January, 2011

I had breakfast last summer with one of the titans of 20th century publishing who is now in his senior years running his own smaller operation. He’s a notorious non-techie.

When we talked, he was trying to come to grips with what the problem for publishers was with this digital transition. From his perspective, publishing just gets cheaper (no books to print) and there should be room to lower prices, pay good author royalties, and still make a profit under something pretty close to the traditional model.

Well, I said, that would be true, but the problem is you’re going to face a lot more competition. Demand may go up and costs may go down but if supply in competition with publishers’ outputs rises too fast, there could still be a very difficult period in front of the industry’s legacy players.

That is: it could get increasingly difficult to get consumers to give you money.

Of course, increased competition from anonymous authors — many of whom would have been filtered out by the curation activities of agents and editors in the past — didn’t scare him. But, I pointed out, it won’t be limited to that. Do you think ESPN, for example, with all its content and all its market reach, will need a publisher to do a book or book-like thing? Or CBS News? Or The Museum of Modern Art?

When I shifted the conversation from stray authors he would have rejected as a big publisher to brands he sought deals with, the point had more impact.

Then, earlier this week at Digital Book World, David Nussbaum’s panel of publishing CEOs and presidents took up a related subject: ebooks being given away for free as a promotion. Brian Napack of Macmillan expressed a concern I’ve felt previously (and wrote about a year ago): that if there are enough free books around out there being distributed to promote an author or series, many readers will just choose from what’s free and stop buying books. Jane Friedman of Open Road declared on the same panel that “free is not a business model; it may be a marketing model, but it isn’t a business model.”

What the CEOs were focused on was what their company policies were and what they hoped others would be. Everybody’s learned that giving away a free book can serve as a promotion for other books by the same author, particularly if the book given away is the first in a series. But if enough people are promoting, that can generate a lot of free ebooks for any consumer to choose from any day of the year.

In a presentation of consumer data the following day, both the joint effort from BISG and Bowker (who were surveying the ebook consumer) and the research from iModerate (who were surveying readers who use multi-function devices) revealed findings that suggested that half or more of the ebooks being read these days are being obtained for free! How much of that is public domain material, how much of it is unknown authors promoting themselves, and how much is branded content from major houses is not yet known.

These two things — non-publisher brands and entities competing with publishers to deliver content and free content competing with content for sale — connect in a painful way at the publisher’s balance sheet. And there isn’t a lot publishers can do about them.

This morning comes the report that the New York Times is tackling the question: “How do you monetize the content when it is not news anymore?” Would you be surprised to learn that the answer is “publish an ebook”?

Their new ebook, “Open Secrets”, further amortizes the large volume of work they did to comb the wikileaks material. The ebook is available for $5.99 in most places ebooks are sold. Will there be more of this? You bet there will! Jim Schachter, the paper’s associate managing editor, is tasked with making sure there will.

The same approach is being tried by a newer brand with similar content, the independent journalism farm, ProPublica, which heretofore has teamed with various newspapers, including the Times, to deliver their investigative journalism to the public. Their entrant is “Pakistan and the Mumbai Attacks: The Untold Story” by Sebastian Rotella and it is available only from Amazon through their new singles (short works) program for $0.99.

Ten or fifteen years ago, “Open Secrets” would have been an “Instant Book” from a major publisher (if it were anything at all.) The Times could have an opportunity like this 10 or 20 or 30 times a year. They provide themselves with brand extension, revenue, an opportunity to give more exposure to their reporters and their reporting, and total flexibility without the need for the complexities, including contracts and corporate interactions, that arise when getting a book published by somebody else.

According to Richard Tofel of ProPublica, their goal is primarily dissemination of the information. After all, they’re a mission-driven organization to begin with. So they seem quite happy selling high-quality, curated content for 99 cents. Not free, but if you’re a publisher trying to sell content at prices that make commercial sense, not much better than free either.

