August, 2009

Debut pricing: my idea, great idea, unfortunately can’t work


In the words of Emily Litella, the Saturday Night Live character of the 1970s invented by Gilda Radner, “never mind.”

I’m referring to my post about “debut pricing” from earlier this week. It can’t be done; at least not easily and at least not immediately.

The challenges we face require a continuing conversation and crowds really help. The collective wisdom and knowledge of the growing crowd reading this blog helped me find and face this hole in my own thinking. (It was also a bit of a comfort to be told in the course of previewing this post that other smart and informed people didn’t know what I missed either!)

What I should have known and factored in, but didn’t, is that ebooks aren’t sold like regular books, with a published discount schedule and no contract. Rather, ebook sales between publishers and their customers, whether intermediaries like Content Reserve and Ingram Digital or retailers like Amazon and Barnes & Noble and the Shortcovers business run by the Canadian chain, Indigo, are transacted under contractually defined and mandated terms. What those contracts say is both confidential and variable from publisher to publisher and customer to customer.

So the suggestion I made — that publishers adjust their ebook pricing by changing the discount schedule for newer books — can’t be achieved by unilateral decision of the publisher under most of the contracts that exist today. Any publisher that wants to implement my suggestion would have to wait for their contracts to expire and then negotiate new ones that would allow them to manage their terms of trade in ways that they can’t do now.

I am also told by publishers in the wake of my piece that Amazon has terms in place that very much anticipate the move that I suggested. At least some publishers have terms that tie the pricing of the ebook to the pricing of the print book (the ebook can’t have a higher suggested retail) and that tie the discounting of the ebook to the discounting of the print book. So the publisher couldn’t reduce the discount for the ebook without reducing the discount for the print book at the same time (and one suspects even that flexibility wouldn’t extend to all publishers and all contracts.)

Apparently some contracts go further than locking in the publisher to print book prices and discounts but also require the publisher to subsidize Amazon’s discounting. In one case I was told about, there is a maximum discount Amazon can require to be subsidized based on the publisher set retail price.

On top of their problems with Amazon, a publisher told me that they had contractually given Fictionwise the right to discount their ebooks and commensurately reduce the payment to publishers. For years, the Fictionwise policy was to do very little discounting and usually the discounts were about 10%. According to one publisher, new owner Barnes & Noble saw the opportunity in those terms to cut prices to the consumer dramatically.

So when Dominque Raccah said her choices with Bran Hambric were limited to when and whether to issue an ebook and not much else, she was absolutely right.

What this means is that publishers have largely dealt away control of their businesses, at least for the time being. All they can do right now to defend themselves is to set the retail prices high and let the marketplace do what it will. With competition fierce among the retailers to cut prices to the consumers, the prices at retail will not be as high as the publisher sets them.

A similar contractual situation exists between publishers and the wholesalers Ingram and Content Reserve, where discounts have been negotiated and are in place until multi-year contracts expire. The same situation exists with Sony which would be the next largest account for ebook sales for most commercial publishers.

So at what is really the dawn of the ebook era, publishers have very little leverage to manage the ebook pricing and distribution in the marketplace.

The way that ebooks transactions differ from print books could also argue that ebooks aren’t “sold”, they are “licensed.” That could present another problem for publishers because licensing revenue is often split 50-50; ebook revenues seldom are. Agents are sure to become increasingly aware of the distinction, just as they will be aware that almost all the sales right now can be achieved by making half-a-dozen deals. That’s not very tempting when ebook sales are 5% or 10% of a book’s total. But what about when they reach 25% or more?

There is one big new entrant coming to the ebook game and that’s Google. With the industry (including Google) other than Amazon coalescing around the epub standard, one can see another change in the wind coming. Google has already created a huge challenge to Amazon by making a million titles available in the epub format which Amazon would have to convert to their proprietary code in order to offer on Kindle. (These titles are public domain and the free epub code offered by Google should minimize that conversion cost, but a million times anything amounts to a lot and, whatever it costs, it won’t happen instantaneously.)

