April, 2012

Amazon’s growth and its lengthening shadow


The DoJ lawsuit and settlement, Amazon’s next giant step of growth in sales,  the Business Week article on Amazon pushing publishers to allow them to print slow-movers on demand, and then this morning’s New York Times story about a book driven down to a price of zero on Amazon (presumably by an algorithm), combine to raise again the questions of whether the traditional legacy publishing model is worth saving and whether it can be saved.

It really isn’t hard to appreciate the modernist, digitalist, Amazonian point of view. Trade publishing has historically been one of the least efficient businesses in existence. Most books don’t sell well; most authors are frustrated; and getting into the game requires jumping numerous hurdles to even get to the starting line.

The ebook model and online print distribution really are much more efficient than store distribution of printed books has been in reaching the part of the market that buys online. Returns really can be eliminated. In many cases, perhaps most cases, you really can just print the book when it is ordered, not on a wing and a prayer weeks or months before it is ordered.

If you start from the point that the manuscript is completed, it is easy to see why many aspiring authors would choose self-publishing, primarly through Amazon (because they reach the most customers), rather than take weeks or months to find an agent who will take weeks or months to put a proposal in shape to then take weeks or months to find a publisher. And the publisher will then take months, at least, to put a book into distribution. And that’s if you succeed. Most attempts even to secure an agent — just the first step — fail.

Failures overwhelmingly outnumber successes at every step. But, of course, they do in self-publishing as well.

You look at what the publisher will contribute, which is often described as making the book better and more saleable by copy-editing, putting on a decent cover, listing it for sale in places the industry and public can find it, and — for a while longer — putting print copies into stores. All of those things can be purchased, so theoretically you don’t have to give them up just because you self-publish, if you think they’re worth paying for.

And, of course, the author who goes the self-publishing route keeps a lot more of the consumer dollar than the one going through a publisher.

If you’ve got the manuscript in hand and you have a choice between going that route and having books to show your friends within days at just about no cost, why wouldn’t you seriously consider it? Why wouldn’t you do it? It seems like a no-brainer. That explains the conviction with which writers who have succeeded through this means, even those who didn’t quite do it themselves but instead just agreed to be published by Amazon, are so unsympathetic to the concern that Amazon’s business practices could cripple the legacy publishing business.

Inefficiency gets its just desserts.

But it isn’t yet that simple and it may never be that simple.

There are (at least) four serious qualifiers to the logic advocating self- or Amazon-centric-publishing. One is in these words: “if you start from the point that the manuscript is completed.” A second is the assumption, never explicitly stated but tacit in the recurring arguments from Barry Eisler and Joe Konrath (who are the proud poster boys for Amazon-instead-of-a-publisher), that the print-in-store component already doesn’t matter.

Third is that legacy publishing delivers an integrated business model that bundles all the services an author needs together and also includes a shift in risk from the author to the publisher. Self-publishing shifts the risk back.

And fourth, and not trivial, is that legacy publishers sell ebooks for higher prices than the self-published authors do. Expressing things in percentages might elide realities in dollars.

Requiring the whole manuscript before you start doesn’t change things for most unpublished novelists because most publishers won’t buy a first novel on an outline. And it might change little for the most established novelists because they’ll presumably make money on whatever they do, so they just keep writing.

But most other books published by the existing publishing establishment are financed from a point long before completion, unlike the situation for every self-published author. And that financing model is a risk-shifter that any author who can get it should be reluctant to relinquish.

(Yes, I know that Amazon is now publishing books and paying advances, including a substantial one to Eisler. But, remember, when they do that the royalty differential isn’t four times the legacy publisher ebook royalty rate [70% to 17.5%], it’s double, because Amazon pays 35% to the authors they sign, not 70% as they do for self-published. And there’s still no store distribution, which reduces revenue and marketing. The Amazon retail price will be lower. That may drive up units, but it also confounds the straight percentage comparison of the author’s take. A meaningful comparison between the marketing Amazon can do that nobody else can to the publisher-like marketing Amazon might do but hasn’t demonstrated yet is simply not possible until they publish a lot more books.)

Publishers actually weaken their own case when they articulate their value as “curators”. That makes it sound like they’re squeezing our cantaloupes for us. Who needs that, right? We can be our own judge of what’s ripe and what’s not!

They’re doing much more than that. Publishers aren’t squeezing the cantaloupes. They’re deciding which cantaloupes to invest in before the seeds are in the ground. They’re deciding based on the farmer and the climate and the soil and the weather forecast which cantaloupe growers get to participate in the market. And, if they don’t invest, those cantaloupes don’t get grown and they don’t get squeezed by anybody.

And although I’ve been as Cassandra-like as anyone fearing the creeping trivialization of the bookstore channel, it is definitely not dead yet. In-store sales of printed books still constitute most of the sales for most of them (although, admittedly perhaps less than half for a lot of fiction.) And experts like Peter Hildick-Smith of Codex believe that in-store discovery is still a critical driver of online sales, print and digital.

There is no doubt that a lot of what legacy publishing spends its money on will no longer be necessary in a few years. If the stores are mostly gone, or aren’t critical to discovery or sales, then printing expertise, warehouse and distribution capabilities, and all the investments and workflows required to maintain them won’t be necessary either. However, that day certainly hasn’t come yet (even if the digerati think it has!)

But, even more important, and so frequently elided in the discussions of the value of legacy publishing and whether it is worth an effort to preserve it, are the investments publishers make in books that would simply not be written if they didn’t.

If legacy publishing had been run by modern business principles, much would have changed years ago. For example, the trade would get smaller discounts on the biggest titles. After all, if part of the margin given to retailers is for “marketing” (i.e. “discovery”), they need a lot less of it for Harry Potter or the latest Patterson than they do for a first novel. With today’s computers and business acumen to work with, it would seem silly to offer the same margin across all titles on a list, when some clearly need less than others to get placed and sold.

It is partly the standard treatment across all books that is coming back to bite publishers now. Amazon doesn’t discount all titles equally; nor does any other bookseller. They give back the margin on those where it benefits them to do that, selectively. The publishers could have pre-empted that opportunity, or at least made it much more difficult, by varying the margin they offered by the sales appeal of the book. They adjust margins on the royalty side of the equation by paying advances that don’t earn out to big established names, effectively delivering them a higher percentage of the take. But they give the same margin on every title, regardless of cost or appeal, to the trade.

Sharing media attenton with the accounts of Amazon and DoJ recently have been stories about Robert Caro, who wrote The Power Broker about master builder Robert Moses 40 years ago and leveraged that success into a life’s work series of books about Lyndon Johnson. Caro was working on negative cash flow — selling his house and with his family being fed on his wife’s paycheck — until Knopf took over supporting him. If they’re printing 300,000 copies of his next book (which they say they are), that’s probably five million in billing on the first printing, plus ebook revenue, in the immediate offing. They’ll get their money back.