These two unrelated realities — consumers being diverted from purchases by free ebooks and sources of content being diverted from publishing contracts by alternate paths to the market — make it clear that traditional publishing faces challenges both upstream and downstream from where they sit.

One of the key building blocks of my career was the six years I spent working on a program called “Publishing in the 21st Century” with Mark Bide and a team at Vista Computer Services (now Publishing Technologies) led by then-Chairman Denis Bennett, John Wicker (now at Tata Consulting Services), and Martyn Daniels (now at Value-Chain International). Every year we picked a digital change theme: organizational structure, content to context, etc., and did some research around it. Then we’d present our findings in a White Paper and conferences.

I think it was Martyn who observed that our exercise was like “looking into the same house through different windows.” That is, the subject was really always the same — digital change in publishing — but taking a different slant on it each time would deliver different observations and insights.

And so it continues. The subject of digital change in publishing continues to prove an endlessly fascinating one for observation, analysis, and speculation. And each time you think about it from a different point of view, you learn something new seeing what you have seen before.

This entire experience was critical to my own intellectual development for two reasons: it gave me subsidized (paid-for) time explicitly devoted to thinking about the future and it gave me a lot of smart people, inside Vista and among publishers and other stakeholders whom we interviewed in our research, to discuss with and learn from.

The topic of digital change outside the English-speaking world was placed on my radar in 2008 when I was invited to speak in Copenhagen to Danish booksellers and publishers. It was already the case that a large percentage of the books sold in Denmark were in English. (I have recently heard it said anecdotally that sales of English-language books in Denmark have climbed to 25% of the total!) I observed at the time that digital disruption, which would make books more ubiquitously available outside their home territories, would result in increased intrusion by books in English. It seemed to me, at first, that booksellers would be better able to adapt to this change than publishers because booksellers are not nearly as tethered to their language as publishers are.

I got another chance to focus on how things look outside the US and the English-speaking world when I spoke at the Sao Paolo Book Fair last August. What slapped me in the face there (a sort of “d’uh, I shoulda known that” moment) was the paucity of titles available in epub format in Portuguese. That meant that Portuguese-language ebooks were PDFs, which are not reflowable and very clumsy to read on a device. What is obvious immediately is that holds back the ebook market in Brazil. What is obvious on second thought is that those Brazilians who want to read on devices and who can read in English will find much more of what they want to read in our language than in their own.

Now, with the US having reached a point that ebook sales are substantial, providing meaningful revenue, threatening mortal damage to the print book distribution infrastructure, and upsetting the publishing value chain we’ve known for a century, more or less, the rest of the world knows it is going to follow suit. The UK, frankly as much because they operate in English as for any other reason, is beginning to catch up noticeably. The rest of the world isn’t so noticeably yet, but we all expect they will begin to very soon. And that means disruptive change is coming to the book businesses of the world and they’re looking to the US experience to understand the nature of that change and what to do to prepare for it.

It is clear already that 2011 is going to be a year for me to be discussing the US experience and trying to discern its global implications with publishers and booksellers and agents all over the world. Some of the plans in that regard aren’t quite ready to be announced (although they will be very shortly) but the first such opportunity will be at the IfBookThen conference in Milan where I’ll be speaking on February 3.

I got an insight (another “d’uh” moment) talking to a French sales executive about the local French ebook market a couple of months ago. He said he’d be urging French ebook retailers to make sure to carry titles in English. Why? Because Amazon, Apple, and Google (and he didn’t mention Kobo, but he could have) would all be serving titles in all languages to French consumers. If the local retailers don’t compete that way, they’ll quickly be bypassed by consumers.

So the reality that everybody in the world has to deal with is that English-language title availability in epub dwarfs that of all other languages and that we’re also exporting a developed infrastructure that can make those titles available everywhere and very quickly.