Setting up new arrangements with Google presents the next opportunity for publishers to “get it right” and to take back some semblance of control over the products they publish and sell. But Google won’t want to be buying at lower discounts than everybody else and they won’t want to be selling at higher prices than everybody else either.

There are some hard negotiations ahead on the ebook front.

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What advice do you give a writer?


Because I am giving a keynote talk at the Writer’s Digest Conference in New York on September 18, I am thinking about “what do you tell a writer about digital change in publishing?”

The view of the media world that I proselytize, which is that it is “going vertical”, is hard to accept if you are “general” (i.e. horizontal) and it is hard to accept if you are small. Both general publishers and small publishers have always depended on aggregators to create a large enough offering to be commercially viable. General publishers need bookstores, primarily, and general book review media (pre-pub and to the consumer) as well. Small publishers have required wholesalers and distributors to organize a large enough product offering to be effective with bookstores and libraries. The intermediaries have always found it difficult to deal with offerings of a small number of titles.

The vertical vision says that aggregation is not just necessary at the “book” level, but also at the “subject” level. If the vision is accurate, publishers of just a handful of titles — even if they are in a niche — will find it prohibitively difficult and expensive to reach their audience.

One reason why life is getting so much more difficult for general trade publishers and small publishers is that the capital barriers to entry for publishing, particularly ebook-first publishing, have dropped to near zero. The aspiring book author 10 or 20 years ago needed somebody to print a run of books, hold them, and distribute them — mostly one-by-one — to points of distribution (called bookstores, libraries, and wholesalers) all over the country. That took capital and it took scale.

This isn’t true anymore. Anybody with a computer and an internet connection can be a publisher. You can publish a blog on a free platform. You can publish ebooks through Smashwords by sending them your Word file. You can publish a document for download through Scribd by sending them a PDF. You can make your property available as a printed book through a number of services — Author House being the largest — without any investment in inventory and only a modest set-up cost.

This ease of entry is part of what bedevils the established publishers. They’re still gatekeepers, but the gate isn’t attached to a fence or wall anymore so aspirants just walk around it. That doesn’t mean that getting published by a real publisher is of no value; it is still the only way to sell significant numbers of copies, and it will remain that for some time to come.

But most books, even those published by legitimate publishers, don’t sell large numbers of copies. And it is increasingly the case that the self-publishing of various kinds is the best way to get on the publishers’ radar screens and it has the additional benefit of beginning to build an audience and a response loop that are essential components of any successful writer’s platform.

In fact, when we discussed with a leading agent a panel we’re planning for our January Digital Book World conference called “Stalking the Wild Blogger: Scouting Blogs and Self-Published Content for Fresh Voices”, which is about agents and editors finding authors through blogs and self-published books, he said that is now something that “every agent does.” He explained: “it is now the standard way to find new clients.”

That means that blogs and self-published books using ebook and print-on-demand models are now part of the overall commercial structure of publishing. They are not something separate and inferior, as “vanity publishing” was in the past.

The best thing that can happen to a writer is still that an established agent takes on and sells their project to an established publisher for an advance large enough to constitute adequate financial compensation to the writer for her work. Most books published by mainstream publishers still do not earn out their advance and yield additional royalties, so getting paid upfront is still the best financial situation for the author, in the short run. (In the long run, failing to earn out advances and sell books will catch up with an author; it’s a trick getting harder and harder to repeat in a world where BookScan numbers tell each publisher how prior books have performed.)

So here’s a starter list of tips I’ll be offering writers on September 18, a list that would grow between now and then even withoutthe help I may get from readers of this blog.

1. Understand your vertical world on the web, and participate in it.

2. Blog. And build a following for your blog.

3. If you have finished book material, and it is not already in the hands of a capable agent managing the process of selling it to publishers, self-publish it in ebook form at least and promote it the best you can.

4. Join PublishersMarketplace for at least one month and use the deal database to find the agents that handle material like yours. Reach out to those agents and listen carefully to their feedback.

5. If you have a book with an ISBN, self-published or not, take advantage of your free web site at Filedby.com to promote yourself. (I am a proud co-Founder and shareholder of Filedby.)

6. Google yourself and find and fix your presence anywhere on the web where you can influence it, particularly bookish sites like GoodReads, Red Room, Shelfari, LibraryThing, and, of course, BN.com and Amazon.

