at Javits Center, 11 am on Thursday, May 28.

Evan Schnittman at Black Plastic Glasses posted the final chunk of a 3-parter yesterday that contained a real shocker (to me) at the end. The 3-part post shows through Evan’s personal experience that a) we now insist that content come when we want it and how we want it and b) the very existence of that level of content and connectivity choice can, in and of itself, discourage long-form consumption.

OK. True and pretty well-written. But the “news” (to me; I know there’s a world out there that must have been aware of it) at the end is much more startling than the personal reporting and interpretation.

It turns out there is a clause in the 1978 copyright law that allows any author to reclaim any copyright despite any contract with a publisher, simply by serving notice. The copyright can be reclaimed no less than 35 years and no more than 40 years from the book’s original publication. So books published in 1978 can be reclaimed by their authors from 2013-2018.

It would appear that publishers have a new rights-related challenge to consider. While they’re getting all their ducks in a row (and rights in a database) to respond to the orphan challenges that will arise through the Google settlement, they might also be checking their backlist revenue to see if any of it is in jeopardy. And they also might be checking their competitors’ backlists as well, to see if there are titles they should be going after.

In trying to do a fast look at what might be available, I googled for “books published in 1978.” What was interesting was to see that what comes up is all about verticals! It says something to me that this kind of information is already being naturally organized by niche.

The number of books yielding substantial revenue today that are 35 to 40 years old is small, but it looks like a new payday has been set up for those that exist. And because notice of these potential terminations can be given 10 years before the effective date, the Copyright Office has been getting correspondence on this matter since 2003. They have even been modifying the rules for those notices.

According to the Copyright Office’s material on the web site, it appears a deadline is not too distant. Notice must be served “not more than ten nor less than two years” before the “effective date.” So if one published a book on February 1, 1978 and wanted to get the rights back on February 1, 2013 (the earliest possible “effective date”), they would have to serve notice by February 1, 2011.

One wonders how many agents are aware of this law and are preparing for it. Certainly the big publishers must be. I am just finding it a bit surprising that the existence of this looming opportunity for authors has not arisen with all the recent conversation about copyright arising out of the Google settlement.

Don’t forget May 28 at 11 am at Javits Center when I’ll be talking about how today’s publishers can “Stay Ahead of the Shift.” What’s the shift? It’s from IT to eyeballs, from monetizing content to monetizing community. It will be 20 years in the making; a subtext of this speech is “a lot happens in 20 years.” Think about the book business 20 years ago; or the newspaper business…

After Making Information Pay on Thursday, I had lunch with Michael Cader. One of our topics was some statistical research he is doing on the question “how many orphans”? This is his research to reveal, but I will only tell you “not nearly as many as I thought.”

Part of what I learned from Michael is that the annual output of new titles as measured by Bowker from the 1920s until the 1970s was about ten thousand titles per year. It is several hundred thousand now. This put a piece of Shatzkin family publishing history into an entirely new perspective for me.

My father, Leonard Shatzkin, had created the Dolphin Books imprint at Doubleday in the late 1950s. Jason Epstein had gotten Doubleday into the “quality paperback” business early when he founded Anchor Books in about 1953. Len was “Director of Research” (that’s another story) at that time, with a big focus  on strengthening the sales organization. He did so largely through a 1950s version of “automation” (which required a large roomful of worker bees at Doubleday’s plant in Garden City): a vendor-managed inventory plan that wrote the orders for the stores based on physical inventory counts the Doubleday reps sent from the accounts (instead  of orders!) 

In 1957 or 1958, they put 800 stores on the Doubleday Merchandising Plan. Backlist sales quadrupled. Cost of sales quartered (they had added a lot of sales reps, so travel expenses were cut sharply.) They wanted more books! 

But the Doubleday editorial department said, “there really aren’t any more books. We see all the books that are made available; we buy the ones that are worth publishing.” So management created a new imprint, called Dolphin Books, and it reported to Len. 

