March, 2011

The most important problem for publishers to solve over the next ten years

On Thursday, our clients at the Book Industry Study Group are running a “NEXT” conference which is tackling the question of what publishers (and publishing) should be doing now to be prepared for the world that we’ll be living in 10 years from now. (I love this subject and actually believe Mark Bide and I invented this idea for modern times in 2000 when we staged our Publishing 2010 conference in London on the day after that year’s London Book Fair.)

As it happens, I’m speaking in Ljubljana that day at the World Book Summit in the beautiful Slovenian capital, but I couldn’t resist trying to answer the question posed in Publishing Perspectives in its promotional piece on Monday for the event, which is: “What is the Key Problem for Publishing to Solve by 2020?”

And the reason I can’t resist is that The Idea Logical Company (that’s my team!) and Copyright Clearance Center (our client) are hard at work on it right now…in conjunction with BISG!

I see that my occasional collaborator and office-mate, Brian O’Leary, is delivering the opening remarks. Brian has been introducing a paradigm with some success to publishers: that they should think of content in a larger context than the “container” (Brian’s word: a good one) they generally sell it in, which for us is “the book.” Brian makes a whole host of points — his is a big thought — and I won’t attempt to summarize because he goes in many directions I’m not addressing here. But there is a point central to his (I’m sure evolving) presentation that is central to this post and to what we’re doing with CCC and BISG.

The hard fact is that it has been, is, and will be, progressively more difficult to monetize content as “a book”. And there also has been, is, and will be proliferating opportunity to monetize content that is in a book in bits and pieces within other projects that follow. Publishers have so far addressed the reality of the increasingly difficult book market by cutting. They cut lists; they cut staff; they cut warehouse space; and, more cheerfully, they improve processes to eliminate waste. This addresses the fact in the first sentence of this graf. It does nothing and, in fact sometimes undercuts, the fact in the second sentence.

I’ve heard Brian express the insight for many years that publishers need to learn how to grow revenue sources for their content. And the thrust of the particular “container” presentation I heard was around how publishers have to think differently and act differently so that their efforts to create and sell content enable unforseen opportunities, both in terms of control of costs and so the publisher knows what they have (and other people can too).

That’s precisely right. And that leads to the answer to Publishing Perspective’s question and to the project we’re working on, which we will report on more fully at Making Information Pay, another BISG conference, on May 5.

What publishers are seeing writ large, as enhanced ebook, new media, and app developers suddenly hit their licensing radar trying to make deals to put some of that old book wine in some new bottles, will be even more powerful writ small, if we let it. The number of web sites and apps and enhanced ebooks that could and would make use of a reservoir of book content, if there were one large enough and if the bits and pieces they needed were priced sensibly and didn’t require bureaucracy and negotiation, will, over time, be in the millions.

But the business that I believe will one day catch fire: a repository of content for just about any purpose which can be subscribed to for a fee based on use and scope (fill in the blanks in the online form) without rights ambiguity and requiring no negotiation, is several steps away. In fact, CCC is on the road to it. But what they can see from the steps they’ve already taken, which are all about aggregating and simplifying rights and permissions transactions in multiple ways, is that too many publishers can’t take full advantage of the services they offer already.

Because the publishers have a huge problem. With very few exceptions, they don’t have the rights they control in a relational database.

In the best situations we’re aware of (except one, frankly), which are rare, publishers have just about all the rights from their most recent contracts in a database and they’re putting all the rights they acquire to new contracts in a database. But even those publishers have research to do to respond to rights requests. And in many companies the function of responding to requests for pieces of books, let alone fragments, is not seen as strategic. It is often seen as a nuisance.

But CCC knows that pre-clearing rights makes content sell better. They also knew, and our research working with BISG confirmed, that simply responding to requests more quickly can make rights sales grow dramatically.

But CCC, or anybody else who might try, is handicapped opening up the mother lode of revenue that a collective licensing solution to meeting the market opportunity in content for web sites (and apps and enhanced mash-ups yet to be invented) could enable. Publishers simply do not have the metadata to put the rights they own and control on sale. I personally see this as an enormous opportunity for big publishers, because it is one of the descriptions and visions of the future that shows a role for the scale that publishers can provide.

Having rights databases that can support the emerging business opportunities is each publisher’s and the industry’s most important challenge. It is definitely the “key problem to solve between now and 2020.” I hope the NEXT conference makes progress on this (and other) issues, but I know the work we’ve done has, and I think we’ll be able to propose some great follow-up steps at MIP.


Do ebook consumers love bestsellers, or does it just look that way?

In theory, the more books are sold online the more sales should move to the long tail. Online bookstores have the advantage of “unlimited shelf space”. Nothing has to be left out of the assortment because of constraints on capital to stock inventory or room to hold it. Furthermore, as Konrath and Eisler pointed out in their extensive discussion of online versus print within the larger conversation about self- or publisher-issued, the differential impact of display when one title has a stack and another has a single spine-out copy is eliminated in the digital world.

But it doesn’t seem to be working out that way. While overall ebook sales in the US are still calculated in the 8-10% range of publishers’ revenues, so we’d reckon perhaps 10-12% of unit sales (ebooks generally, though not always, yield slightly less revenue per copy than print) or maybe even 15% for a publisher still drawing big print sales on books not available as or suitable for ebooks for whatever reason, we’re hearing frequent reports of big books selling 50% or more of their units as ebooks, particularly in the early weeks of their life.

So it would appear that ebook sales are even more concentrated across a smaller title band than print.

