August, 2012

Things to think about as the digital book revolution gains global steam


The switchover from reading print to reading on screens, with the companion effect that increasingly the purchase of books is done online rather than in stores, is far advanced in the English-speaking world and especially so in the United States. In the past 12 months, the UK has begun to resemble the US market in this way.

With all due respect to everbody else, the primary driver of this change has been the efforts of Amazon.com. They made the online selling of print books work in the US and then provided the critical catalyst — the Kindle — to make ebooks happen. Other players — Barnes & Noble and Kobo with their devices and the publishers with their sales policies — have crafted their strategies primarily in response to Amazon. They are participants building out a market that Amazon first proved existed.

The impact of digital change in the US and UK markets has been both profound and severe. Bookstore shelf space has been lost at a rapid pace. (This has long struck me as the key metric to watch to predict industry change.) I have seen no estimates to quantify this, but with Borders gone and Barnes & Noble devoting much less space to books than it once did and the disappearance of many independents, it seems apparent that half of the bookstore shelves that were available in the US in 2007 are gone by now. The book trade in Britain is moving in a similar direction.

The publishers are well aware that their ecosystem has changed and that they have to change too. Many have changed their workflows so that ebooks and print books can be outputs from the same development process. They are all seeking new ways to interact directly with readers, which no general trade publisher would have considered doing ten years ago. They are learning about how to deliver their digital products with better metadata. They are learning to optimize that metadata for search. They’re trying to build vertical communities — or at least develop vertical audience reach — and developing new services and products to sell to the customers that they attract with their books. They’re recognizing that digital distribution newly empowers authors and responding by trying to make the experience of working with them more author-friendly.

And they’re recognizing that the world is getting smaller: that their outputs can reach readers outside their home market much more readily than ever before. That recognition is particularly useful to American and British publishers because English is the world’s leading second language, with potential customers for English language books in every country in the world.

Change has come much more slowly in non-English markets. There are many reasons for that. One is that the US and Britain have exceptional — if not unique — marketplace rules that encourage retailers to compete for book sales using pricing as a tool (or, if you prefer, as a weapon). Amazon used deep discounting to solidify its position in the late 1990s when it was building its print-selling hegemony and then again to create locked-in ebook customers for the Kindle when it launched in 2007.

The combination of price controls on books and VAT rates that have been uniformly higher for ebooks than they are for print have prevented Amazon from replicating these tactics in some other markets. There are cultural differences as well; American (and British) consumers seem more relaxed about online credit card purchases than are the citizens of many other countries in the world.

And because there was a market for ebooks in English before anyplace else, the investments have been made to assure a large reservoir of titles in English faster than for any other language.

But four major companies — Amazon, Apple, Kobo, and Google — (as well as a number of smaller ones) have been methodically building out a global infrastructure to deliver digital downloads (of books or anything else.) Barnes & Noble, which has been the most successful Amazon competitor (albeit only in the US so far), has just gotten a large investment from Microsoft to help finance a global expansion and has announced its first non-US online store will open in the UK shortly.

So the roads to deliver ebooks to the global consumer have been getting paved, even if there is very little traffic on most of them so far. It seems unlikely (at least to me) that there will ultimately be much variation in the ratio of digital to print reading by country or language. (One exception: I’d expect the poorest parts of the world to get to near-zero print faster than the developed world because, ultimately, distributing books electronically will be so much cheaper that printed books will become a relative luxury.)

The US and the UK transitions are in some ways instructive to the book businesses in other markets as they prepare for a similar period of change. But, cultural differences and local commercial rules aside, the next five or ten years outside the English world will only share some of the characteristics of what the English world has seen. Because times have changed.

There are some real differences in circumstances between how things stood when the transition began in earnest in the US and UK five years ago and what we’ll see in the rest of the world over the next five years.