But they had to decide to risk it. Publishers do that every day. Sometimes they don’t get that money back.

Yes, there is Kickstarter as the new spec funding source. But how many publishers would fund projects if they couldn’t manage the creative process or understand and control the marketing and distribution that would take place when the project is finished? Even “finished’ is a complicated concept in the world of publishing. It brings to mind the saying I heard once, but can’t attribute, that “works of art are never completed; they are only abandoned.” Deciding when a manuscript is “ready for publication” is a judgment call that is essentially commercial: when will more work no longer lead to more sales?

Since Kickstarter funders won’t have that kind of control, believers in a rational market would also have to believe that projects that many publishers would fund won’t attract the investment they require through Kickstarter. Perhaps a private equity fund tied to authors would work better, but that would require margins to pay authors and acquiring editors and repay the investors. Even then, you wouldn’t necessarily have the integration of services combined with assumption of risk that makes the current system, which is so beneficial to so many authors, also work for the publisher/investor.

Publishers may never have unbundled the big books from the others in how they treat them commercially, but an Amazon-led marketplace is now doing that for them. The less help an author needs from a publisher, the more appealing the fatter margins of self-publishing look. The less value there is in the retail channel for print, the less lost by giving up the retail distribution in favor of an online-only sales outlet.

Despite that, few big authors  have gone for Amazon’s money. Tell the truth: wouldn’t you have expected that with Amazon’s power, deep pockets, and an experienced book acquirer at the helm, they’d have attracted some bigger “gets” by now? I’ll admit that I did.

Besides delivering widespread print distribution and funding projects speculatively within a system that bundles services and accepts risk, there is one other thing that separates publishers from Amazon as a route to the marketplace for authors. It might be the most important thing.

Amazon ultimately only cares about sales made through Amazon and, if they were candid, would admit that any sale not made through them or an affiliate is a target for future growth. Publishers want as diverse a distribution network as possible; it maximizes sales and exposure for the books they’re charged with and, not at all incidentally, gives them a reason to exist.

This difference in perspective has big implications. USA Today, for example, considers the breadth of a title’s sales across retailers as a component of its bestseller calculations. A book that sells through only one retailer (and that would mean Amazon) doesn’t get the same consideration as one that sells the same number in multiple channels. Similarly, how would the New York Times feel about reviewing a book that isn’t available in stores or in all ebook formats? They might legitimately balk at reviewing something that many, if not most, of its readers won’t encounter commercially.

The divergence in point-of-view is illustrated in the conflict over print-on-demand that is discussed in the WSJ piece. From where Amazon sits, it is simply more efficient to print what they need of slow-movers when they need them. They can probably make an offer to publishers that looks “margin-neutral” or even more favorable. But publishers know they have to print for everybody else, and taking the Amazon demand out of the print equation — particularly for slow-movers — would really disrupt the overall economics for any title that weren’t already printing on demand. These overall marketplace economics aren’t Amazon’s concern.

So as Amazon continues, as any commercial entity would, to set prices, seek margins, and adjust practices and workflows in ways that work for its own business, it drives the industry to “efficiencies” that take the margin that finances all publishing activities — those that will fade away like print distribution and those that are indispensible like funding and developing new projects — out of the commercial equation.

That can only really improve things for authors that don’t need or want those functions. Since the most reliable big authors with savvy and competent agents are already getting 60 to 80 percent of the revenue their books produce guaranteed to them, it is not clear that even the notionally higher ebook royalties deliver a better deal than the publishers do now for that group. But  the scads of authors who can’t get, or don’t think it is worth the effort to find, an advance-against-royalties publishing deal will be happy with Amazon. Indeed, they’re probably happy now.

As bookstores continue to diminish, though, it will get harder for the publishers to continue to compete for the big authors, particularly if Amazon is the one picking up the share the bookstores relinquish. That could change the status quo and Amazon might start to get big authors then. If and when enough of the big authors move on, the legacy model will break and we’ll be in a different world.

When that day comes, I’m sure Amazon will recognize it and change their margins and practices to suit. Perhaps the Department of Justice will want to reconsider its thinking then as well.

Remember, the DoJ wants to hear from us about the settlement unfortunately (in my opinion) agreed to by three major publishers. We still have several weeks to get those in. I hope this post contains useful thoughts for some people formulating their response, which I am still doing. Whenever you’re ready, send your letter to:

John Read, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 5th Street, NW, Suite 4000, Washington, DC 20530

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Things learned and thoughts provoked by London Book Fair 2012


This post contains a batch of observations from this year’s London Book Fair. Some of it recalled an experience from about 20 years ago. We’ll begin there.

In the early 1990s, Microsoft was on a mission to get computer hardware manufacturers to install CD-Rom drives in new machines. Microsoft had a very simple motivation. Software then was sold as hard goods. One CD-Rom could hold the data that required many, many diskettes. So if the storage and transfer medium were changed, the cost of goods for Microsoft would drop sharply. Since the value customers were buying was the code, not the package, Microsoft figured (correctly) that they’d be able to keep the price of software the same and simply make more profit if their customers could handle the CD-Roms. (Please note this logic applies very nicely to any discussion of what ebooks should cost in relation to print.)

But, of course, most people don’t load that much software, so the CD-Rom argument would be strengthened if content were also available on them. That inspired Microsoft to stage a half-day conference to “educate” the trade publishing community about the “opportunity.” (Of course, areas of technical and professional publishing, which had opportunities in delivering very large amounts of data, had already started to move in that direction; the value of CD-Roms was real and obvious to them. They also had vertical audiences of professionals that were perfectly able to hook up a CD-Rom drive to their existing machines, and did.)

At the conference, Microsoft basically showed all the “cool” things the computer could do: delivering sound and images (not video so much in those days) and hyperlinks. They basically said, “we don’t know how you’re going to make money on this; you’re the content experts. But we’re giving you this great new canvas to create on. Create!!!”

The excitement Microsoft and others were able to generate led to a burst of activity by publishers to create CD-Roms. Very few people found this new packaging of content particularly appealing at any price, and they actually were listed at very high prices. In other words, the techies had no clue about the content business and their advice to it was self-serving.
——
Last Monday in London, Susan Danziger of Publishing Point hosted The Great Debate. The proposition being debated was that the new tech companies would ultimately deliver a “knockout blow” to the conventional publishing establishment. Michael Healy of Copyright Clearance Center moderated.

Speaking for the new tech companies were two stunningly successful new technology entrepreneurs: Bob Young of Lulu and Allen Lau of Wattpad, both of which take anybody’s content and put it into circulation. Lulu’s core mission is seamlessly turning content into printed books and Wattpad’s is about organizing it for crowd-sourced consumption and discussion.