Furthermore, the occasional reports of enormous unit sales by the new crop of online author-stars like Amanda Hocking (coming next year to the bookstore that remains open nearest you) and John Locke also tend to support the idea that ebook sales are more concentrated, not less, than print sales. Unlimited shelf space and more uniform “display” don’t seem to be having the expected affect.

I recall a recent stat I believe came from Bowker, which tracks a large panel of book consumers, suggesting that bookstores still account for the largest single share, by far, of “book discovery.” What I recall hearing was that thirty percent of people report having learned about a book they bought from a bookstore display, much more than from any online source.

Of course, that’s certainly not true for Locke and Hocking and the books by Joe Konrath that aren’t in bookstores (although, as Joe points out, he does sell in print through Amazon’s CreateSpace print-on-demand program.) I haven’t seen anybody else talk about this subject, but Konrath also says that he gets a wildly disproportionate share of his overall sales from Kindle, much  more than the 50-60% market share one hears anecdotally attributed to them by publishers. I know from private exchanges that Amazon themselves believe they do a better job than the other ebook formats for the self-published author in proportion to their size. We’d certainly want that confirmed by more authors than just Konrath, but if they’re doing that as a strategy, it’s a good one. A self-publishing author won’t need a lot of persuasion to not bother with other outlets if s/he can get 90% of the expected sale from one (which is what Konrath leads me to believe is the case for him, even though he is widely set up among the other platforms.)

Be that as it may, the fact is that none of the online retailers have figured out how to come close to what a bookstore can do in giving a consumer real choices-per-second. And the principal tool that online booksellers could be using to overcome the disadvantage of 2-dimensional presentation — customized choices for each online customer — is very little in evidence (except as top-of-the-page suggestions) in my personal shopping experience (which extends on a regular basis to Kindle, Nook, and Kobo and on an occasional basis to iBookstore and Google).

The impact of presence and display was understood by all in the bricks world. A book that is in the store in which a customer shops has a nearly infinitely larger chance of being purchased than a book not in the store. Sophisticated merchants like Barnes & Noble know how much sales lift to expect from a front table display. We all expect the book that it is faced-out on a shoulder-level shelf to sell better than the spined book you have to bend down to see.

For years, aggressive sales reps would move their books around. In the years before computerized inventory record keeping, it was incumbent on reps to count the books that were on the shelf to coax out a backlist reorder; that gave them ample opportunity to face books out, move books up, and point it out when a book was displayed in something less than the optimal subject section.

Now the paradigm has changed. The default front table is the choice of titles on the screen that comes up first when a store’s program is opened. That’s almost always that retailer’s bestsellers (and, as far as I can tell, it isn’t customized for me at any of these retailers; you or my wife would see the same default screen that I would.)

Then there are a bunch of pre-packaged choices — think of them as “tables” too — for NY Times bestsellers or (at Nook I noticed) “ebooks under $5” or under menu-driven choices of subject (they’re like “store sections.”) Of course, the earlier and more often a book is presented to a consumer in their online shopping experience, the more likely it is to sell.

The standard technique is that there are a set and limited number of titles a customer sees “at a click.” If you want to see more, you have to click again and (depending on connection speed) perhaps wait for more titles to load, which will usually be another 10 or 12 or maybe 25. If you shop the same sections repeatedly (and who doesn’t), most of what you see will be titles you’ve seen before and either bought or rejected. If you shop often, trying to find something new can be exhausting and ridiculously time-consuming.

Even the simplest assistance that would help avoid this duplication — such as displaying books in reverse order of publication (most recent first) instead of “by title” or “by author” — is not (or seldom) available.

Online shopping is great if you know exactly what you want (by title or author.) The online book shops can find you the most obscure book much more quickly than the average clerk in a brick store, and certainly faster than you’d find it yourself. Searching by title or author also almost always works extremely well.

But when it gets more complicated than that — perhaps you’re searching for “baseball history” or “Civil War economics” — the combination of inadequate publisher-provided metadata and insufficiently-mediated retailer choices will deliver you a menu of options that contains some titles so off base that a clerk would be fired for suggesting them.

The Lockes and Hockings of the world benefit from the same effect. They’re betsellers and every retailer has a button to deliver those, by genre and sometimes by pricing band. Getting bestseller status is so valuable that self-published authors seem to frequently employ the technique of  lowering their price to 99 cents to get bestseller status and then popping back up to a more profitable price like $2.99 until the effect wears off.

So ebook purchasers make their choices from what is presented to them, which is a limited number of titles. Let’s not ever leap to the conclusion that there is something about ebooks or about ebook consumers that is biased to the most popular. It is merchandising practices which create that result, not consumer taste.


Publishers Launch Conferences: a new partnership with Michael Cader

I had already been in the “publishing futurist” game for a few years when my frequent project partner Mark Bide and I put together a day-long conference in March 2000 at the London Book Fair called “Publishing 2010.” (As I look at what I wrote for that conference, I can see some things I got right, some I got wrong, and some look like good predictions for the next few years, but haven’t happened yet.)

Although it was an “innovation” when I included agents in the digital change conversation at Digital Book World in January 2010, Mark and I actually did it for the first time at that conference 11 years ago. One of the agents we recruited for this conference was Michael Carlisle. Just a week before the conference, and the day before I was leaving for the UK, Carlisle called me with bad news. One of his literary clients was the driver of Lady Diana Spencer’s car in the crash that killed her in August of 1997. The driver’s book was coming out, Carlisle represented it. The promotional book tour needed to take place during the week of London Book Fair and Carlisle just had to cancel his trip across the pond.

“But,” he said, “I can give you a replacement. I know you don’t know him, but his name is Michael Cader and I can assure you he’ll do a great job as my substitute.” With no time to find somebody else, or even to vet this fellow Cader, I just said thank you and good luck with the book tour.