** The companies that built the digital distribution infrastructure for English were “local”, English-speaking, companies. Amazon, Apple, Google, and Barnes & Noble are American; Kobo began as Canadian (which feels local enough to an American). Michael Tamblyn of Kobo has spoken very articulately about what it takes to open up business in a new market and building a team of locals is high on the list of requirements. I think we can expect local language players to be critical partners in most markets as ebooks roll out. That will be less true over time as proprietary device sales by the retailers decline in importance. Which I say because…

** The key for all the players in the first five years of the ebook revolution (which I’m dating from November 2007, when Amazon introduced the Kindle) has been a total offering: device and store. Many who were disappointed by the relatively minor impact of Google in the US, despite its attempt to build an alliance with independent bookstores, blamed the fact that Google had no device to compete with Amazon, Apple, Barnes & Noble, and Kobo. Of course, Google recently introduced a phone and the Nexus 7 tablet.

It seems likely that the proprietary ereader will have much less impact going forward. (The Nexus 7 isn’t an ereader; it’s a tablet. And Apple doesn’t sell an ereader; the iPad is also a tablet.) When Amazon entered the market, there was no widespread distribution of devices people could read an ebook on, so Amazon had to get them out there. This created an obvious challenge that came with a robust opportunity, which was device lock-in of the customer base for future content purchases.

This is no longer true. Tablet computers are ubiquitous and the question is already being posed whether eink readers dedicated to displaying straight text have any future.

So while device distribution was an important part of building the ebook markets in the US and UK, ebook sellers in non-English markets will be peddling into an environment already heavily seeded with devices.

This cuts both ways. On the one hand, there is an installed base of capable devices, which could speed up ebook uptake. On the other hand, those devices will play movies and songs and do email, so, unlike the original Kindle or Nook, they don’t represent a screen walled off from temptation that tempt you away from a book.

** The selection of ebooks in English is in the millions of titles. Many people around the world can read in English. As they develop ereading capability, they could be tempted by the wider selection of titles in English than they’ve ever seen in any language in local stores, particularly in places where digitization in the local language lags. This is, in the aggregate, a big opportunity for English-language content but, in most individual cases, only a minor sales erosion challenge for local language publishers. All things being equal, people prefer to read in their native language. But the ratio of title availability between English and most other languages makes things far from equal.

** Digital makes everybody global. We’ve observed that ends up engendering competition from English. But it also enables smaller language publishers to find their global diaspora much more effectively than they could in print. I’d expect marketing to pockets of same-language readers distributed around the world will be a worthwhile skill worth to develop to stimulate ebook sales. Digital brings the sale closer and makes the promotion cheaper. It really changes the equation.

** There is another way it will prove important that publishers in a digital world are no longer restricted to publishing for their local market. We learned from some Slovenes last year about small-language publishers who translated their original fiction into English to give them a chance to sell rights in all languages. Now they’re in a position to publish those English translations digitally at very little additional cost. This is an opportunity we are seeing non-English publishers recognize and at least one US entity, Open Road, has seen the opportunity from the other end. They’re courting those publishers for distribution and marketing in the US market.

In fact, the German publisher Lubbe is doing original ebooks in both English and Chinese.

One thing that will be different but similar in the rest of the world will be the decline of bookstores. Retail price maintenance and the fact that in many markets publishers own the bookstores will definitely slow the process down compared to what we’ve seen in the US and the UK, but if the sales move from stores to online (and ebooks will compel that, despite some elaborate schemes and fantasies to preserve a place for stores to sell digital), the stores can’t stay open.

At least the non-English markets will get the benefit of seeing how the English language copes with the challenges of discovery and marketing in a digital reading environment.

Maybe they can even solve the problem of making illustrated books succeed in a digital format, which the English world has not done yet. The Italian publisher RCS (owners of Rizzoli, among others) have done this for a handful of titles so far in a market that has hardly moved the digital needle overall but the successes have been too few in number to call the problem “solved” yet. Perhaps the English-language publishers will find something to learn from them.