7. When you talk to agents, try to discern how aware and conversant they are of ways an author can promote his or her own career. Can they coach you on using social networking and blog touring and your own posts to promote yourself? If they can’t, they might be a great 20th century agent and not right for you in 2009.

8. Link, link, link. When you write each blog post, link out to other sites. Have a blogroll of your favorite sites an encourage them to link back to you. Build your connections on Twitter, Facebook, and LinkedIn. And remember that the people you are linking with have their own agendas, which is not about helping you. Respect that.

I know a lot of readers of this blog specialize in helping writers; I don’t. I want the additional thoughts for writers that I’ve missed. You can post them here or send them to us at [email protected]

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“Debut pricing” for ebooks: a better idea than withholding them


Three weeks ago, the community had a big discussion about the timing of ebook releases which was triggered by Dominique Raccah’s announcement that Sourcebooks would hold back the ebook of Bran Hambric for some period after the hardcover release. The expressed concern was to insulate the $28.95 hardcover from the price competition currently taking place in the ebook space, where Amazon has started working to establish a $9.99 retail price for new commercial titles, forcing BN.com to match them.

This post doesn’t quarrel with the suggestion that there’s a problem; it is a quest for a better solution.

Although Amazon has pushed some smaller publishers to a different discount structure, the established commercial houses usually sell ebooks to retailers at about 50% off the publisher’s retail price, about the same terms they have established for print books. But ebooks, title for title, add more margin (i.e. profit) to the publisher at the same net revenue because the books don’t have to be manufactured and shipped and there is also no cost of returns. (They would also generate more margin for the stores than print books if they the stores sold them at the same price as the print book, but, as I pointed out in an earlier post, under current practices, they never will.)

Both my “current commercial” and “futurist” instincts say that cutting off the ebook market from purchase at the time the book comes out, is being assertively marketed, and when interest is probably highest, is the wrong strategy.

There are non-pecuniary reasons for publishers to protect the print book sale. Except for the USA Today list, which records Kindle sales but no other ebooks, only print book sales are reported to determine “bestsellers.” And enlightened publishers, including Dominique Raccah, want to protect print book sales to protect brick-and-mortar stores, who are still the most important merchandising and marketing tools publishers have (even if many of them don’t know it.)

To the most avant garde digerati, who advocate eliminating DRM and pushing prices to the consumer down as the antidote to piracy (which the most conservative defenders of the old model would liken to putting a bullet in your brain as an antidote to having taken poison), keeping the book off the market to maintain higher content prices is multi-faceted anathema. Among the inevitable consequences of this, they would tell you, is that there will be more pirated editions available and otherwise-inclined-to-be-honest consumers will be “forced” to the pirate editions because a legitimate ebook edition is not available.

I am not a 100%-no-DRM guy. (Actually, I’m a nearly-100%-social-DRM guy.) And while I believe that the price of content is in an inexorably downward spiral, to the point that the day will come some years from now that it won’t be much of a business to control and sell it, I also believe publishers (and authors) need to preserve content margins as effectively as they can for as long as they can to finance the transition to the new publishing economy where eyeballs and human bandwidth, not IP, are the currency of the realm.

I was surprised recently when a Very Smart Friend defended the Sourcebooks strategy by saying, in effect, “what’s so special about the ebook consumer? The paperback reader waits for the book to get it cheaper; why not have the ebook reader wait for the book to get it cheaper?” My argument that the ebook readers and print book readers are two separate markets carried no weight. First of all, there’s also a split between paperback readers and hardcover readers. But also, my debate opponent simply didn’t buy my paradigm, and frankly, it is currently unprovable.

But I still find the Sourcebooks solution very unsatisfying. I think it hurts the overall sale of the book and the profits of both publisher and author in the long run. Although I think the impact is marginal, I have to agree that ebook readers will more frequently obtain a pirated edition if no legitimate edition is available. And it is “unnatural”. The publisher’s job is to get the author’s work in front of as many paying eyeballs as possible and to generate as much revenue as possible in the process. This strategy works against those objectives.