The conference was a success. We made a little money, had a very provocative day of conversation, and a few people even told me it was the best such conference they’d ever attended. Cader was, for my money, one of the stars of the show. I hadn’t ever heard anybody say so many things about digital change in publishing that I agreed with but hadn’t really thought of before. It was easy to agree that we should stay in touch.

A month or two later, Michael sent me a prototype for an idea he had and was about to start: a newsletter called Publishers Lunch. It was a great concept: links to stories about publishing from all over the internet with a graf or two of summary, explanation, and comment. I was bound to think this was a great idea because I’d had a similar thought about six or seven years earlier, just before the Web changed all of our lives. I had suggested to my friend (and one of my very favorite people to work with) Lorraine Shanley of Market Partners that the publishing world needed a service. Since a story about publishing could appear in any one of several newspapers or magazines on a New York newsstand on any day, we should hire a kid to read the papers at 3 am and send out a FAX at 6 in the morning telling people what stories they shouldn’t miss!

We didn’t do it. Cader’s version, with the advancements of technology, was an infinitely better iteration of the idea. As it turned out, his ongoing commentary also added more value than we could possibly have added (unless, of course, we had his help, but we didn’t know him then!)

In the decade-plus since that London Book Fair and the start of Lunch, Cader and I have had the opportunity to work together from time to time on conferences and industry events. We’ve shared stages. At the last BEA in Washington a few years ago, I interviewed Michael in a 1-on-1 session. And we have endlessly discussed our views about publishing and digital change.

We are both, in different ways, already making our living delivering “industry education.” For public consumption, Michael delivers each day’s facts with a few words of wise context; my less-frequent Shatzkin Files posts select a context or a paradigm to explain with, usually, some supporting facts. The consulting assignments of my company often involve teaching a tech company about the publishing business or helping an industry service get a better handle on what their client base needs or can accept. We’ve talked about ways to formalize a partnership over the years. Before it disappeared, we talked with the Stanford Publishing Course about delivering a new digital curriculum. We’ve fiddled with live event ideas.

When David Nussbaum, the Chairman of F+W Media, came to me two years ago with his concept for a new conference called Digital Book World and asked me to organize the program, I suggested strongly to him that he figure out how to engage Cader as his marketing arm. David agreed, and for the past two years, Michael and I have happily collaborated on programming and promoting a 2-day event which, in two short years, has grown to the same size as the 5-year old, very successful, and very worthy Tools of Change.

Today, Michael and I have announced a formal partnership called Publishers Launch Conferences to deliver live events — globally and throughout the year — on publishing and digital change. It is an anchor of this business that we will continue to do the 2-day Digital Book World event in January 2012 and for years thereafter. We call Digital Book World a “State of Play” event, covering the landscape of digital change.

DBW is aimed primarily at US trade publishers and the extent of the show — 2 days and 4 parallel programming tracks for half of the time — allows us to cover more than two dozen distinct topics with panels and presentations. Publishers Launch Conferences will, in its first year (ending next January with DBW 3), deliver about seven shorter (1 day or 1/2 day) and more focused events in New York, London, Frankfurt, and San Francisco. Our first day-long conference will be at (and in conjunction with) BookExpo America in May, aimed at international visitors and the Americans who are doing business with them. Our event in London on June 21, being presented in partnership with the UK’s Publishers Association, will address digital change from a UK perspective.

It has already been an education for us to think things through from the point of view of the different audiences we’re delivering for. Our plans for our London show were greatly informed (and modified) by meetings we had three weeks ago (thanks to our partners at the PA) with about 20 different players in UK publishing to discuss what needed to be addressed, how, and by whom.

Some of the Publishers Launch Conferences events will be topic-targeted. We’re planning two niche shows in the Fall: one on juvenile publishing (which both Michael and I see as the segment of the book business facing the most potential intrustion from outside players because of digital change) and one we’re calling internally “ebooks for the rest of us”. That one will focus on the mechanics of ebook publishing — from content conversion to the ultimate sale — for the smaller publishers, agents, and authors who don’t have the IT and marketing resources of the big publishers. A number of small publishers and entreprenurial authors have achieved notable success in the ebook world already. We’ll focus on what it takes to do that so that more small players can follow in their footsteps.

We decided on doing a few things differently than most other conferences. We won’t have a zillion sponsors; we’re limiting sponsor participation in the interests of our audience and in the interests of the sponsors themselves. Our first two Global Sponsors, Copyright Clearance Center and Perseus’s Constellation service, have embraced our unconventional practices. There will be no sponsor pitches from the stage during our programs. There will be no email spam sent to attendees by sponsors after the programs. Even our printed program will be designed to be helpful and worth keeping and we’ll do our best to have it contain the information that our audiences need to take home, reducing their need to take notes during the show. As readers of this blog know, organizing conferences engages me in conversations that often turn into posts.

Part of my value — and Michael Cader’s — comes from talking to people who are smart and well-informed about the topics that all of us in publishing must inevitably wrestle with if we want to stay in publishing during this time of constant and roiling change. Planning these events and recruiting speakers for them as a continuous and year-round process will be a new ongoing feature of my life, and therefore of these posts as well. I hope we’ll see you at some of the shows but, whether you’re there or not, they should result in you should be reading a more informed blogger when you come to The Shatzkin Files.


Eisler’s decision is a key benchmark on the road to wherever it is we’re going

I wasn’t planning to write a post this past weekend for Monday morning publication. But then Joe Konrath and Barry Eisler contacted me on Saturday to tell me what Barry is up to. I’ve read their lengthy conversation about Barry’s decision to turn down a $500,000 contract (apparently for two books) and join Joe (and many others, but none who have turned down half-a-million bucks) as a self-published author.