All of these players (and Kobo, Canada-based with a worldwide base of investors) are sourcing titles in all languages, have multi-device platforms, and are each developing a separate and siloed content-focused app market. Standing on the sidelines (internationally; they’re a US-only play at the moment) with many of the same capabilities is Barnes & Noble, who could decide at any moment to be a global player and would have a big infrastructure and title base from which to do it. Copia, which has been our client, Baker & Taylor’s Blio, and Sony also have many of the necessary components in place.

And all of them have designs on getting some content exclusively if they can.

What I’ll tell the conference-goers at IfBookThen in Milan is what the local booksellers and publishers should be thinking about as digital change in their neck of the woods accelerates.

The local retailers must, as the French sales executive said, endeavor to carry titles in all languages, particularly English. (There are tools from the US infrastructure available to enable that too, particularly from our clients at Ingram and our longtime friends at Overdrive.) They have to deliver multi-device functionality: an easy ability to shop and consume ebook product on all of the most popular devices. They have to keep up with features like lending and notes and internal dictionaries. They have to deliver impeccable customer service. And for those retailers that have brick-and-mortar stores, they should learn the lesson from Barnes & Noble’s delivery of Nook that retail locations are very effective places to introduce readers to ereading devices.

Retailers based locally have some other advantages to employ against the global players. They can provide local propositions for content and marketing of use to libraries and institutions. They can be better partners for local authors and local brands. They can maximize their knowledge of local content silos, such as IP that is developed by governments and local corporations and not-for-profits. And, presuming they are more successful than the global players at harvesting content in their local language, they can garner important revenue by selling to their own-language customers globally.

The challenges and opportunites are somewhat different for publishers. I am looking forward to discussing those, as well as going into more detail about the American experience and what lessons can be drawn from it, when I get to Milan in ten days.

In the meantime, next Tuesday and Wednesday we’ll be looking at this from the other end of the telescope at Digital Book World. We’ll have a conversation with a European member of the IDPF board, Cristina Mussinelli, about the emerging market for English-language ebooks in Europe. We’ll have a session moderated by agent Cullen Stanley with an American, a French, and a British publisher talking about how rights carve-ups might be changing going forward. We’ll have presentations from both Amazon and Google. And, perhaps most important of all, we’ll have separate sessions on core and enhanced metadata moderated by Scott Lubeck of BISG, along with a conversation between Lubeck and consultant Michael Cairns about ebook identifiers. Metadata that is accurate and robust is the key foundation for publishers with digital ambitions anywhere in the world.

All publishers are global now. All book retailers are global now. The publishers and retailers who embrace that reality soonest will have the best chance to be around the longest.

There is a lot of disagreement about piracy and DRM (digital rights management) among thinkers in the publishing space. This post will express a few thoughts about both but, mainly, this post is a plea not to conflate the two into the same discussion. In fact, whether they are part of the same discussion appears to be as contentious a point as whether piracy is a threat to publishers and whether DRM should be employed at all.

First, let’s define some terms. I make a distinction (which is not universally accepted) between piracy — which I would define as making a copyrighted file available for free access to anybody who comes along — and “casual sharing”. Casual sharing takes place between people who know each other; piracy takes place among strangers.

It has been observed by many for a long time that DRM does very little to prevent piracy, which is usually executed through web sites that host unprotected versions of content. It has been frequently demonstrated that DRM can readily be “broken” (I have two friends who routinely break it for sport: one in the US who isn’t in the publishing business and one in Brazil who is. Neither of them ever sell or transfer the jailbroken files, but they peel off the protection just to prove they can. And they say they always can.) In fact, books which had never existed in digital editions, like the Harry Potter series, are served up on pirate web sites.

You can scan a printed book and create a digital file pretty readily. There’s recently been a gadget introduced that provides a little automation for that capability. But you can buy content conversion commercially that will give you an ebook file from a printed book for low hundreds of dollars per title. So I would emphatically agree that DRM would do little or nothing to deter a pirate who has a minimum of determination to deliver a pirated ebook file, whether there was DRM or not; whether there was an ebook at all or not!