Tom McCormack, later the dynamic CEO that built St. Martin’s from a relatively insignificant player importing Macmillan UK titles to an industry powerhouse, was a young editor there at that time. Dad had Tom start making lists of all the public domain books and what editions were available of them. As I heard the story (and Tom may read this and correct me), Tom said to Len: “I get it; we’ll figure out which books haven’t been done and do those.” To which Len said, “No. We have the strong sales force. We pick the ones that everybody does, because those are the ones that sell [no BookScan back then; no B&N or Amazon either]. We’ll push somebody else off the shelf.”

Anyhow, Dolphin was a big success. Two other things about those times:

Buying a paperback houses was seen as the way to get into the paperback business because of the perceived need of a backlist to be viable. That was the way to get one.

Mass markets really were paperbacks. The trade paperback business was small and academic. And mass market was distributed through IDs.

Well, Len didn’t believe in ID distribution; he believed it was inherently inefficient and the mass market business would ultimately choke on its growth. (It took 20 or 30 years for that to become obvious, but he was right.) So he wanted to create a paperback line which created its own outlets, using the same rack-jobbing (inventory selection)  techniques he had developed for the Doubleday Merchandising Plan.

Len also thought he had a better way to get to a backlist than to buy one. He would create one by publishing a very large number of titles — 50 new ones per month. The plan was to do this for three years which would give him 1800 titles in print. Presto, instant backlist.

Ray Hagel, the CEO of the Crowell-Collier Publishing Company, was recruiting Len from Doubleday and bought into this idea. Hagel was early in the curve of the go-go 60s, acquiring companies with stock. While Len was there, he acquired Macmillan Publishing, Free Press of Glencoe (bringing the soon-to-be-legendary Jeremiah Kaplan to New York publishing), Brentano’s Bookstores, and, if memory serves, a planetarium-creating company in Baltimore. And he financed Len’s vision: a new company called Collier Books.

So, starting in about early 1962 I think, a box of 50 new Collier Books titles would arrive at our house every month. And did for about a year or so. Collier Books started branching out. They created Modern Masters for Young People, children’s books from famous authors (Robert Graves, Louis Untermeyer) in a series overseen by a young neophyte editor named Harlin Quist, who also later made quite a name for himself publishing original children’s books. They had a line of study guides. They started publishing hardcovers. They even had a line of books that anticipated computerized teaching: you read a chunk, you get a question, and a choice of four answers. You turn to a different page based on which of the answers you chose, which told you if you were right or wrong and addressed your specific misunderstanding if you were wrong. Lots of smart stuff!

But then the stock market turned sour. Crowell-Collier stock went down. All the transactions they’d done using the stock for leverage were now jeopardizing management’s control of the company. Expenses had to be cut. And the very ambitious Collier Books rollout had to be curtailed.

This meant my father had to fire a lot of people. Although Ray Hagel offered him a 50% salary increase to stay at the company (and, by this time, Dad was running other divisions, including Brentano’s), Dad took the whole Collier Books thing too personally to consider it. He left and went to McGraw-Hill a few months later.

But here’s the thing talking to Cader made me realize on Thursday.

When Dad published 600  new titles a year (more really, because 600 was the number for the rackable paperbacks) at Collier Books, he was increasing the industry output by SIX percent! To put that into context, we’d be talking about a new company today publishing about TWENTY THOUSAND new titles a year to have an equivalent effect on industry output. I have known this history for a very long time. I have a whole new appreciation for what Dad did in this context. It’s one of those times I wish I could tell him.

From now until May 28, every post will end with a word about my speech at BookExpo at 11 am that morning. Called “Stay Ahead of the Shift: What Product-Centric Publishers Can Do to Flourish in a Community-Centric Web World. ” If you’ll be in NYC that day, please come. Posts between now and then will tell you a bit more.

The question of how to plug the independent bookseller into the digital revolution is a knotty one. Nobody has really “solved” it. 

Two of the smartest guys in the UK, Francis Bennett and Michael Holdsworth, tried to tackle this question in a report for the Booksellers Association in a report published in 2007. While they touched on a whole host of issues, including that publishers are likely to sell digital downloads direct, they really didn’t manage to come up with an action plan for the individual bookseller. Rather, they focused on the need for booksellers and publishers to join collaboratively to solve the problem: start with a public conference, create standards, form a joint trade working party. This is, at best, a path to an answer.