To use a metaphor that connects with the current news: this is a very major earthquake. This one won’t cause a tsunami and a nuclear meltdown, but you better believe it will lead everybody living near a reactor — everybody working in a major publishing house — to do a whole new round of risk-assessment. Because, in its way, this is more threatening than the earthquake that just hit Japan. This self-publishing author will much more assuredly and directly spawn followers.

As news of Eisler’s decision spreads, phones will be ringing in literary agencies all over town with authors asking agents, “shouldn’t I be doing this?”

I submit a bit of perspective from another part of publishing: scholarly journals. A few years ago I asked my very smart friend Mark Bide, who knows that part of publishing much better than I do, how I’d know if the business model for journals — by which they publish work the university paid the professor’s salary to write and then sell the published version back to the university’s library — was threatened. Mark told me to watch their submissions. As long as the scholar-authors felt the need to be published in journals, the journal business model would continue to function.

I am not alone in having long known that self-publishing would ultimately present big authors with the opportunity to disintermediate their publishers, but I wouldn’t have thought when I asked that question that the sci-tech journal would hold its ground longer. Now I wouldn’t be so sure.

The decision for Eisler, at its core, was pretty simple. On the basis of what he’s learned from his friend Joe Konrath, who seems to be banking in the mid-six-figures self-publishing annually after a career as a non-bestselling author for established publishers, and what Eisler learned himself by self-publishing a short story, he figures he can earn more, much more, in the long run by publishing himself. This is not about ego or vanity; it is not about hating the publishing establishment. It is a coldly calculated decision (by an author who should make those well; he started out in life as a covert CIA operative) that says, in effect,  “it would not be smart to take half-a-million bucks considering what I’d have to give away to get it.”

In the conversation between them which they just published, Konrath and Eisler touch upon many aspects of the publisher-author interaction and the author’s self interest. The conversation is smart, sophisticated, and mostly entertaining (although it is definitely too long; should they have hired an editor?) It is a conversation that everybody in the industry thinking about its future will likely read more than once (particularly the highlights, which are sure to be extracted by many people from the entire text.) Contained within it are certainly a number of points made to which there are valid rejoinders that could be offered. And certainly some will point out that Eisler’s BookScan figures suggest a decline in commercial appeal. But, in the overall scheme of things, the contentious portions are minor and the fact that his sales through publishers have been declining would mitigate the expectations for him somewhat and make any success he achieves on his own even more noteworthy.

The overall thrust is that an author has just made an entirely rational decision to turn down half-a-million bucks of big publisher money to self-publish. And what is said in their dialogue, but perhaps not emphatically enough, is that the direction of change makes this decision likely to make more sense to more authors each successive week than it did the week before.

What we do here at The Shatzkin Files is try to provide insight about the implications of news events rather than be the best reporter of them. If the implications of self-publishing to the business models of established publishers interests you (and what are you doing here if it doesn’t?), then you need to read the entire exchange they’ve published and the reporting others will do of it. I will limit this post (longer than mine usually are as it is) to a few points which for the most part are intended to extend their discussion, rather than contend with or correct it.

1. They didn’t do the math on what the loss of print sales and print merchandising might mean in dollars and cents and how to address it.

One of the themes that I’ve been working on for some conferences I’m planning (more on that upcoming later this week) is how the arguments about rights, royalties, and publisher leverage change as the balance between digital and print sales continues to shift. What this conversation can make you forget is that far more than half of most books’ sales, perhaps more than 70% for the majority of titles, are still print copies selling because they’re on-hand in a physical retail location. And that’s in the US. The number is higher in the UK and is almost certainly more than 90% in most other places in the world. So even if the math Konrath and Eisler put forth showing that the author share of ebook sales can increase by three or four times through self-publishing; even if we ignore (as they did) the fact that the higher percentage will be on a lower retail price (they trumpet the lower retail price they can charge as a key motivation for the shift); and even if we forget about the costs in time and actual expense involved in self-publishing, the author who follows this formula has to take into account the loss of presence and revenue from the retail channel.

But, having said that, the shift to digital seems to be increasing in speed worldwide. The percentage of print sales will keep declining. Eisler would have been signing a contract for a book that would come out a year from now and digital will be more important then, perhaps twice as important then, as it is now. And, as he points out in the conversation, the book a publisher would put out a year from now will have been selling and delivering revenue for a year before the publisher would have had something in the marketplace. To paraphrase the great author and publisher, Mark Twain, “the self-publisher will be halfway round the world before the legacy publisher can get his boots on.”

And that leads me to…

2. I’d be amazed if Barnes & Noble doesn’t detect an opportunity here to do a completely different kind of deal. What if B&N went to Eisler and said, “we’d like to buy print rights to sell your books just to our own customer base”? I can’t see why he wouldn’t just say “yes.”

What I’m envisioning here is something like a book club deal. B&N pays an advance and licenses the right to print its own copies for display and sale through its own stores and dot com. This could work many ways, but one might be for them to pay a royalty based on the actual selling price for every copy shifted. That would allow them to manage their downside risk on the printing because they could cut the price when sales slow down.

That might lead (or even trail) a wholesaler like Ingram or Baker & Taylor or Charles Levy to make a similar offer to print copies for sale through other retail outlets. The big publishers have taken a firm position (which, in my opinion, they’ll be figuring out how to walk back in a year or two) against buying print rights only, but one has to figure that a smaller publisher or a trade book distributor, looking at lots of underutilized capacity to handle print in the coming months, might see commercial merit in handling the print side of a major ebook bestseller.