But casual sharing is another matter, or so it seems to me. People share published material all the time through email, usually by forwarding a link to something they want somebody else to see but sometimes by attaching a file or embedding text or images in the body of an email. Some people (my wife among them) maintain mailing lists of people whom they alert about one thing or another. This kind of person-to-person curation is the new automation-assisted word-of-mouth, and it is a critical component of modern communication.

So here’s what I think. I have no idea whether piracy helps sales or hurts them but, whatever it does, I can’t see how DRM prevents it. But I do think DRM prevents “casual sharing” (it sure stops me; and I think most people are more like me than they are like my friends who break DRM for sport) and I believe — based on faith, not on data — that enabling casual sharing would do real damage to ebook sales with the greatest damage to the biggest books.

Big general publishers survive based on the performance of their biggest books. Agents survive based on the sales of their biggest authors. So the biggest publishers and the biggest agents, if they see it the way I do, would be in favor of DRM even if does nothing at all to prevent the kind of piracy they attempt to cure with take-down notices.

There are a lot of good reasons to dislike DRM. It can make purchasing or consuming something harder. It is apparently responsible for the lion’s share of customer service costs for all ebook vendors. It can foil legitimate use by a legitimate purchaser. And it costs money and adds complications. In general, the more comfortable you are with technology, the more likely you are to be annoyed by DRM.

But it drives me a bit nuts when people attribute the belief that DRM protects against piracy to everybody who accepts the sense of using it.

So with this as background, I picked up a link earlier this week to an interview on O’Reilly Radar with my office-mate (but a man who very much runs his own business) Brian O’Leary entitled “What’s the current impact of piracy on the book publishing industry?” Brian has been trying for almost three years to measure the real effect of pirated editions (not casual sharing) on sales. His method is to watch the pirate sites for the appearance of books and then to measure the sales for the weeks before the pirated edition appears and the weeks after. If piracy is cannibalizing sales, one would expect to see a decline following the appearance of the pirate edition. If piracy is stimulating sales through additional word of mouth, one would expect to see sales rise.

Of course, the data to do this analysis can only come from the publishers and publishers, despite their often-professed concern about piracy (and their apparent willingness to spend a lot of money to track and combat it), have mostly not been willing to participate in Brian’s efforts to measure its impact. But what Brian did see (mostly through O’Reilly data, and O’Reilly is a DRM-free publisher) suggested that piracy might lift sales more often than it hurts them.

In the interview, Brian makes some very good points but then I get to this:

“I’m pretty adamant on DRM: It has no impact whatsoever on piracy. Any good pirate can strip DRM in a matter of seconds to minutes. A pirate can scan a print copy easily as well.” (I agree about the “good pirates”, but is the “no impact” statement data-driven? I doubt it.) But then:

“DRM is really only useful for keeping people who otherwise might have shared a copy of a book from doing so.” So, he’s against DRM even though he agrees it prevents casual sharing. And I’m not aware that anybody, including Brian, has ever attempted to measure the impact of casual sharing.

This is interesting, because he and I have exactly the same opinion about what DRM can and can’t do, but we don’t have the same opinion about whether it should be applied or not!

The point that Brian makes which I take to heart, though, is about trying to base opinions on data whenever possible rather than on conjecture. Many of his colleagues-in-arms against DRM attribute its continuance with ignorant and wrong-headed thinking: publishers and agents who somehow are deluded into thinking that by using DRM they restrain piracy. At the same time, concern about casual sharing is either ignored or elided.

And while gathering data about the true effect of piracy is difficult and gathering data about the potential true effect of unfettered sharing of commercial books is impossible, I am in a good position to gather data about what senior publishing executives and powerful agents believe about piracy, casual sharing, and DRM. So I created an informal survey to find out.

I asked three questions.