Opposing them were two publishing veterans (and, I’m happy to reveal, good friends): Evan Schnittman and Fionnuala Duggan. Schnittman is about to move from a global sales and marketing position at Bloomsbury to become Hachette Book Group USA’s head of sales, marketing, and digital. Duggan came from the music business, spent several years heading up digital at Random House UK, and is now Managing Director for International Course Smart, the digital platform created by a consortium of college textbook companies.

There is no ambiguity about what happened in this “debate”. The format required each of the approximately 250 attendees to register their opinions as to which side they favored on the way in and then again after the speakers had presented. The “establishment” side — the Schittman and Duggan side — picked up about 100 votes with their arguments from where the audience was when it came in. The incoming audience favored the proposition that the knockout blow was coming by a wide margin. After the debate, the margin was as wide in the opposite direction. (Some were undecided; so don’t drive yourself nuts trying to work out the math.) It is hard to imagine a more decisive outcome.

Of course, Duggan and Schnittman know quite a bit about technology. But neither Young nor Lau seemed to know anything about the content business. That shouldn’t be a surprise. Both of them have gotten rich in businesses that are ostensibly content businesses, but they aren’t. Their financial success is not dependent on the quality of content, the skill in developing or marketing it, or its inherent appeal. In fact, Lau kept touting the volume of what he hosted and claiming that technology would handle the curation perfectly adequately in the future. This was “proof by assertion.” It was the ultimate declaration of faith. The audience didn’t buy it.
———————
On the day before, Schnittman had hosted the Digital Minds conference. One of the keynote speakers was an old friend of his, Andrew Steele, who is the creative director of the very successful web site, Funny or Die. Steele told us the story of that business, which is instructive.

The original concept of Funny or Die was to crowd-source user-generated content, like YouTube. They’d build up traffic and monetize it. But there was a problem. Most of the amateur stuff they got just wasn’t funny. As Steele points out, we go to YouTube when somebody sends us a link for something good. We don’t go to YouTube and browse all the amateur content. There’s a reason for that. Most of it is crap. And most of what Funny or Die was getting from the crowd was crap. They weren’t getting page views. They weren’t going to succeed.

So they tried something new. (That’s called pivoting, for those of you who don’t spend enough time talking to the tech-and-finance community.) They got professionals to create content. Things changed quickly. By allowing their professionally-produced content to go off the site while it maintained the “Funny or Die” branding, they soon built a large audience. It now keeps growing and growing. Success is assured. But the lesson Steele emphasized was that professionally-created and -curated content succeeds where amateurs fail. He sees no reason why it should be any different in our world.
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I got a chance to visit with Charlie Redmayne of Pottermore. He was a bit bleary-eyed at the Digital Minds event on Sunday because the site had opened to the public that weekend. When I saw him on the show floor during the week he had just benefited from a full seven hours of zzzs, and he was enjoying his status as a game-changer.

The key to Charlie’s disruption was his willingness to substitute watermarking for DRM. He said it definitely made him nervous to do it, but he couldn’t see any other way to achieve what he wanted for Pottermore. He had to be able to sell to any device; he wanted to be able to allow any purchaser complete interoperability. There was no way to do that and maintain DRM.

His technical infrastructure is awesome. It stood up even though the average length of engagement by each user was three or four times what they had projected and the traffic exceeded expectations as well. But the most startling early news was what he reported about piracy.

Apparently, Potter ebook files started showing up on file-sharing sites pretty much right away after they opened. But before they could serve any takedown notices, Charlie says the community of sharers reacted. They said “C’mon now. Here we have a publisher doing what we’ve been asking for: delivering content DRM-free, across devices, at a reasonable price. And, by the way, don’t you know your file up there on the sharing site is watermarked? They know who you are!” And then the pirated content started being taken down by the community, before Pottermore could react. And very quickly, there were fewer pirated copies out there than before.
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I heard a rumor from a very reliable source that two of the Big Six are considering going to DRM-free very soon. The rumor is from the UK side, but it is hard to see a global company doing this in a market silo. Another industry listener I know was hearing similar rumors from different sources.

Could we see another crack in this wall sometime soon, maybe this year?

This is one lecture the techies have been delivering to the content folks that might have been on the money. I’ve always been skeptical that DRM prevents piracy, but I’ll admit that I was more concerned in the past than I am now that it would cost sales.
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At the Digital Minds conference, there was a panel on children’s content publishing. Sara Lloyd, head of digital for Pan Macmillan, moderated a group that included Belinda Rasmussen from her own company, Eric Huang from Penguin, Jeff Gomez of Starlight Runner Entertainment, and Kate Wilson of Nosy Crow, which is a new children’s “book publisher” that seems much more focused on apps.

I have trouble seeing a future for book publishers in the kids’ content world. Everybody seemed to agree about what the apps of the future required (interactivity, game elements, animation) and that the parents of five years from now will be much more likely to hand their kids in the back seat an iPad than a book. So I asked them, as books diminish, what will publishers have to offer here? Wouldn’t this business belong to people who know gaming and animation, not books?

Kate seized the question from the stage and answered in a way that seemed to confirm my conjecture. “We don’t hire people with book experience,” she said. When I checked in with her later, she agreed that books were a revenue-generating convenience to get her company started. She sees the day when they won’t be part of her business anymore. What excited her (and well it should) was that they’d just made their fifth app and had created all the software tools they needed to build it while making the first four. The cost of creating their apps is plummeting because they’ve built the toolkit.

———————-

The news about the DoJ’s charges against five publishers and Apple and their settlement with three publishers broke just before LBF. It was a topic of much discussion, of course. Most people in the industry are horrified by the lawsuit and the settlement and there is really widespread fear about the consequences of ending the agency model. (The settlement doesn’t do that, but having three big publishers pushed to allow discounting for the next two years at least certainly cripples it.)

On Publishers Lunch, Michael Cader rounded up an impressive set of links to media around the country who are just as horrified as publishers, retailers, and agents at LBF were. Here are the stories from the New York Times, the Wall Street Journal (behind a pay wall, unfortunately), Slate, and the Los Angeles Times.

We understand that an amendment to the Tunney Act obliges the DoJ to take note and report to the court any opinions expressed in writing by the citizenry about a settlement that takes place in a case still being litigated. Cader notes that the law has usually been used to expand a judge’s ability to exercise oversight when the court believes DoJ hasn’t been tough enough. In this case, we’ll be asking them to pare back a settlement, which is apparently a less common use of the law. But the law allows us 60 days from the settlement to get those letters in and it is what we in the community can do to help fight this battle.