Konrath does tout his sales through Amazon’s CreateSpace, which enables his books to be available in print for their online customer base. But he doesn’t talk about B&N’s PubIt program or setting up his title at Lightning Source, which would make it available as print online more broadly. None of these solutions put speculative inventory in stores, though, and that’s necessary to get the full marketing and sales impact for any book today (and probably for a few more years to come.)

3. Because Konrath has proved to be such a multi-talented combo do-it-yourselfer and finder-of-resources, the conversation doesn’t touch on the range of service providers that can help the potential self-publishing author for fees or for a much smaller percentage than a publisher would take. There’s mention of Smashwords, which is one, and of CreateSpace. But the self-publishing giant Author Solutions and aren’t mentioned. Neither is BookMasters, a company we’ve worked with in Ashland, Ohio, which offers a range of self-publishing services, including access to all the editing requirements discussed by Konrath and Eisler along with some human-intermediary handholding that many authors will need. Perseus is building a similar set of services, extending its Constellation service, which began as the means to enable their roster of print distribution clients break into digital publishing. And Ingram has a suite of capabilities that could be extended, if they chose to make the investment, to be an author-service platform. The Scott Waxman Literary Agency is the first to have created a digital publishing arm that, with tweaking, could provide an author with the help they’d need. They won’t be the last.

The single greatest shortcoming of the Konrath-Eisler conversation, to me, was its Amazon-centricity, although there is one place in the conversation that begins to acknowledge that Barnes & Noble’s Nook sales are becoming significant. (Some publishers have told me that Kindle has declined from a share well north of 80% to one in the mid 50s while Nook is now accounting for 25% of their ebook sales in the US.) They don’t mention Kobo, which might have as much as a 7% share now. Sony is still a player. Apple’s iBookstore really shouldn’t be ignored. And Google ebooks is the lifeline for independent bookstores to sell ebooks. No author who wants to stay sweet with independents can afford to ignore putting their books into Google. In fact, Random House executives told us that the growing use of Google by indies was a factor in their decision to level the pricing playing field by moving to agency pricing last month.

And as the build-out of pathways for English-language books abroad continues, these non-Amazon, non-B&N players become even more important.

When Konrath started doing his self-publishing two or three years ago, working exclusively through Amazon made complete sense on an effort-to-reward basis. It is becoming increasingly important to cover more points of distribution, even digitally.

But that doesn’t change the calculation that much for Eisler’s decision. There are already helpers in the marketplace to extend beyond Amazon and there will, undoubtedly, be more. The conversation imagines this kind of service provision. And (if they’re competent) the ones now in the marketplace will be falling over themselves to introduce Eisler to what they can do for him.

4. OK, here’s what these guys really got wrong. They made a mistake about baseball. Their post is full of line drives off the wall, but their interpretation of baseball history is flawed.

I refer to Konrath’s observation about the Negro Leagues in baseball, suggesting that the reason the majors brought in black players was that Negro League baseball had become superior to Major League baseball. Actually, that wasn’t true at all. Although some integrated barnstorming over the years did result in black teams beating white ones from time to time, it was seldom suggested — and certainly no major league owners or fans thought — that the overall level of play was higher in the Negro Leagues. It wasn’t.

Beating a competitor that had somehow demonstrated its superiority was never the motivation for the major league teams to integrate. It was all about them competing with each other and not ignoring talent. The real history might contain a useful lesson for the legacy players in publishing today.

What drove Branch Rickey to sign Jackie Robinson was pure competitive zeal. He wanted to win. He wanted good ballplayers to help him win. If he was missing some good ballplayers by ignoring blacks, he’d stop ignoring blacks.

When he did that, other teams followed. And, in pretty short order, the Negro Leagues were destroyed because the best ballplayers they had were playing in the Major Leagues.

A similar effect has weakened, if not quite destroyed, Christian publishing in the US. A quarter century ago, Christian publishing and bookselling existed in a parallel universe to secular trade: different publishers, different stores, different commission rep groups. Just different. Then superstore expansion and some major Christian bestsellers led to the major chains starting to carry the best titles from the Christian publishers. That weakened the Christian booksellers, who were the ones that carried the wider range of titles from the Christian publishers which, in turn, weakened them.

Of course, Eisler hasn’t succeeded yet. He has a book to put out this Father’s Day that he turned down $250,000 to have come out next Father’s Day. If the over-under is whether he’ll have earned his $250,000 by then, which way would you bet? It would strike me as extremely ambitious, but if he can sell at $4.95, not entirely inconceivable. And, of course, you could set the bar at which you’d call it “success” a lot lower than that.

If the legacy publishing establishment can develop tools to deliver marketing at scale, adjust its contracts to pay higher digital royalties, and, perhaps, offer a “fee for service” model alongside its “advance against royalty” model, it might, like Major League Baseball did, weaken the infrastructure that is developing that will increasingly tempt authors (and readers) to abandon it. But it also could be that I was right four years ago when I said that the general trade publishing house was a dinosaur in the emerging world of 21st century publishing. Wasn’t it a natural disaster that was the catalyst for killing the original dinosaurs as well?

Konrath made the point that self-publishing just gives him more time to write. He and Eisler both expressed frustration about living with the long schedules and companion limitations of traditional publishing practices. From their perspective, it is wasteful to not start monetizing IP quickly after it is finished in the digital age and it is unnecessarily constraining sales and income to publish only one book a year, or even one per publishing season.