So here’s another solution, one that:

1. Allows the publisher to sell the ebook at the same time as the print book;

2. Makes it much harder for retailers to discount the ebook way below the print book price; and,

3. Increases the profit to the publisher and author on every ebook sold.

For the first six months of a hot new book’s life, publishers should establish “debut pricing”: reducing the discount at which they are sold to the trade to 20%. And, at the same time, the publishers should sell these ebooks as digital downloads from their own site at full retail price. After the early “debut pricing” period, the discounts are restored to normal, but the publisher’s own site should still continue to sell at full retail (except as part of bundle or subscription offers, of course.)

In the Bran Hambric example, where the book is $28.95, let’s say the ebook were priced at $26.95. Then a retailer (Amazon) buying at 50% off would pay Sourcebooks $13.475 per copy and have to take a hit of $3.485 per copy to sell the book at $9.99. But under my suggestion above, the retailer would be paying $21.56 per copy for the book and the cost of subsidy would jump to $11.57 a copy. That’s more than 3.3 times the amount per copy in the cost to the retailer to support the $9.99 price.

The math for impact on the publisher and author is a bit more complicated. How much additional profit over print books this would represent depends on what the print books cost to manufacture and what the split of revenue is between publisher and author. But it is likely that a change to this policy would mean that each ebook sold would generate  more than twice as much profit to the publisher as a printed book for the period of “debut pricing” discounting.

“Debut pricing ” is not a tactic that will work forever. We’re going to see accelerating change in the way ebook publishing works, including enhanced editions subsequent to the first one that will differentiate the ebook from the print book as we proceed into the digital age. But for the next couple of years, as we start to see ebooks take more and more share from print, this is a way for publishers to keep the pricing of ebooks closer to print books and earn more profits, for themselves and for their authors, at the same time.

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When the entry level employee knows more than the manager


Here’s how we’ve been putting together the program for Digital Book World.

First, I dreamed up a list of panel “topics” that I thought touched the key issues and concerns facing general trade publishers today as a result of digital change. Then we ran that list past our illustrious and helpful Board of Advisors, who pointed out some places where consolidation would be appropriate and dismissed a couple of ideas as klunkers.

That left us with a list of topics longer than we can use: we have between 18 and 24 panel slots and well over 40 ideas in hand. We figured that some would be harder to fill than others and things would sort themselves out as we recruited panelists.

In the process of discussing things with our Advisors, new ideas also surfaced. One of them is now looking prescient.

At a meeting at Macmillan with Advisory Board member Ami Greko and a couple of her colleagues, an interesting topic arose. What happens when the entry level employee knows more than the manager about how to use digital tools or play in a digital space?

After all, the top marketers in trade publishing houses honed their skills in a different era. They don’t necessarily know how to use Twitter or Facebook or Ning. But the people they’re hiring to fill entry level jobs have been on Facebook for years and they have probably already used it to organize something. Who would tell whom what to do here? Who would be in charge? And how do we apply the content-and-market knowledge that is developed through years of book experience to promotional venues that are best managed by green marketers (and we don’t mean “green” in the environmental sense!)

Although that panel figured to go on the list of those likely to be “harder to fill”, it seemed to us like an important topic.

And we got evidence this weekend that we’re not the only ones with that thought in mind, although perhaps publishers are seeing it a bit differently. The Bookseller reports that a survey by an organization called “Skillset” has revealed knowledge gaps in UK publishing houses.

Suzanne Ashley, Skillset publishing sector manager, said the report had revealed specific problem areas within training and recruitment.

She said: “There are those who know the business really well—often those who are more experienced, middle-management types—who are very uncomfortable with the wholly changing digital landscape.”

The question not being answered is whether those who “know the business really well” might actually be uncomfortable with the young people new to their team who live in, and are quite comfortable with, the changing digital landscape. That’s the question I hope we’ll explore constructively at Digital Book World. If any managers or recent recruits have thoughts to offer on this question, we want to hear from you.