As I wrote in my summary of the impact of this settlement, it is one where Amazon and the cost-conscious ebook consumer win, but everybody else (and that means authors, publishers, retailers, and the public that wants good books, as I explained on NPR) lose. The low-price side of this is easy to understand. The publishing business side isn’t. (If this were a GOP DoJ, I’ll admit that I would have inserted a snide remark here about what this shows about their IQ.)

One point to note here, which didn’t occur to me at first, is that the three settling publishers are about to game the two fighting publishers (and, perhaps, Random House) the same way Random House gamed them when they stayed out of agency at first. Whether or not they stick with agency, they are now enabling discounting, so they might get the same benefit of the retailer discounting their goods while they retain their revenue that Random House got for the first year of agency.

In other words, more weight on the shoulders of the two companies, Macmillan and Penguin, who are carrying the fight for the whole industry. And that means more reason for the rest of us to try to help.

I am working on my letter to DoJ now, and I’ll publish it in a future post. I hope all my readers who understand what’s at stake here will also write to Justice. Address your letters to

John Read
Chief Litigation III Section
Antitrust Division
U.S. Department of Justice
450 5th Street, NW, Suite 4000
Washington, DC 20530

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Jane Litte explains the DoJ suit very well, and I have a couple of points to add


Jane Litte at the DearAuthor blog has written a remarkably concise, clear, and cogent piece about the DoJ case. This whole paragraph is a link to it. That’s a signal.

In fact, if this is a subject of high interest to you and you are not a lawyer, I would encourage you to read Jane’s post before you read this. I am not in any way attempting to substitute for or contest anything in Jane’s piece, which explains the law and the issues in terms that really helped this layperson feel like a participant in the discussion. A number of things struck me as I read it, but there were three paragraphs Jane wrote that called for answers. I hope she and others will find this a useful addition to her mighty contribution to the discussion. Quotes from Jane’s piece are in italics.

There are two elements that stood out for me in reading the DOJ’s complaint. First, Apple set the pricing floor and ceiling for ebooks and every publisher accepted those terms. Did the publishers individually attempt to negotiate for differing floor and ceilings? Why was it the same for every publisher? No other app in the app store has a pricing floor or ceiling like the books in the iBooks store. Why were books treated differently?

No other app in the app store has a print equivalent. The pricing floors and ceilings are, as I understand them, all expressed in relation to the print retail prices. That logic cannot be extended to other apps in the app store. These restrictions, almost certainly sought and engineered by Apple, were to assure them that there would be an understood relationship between the print competitor and the ebook. Whatever that means, I find it hard to see how it constitutes publishers colluding with each other.

And the publishers chose their print prices, so, in effect, they chose their ebook prices as well. Without collusion. Publishers don’t talk to each other about what retail prices they’re setting.

Second, the David Shanks email to Barnes and Noble. In the email, Shanks urges Barnes & Noble to punish Random House for not hopping aboard the pricing agreements that the other publishers had agreed to with Apple. This type of email is evidence that the DOJ will point to as attempting to police or enforce a collusive agreement. In other words, if there is only conscious parallelism why would Shanks need Random House to engage in the same type of pricing. That is one piece of evidence that seems to rule out independent action.

There is absolutely nothing strange about this nor is there any reason to think Shanks wasn’t acting totally independently.

Remember that Barnes & Noble entered the ebook market with the Nook in November 2009. They were very explicit and clear with all their trading partners that the Amazon pricing was a big problem for them. You don’t need to have it spelled out to you or be a rocket scientist to see the unpleasant consequences of having to give away all that ebook margin: fewer brick stores, less resources to develop the Nook against the Kindle, and perhaps the need for more margin from the publishers on the print and store side. All the publishers were aware of that.

When Random House stayed out at first, some people were confused about that choice but the insiders understood that they had “gamed the system”. Now they’d sell their ebooks to Amazon at the old (higher) wholesale prices and get the benefit of the lower retail prices because they had the branded loss leader category to themselves. And perhaps they’d even get better treatment from Amazon on their print books too, because, after all, their titles were the ones Amazon could promote which would promote their ebook pricing policy at the same time.

I can tell you that this caused massive teeth-gnashing at all the other houses. But there was, actually, not a damn thing they could do about it. They had to swallow lower revenue per copy for their books as well as a price-disadvantage in the marketplace and they did it because they thought leveling the playing field on price was so critical to their futures. Meanwhile, from their perspective, the biggest player sat out the fight.

And from Random House’s perspective, they did the best thing for their owners and their authors.

At the time, all the other houses were aware that they had done all this partly for B&N and that B&N was presumably being hurt by Random House’s unwillingness to go to agency, and, dammit, why wasn’t Barnes & Noble doing something to push Random House in the right direction?

Executives from many of the other firms, although not David Shanks, asked me why Barnes & Noble wasn’t pushing Random House into line on this. In fact, I made the observation to people at Random House that the question got asked by their competitors. It would have been neither polite nor politic to push the conversation any further than that, but nobody registered any surprise.

My own read of the B&N-Random House relationship is that it has been strong for years on many levels and it therefore withstood this blow to it without disrupting most of what else was going on. I have no doubt that B&N expressed displeasure about it and that making them happy was one of several factors that motivated Random House to move to agency pricing a year later.

But David Shanks was representing a point of view that every informed executive at every major publishing company had. He didn’t need to talk to anybody else to come up with it and it is totally appropriate within the context of a frank and open relationship with a major trading partner for him to have said what he did to B&N.

The problem here is that Apple was not (and is not) a dominant player in the digital publishing market. I don’t know if iBooks has even a 1% market share. The hub in a hub and spoke conspiracy ordinarily has a dominant market share such as the two theatre houses that controlled the majority of the market in which they had first run theatres. The DOJ identified the relevant market in its petition as trade ebook market. I find that definition too narrow and wonder if it won’t spike the DOJ’s suit.

What I can tell you is that major publishers put Apple’s share of the ebook market to me at between 10 and 20 percent. Because they don’t have as wide a selection of titles as the others, it is likely that their overall share is something slightly less than that. Dominant? No. Third in the market in the US.

And these italics are me again, not Jane. I have another post just about ready that I was holding for tomorrow morning but now might hold another day.

I am going to do all I can in the next 6 weeks to encourage an understanding of the DoJ case (which I think Jane makes clear is not close to overwhelming) and the necessity of people in the industry registering their concerns with the settlement, which could be devastating if it became law. When I saw Jane’s post a couple of hours ago, I thought I could usefully add to the discussion and I want to encourage as much traffic to her as I can. I think she presents some foundational understanding here that is very important for people to have about the law. I was encouraged by her explanation and analysis that there is more hope for what we need as an industry to happen than I had previously thought.

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After the DoJ action, where do we stand?


This post went up around midnight last night (Saturday, 4/14) in London, or between 6 and 7 NY time. I had been concerned about a part of it that has been edited below. If you read it before 5 pm today (Sunday, 4/15), you’ll not have seen this correction. And you’ll see some comments that obviously pre-date the update.