I’ve tried to recruit Joe to speak at conferences, with a total lack of success, because he thinks the best marketing he can do is just to keep writing. New stories help him market himself more than public appearances do. Since he also enjoys writing more than speaking and would rather be home than on the road, it’s a pretty tough sell to ask him to lose a day of editorial output to have a conversation with a bunch of strangers.

The portion of their conversation about staying focused on generating editorial output was one of the most persuasive elements of it. A publisher would help itself a lot if it focused on that question too and thought of a writer’s time as a valuable resource that should be devoted, as much as possible, to doing what that writer can do that nobody else can. And that’s “write.”


Ebooks are making me recall the history of mass-market publishing

The ebook revolution is really beginning to remind me of the mass-market papeback revolution.

The mass paperback was really “invented” by Sir Allan Lane when he created Penguin in Britain before World War II. (Wikipedia credits a German publisher with the first cheap paperbacks a few years earlier, but Lane was certainly the first in English and deserving of some extra credit because the company he started continues in the same business to the present day.) Pocket Books in the US was also born just before the war. During World War II, historian and polymath Philip Van Doren Stern (who wrote, among other things, the New Yorker short story on which the movie classic  “It’s A Wonderful Life” was based) ran a program for the US military by which inexpensive paperbacks were made available to the troops.

After the war ended, mass market publishing really grew. Many houses — Ballantine, Bantam, Signet, Avon — were launched immediately following the war. The key to mass-market publishing was that it achieved distribution through the network of wholesalers that put magazines on newsstands and in local stores (often drugstroes) nationwide. Unlike trade books, which required an agreement between publisher and bookseller to get a copy of any book on a retail shelf, mass markets were “allocated” by the publisher to the wholesaler and in turn pushed out by the wholesaler to the racks they controlled.

The advantage of this distribution technique was that it enabled lots of copies to be pushed out to lots of places with much lower sales and distribution costs. The disadvantage was that it really only worked if books were treated like magazines, with “on sale dates” when they went out and “off sale dates” when they were pulled back and, like magazines, had their guts pulped while only the covers were returned for credit.

The paperbacks were typically priced at 25 cents when hardcover books were $2 or $3. (Compare that 8-to-1 or 12-to-1 pricing ratio to what exists today. It doesn’t.) And mass-markets were available in tens of thousands of locations nationwide, perhaps more than a hundred thousand, when bookstores were few, department stores tended to have only one location, and trade books were typically available in hundreds of locations, or at most a couple of thousand.

The much more widespread availability of these titles combined with their much lower prices created legions of new readers. And, in the beginning, most mass-markets titles tended to fit into “genres”. Westerns were a really big one fifty years ago. Bantam’s perennial bestselling author of westerns, Louis L’Amour, may still be the biggest-selling author in unit sales in (what is now) Random House history. Crime and science fiction lines were also popular as were raunchy books. I’m not sure that romance lines existed in the way they do now (although I’ll bet that among the readers of this blog are people who will tell me that answer); at that time there were lots of magazines peddling romance stories (as there were for other genres.)

If this is ringing some bells for an observer of the ebook transition who didn’t know paperback history, it is entirely intended to. Let’s ring a few more.

The hardcover publishers were very snobby about the paperback houses. Over time it developed that the mass-marketers were able to create enormous additional revenues from books previously published as hardcovers. (This did require the mass-market publishers to keep some titles on sale for longer than a normal cycle, which was not simple, but worth the trouble for books that sold really well.)

The name recognition of successful books, along with the ability to put words which said “established bestseller” on the cover, could be converted into huge sales given the much lower prices and much wider distribution mass-market could achieve. Over time this led to rapidly rising paperback license payments from paperback publishers to hardcover publishers. These were, by traditional contract, shared 50-50 with the authors. They provided a substantial, if temporary, bonanza for the trade houses in the 1950s, 1960s, and 1970s.

But the new marketplace also led to the growth of genre authors whose audiences were established for low-priced paperbacks. It was often difficult for those authors to move “up” to more expensive hardcover publication. Their audiences didn’t want to pay the higher prices, but they also didn’t necessarily shop in the bookstores and book departments where those books were found; they were used to buying their books at newsstands and in drugstores.

When I was first coming into New York from the suburbs as a kid in the late 1950s and early 1960s, there was a fabulous selection of paperbacks at a drug store that occupied the corner location in the Grand Central building at 42nd Street and Vanderbilt Avenue. I found a series of baseball biographies there published by Sport Magazine. I remember a book about 1001 things you could get for free by writing away for them. And, of course, the public domain classics were all there. And I got some great trash like “I Sell Love” and a book about airline stewardesses whose title now escapes me but which was great naughty reading for an early teenager.

Then in the summer of 1962, when I was 15, I worked a 2-month stint at the very classy Brentano’s Bookstore on 5th Avenue and 47th Street. My assignment was downstairs in the brand new, just-opened, paperback department. The center of the basement contained the “trade” paperbacks, mostly academic, on shelves. Around the outside were the mass-markets in racks. The mass-markets were on racks arranged by publisher, because the publishers’ reps serviced them on a weekly basis.

Scribners Bookstore, across the street, didn’t deign to stock paperbacks for some years thereafter.

My dad, Leonard Shatzkin, told a story about the legendary Jason Epstein’s Anchor line of paperbacks at Doubleday (perhaps the first line of quality, or trade, paperbacks, but almost certainly the first such line to come from a mainstream trade house). Dad’s responsibilities as Director of Research extended to the sales force and he ran the sales conferences. At one such conference when Anchor Books (and Jason) were very young, Dad told me that Sid Gross, the head of merchandise for the company’s Doubleday Book Stores, tore into the whole concept of the cheap paperback. He hated them. From his perspective, it was bad for a book retailer to be selling 25 cent items instead of $3 items! Many other booksellers back then felt the same way.