1. Do you think DRM is necessary to protect the sales of ebooks for popular titles?

2. Do you think DRM is an effective check against piracy?

3. Do you think the main benefit of DRM is that it prevents casual sharing?

I asked top executives in major houses and agents who handle major authors.

Nine executives and four agents (more than half the number I asked) were kind enough to come back to me with answers (so far). I’ll report on the findings in my next post.

The title of “nicest person on the planet” is now open. The longtime incumbent, Ruth Cavin — also a veteran book editor who was known to many as the doyenne of mysteries — died early Sunday morning at the age of 92. She was still holding down a full time position as an editor with the Thomas Dunne Books imprint at St. Martin’s at her death.

What is unique about Ruth’s career is that she didn’t become an editor until she was past her 60th birthday and didn’t start her more than two decades at St. Martin’s until she was 70. She was sort of the Grandma Moses of mystery editors.

I had the very good fortune to have known Ruth all my life.

Ruth Brodie grew up in Pittsburgh where she first met my mother, Eleanor Oshry, when they went to kindergarten together. They were active together as schoolchildren in the YPSLs (Young People’s Socialist League, the youth arm of the political party that was led by Norman Thomas) and they both attended college locally at Carnegie Tech (now Carnegie-Mellon).

The story in the family is that when my father, Leonard Shatzkin, went out to Tech in 1938 to get his degree in printing, he had the phone number of two girls in his pocket: my Mom and Ruth. He called Mom first. She said she knew he had both numbers, so she kept him too busy from that point on to have time to call Ruth.

But they all became friends and worked together on the Carnegic Tartan, the school paper, on which Ruth was a columnist, Dad eventually the editor, and Mom the managing editor.

I realize as I write this that I never asked Ruth exactly how she ended up in New York after college. What I do know is that between when the war ended, during which my Dad had been exempted from service because he was working on the Manhattan Project, and when my arrival could be anticipated (which would have been late in 1946), they thought he would be drafted. My parents organized a going-away party for him for which the guests were all married couples except for two single friends: Ruth and a young Business Week writer named Bram Cavin.

The families remained close, personally and professionally. When Dad started the Dolphin Books imprint at Doubleday, he was able to hire Bram as an editor. In the early 1960s, the Cavins with their young children, son Tony and twin daughters Emily and Nora, moved to Pleasantville near where we lived in Croton and we saw them increasingly often. They moved to Cleveland in about 1964 when Bram took a job as an editor with World Publishing and Ruth’s home was my stop the first night I was driving across the country to go to UCLA in 1965.

Ruth was not working full time then but was active in anti-war politics. She was also interested in whatever you were interested in. I remember in the late 60s when bands starting putting out “concept” albums sitting with her for an hour with the Moody Blues’ “Days of Future Passed”, talking about what was “different” about all this, or whether anything really was.

In the early 1970s, my father started The Two Continents Publishing Group, setting up a trade book distributor on what is now the PGW-NBN model before there really any prototypes. Dad hired Ruth as his first employee to do the publicity. She also sold the subsidiary rights. I got the entirely-too-inflated title of Director of Marketing which meant that I got credit for a lot of what Ruth did.

Her output was prodigious. She wrote all the catalog copy, edited or wrote press releases, flap copy, and rep information for what grew into many dozens of books a year. She called on all the book clubs and all the senior book reviewers. Meanwhile, she had written a couple of books. One was called “Dinners for Beginners”. Another was on inter-urban rail transportation, mostly in the midwest, called “Trolleys.”

And, I must stress, it would be an understatement to say she had a smile on her face every day. Ruth had a smile on her face every minute. Nothing flustered or annoyed her. When you knew her well, you knew she had smiled her way through some pretty significant annoyances. She had a mastectomy in 1941. (She told me about two years ago that she now thinks she didn’t have cancer; that the diagnosis was a mistake.) She had a pacemaker installed in the late 1960s. I’ll bet that very few people who knew her had any idea about either of these things.