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I keep wanting to make an observation that isn’t worth a whole post, so I’ll stick it here. The “Fifty Shades of Gray” phenomenon, which hit our collective consciousness in March, was foretold by our Romance study at Digital Book World last January. (A hat tip and thanks to AllRomanceebooks for having done that survey for us.) What at first glance appeared to be the romance community “voting” with their purchases for less DRM turned out, on closer examination, to be votes for more sex. I made the point in this piece that mainstream publishers might be letting fledglings steal the market for raunch. Those days are over.

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This piece raises a lot of issues we’ll be covering at our Publishers Launch Frankfurt conference on October 8. Many of the players mentioned here will be speaking there. Check out the entire program and I think you’ll agree that if you can get to Frankfurt on the Monday before the Book Fair, you’ll want to be there. We have shifted the time of the conference slightly, starting at 10:30 instead of 9, to make it easier to travel in that morning and make it.

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DBW lets us look at ebook bestsellers by price, and things are revealed


Digital Book World unveiled its new ebook bestseller lists this morning. They put this effort together — I program the annual January conference for them; this work has almost nothing to do with me (although I’m over-generously credited with having provided “guidance”) — over the past couple of months working with Dan Lubart. Lubart owns Iobyte, which had been tracking ebook sales and rankings for over a year before he took a job at HarperCollins late in 2011.

It occurred to me a long time ago that ebook bestseller lists had a core flaw. Because many print book lists were sorted by format (hardcover, trade paperback, mass-market paperback) — USA Today’s is an exception — they were effectively “tiered” by price. But ebook pricing, famously a point of contention as publishers tried to maintain higher prices in the marketplace through agency agreements, varied widely and that variance was obfuscated in the lists.

So when four self-published authors land on the NY Times list, the stories saying so don’t even mention the big price advantage working at the back of two of them, whose books were 99 cents. All the more credit, of course, to Colleen Hoover, who scored with two books on the list priced at $7.99. She has since signed a contract with Simon & Schuster. (Bella Andre, who has books at $4.99 on the list, spoke for us at Digital Book World III last January.)

In the absence of prompt unit sales reporting by accounts, which doesn’t seem to be on the horizon any time soon, the only way timely lists of this kind can be assembled is with a certain amount of informed guesswork. (You can collect unit sales numbers through the publishers, but only with a very serious time lag.) The Lubart-DBW team can see the sales ranks of all these books on the various ebook vendor sites, but they have to take educated guesses about how to factor in the different rankings (power law curve; sales drop sharply as ranks drop) and different account sales power (number five on Amazon almost certainly sells more than number five anywhere else).

So nobody’s list can be above dispute.

DBW’s methods, which I have discussed with them and which Lubart lays out in a post, are objective and reasonable and constantly under review. So their lists deserve to be treated with respect and analyzing what they tell us is worth the effort.

First of all, there is a striking lack of self-published material represented. There is not one self-published ebook in the overall Top 25 and only two appear at all, both on the lowest price band (from zero to $2.99).

Secondly, there is a publisher I hadn’t heard of that shows up with two titles in the cheapest band and with one in the next one up ($3-$7.99). That’s “Entangled Publishing”, which has an interesting business model that Jane Litte talked about on her blog a couple of months ago. They’re also intriguing because one of their hits, a book called “The Marriage Bargain”, was on the Hollywood radar screen when I was out there talking to people two months ago. Now they know there’s a new publisher to watch.

The Top 25 break down by publisher this way: Random House 10, Penguin 5, Scholastic 3 (we know what those are), Simon & Schuster 2, Hachette 2, Macmillan 1, HarperCollins 1, Soho 1. (Soho is an independent New York-based publisher.)

But what is even more interesting to me, and which defies the notion that the big publishers aren’t aware of the value of lower pricing, is how the list breaks down in the lowest price tier (they list 10 titles): Random House 2, Self-published 2, Entangled 2, HarperCollins 2, Soho 1, Penguin 1.

Six of the top 10 titles under $3 belong to the Big Six.

The Big Six plus Scholastic have seven of the top 10 in the $3-$7.99 price band as well.