My father’s reaction, pretty typical for him, was to support the contrarian and revolutionary view. He pushed the reps to make Anchor Books a success and, a few years later when Epstein had moved on to Random House, Dad created the Dolphin Books line of quality paperbacks to complement Anchor, whose title selection was pretty highbrow, with public domain and more popular current titles.

That anti-paperback snobbery was widespread and the separation between trade and mass-market publishing persisted for a long time. For at least a couple of decades, paperback houses didn’t do hardcovers and didn’t try to put their titles directly into bookstores (as bookstores started to carry mass-markets, at first they bought them from the wholesalers who racked them) and the trade publishers didn’t try to access the mass-market distribution system. This changed in the 1970s. First Peter Mayer and Bill Shinker pioneered the use of mass-market techniques for oversized trade paperbacks published by a mass-market house (Avon). Then a few years later, Bantam starting publishing hardcovers with distribution to mass accounts.

In the end, mass-market distribution was dismantled by a number of forces. The best retail accounts started buying direct from publishers rather than through the local wholesalers. The number of titles grew so that the “allocation” methods wouldn’t work anymore; there were too many publishers and too many titles for a diminishing number of pockets to handle, so the more expensive negotation method became required.

Patterns are being replicated now with inexpensive and widely-available ebooks. New authors are being spawned. Genre fiction works best. Books that were previously successful in more expensive formats can find new audiences as their prices come down and they go where new customers are shopping. And traditional publishers are sure that their “quality” protects them from low-brow competition, even while that competition is taking millions of customer dollars and countless hours of customer mindshare off the table.

But here’s how that old story ended. Mostly, the mass-market publishers won. Penguin bought Viking. Bantam bought Doubleday and then Random House. Simon & Schuster survived largely because they merged very early with Pocket Books. What is now Hachette is largely called Little, Brown, which was a hardcover house, but it really developed over the last two decades of the 20th century as Warner Books, a mass-market house. Really, only HarperCollins and Macmillan of the current Big Six are true descendents of the trade publishers that were dominant when mass-market publishing arose.

There are a slew of differences between the transitions; ebook publishing has a title glut to deal with just like mass-market did, but the challenges are not the same when you don’t have printed books to manufacture and ship around and your distribution isn’t limited by shelf space or pockets to display them. And authors couldn’t do it themselves in the mass-market era the way they can today. But there is a very basic lesson I think publishers better take on board from this history.

Much-less-expensive editions, combined with access to audiences for authors that couldn’t get past the gatekeepers in the established houses, can create millions of new readers that weren’t available to the legacy products at the legacy prices.

And that can lead to economic power that can ultimately swallow up large chunks of the legacy publishing establishment.

I posted more than six months ago that I had read my first self-published ebook, a history of the 1962 New York Mets called “A Year in Mudville”. Then I had an exchange in the comments string of my last post with Joe Konrath, who used to be published by NY publishers but is now finding it much more lucrative to do it himself, and a reader named Chris. They urged me to read a self-published ebook bestseller, “Wish List” by John Locke. It was fabulous, sort of a cross between contemporary bestselling author Carl Hiaasen and a relic of the early mass-market days, Jim Thompson: bold, caustic, and funny with characters you like who suddenly do outrageously anti-social things. Locke has apparently come out of nowhere with just his talent to help him and is selling shedloads of ebooks. (He’ll certainly sell another one or two to me!) I am not price-sensitive about my reading and I haven’t ever shopped the 99 cent pile, but Locke is certainly evidence that there is stuff in there that is the equal of anything the big publishers are doing at major multiples of that price point. It will be an interesting challenge to see if any major publisher can deliver enough added value to make a deal with Locke or Amanda Hocking, another writer who has found a huge market without any help from the establishment.


Publishers better start using their scale to price better, and soon!

It was just about two years ago that I appeared on a panel at a meeting of agents with, among others, Macmillan CEO John Sargent and Sargent made the point that maintaining ebook pricing and margins was one of the critical challenges facing publishers. Ebook sales were still hovering around one percent of the business. Or maybe two. Nowhere near five. Sargent was prescient.

It was about six months ago that I did a couple of posts on direct marketing techniques. I engaged a publishing friend named Neal Goff, whose background is mostly outside of trade books, to help me with those. I had him walk me through some fundamentals because I didn’t know them and, I feared, neither did the trade houses that were now — because of agency — required to set prices on their own books without the requisite expertise.

It was only last week that Random House announced it was shifting to agency pricing and I said I hoped they would be more ambitious about experimentation with price than their competitors in the arena had been.

All of these thoughts came together for me when I read this post on CNET that has two real wake-up calls in it for the big publishers.

One they are increasingly aware of: very cheap ebooks are selling very well and, with at least two major bestseller lists (The New York Times and USA Today) now counting ebook sales in units for their rankings, there is a real threat that the established business at established price points could be chased from the biggest market-maker there is. (It is important to note that the Times and USA Today methodologies are still a bit opaque and it is not clear how lower-price books are weighted. Some clear successes in the low-price realm haven’t shown up yet.)

The other point is more subtle. Individuals and little publishers are fiddling with price in ways to maximize bestseller positioning and revenues. The rules are complicated. Both Amazon and Barnes & Noble have programs that reward pricing above $2.99 by paying higher royalties. But it would certainly appear that there are many consumers who are limiting their shopping for ebooks to those that cost 99 cents or below. So some authors have learned that cutting their price increases unit sales to put them on a bestseller list, then raising their price results in more revenue. Apparently one very useful strategy for revenue maximization is to shuttle between prices.