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More evidence that the general trade business is getting harder


The shift from horizontal paths to audiences to vertical ones is a hard concept for people who have grown up in book publishing to accept. Most resistant, judging from the questions I get when I talk to book publishing audiences, are those who see book publishing as being about “writerly” books: “non-genre” fiction, belles lettres, memoirs that don’t have a particular historical or current affairs hook.

When I tell publishers “you must focus, you must specialize in niches so that you own vertical audiences”, the inevitable question is: “what about fiction?”

Two articles picked up by today’s publishing news aggregators, each in its own way, refer back to that question, although one of the articles is not about a book of fiction.

Boyd Tonkin, a UK columnist who comments on the book scene for The Independent, observes that “the collapse in advances paid to and earnings expected from serious authors has made many far-from-obscure names feel the chill of full-time writing in a sharp cyclical slump.” Tonkin notes that it has been this way before: Proust and Henry James relied on unearned income; Joyce and D.H. Lawrence had to get help from patrons; Kafka had to work a day job.

But the message is clear and sobering. Many writers who have made a decent living, or even a lot of money, from book advances and royalties will start having to do without, or do with less.

The same chill that has frozen publishers’ spending on established authors is affecting their willingness to take chances on something new as well. That’s the story author-producer Tom Matlack wants to tell. He and his partner came up with a pretty nifty idea: assembling a collection of first person stories by men about manhood. Their proposal, shopped by “the best agent in the business” (whoever that is, and by whoever’s definition of “best”) was rejected by 50 houses. So they’ve built their own web platform, produced a companion documentary film, and are publishing the book themselves this Fall.

The piece describing this endeavor for the Huffington Post is a bit self-centered (this experience convinces Matlack that book publishing is in worse shape than any other media, because they were so dumb as to turn down his book!) And it is a bit naive: he says publishers take “85% of the royalties”, which, one presumes, he calculated because the author’s share normally tops out at 15% of the retail price (out of which also must come the 50% or more for the distribution channel and manufacturing costs, as well as book development and publisher overheads.) For some reason, he and his partner have chosen a distribution route that seems to ignore both Barnes & Noble and Amazon as well. (He’s explicit about excluding B&N; doesn’t mention Amazon.)

Aside from the fact that one might expect the 50 publishers to have reacted differently if the web activity Matlack created and the documentary film he’s launching had been part of the proposal shopped by “the best agent in the business”, his experience does suggest a lack of imagination among the publishers (they couldn’t have created the film; but they damn sure could have created the web activity!)

Both of these experiences say the same thing to me: publishers are finding it increasingly difficult to market books. They are still highly dependent on intermediaries to reach the public, so they try to anticipate what will move those intermediaries as well as what will move the public. That’s like trying to throw the football through two tires swing from tree limbs with the tires swinging in different arcs. You need to wait for the ideal moment and you have to make a perfect throw. It’s tough.

Tor and Harlequin don’t have the same problem. As long as they stick to their sci-fi and romance knitting, they have ways to reach the public and influencers of the public directly. Increasingly, the retailer intermediaries will trust them to do that, so, in effect, the two tires are moving in synch for them.

And that brings me back to the question I get when people ask me how to apply “vertical” to books that don’t seem to fit the paradigm. The first answer I give is “work with the world of the story.” If the novel is about alcoholism, find the web communities that care about that. If it is about adoption, find the right communities for that. Every piece of fiction is about something; use the community of interest in whatever that is as your springboard.

That answer doesn’t please a lot of people. So I have another answer. And that is “I don’t know.”

But I do know that the horizontal book-based marketing and sales infrastructure is vanishing. The review media is fading and, for the first time in my lifetime, bookstore shelf space in the US is shrinking (and at the very same time, ironically, more and more books are competing for the space.) As vertical subjects move to the web, it is harder for bookstores to sell travel books, cookbooks, computer books. If a store loses sales in a bunch of niches, they might not be able to pay the rent to keep the store open. Then they’re gone for fiction too.

The writers Tonkin talks about sympathetically and the publishers Matlack condemns are all suffering from a problem not of their making. Unfortunately, the natural forces that are creating the problem are not providing a natural solution.

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Ebook growth explosive; serious disruptions around the corner


The news about trade ebook sales growth continues apace. The IDPF has just said that sales in June 2009 were up 136% over June a year ago. Calendar year sales to date are up about 150% over 2008.