Well, we certainly have a confused book business on our hands following the announcement of the Department of Justice intervention last week.

According to my (admittedly tentative) understanding:

1. We have three Big Six publishers (Hachette, HarperCollins, and Simon & Schuster) that have agreed to a settlement with Justice that obliges them to modify their agency arrangements over the next 60 days in ways that will eliminate their ability to control discounting in the supply chain for the next two years.

2. We have two Big Six publishers (Macmillan and Penguin) that will contest the DoJ position that they acted illegally (in collusion). They can apparently continue to manage their business with agency pricing the way they have, at least until a court rules. And, as we know, that can take a while.

3. We have one Big Six publisher, the biggest of all (Random House), which can continue to sell under agency terms without restriction and without a lawsuit to defend. Why? Because they didn’t take simultaneous action with the other five and were, therefore, not implicated in the alleged collusion.

4. Agency terms, including even most favored nation clauses (which never really affected the Big Six anyway), have not been ruled illegal. (Cader said in his post on Friday, blocked by paywalls I think, that, as a result of this set of legal actions “agency itself is demonstrably considered legal.” If that is accurate, and he almost always is, that is certainly an unintended consequence.)

5. The DoJ delivered some convincing evidence, surfaced on the Melville House blog, that despite my conjecture to the contrary, big publishers did discuss agency among each other before they implemented it. That certainly doesn’t look good. But whether or not it was implemented legally does not affect my opinion about the value of agency or the damage from losing it.

Added later. But, aha!!! This is not convincing evidence of a conspiracy. It is most likely that this discussion, assuming the email quotes are all legitimate to begin with, was about Bookish, the book retailing initiative funded by Hachette, Simon & Schuster, and Penguin. If that’s true, it would suggest that HarperCollins was an early participant in the conversations about starting it. That makes sense. HarperCollins is a partner with Penguin in the financing of Anobii, an ebook retailing site in the UK. 

And hats off to my great friend and favorite consulting competitor, Lorraine Shanley of Market Partners, who made the penny drop for me in a conversation at the Digital Minds Conference today in London! I was only comforted when I spoke to one of the smartest guys in trans-Atlantic digital publishing who said, “of course” to this when I told him, just as I did when Lorraine told me. Like me, he didn’t get this right off the bat!

6. The publishers who settled appear to be on notice that the new arrangements they create to replace the status quo better not look too similar to each other’s when they’re done. (This seems extraordinarily difficult to me. The accounts actually limit the amount of variation that can exist…)

7. In a separate proceeding from DoJ, the settling publishers appear on the verge of refunding money to consumers who “overpaid” for ebooks. (This is a result of settling lawsuits arising from States, not DoJ.)

8. “Loss-leading” sales were addressed by Justice in a very creative way. They are banned, not on a “per-sale” basis, but rather on a “aggregate” basis. So retailers can give away ebooks. Heck, they can pay customers to take some ebooks, as long as they make back the margin they shed on other ebook sales from the same publisher. Since Amazon has never done anything else (they told me very clearly, and not under NDA, two years ago that they discount a small percentage of the total titles that constitute a big minority slice of total sales and their overall ebook sales deliver positive margin) and nobody else could afford to, that’s a restriction without any real meaning.

Looking back at the post I wrote six weeks ago when the possibility that agency would be ended or damaged first surfaced, I find nothing I want to take back or change.

I would summarize the situation this way. Amazon (which includes any other player largely dependent on Amazon) and the most price-conscious ebook consumers have won. Everybody else in the ecosystem: authors, publishers, and other vendors, have lost. The reaction from all quarters seems to confirm that analysis.

The biggest question going forward is how Amazon will react to this. Cader’s unique and invaluable analysis says that Amazon will have a “pool” of about $113 million for discounting and incentives in the coming year. B&N, with half their market share, would have about $57 million.

It will be fascinating to see how Bookish, owned by three Big Six publishers (two that settled, one that didn’t) navigates all this if it opens, as rumored, between now and BEA.

The Digital Book World website (a fine institution I have nothing to do with; we just program their annual NYC conference) reports that James McQuivey of Forrester expects Amazon to be very restrained in how they’ll employ discounting when the dust on this all settles (in about 60 days). I’d actually expect precisely the opposite. I think Amazon will do the splashiest discounting they possibly can, making the point as loudly as possible that they deliver the lowest prices to the consumer and daring their competiton to match them.

Every company in the industry is going back to the drawing board. Only one is not unhappy about it.

There’s a response from Dick Heffernan, President of Sales at Penguin buried in the comment string after my last post making the point that Penguin has also not cut its sales force in recent years. I congratulate them for that and I’m sorry that I jumped to the conclusion that because the major house senior executive who mused about Random House saw their behavior as unique that it must be so. I think the insights from Random House were useful — the comment string and traffic to the post seem to confirm that — but I’m also happy to also acknowledge Penguin’s persistence in maintaining service to the bookstore channel.

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Random House maintaining a big field force while the industry wisdom is to cut


I was brought up to believe in the virtues of a large field sales force. One of Dad’s early successes in his career as Director of Research at Doubleday was when he analyzed sales rep effectiveness to advise the company about the optimum number of reps to keep when they combined sales forces that had 10 and 14 members, respectively. The company expected him to come up with a number between 10 and 14, or, perhaps, between 14 and 24. His careful analysis of the impact of reps calling on stores led him to recommend that the new sales force consist of 35!

This decision was contrary to the contemporary practice and reasoning of all other publishers.

And very quickly thereafter, Doubleday concluded that taking orders was not the most important function for the rep. Influencing display, store merchandising, and sales clerk awareness of Doubleday titles were where they came to believe the big wins were.

A lot has changed since then, of course, including the ubiquity of computerized inventory management tools, very fast service nationwide from well-stocked wholesalers, and the growth, and then decline, of bookstore chains. But, most of all, we have gone from a country where the number of bookstores was organically increasing to one where it is, clearly, organically diminishing.

Is a large field sales force still a good idea? Dad died 10 years ago, but I am pretty sure he would think it was. He’d be very pleased to see what Random House is doing. They are maintaining a force of well over 100 reps in the field (among several different sales organizations with defined product or account specialties) while everybody else is cutting, usually from a much smaller base. They are, as he did, operating contrary to the contemporary practice and reasoning of all other publishers.

We’ve tried to get at the question of sales force deployment before but I had clearly not focused sufficiently on Random House. We had a session at Digital Book World in 2011 about it and Jaci Updike of Random House (who, as you will see, was a key actor in all this) was on the panel. But the Random House initiative we’ll be talking about below was only in development then. The story that was told at that session, and in industry news reports from time to time, was that the combination of field realities (fewer stores) and new capabilities (like electronic catalogs created by some houses and the industry electronic catalog Edelweiss) made it possible to cover the retailers with fewer reps. Not only that, sales conferences — a very expensive exercise that requires enormous travel expense to bring reps together — were sometimes being replaced by videos of editors pitching their books. The videos, unlike the reps, travel for free.