The point that “cutting price boosts sales” isn’t exactly surprising, and it also isn’t exactly news. J.A. Konrath, perhaps the first established author to really start raking in shekels self-publishing through Amazon, has been experimenting with pricing and proving this point for a long time. Konrath’s data was charted for clarity by blogger Dave Slusher a few months ago. Konrath’s work and Slusher’s analysis of it further emphasizes the central point Neal Goff made to us. Experimentation matters. (Neal called it “testing.”)

Another author has demonstrated that cutting price is important, and promoting lower prices is also important.

Although I have heard one major publishing CEO suggest that the house is doing some fiddling with pricing, there was no suggestion there of controlled and monitored experimentation. And I believe it is safe to say, without doing any research, that no major publisher is doing that on a consistent and persistent basis, let alone algorithmically-programmed price management such as the major ebook retailers almost certainly do.

There is another hugely ironic point buried in the CNET story. It is built around the work of an author named Christopher Smith, who has mastered the shuttle-pricing technique. Turns out Smith has a new fan named Stephen King. King, of course, has not only published successfully with major houses for decades, he was one of the first great ebook experimenters around the turn of the century when he tried to do author-direct publishing of ebooks before there was a market. King’s blurb for Smith has been very helpful to the lesser-known, lower-priced author.

Might Smith return the favor for King by teaching him the revenue-maximization techniques he’s developed so King can get back into the self-publishing experimentation game? I think that possibility encapsulates the major publishers’ biggest nightmare. Publishers are going to have a devil of a time defending their 25% royalty rate into the future, which just feels intuitively unfair to authors. They can get away with it for the time being because print sales still matter. But they won’t for long and if publishers don’t use their scale to do a better job managing dynamic pricing to extract the maximum revenue from ebook sales than an author might do on his or her own, the challenge of retaining their top talent will become even more difficult.

There is a reasonable suggestion that publishers should be making in a hurry about bestseller lists in the ebook era. In print, books are separated by format (hardcover, trade paperback, mass-market) by The Times and identified by format by USA Today  so that apples-to-apples comparisons are possible for consumers. It is really a stacked deck to rank on unit sales alone any book at 99 cents and Ken Follett’s bestseller “Fall of Giants”  at $19.99. Format in print creates a reasonable proxy for price. I think price-tiered bestseller lists would be a stretch, but going to the movie studio “box office” concept would not. Publishers, while they still have clout as advertisers in media that promote bestseller lists, should suggest a “units times price” ranking as one that provides a more useful comparison for many consumers.


Random House joining the (formerly) Agency 5, and what it might mean

Now the Big Six are all selling ebooks on the agency model. Random House has joined their five competitors.

It is almost a year since Apple launched the iPad, opened the iBookstore, and delivered big publishers an opportunity to rewrite the rules of the ebook marketplace, at least for their books and at least for a while. As readers of this blog almost certainly know, five of the top publishers (Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster) used the opportunity presented by Apple’s arrival on the scene to implement the change to agency for all their customers. Random House, for reasons that made sense to me at the time and almost certainly delivered some competitive advantages to them over the past year, judging by the open annoyance of many of their similar-sized competitors, stayed with the original wholesale model.

The competitive advantaged stemmed from the fact that all the agency publishers “forced” a 30% selling margin in to the ebook retail channel whereas Random House may actually have drawn margin out of the retail channel.

Here’s what I get out of this change.

1. Agency has been successful in cracking Amazon’s hegemony over the ebook market. A year ago, it seemed possible that Amazon could have an enduring 75% or 80% of the ebook market. While they’re still the biggest piece, and almost certainly have more twice as big a chunk as anybody else, agency has enabled real competition to develop from the iBookstore, B&N’s Nook, Kobo, and Google. And the independents served by Google, Ingram, and Overdrive all over the world offer a lot of potential marketing leverage, if they’re not driven out of the game by price competition. Amazon is still the behemoth, but they’re no longer the only game in town. Agency delivered competitive advantage to Random House, but also to Amazon. If they had continued to be 80% of the market, you might not be seeing this switch.

2. Google may not (yet) be selling a lot of ebooks (as in having a big market share), but they are opening the business up to more and more independents. Independents talk to sales reps, and Random House has more sales reps than anybody else. I would imagine the company began to feel some discomfort about the feedback they were getting from the retail network they very much want to keep alive.

3. So far, none of the major publishers has taken the step of aggressively selling ebooks direct to consumers online. But they’re ultimately going to have to. You may recall that Random House’s CEO, Markus Dohle, told me last summer that he realized publishers needed to become B2C. He wasn’t suggesting he’d sell books direct-to-consumers then; in fact he insisted that there were other ways to manifest that vision other than selling direct. But, if it ever enters your mind to sell direct and you think about it for fifteen minutes, you realize that you either have to do it under agency terms or face complicated and very troubling conversations with your retailers.

And here’s what I’m watching for.

So far, as near as I can tell, there has been very little use made by the big publishers of their ability to manage prices in the market. I am not aware of much experimentation. I am not aware of any direct-marketing or dynamic pricing expertise (both of which would be relevant) being brought on board by major houses to help them realize the potential of the opportunities. And I can only think of one senior executive I know who takes much of a personal interest in pricing dynamics.

Maybe Random House will be different. They’ve been the traditional industry leader in operations and analytics. They do vendor-managed inventory for retail accounts; I’m not aware of any other major publisher who does. They’ve done sophisticated supply chain management for years.

Now they’ve had the advantage of seeing what their competitors have done, and not done, over the first year of agency pricing. It will be worth watching to see whether they approach the pricing opportunity more energetically than the other publishers seem to have done so far.