Anecdotal information from big trade houses suggests that ebook sales are approaching 3% of total sales. But not all the books big houses sell are “ebookable” with current technology: much of the juvie list, most illustrated books, and books where tabular or graphic material is important might well not have been made into ebooks. So the number is larger, maybe 5% or 6%, of the straight narrative books. And because not all of everybody’s backlist is yet available in ebooks, sometimes because of rights issues and sometimes because it just hasn’t been digitized yet, the number is higher for straight narrative new titles. So maybe that’s at 8%. Now!

And the chart of the sales trend that IDPF shows would certainly suggest we’re still seeing accelerating growth. There’s no reason to think that will stop; in fact, there is every reason to think the growth will gain additional impetus. New reading devices are coming and new features are coming for existing devices. Growth in ebook uptake to now was achieved with no help from the biggest purveyor of consumer books: Barnes & Noble. Now they’re jumping in to the pool with both feet. They have announced a partnership with Plastic Logic on one new reader and there is a rumor they will have another one of their own.

And the Apple tablet is going to be a reality, which many people think could be a Kindle killer. It won’t be, but it will surely be a Kindle challenger and it will grow the market in various ways, including making good ebooks from a lot of books that weren’t good candidates with the previously available screens.

The market is still dominated by Amazon and by Kindle, which may be selling 70% of the trade ebooks at the moment. Publishers are saying that seeing 50% of Amazon sales on a title in Kindle is not unusual. On most big books it is 30 or 40 percent and rising.

It has been reported that this is going to be a big Fall for big books: the late Michael Crichton, Pat Conroy, Jon Krakauer, Dan Brown, E.L. Doctorow, Margaret Attwood, John Irving, Philip Roth, Barbara Kingsolver and many others will have books hitting the shelves between now and Christmas.

If that has any effect on ebook reading, it should be a spur. Of the 90+% of book readers who do not (yet) read ebooks, some know they will, but they just haven’t started yet. Since ebooks are cheaper than their hardcover counterpart, sometimes — given the price wars taking place among retailers — a lot cheaper, the plethora of hot new books should be a merchandising tool to sell devices and to get people who already have ereadable devices like iPhones to try this new way of consuming print content.

And then we have another piece of news: that Sony is pushing its partnership with Content Reserve to boost use of Sony Readers by libraries.

When we get to the point that the ebook share of a new book is consistently 25% or more, we will start to see real strain on many aspects of today’s business model. And we can expect to reach that point before Obama runs for reelection, perhaps in the next 18 months. I don’t want to try to get into answers in this post; it’s enough to just think about the questions. Consider…

1. Bestseller lists. Right now ebook sales don’t get added into bestseller list numbers. With Kindle sales (by our informal estimate) constituting about 70% of ebook sales and no apparent inclination by Amazon to report those sales, that’s a hole that will exist for a while. With all the big books coming this Fall, publishers will have a chance to see how ebook sales vary by author, genre, pricing, and ebook release strategy. Will authors whose audiences switch to ebooks faster be punished on the bestseller list as a result?

2. Library sales. From the beginning, Content Reserve — the principal provider of ebooks to libraries, the power behind Baker & Taylor’s ebook provision and now in partnership with Sony Reader — has attempted to replicate the printed book world with a model that requires libraries to buy the number of copies they want to lend simultaneously. So if a library wants to lend 100 copies of the new Dan Brown at the same time (assuming it is available as an ebook), they’ll have to buy 100 ebooks. But what is not factored into the current model is that print books wear out. A library can only lend a print book X number of times before pages start to fall out. Replacement stock wouldn’t be part of the (current) ebook model. (In fact, with the new Sony deal for readers in libraries, it is the hardware that will wear out, so Sony, not the publishers, will get the replacement stock business.)

3. Library sales again. In the print book world, you have to go to the library to get a book and then go back to the library to return it. In the ebook world, you go to one web site to download the book for free and another one to download it and pay. Consumers are bound to notice. How will publishers that are spending a lot of money and time chasing down pirate copies respond to that?