When the Shatzkins sold out of Two Continents in 1979, Ruth was 61 but definitely not done working. She was looking for new worlds to conquer. She managed to get a job at Walker and Company, a family-owned independent publisher that did a lot of mysteries. And thus did Ruth become a mystery editor.

Among the people she worked with at Walker were Philip Turner, who went on to work at Random House, Kodansha, and Sterling, and David Sobel, later at Wiley and Holt. I had an exchange with David yesterday in which he said, tongue only partly in cheek, that Ruth taught him everything he knows.

Ruth would teach you without it feeling like teaching. Every conversation was with an equal; every relationship was collegial. Her respect for other people was universal and deep and entirely genuine.

Tom Dunne was the man who “discovered” Ruth (when she was 70) for his imprint but he had support for the idea from then-CEO Tom McCormack. McCormack (another Doubleday alumnus originally recruited by my father) told me that he had a previous good experience with Joan Kahn, a mystery editor who had been retired by Harper at age 65 and then gave St. Martin’s ten great years.

Ruth started five years older and gave them more than 20!

The enormous productivity that my family and I saw in Ruth at Two Continents continued to be her reputation at St. Martin’s. I heard over the years that she routinely acquired, edited, and put into production more books than anybody. Since I pitched a few and sold her a couple over that time, I can tell you that she did all that without stinting on any part of the job from first contact through contract and editing and launch. Working with her was a positive experience for every author I know who did it.

With greater diligence since my Mom died in 2007, I’d see Ruth every few months outside the holiday season. We’d have lunch. She’d come along to see my nephew A.J. Shively in a play. I took her downtown a couple of times to get new hearing aids. I could see her decline. The scoliosis in her spine had her bent over so her back was nearly parallel to the ground. That meant she couldn’t breathe. We’d have to stop 3 times on the one block walk from her office to the restaurant she frequented.

Her memory, which, for names, had been sliding for years, started showing other lapses. I’d always ask her about her job. She always had a determination to keep it; the time she spent in the office with her colleagues was precious to her. A couple of years ago, she told me a bit abashedly that her company had insisted she stop taking the bus down from Grand Central to the office and provided her with a cab and then a car to take her back at the end of the day. (This was at the time that Bram was in a home near the White Plains train station, and Ruth stopped and saw him every evening on the way home.) A year or so ago, she said there was a plan afoot to have her work at home sometimes because the travel to the office was exhausting her. But she loved being with her colleagues. And she revered her boss, Tom Dunne, who really was the one who gave her this magnificent post-retirement-age career.

I had a conversation with St. Martin’s Publisher Sally Richardson (Dunne’s boss) about Ruth at a party for Al Silverman’s book three years ago. Sally was saying that she was working on making sure Ruth got a decent winter coat; she was so frugal and unconcerned with her own comfort that Sally had to, more or less, do it for her.

I told a few people at Macmillan that I wanted to acknowledge them publicly on Ruth’s behalf for the extraordinary sensitivity and generosity they showed her over the last months, perhaps even years, of her life. Although Tom McCormack made the point that they had learned that a “no age limit” policy made sense through their experience decades ago with Joan Kahn, that policy would not have obliged them to give her the extra support and reduced expectations that she must have required in the recent past.

They did that because they loved her, which was an inevitable consequence of knowing her well, so that isn’t extraordinary. But the fact that the company, particularly a company of the size of Macmillan, treated her better than many families would, is both rare and worthy of commendation. From this lifelong friend of Ruth’s, thanks very much.

The necessity for publishers to reduce their hard-copy operating costs, the reality that smaller as well as fewer bookstores are inevitable, and the overall question of shrinking shelf space are topics we have explored before.  But it is intrinsically difficult for those of us who have been in the book business for decades to envision life without a robust bookstore channel. The current unfortunate news about Borders suggests that it won’t require a great imagination for very much longer.