From this I conclude there is no ebook-centric answer. If there were one, these guys would have found it.

Then, three weeks ago, PW did a story headlined “Indie Booksellers Debate the E-book Conundrum”. This article introduced a product/technology called Symtio, which stores (among them Tattered Cover) use to back into ebook revenues. Symtio is a plastic card, sold at a retailer, which entitles the bearer (gift recipient) to download an ebook, an audiobook, or both from Symtio’s web site. If this strikes you as something less than the perfect ebook solution for retailers, you’re seeing it the way I do.

The ABA plans to work ebooks into Indiebound. Len Vlahos calls it a “focus for the immediate future” in a white paper presented to the ABA Board. Ingram Digital offers access to 150,000 ebook titles to independent stores. And stores such as Vroman’s are quoted as enthused about the potential for them with ebooks.

Dick Harte, however, who runs BookSite, which provides Web hosting for booksellers and librarians, doesn’t agree. Not only were ebook sales low on the BookSite platform, often they were erroneous purchases (people thought they were buying a printed book!) which then required a customer service intervention. One particularly far-sighted bookseller quoted in the article is David Didriksen who sees ebooks as very low-margin transactions not worth the effort.

I agree. What distinguishes what independent booksellers offer: local taste and judgment, personalized service, intimate customer knowledge — these things just don’t provide much competitive advantage in the ebook space. And the competition isn’t just Amazon and B&N either.

So independent booksellers need to look elsewhere to participate in the digital revolution. I tried to sketch out a strategy in a previous piece:

1. Set yourself up (probably with Ingram) in the simplest way you can to be able to sell as many titles in as many formats as you can. That is, get the maximum choice you can for your customers with the minimum hassle and investment for you.

2. Don’t expect to make money selling ebooks: consider it an accommodation to your customers to keep them buying physical books from you. Restrain yourself from investing large amounts of labor improving your ebook presentation past the point of acceptable. If the margin from your sales starts to amount to something, you can do it then.

3. Spend all of energy that you might have wasted perfecting the sale of ebooks on social networking, trying to be in direct contact with your customers through Facebook, Twitter, and through postings on popular and well-read blogs in subject matters your store specializes in. Particularly focus on the opportunities to promote to specific groups, such as through hashtags (#s) on Twitter, which identify groups of people interested in a particular thing.

I neglected to add a fourth, very important element of an indie bookseller’s digital strategy, although it is hinted at in the marketing suggestion above. This one is the same as it is for general trade publishers: get vertical!

The bad news about digital change is that it brings the biggest companies in the world — Amazon, B&N, Apple, and every phone company — into the indie bookseller’s back yard. But the good news is that it also brings every customer in the world into that back yard. So a bookseller with a vertical specialty can build a global market. This was the pre-Internet strategy of CEO-Read (originally 800-CEO-Read; if Bezos had invented Amazon ten years earlier he would have chosen a 7-letter name…) They’re business book specialists and their customer base is truly international.

Independent booksellers need to build a reputation within vertical niches. That’s a matter of having the stock, having the knowledge of the vertical subject, and then getting involved in the vertical communities — blogging, commenting, tweeting, reaching out. The bookseller’s web site, if it has good content properly tagged, can rapidly be discovered for relevant searches. Tattered Cover may not be able to beat Amazon at everything, but they should beat them on searches for Pike’s Peak. A northeastern store that specialized properly could come up ahead of Amazon in a search for “autumn leaves colors” or “historical sites Boston”. (By the way, I just checked, an no bookstores come up in the first ten pages of “historical sites Boston”!) 

In just the same way that general trade publishers need to use the time they have left when “general trade” still works to build vertical presences that will last beyond that time, so do general trade bookstores. It will work for Barnes & Noble to be “general” for far longer than it will work for any local store. The trick is to be World Class at something, most likely something that has a local root will make the most sense.