4. Market fragmentation. Amazon is 15 to 30 percent of a book’s sale; somewhat less when the book has big distribution through mass merchants and somewhat more if a book is long tail and hardly available except on the Internet. That number is rising. They are perhaps 70% of ebook sales. How long will it be before an author says to publishers “I’ve handled Amazon. Would you like to offer me a contract for the rest of the market?” And with another big chunk at another single retailer, Barnes & Noble, an author’s agent could make two deals and get half the potential market. Won’t that be an enormous temptation?

5. Health of the brick-and-mortar channel. As ebook sales climb, many of those sales will be cannibalizing print book sales (although our friends at O’Reilly say that isn’t happening yet; at least not for computer books.) That would suggest we will see declining sales through stores in the years to come. But stores are the publishers’ most important marketing and merchandising tool. If we do start to see narrative books selling 20% or more as ebooks, what can publishers do to help save brick-and-mortar shelf space? What can the stores do?

6. Pricing and timing. There is uneasiness among publishers about simultaneous ebook release, based on the the bestseller list problem, the bookstore preservation challenge, and the intense ebook pricing competition that is driving prices to the consumer far below wherever the publisher tries to set them. At least one publisher has held back the ebook of an important title for several months as a result. The view from here is that the right strategy is the opposite: get the ebook out as fast as possible to get word of mouth going before the print books hit the stores. (We’re not advocating holding back the print book here; just acknowledging the reality that printing, binding, and shipping take time and the book is “finished” when the PDF is finished.) What’s the right practice? Or does it, like so much in the trade business, “depend on the book?”

7. Ebook royalties. The author can get 85% from Smashwords (OK: no DRM, no merchandising, and not really a big league player…yet; but will it stay that way?); 80% from Scribd; 35% of sale price from Kindle. There are bound to be models also paying much higher than publisher royalties coming from B&N and from Indigo’s Shortcovers. How long will publishers be able to hold the line at 15% of retail or 25% of net, where ebook royalties are now. (Random House UK is trying to hold the line at lower numbers than that!)

8. New publishing models. When ebooks can routinely be 20% or more of a book’s sale, they can be 40% or 50% on many titles. The capital risk of publishing an ebook is a fraction of what is required to publish a print book. New entities are forming built around that reality; how long will it be before conventional publishers try an ebook-only, or ebook-first, approach on some titles? (Random House US is already publishing a number of Kurt Vonnegut short stories as ebooks only, where shorter content at a low price can be practical.)

The strategic thinkers at the big publishing houses, retailers, and literary agencies certainly have a lot on their plate.

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Introducing Digital Book World


Back in 1993 or so, my friend Lorraine Shanley of Market Partners International and I went to a free half-day conference sponsored by Microsoft. At the time, Microsoft was really pushing the computer manufacturers to install CD-Rom drivers into new computers. They had a definite selfish interest, which was to reduce the cost of goods for their software, which was being delivered on multiple floppy disks. One CD-Rom could hold what a dozen or more floppies would hold and would cost Microsoft considerably less. Since the consumer was paying for what ended up in their computer, not the manufacturing cost of the shrink-wrapped product that got it there, Microsoft knew that making the delivery mechanism cheaper wouldn’t oblige them to cut the cost of their software; they’d just make more money.

So on this particular day, they were hosting the publishing community to tell them what CD-Roms could mean to them. This was the first time that I was aware (although perhaps it had happened before) that the mainstream tech community was talking to the consumer trade publishing community and saying “have we got something for you!”

What Microsoft tried to demonstrate was that many things could be done with all the data that could be packed on a CD-Rom. They were in the process of creating their own CD-Rom encyclopedia, Encarta, and they wanted all publishers to get on the CD-Rom bandwagon. The message essentially was: “you’re the creative people; you’re the content guys. Look at all this cool stuff that CD-Roms can do. Now we don’t know what the product should be exactly and we don’t have a business model for you, but, don’t be Luddites, get off your duffs and start making some CD-Roms!”