What made me want to learn more about what was going on at Random House was a conversation I had two weeks ago with another Big Six executive who wondered what they were doing. That person was aware of cuts at their own company and at others, but not at Random House. It seemed impossible that the biggest publisher in town could be cutting sales force and nobody else knew about it; those dismissed reps would be out looking for jobs and knocking on all the competitors’ doors. What was going on there?

I got the chance to ask the question of a friend on Random House’s corporate strat team a few days later. I was told that, indeed, Random House senior executive Madeline McIntosh and the adult sales director who had been on the DBW panel, Jaci Updike, had been redefining the role of the sales rep, broadening the responsibilities so that they remained productive and could be retained in large numbers even with fewer stores. Not only that, but they were proud of what they were doing and were happy to talk about it.

So last Friday I sat down with Updike for an hour and learned about the project that Random House calls “Rep 3.0″.

Whenever you learn about a company innovating, a recurring theme is “it requires support from the top” and that is true here. Jaci’s first reference, when asked “where does this come from?” was to the support the sales reorganization has gotten from CEO Markus Dohle. In his most recent end of year note, he specifically cited the work that Random House’s field reps do. (Updike also pointed out that she’s not the only sales executive leading this. She made it clear that Joan Demayo, leading the children’s sales organization, is doing the same thing.)

There is a belief in Random House, not necessarily documented and perhaps impossible to document, that half of sales come from word of mouth. They are also convinced that their field force is a primary tool to generate the dialogues that sell books. With Updike heading adult sales, they had a leader who had started out as a sales rep at Random House 22 years ago — after working in a bookstore before that — and who was their first Director of Independent Bookselling.

Jaci lived through many shrinkings of the Random House sales force in the 1990s and earlier in this century. But starting about three years ago, they started to disassociate the sales rep’s work from billings and look hard at what reps do “in the community”. Reps already did staff presentations in stores and connected to local media and to libraries. This was behavior that grew organically, but Jaci believes that Random House was unusual in that they encouraged it. If you’re stretched thin trying to cover all the accounts, it is harder to be supportive of what appear to be extra-curricular activities.

But three years ago, with Madeline McIntosh, Jaci’s predecessor in her current job, now running sales and all related operations, they embarked on their Rep 3.0 program. A core element of this was to reorganize the workflow of the rep’s job, using such tools as iPads and electronic catalogs, to make order-generation take less time and free up time for other activities. And those new activities, presenting to libraries and corporations as well as to bookstore staffs, became part of what the company expected their reps to do.

Implementing this strategy required that they make some changes in philosophy and approach that would seem counterintuitive to most sales executives.

They no longer compensate reps based on the sales they generate. Reps are compensated, as are many at Random House, on the overall company performance.

They encourage blogging and speaking engagements without corporate control of the messaging. In fact, they’re quite comfortable if the books their reps talk about aren’t all Random House books. This comes from their conviction that their community-building exercises won’t be taken seriously if they’re seen as shilling for their own stuff. On the other hand, they’re sure their own stuff benefits the most.

And they’ve invested in supply chain in general, seeing the connection between improving the tech in the reps’ hands, the speed of shipment from the warehouse, and the development of such capabilities as vendor-managed inventory, as worth the effort even in an era when the number of bookstores is getting smaller.

The community-building, non-bookstore efforts by the reps get very ambitious. There are Random House reps organizing “retreats” with authors where readers pay to join the group. These bring in attendeees from far afield, including from other countries who want to participate in the discussion about books. The attendees are not book sellers, primarily, although a bookseller is always involved. They are book readers, book lovers. But Random House doesn’t see this as a brand-building exercise. Updike believes that a part of what makes this all work is that the reps are “credible”; they’re not just pushing Random House books.

“We don’t touch what they do with their blogs,” Updike says. “We don’t influence. We don’t suggest.” It is the independent view the reps offer that “makes efforts like this work”, in her opinion.

With these new marketing practices largely arising from reps’ creativity and initiative and then being spread as “best practices” throughout the sales force, the company-wide sales meetings remain very important and Random House continues to run them twice a year.

So Random House sustains an investment in covering field accounts that none of their competitors appear to believe is sustainable, and they do it employing very unconventional techniques that are hard to measure. Is it working? Do they believe it is working?

Updike was convincing on this subject, even while she rejected as somewhat inflated a colleague’s report that independent store sales were measured as “up 40%” in February. (Like her reps increasing their credibility by not limiting their discussions to Random House books, Jaci’s willingness to discount what she thinks is an inflated measurement of their success reinforced her credbility with me!)

She figures some of that 40% increase was simply a shift of sales from wholesalers to direct because Random House had a few-month program of 2-day-shipment that ran through February. But she also knows that “POS was up” and she believes “our in-stock position was better than other publishers. We were in stock on a lot of hot titles when others were not; that was part of it.” And even with Borders closing, which we all know put wind in the backs of many independents, the 15% increase in indie store sales she thinks is the accurate number, is a very impressive feat in these times.

Random House figures that its “army of marketers”, which is how Updike now sees her sales organization, is helping them sell more books, build more titles from obscurity to success, and is thus giving them an edge winning over agents as well. This is a strategy not likely to be duplicated by any of their competitors. It will be interesting to see how clear a competitive advantage it can deliver them, and for how long.

Here’s another family anecdote that brings all this home. In 1975 I was working for my father, running sales at Two Continents. He had met a young sales director at Frederick Fell named Charlie Nurnberg. “Go meet him, Mike,” my father said. “You’ll learn things.”

I did, and I did, starting with the very first conversation we had when Charlie explained to me that if the permission line when somebody excerpted your book included a price and an address, you’d get orders.

In any era before the current one, the executive who got me started on this investigation by wondering aloud what was going on at Random House would have just picked up the phone and taken somebody there out to lunch to find out. “What are you guys doing about sales force deployment?” would not, in and of itself, have been seen as a “price-fixing” or “combination in restraint of trade” question.

But the reason why they don’t act that way today became very publicly evident yesterday, with the announcement of the DOJ suit against Apple and five publishers and the settlement agreed to by three of them. Publishers can’t talk to each other about the industry anymore. Aside from many other things, this means publishing just isn’t as much fun as it used to be anymore. (Even as I write this, I can hear the ridicule that statement will inspire in some quarters.)

I want to let the dust settle for a couple of days while people smarter about this than I am make clear what the legal papers actually say and what the timetables are for changes to become effective before I try to spell out some things it might mean.