One thing that has changed considerably in the last 20 years is the huge increase in information available to publishers about what is going on in the supply chain: that is, they can track the books between their own warehouse and the end consumer purchase. The Big Kahuna of information, of course, is provided by BookScan, based on cash register capture of data as books are sold at outlets all over the country. BookScan not only lets its subscribers see the activity on their own books; it gives everybody a view of every book in the industry.

But as valuable as the BookScan data can be to discern trends and the performance of competiton and potential competion in the marketplace, it has real limitations as well. Knowing the sales without knowing the inventory is like knowing the number of hits a batter had without knowing how many times the batter came to the plate or knowing how many games a team won but not knowing how many games they played. Some books that are scoring low in BookScan’s data never had a chance: there weren’t enough copies in stores to enable a robust sale. And some books that are scoring high in Bookscan’s data are not going to be profitable because the number of distributed copies that won’t sell (and which will end up back in the publisher’s possession) is higher than the number that do.

Over a decade ago, pioneered by Barnes & Noble and Ingram, the biggest retailers and wholesalers started to provide publishers with data about how their inventory was performing for that trading partner. This data had the advantage of being far more complete and analyzable, but a publisher could only look at their own books’ performance. Because BookScan presented summary global sales numbers and everybody’s books, the BookScan reporting was what tended to be of interest across a company: to editors and marketers and top executives. But the more granular view of a company’s own inventory provided by the individual account reports was pure gold for the sales department and for the then-emerging supply chain management function.

When we first started helping publishers mine these reports in the early part of the decade, the practice at most publishing houses was for somebody in the sales department to look at the weekly spreadsheets, extract whatever insight they could, and then throw them out when the next week’s reports arrived. We were handed an assignment by our friend Charlie Nurnberg, then VP and Director of Sales at then-independent publisher Sterling. (It is a pure coincidence that Charlie’s name never appeared in the blog until my last post and now he’s in two consecutive ones!)

Charlie said, “for years we had 1000 titles on our backlist. I got the B&N green bar report (there was a time when all computer reports were green bar reports) each week and went over it with a fine-tooth comb and I knew everything that was going on. Now we have 5000 titles on the backlist, I have delegated the coverage of B&N to two people, and I know things are falling between cracks. Can you help me get a handle on it?”

To respond to this request, we did two simple things. First we databased the reports, so we could look at data across a longer period than one week at a time. (For fast-moving titles, a week in a chain can tell you a lot, although it certainly can’t give you trending insight that multiple weeks give. For slower-moving titles, a week’s sales might tell you almost nothing at all.)

The second thing we did was to contruct some simple metrics, so we could sort the reports by something other than the total inventory and total sales for stores and distribution centers that B&N provided. There were two key things we looked at right off the bat: the percentage of the week’s store-on-sale inventory that had sold and the percentage of the book’s stock that was kept in the distribution center. The first trick was to look for books that had a high percentage sellthrough but a relatively low number of copies on sale in stores. Presumably putting more copies out in stores would increase sales to everybody’s advantage. The second trick was to find the books which had a high percentage of inventory in the distribution center. Those books, we felt, were in greater danger of being returned. In general, publishers prefer to keep excess inventory in their warehouse.

These weekly Flash Reports quickly proved to be very valuable. The first day I showed them to Charlie and his team, we sorted the warehouse percentage in descending order. The two books at the top had 5000 copies each in stock, all of them in the warehouse! It turns out those books had been there for three months. There was a flaw in the B&N system — repaired almost immediately as a result of this discovery — that allowed a bulk purchase to be made by a buyer but didn’t require a distribution plan for the books. Sales management at the publishers, focused on looking at books in descending order of sales (which is what Sterling and just about everybody else did with those reports), might never notice that books sitting in the warehouse and not distributed to stores were also reported in the same spreadsheet.