Lorraine and I walked out of that meeting thinking, “this isn’t very helpful” to the content publishers who were our client base. So our two companies joined forces with another consulting company owned by Dan McNamee, got PW as a sponsor, and staged a full-day conference called “Electronic Publishing and Rights” (which turned out to be the first of two.) We had a plenary session in the morning, and then the afternoon proceeded on three tracks: consumer, education, and professional. (When we did the second show, we made it five tracks: consumer, school, college, sci-tech, and legal/accounting.) Both shows were sellouts and what I learned putting them together really pushed me, before the Web, before Amazon, and before ebooks had anything more than a 4-line display on an early Sony device, into the business of thinking about what the impact of digital delivery of content would be on consumer trade publishing.

Before long, the conferences we did led to the “Publishing in the 21st Century” program I described last week and the regular reminders that book publishing is many  businesses with quite different characteristics, not just one (which we had acknowledged at our EP&R shows with our afternoon tracks.)

And that leads us to Digital Book World, the new conference on digital change for consumer trade publishers that was announced yesterday. We’re now having conversations that go beyond our very illustrious Advisory Board about speakers and topics. What comes back to us over and over again is how important the trade book focus is.

For example, earlier this week we spent the day working with a client — a large aggregator — that wanted a little “ebook seminar” for their team to be part of our visit. In order to really focus the conversation, I asked for a list of questions and concerns. It became evident very quickly that this company needed information about sci-tech, college, and school ebooks and, of course, what I know best is trade. But I knew enough about the others to know that they are quite different, so I checked in with two smart industry colleagues (both of whom are members of our Advisory Board, as it happens) who know both the trade and non-trade spaces. We came up with a list of distinctions, but one really stood out to me.

In the trade space, one of the big ebook topics (which we plan to explore in depth at DBW) is “pricing.” What should ebooks cost the consumer? The convention among trade publishers has been to peg ebook retail prices to the least-expensive edition available in print. So if there is a cloth edition and a paperback edition, the publisher would be guided on ebook pricing by the paperback (usually setting at or slightly below the print book price.)

But in academic publishing, hardcover and paperback editions are often published simultaneously. The publisher figures that the paperbacks are for the students; the hardcovers are for the libraries. Since ebooks in the academic space are considered primarily library items, and because they have often become part of larger searchable databases, the academic publishers would set their ebook prices based on the hardcover, the more expensive print book available. He also said that sometimes they are even more expensive than the hardcover, because of the additional functionality they have, like links and embedded video.

This was important information for our client, who works across publishing segments. But if presented without a clear contextual frame, it could well be confusing information to a consumer trade publisher (or an academic publisher) trying to figure out a pricing strategy. Because we are tightly focused on consumer trade publishing, our panel(s) at DBW might not mention a tie-to-hardcover pricing, but if we did, we’d pose the model and talk about why it made sense in some other context, but not in ours. We’ll be talking about lots of other things that affect price: discounts, retailer strategies and control, the impact of the publisher selling direct to the consumer, and the extent to which there is enrichment or enhancement, for example. All of those things, as well, are somewhat different in the consumer space than in the others, where aggregation and value-added capabilities are critical components of ebook development.

Now that DBW has been announced, we’re engaged in conversations to refine the topics list and speaker suggestions we’ve gotten from our Advisory Board. We’ll be announcing speakers and panels as they are nailed down. We’re striving for a show that will scream “this is for me!” to consumer trade publishers. While we’re not doing a “call” for topics and panels (we did that ourselves, internally and with our Advisory Board, already), we certainly will happily entertain suggestions. If you have any you want us to consider, better to email my colleague Sophie Shepherd (at [email protected]) than to post them here (though you can also do both.)

This post and my last post last week and many you will see in the weeks to come will be making the distinction between “general trade publishing” and other book publishing. That distinction is a remarkably important one, but it is also going to be a disappearing one. In fact, the distinction between “book publishing” and “publishing” is going to be a disappearing one over the next couple of decades; we have talked before about the fact that format-agnosticism will increasingly characterize all media, not just publishing, as will verticality. While that means that there is a real need for Digital Book World, which emphasizes that distinction, it also means there is a place and need for the more tech-centric and publishing-type-agnostic program presented at O’Reilly’s Tools of Change. Personally, I’m planning to attend both.

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