This will certainly make for a lot of interesting conversation starting this weekend at the London Book Fair.

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A feast of data to interpret in new Pew survey of book readers about ebooks


There are a few gems to interpret in the just-released Pew survey of ebook reading.

1. We are getting very close to half (they report 43%) of Americans 16 and older saying they have read a book or other long-form content in digital format in the past year. As other data in the survey suggest, this number is still rising rapidly.

This number is an index of how much of the reading public can be reached without print. Since elsewhere in the data it is reported that only 78% of the people 16 and over have read a book in any format in the past 12 months, it appears that more than half the book readers can be reached without print already.

2. Pew tracked some startling growth around Christmas. Just before the holiday, 17% of Americans 18 and over (sometimes they seem to measure “adult” from age 16, sometimes from age 18) had read an ebook in the previous 12 months. But right after the holiday, that number had jumped to 21%. Remembering that 22% of the population hadn’t read a book at all in the past 12 months, that means that about 27% of book readers report having read an ebook recently. And that number jumped nearly 25% in a month!

3. One of the most startling data points reported is that both tablet ownership and ereader ownership had just about doubled over Christmas, from 10% in mid-December to 19% in mid-January in both cases. With overlap accounted for, Pew estimates that 28% of Americans 18 and over own one or both.

Device ownership is still climbing fast, although it is likely that the overlap, a single person owning both devices, grew faster over this Christmas than it had before. When people get a second device, a replacement or a complementary device, they probably don’t indulge in the same buying spurt as they do when they get their first device. The data summary I saw didn’t correlate the rise in ownership of each of the two devices with the rise in ownership of either of the two devices, which limits our ability to forecast how much content growth we should see following the increase in device penetration.

4. Device owners who own an ebook reader read an average of 24 books in the previous year, but those who don’t, including those who own tablets, only read an average of 16 books. The report says that tablet owners read the same number of books as those who don’t own devices.

This data would seem to confirm the conjecture that multi-function tablets present many alternatives to ebook reading and therefore aren’t as reliable catalysts for reading growth as dedicated ebook readers are.

5. The survey found that 41% of people who have owned a tablet or ebook reader for more than a year say they are reading more books than before, but only 35% of those who have owned either device for six months or less make that statement.

This could mean that people just steadily increase their reading when they get a device. But another possible explanation (which I think is likely to be the more meaningful) is that the difference doesn’t have to do with how long people have owned a device but instead reflects the fact that the heaviest readers shift to digital formats first. The more recent converts are less likely to be heavy readers and therefore are less likely to increase their book reading because of device ownership.

6. In the December 2011 survey, 72% of American adults had read a printed book in the past year, 17% had read an ebook, and 11% had listened to an audio.

So ebooks passed audio in penetration of consumers in 2011. Audiobooks started to rise in popularity in the mid-1980s, nearly 30 years ago. eBooks have been gaining traction since late 2007, or less than five years.

7. In an 18 month period (June 2010 to December 2011), the number of people reading an ebook on the average day jumped from 4% to 15%.

This is a great data point and really illustrates the explosive growth of ebooks. The number of people reading an ebook on any particular day doubled twice in 18 months. Two more doublings would put the number of readers each day at 60% and, given that the heavier readers become digital first, that might constitute access to 80% of the consumption. The rate of growth will absolutely slow down; it will not double twice again in the next 18 months. But how much will it slow down? How about two doublings in the next three years? Five years? Whatever it takes, that’s the distance between us and an overwhelmingly ebook world.

8. A startling stat: more device owners are reading a printed book on any given day than an electronic one. Only 49% of Kindle and Nook owners are reading an ebook on any given day, but 59% are reading a printed book. Less surprising is that 39% of tablet owners are reading an ebook and 64% are reading a printed book.

Of all the data in this report, this piece would give the greatest comfort to those who believe the printed book has a long and prosperous future still in front of it. It would be considerably more helpful if we understood better which printed books these people are reading. If the device owners are reading novels in both formats, that’s quite a different thing than if they’re reading novels on their devices but using cookbooks in print. And we should remember a fact that Peter Hildick-Smith of Codex has imparted: ebook device owners tend to keep increasing the ratio of their reading to ebooks from print books over time.

9. One question delivered the most startling answers considering how far along we are in device penetration. The most commonly employed ebook reader is a plain old computer, on which 42% of people read ebooks as opposed to 41% on Kindles and Nooks. That’s surprising. Perhaps even more surprising is that more people (29%) read ebooks on a cell phone than on a tablet computer (23%).

As an iPhone-only book reader, I’m going to stop feeling like so much of an outlier. But there is even more significance to the fact that so much of the reading is done on PCs. That means two very important things to me. One is that a lot of people are reading in the office on their computers while their bosses and colleagues think they’re working. And the other is that all the hope that is harbored by illustrated book publishers that tablets will drive greater uptake of their ebooks, that sales so far have been constrained by the limitations of ebook readers, may already have been demonstrated to be futile. If nearly half the ebook audience already reads on fully capable PCs, they are already able to consume ebooks with color and illustrations and video and audio without needing a tablet. But they aren’t. The question is, “will they ever?”

10. eBooks narrowly nosed out print, 45% to 43%, as the favorite for reading in bed. Apparently they didn’t probe whether tablets or phones, which are backlit and enable reading without room light, are favored in that situation.

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Should trade publishers start ditching their B2B imprints for a B2C world?


I spent last Friday at the On Copyright 2012 conference staged by my clients at Copyright Clearance Center. CCC is an organization dedicated to generating revenue for content creators from what is referred to as “secondary” licensing, or uses that are not core to the publisher’s revenue stream and which are often impossible to manage from an individual publisher’s point of view. CCC has the interests of copyright-holders at heart and at the core of their enterprise, but they also live on the cutting edge of digital content consumption where mash-ups, fair use, and the reality that piracy often happens because rights are too difficult to license can’t be avoided.

I’ll admit that discussions of the nuances of copyright itself leave me mostly befogged. Fortunately, this event was much more about the practicalities of the marketplace than about the theories of the law.

The most engaging and interesting speaker of the day was Robert Levine, author of “Free Ride”, an analysis of content and the Internet that deeply questions the increasingly ingrained notion that getting paid for content is inherently contradictory with the growth of digital media. Levine is smart and open-minded about content models and DRM and piracy and enforcement. Indeed, one of the noteworthy features of the entire day was its willingness to entertain notions that might be considered heretical by copyright and old model zealots.

In fact, Maja Thomas, the chief digital thinker and strategist for Hachette Book Group USA, opened the door just a bit to the idea that DRM on ebooks might be counterproductive (at worst) or futile (at best). Maja’s background is extensive in audiobooks. She told the conference that she had been assigned to monitor the destruction of her audio business when DRM was removed from those products a few years ago. And, in fact, there was no destruction!