This tool for discovery was well-received by Sterling, but it was also well-received by B&N. Their very enlightened inventory management team understood that having publishers doing sound analysis of the data they provided could be helpful to them. After all, the books sitting in the warehouse were painful to B&N as well to Sterling; that inventory investment was on their balance sheet (and, as it turned out, these particular books had been purchased on a “no returns” basis!)

In time, the business of doing sales data analysis grew for us. In addition to the weekly Flash Reports, we designed Stock Turn Reports to enable meaningful analysis of slower-moving backlist. We started computing the overall stock turn for a publishers’ books by store section, which was necessary to really decide whether a title’s stock turn was good or bad. Turning 1.3 might be nowhere good enough in fiction, but it might be heroic in philosophy or poetry. All of this analysis began to demonstrate the realities of bookstore economics to the sales reps and it got them thinking the way the store buyers do, where stock turn is a critical metric.

It wasn’t long before other publishers were using what we called the Supply Chain Tracker service and asking us to provide the same insight from the data provided by other accounts. Soon we were doing similar analysis for data from Borders, Books-A-Million, Ingram, Baker & Taylor, and Amazon. For publishers using us across accounts, we were also able to provide a much wider view of how their inventory was performing. We built spreadsheets showing what the percentage sellthrough was across retailers and across wholesalers and distribution centers. This information helped our clients match the growth and shrinkage of inventory across all accounts to respond to rising, and then usually declining, sales of a title.

We discovered a great opportunity in cross-account exception reporting. We’d look for the books that sold well in Borders but were under-represented at B&N and, of course, the larger number of titles that were the opposite: selling well in B&N but not well represented at Borders. That, and the stark differences in stock turn and percentage sellthrough between the two chains, would have told a perceptive sales director many years ago to expect the problems the Borders chain faces today.

At its peak, about four or five years ago, we were delivering Supply Chain Tracker reports to quite a few publishers, including Hachette, Harcourt, Chronicle, and Motorbooks. We did tutorials on our techniques for several major publishers, among them S&S, HarperCollins, Penguin, Perseus, and Scholastic. And B&N supported our efforts to teach the analytical techniques to university presses, including Harvard, Yale, California, and Chicago.

David Young learned what we were doing when he was running Little Brown UK and soon we found ourselves applying our techniques to data provided to them by Waterstone’s. When TimeWarner was sold to Hachette, our efforts were spread further around the Hachette UK companies and, at one time, we were doing Waterstone’s reports for four different Hachette divisions in London.

But, over time, big companies saw the importance of this kind of supply chain analysis and they brought it inhouse and, in many cases, extended it. That wasn’t good for Supply Chain Tracker, but it was the right thing for those companies to do for themselves. We stopped doing this work for US clients two years ago; we’ve just had our last two British clients take the function in-house. So for the first time in eight years, sales data analysis is no longer part of what we do.

The level of sophistication of inventory management in the supply chain by big publishers has taken a huge leap in the time since we started doing this work. I think we provided some impetus for that leap. This analysis will, paradoxically, be of increasing commercial value as brick-and-mortar sales decline in the years to come. Getting inventory levels right in years of relatively stable print sales was a key to profitability. Getting inventories and printings right in the period of print sales decline we face for the forseeable future will be a key to survival.

I wear with pride the fact that nobody else programming a conference on “digital change in publishing” has chosen to feature agents — both their challenges and their opinions —  the way we do on the program at Digital Book World. But we’re also covering the topic of this post. We’ve put together a panel of very experienced sales executives (Jaci Updike from Random House, Michael Selleck from Simon & Schuster, Alison Lazarus from Macmillan, and Rich Freese from National Book Network and moderated by David Wilk, who has years of trade sales experience) to talk about the evolution of the sales department. Find that on somebody else’s digital change program! And good luck to the trade publisher who rides into the future without agents and managing down the print and physical supply chain top of mind.