When the program ended, I dashed down to the front to introduce myself to Levine. He knew me before I said my name and “reminded” me that he had interviewed me during his research for his book. (Somebody else later told me, “oh yes, you’re in there.” I’ll have to read it…) I don’t know whether to blame the fact that my memory for these details is a sieve or that I do an interview or two a week with somebody about something and am seldom called upon to remember them later.

What triggered further thoughts for me (and, ultimately, the point to this post) was a discussion in that last panel, chaired by Michael Healy and including Levine and Thomas, about branding. There was a reprise of the frequent (and mostly accurate) meme that author brands are the ones that matter to consumers, not publisher names, with rare exceptions such as Harlequin.

I think that could be changing. Certainly the circumstances around it are. As publishers are challenged to think about and articulate the value they bring to the process, they often cite curation (publishing just the good stuff and filtering out all the inferior stuff) and editorial development (helping the author improve the work before it is published) as significant contributions. Thomas seemed to suggest that a lot of thinking is going into articulating a publisher’s value at her shop.

I have said for some time that the core value proposition for a trade publisher is “we put books on shelves.” That’s looking at it from the author’s point of view. From the consumer perspective, the curation function is seen to be performed by the bookstore and the hurdles that stores create to getting on those shelves assure that only well-conceived and well-edited books make it there. (There have always been exceptions, of course.) As the shelves for print books diminish and are replaced by virtual shelves that are not nearly so limited, books that might not have made the selection grade in a physical world are sharing space with the carefully (and expensively) selected and edited works of major houses.

And that brings us back to branding. Brands are shortcuts for their users, telling them in a name what they can expect from a product or service they haven’t sampled yet.

Publishing brands until the digital era were really shortcuts for the trade, not for the consumer. The buyers at chain and independent bookstores, the collection development team at libraries, and the editors of major book review media all believe they understand the difference between a Farrar Straus or Knopf book and one from a “lesser” house. That figures into the “hurdles” I cite above. Top publishing imprints found it easier to get placement and reviews and get their books in front of the purchasing public.

That fact (alongside the fact that big publishers grew by acquisition of smaller companies and often would preserve the name of the company they bought, which is how Knopf ends up a Random House imprint and Scribners is an imprint at Simon & Schuster, to cite two of far more examples than you’d care for me to name) started the proliferation of imprints we now see. It has been fueled by publishers’ use of imprints as way to attract and award top acquisition talent.

Imprints have dedicated editorial teams and usually some internal marketing resources, but their value as identities is diminishing. The point to them was always to provide useful branding for business intermediaries, not the end consumer. And, as they proliferate, their value for their original B2B purpose is diluted.

(It is currently fashionable to castigate publishers for their focus on the supply chain rather than the end purchaser. This fashion, along with the totally ignorant bashing of the convention of “returns”, is based on apparent indifference to the history and development of the business. When the entire imprint structure of publishing houses is built around B2B brand recognition and has been built up that way over a century, you’d think people would think twice before being reflexively dismissive of the B2B focus. It is really only recent developments that have turned it into a questionable idea.)

But times really have changed. Attention on the end user is rising; the intermediary structure is declining. And publishers should be rethinking their branding strategies, at the core of which are imprints, as they address the emerging marketplace realities.

Publishers seem to recognize that the competitive statement they need to make going forward is about quality, expertise, and investment in professional support for the creative effort. This will distinguish theirs from the swelling mass of self-published books which are usually sorted out today by their pricing. On the agency model, the Big Six books are $9.99 to $14.99 (a few bucks cheaper on the backlist) while the self-published books cluster around a band centered at $2.99.

That may actually work, for now. But what if big publishers want to compete at the lower price points but still make a “quality” statement? And some indie writers are trying to nudge pricing up a bit while publishers are experimenting with bringing them down, so what if we start to see both indie and branded ebooks in the $5.99 range? Can the big publishers do anything that would help them then?

I think they can, but it will be require a decision that is painful to make, considering their history. They should, for the most part, get rid of their imprints. They should brand every general trade book they publish for quality and professionalism, and that only requires one name per major house and could never benefit from more than two.

That is, knowing that a book is from the Random House family of books is all the quality branding the consumer needs. They don’t benefit from from the more nuanced distinctions between Crown and Knopf, and Random House scatters its consumer firepower to its disadvantage trying to establish multiple names in the consumer mind. (In fact, I’m not sure the big houses even try to establish all these imprints as consumer brands. If they’ve already abandoned that effort, they’ve taken the first step in the direction I’m trying to encourage here.)

If this idea is right, then each Big Six house should select one name (and logically, the single best known name they now have among consumers would be the most sensible choice), or perhaps two, and promote it. (The second name might make sense if there is an imprint already known for “quality”, like Farrar Straus or Knopf.) No other name should be promoted to consumers unless it is establishing a clear niche identity (Fodor travel books or tor.com science fiction, as examples). There’s no point establishing brand identity unless you expect consumers to return to it repeatedly, the way they return to stores to buy reading material.

Consumers can’t keep dozens of imprint names straight in their heads, but they can learn the names of six big houses, particularly if they’re starting with names they already know. Like the possibility that Random House should preserve the brand equity in Knopf in addition to building Random House as the general trade imprint, there are nuances to consider in other houses to best implement this strategy.

For example, should Penguin perhaps restrict the use of the Penguin name to classics and established backlist and use something different (Viking?) for everything else? Penguin, because of its publishing history, means something to some people, although I’d argue that not restricting the use of the imprint name to classics and the most distinguished backlist actually dilutes the meaning it might have.

Should Hachette, a name that probably has very low recognition to US consumers as a quality book imprint, be ditched as the brand? Should the company use Little Brown, the most venerable and best known of its imprint names, even though it has created an internal distinction between LB and its relatively new (and therefore mostly unknown to consumers) Grand Central imprint?

What’s the best known name the company now known as Macmillan has? Is it Macmillan? Or is it St. Martin’s or Henry Holt? Farrar Straus might have a cachet worth preserving at the high end, but it would be diluted if it were the overall brand. I suspect that should be Macmillan, but that’s not what they’ve ever called their books; it is just what they have recently started to call their company!

America’s biggest consumers of books can readily remember a few company names to signifying “quality”, and perhaps a few more to mean premium content. Knowing a book comes from an established company with a long list of previously-published titles that book readers are familiar with is the kind of signal people need to be persuaded to part with a few additional bucks for an otherwise unknown author. But that’s all we can ask the brand to do: signal professionalism and quality. The much more nuanced distinctions that the imprint names have been intended to communicate within the trade can’t possibly be delivered cogently to the public at large.

And since the public is now the brand target that matters, it is time to align brand strategy and the brands themselves to that reality.

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