Above $8, only Kensington breaks the monopoly of the Big Six, with one title.

So it would appear that the notion that The Big Six are hurting authors by pricing their books too high is not borne out by this data.

It will be particularly interesting to watch how the lists change in the various price bands later this Fall if the DoJ settlement is approved and the retailers are free to set prices on the output of half of the Big Six.

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Barnes & Noble announced today that they’re going into the UK with partners they will name later. This was a move the industry has been waiting for. The expectations that B&N would team with Waterstone’s were dashed by the surprise deal the British retailer announced with Amazon earlier in the summer.

This is a very important move by B&N. They absolutely have to get global to be a long-run competitor in ebooks, and Britain is certainly the logical place to start.

I see two big issues for them. The obvious one is that they probably won’t be partnering with a signficant book retailer since Waterstone’s has their Amazon partnership and WH Smiths is partnered with Kobo. So they might get a lot of consumer reach — through one of the supermarket chains, say — but the core book market won’t be instantly accessible.

The less obvious one is that dedicated ebook readers, which is where Nook is strongest, particularly with the Glow, are losing ground to a plethora of tablets, led by iPad, of course, which is rumored to have a new smaller version coming. There is a reasonable theory that the eink device has “peaked” and that multi-function tablets will be the point of entry to the ebook market for new consumers in the future.

In fact, that theory is one we’re discussing at our Pub Launch Frankfurt conference on October 8, as Peter Hildick-Smith applies his Codex Group research data to the question of how digital markets will shape up in countries beyond the US and the UK in the future. At the same event, B&N executives Jim Hilt and Theresa Horner will appear as well.

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Some brief comment on news items from this week


Wiley announced a few months ago that they wanted to sell some of their most consumer-oriented lines of books (although, as Cader makes clear, what they announced they wanted to sell constituted only about 20% of the sales volume of the division that houses these titles.) The first sale under that initiative was announced this week: Google bought the Frommer’s travel books for a price apparently somewhere between $23 million and $25 million.

Google had previously purchased the Zagat’s guide business, and the Frommer’s acquisition was (properly) seen as part of Google’s effort to ratchet up its content for travel and for local searches. Attention has been focused on whether they would continue to publish the books (they say they will for now, but plan to reassess) and whether this means publishers should now worry that Google will become a competitor.

Another common, and accurate, observation is that this transfer signals a shift to a different monetization model for content, from selling packaged bundles like books (or ebooks) to delivering nuggets of information at the point of need.

But there’s one relevant observation I haven’t seen, at least so far. Wiley’s Frommer’s travel line is one of two, to my knowledge, that has created a real B2B content-selling business. (The other one is Random House’s Fodor’s travel line.) Indeed, the New York Times, in their story about the transaction concluded with this:

Google also declined to comment on what will happen with companies that have worked with Frommer’s to show its reviews, including Kayak and The New York Times, which licenses destination-related content from Frommer’s for its Web site on an annual basis.

There are two possibilities here and I don’t know Google well enough to predict with confidence which one is right. One is that they like the model of licensing content to websites, will continue it with Frommer’s, and will learn from it to extend it to other businesses somehow. The other — which intuitively seems less likely — is that they are happy with their already-developed model of being the key aggregator of dispersed content and would prefer that this content be found through general search or through the many tools they provide sites to provide customized Google search on their sites. If that’s the case, perhaps they’d unplug those deals as contracts allow.

If the former is true, Google might create opportunities for other companies to syndicate content without building the infrastructure to do it. If the latter is the strategy, then an opening just got created for one or more of the other travel brands to pitch Kayak and The New York Times and all other Frommer’s customers on replacement content. So there will be a few players watching developments here very closely (or maybe they already know the answer).

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Also this week, Royalty Share CEO (and attorney) Bob Kohn filed an additional brief for Judge Cote to consider before she rules on the DoJ settlement with Hachette, Harper, and Simon & Schuster. Kohn’s brief is full of new information for those of us who aren’t lawyers (and perhaps for many who are who haven’t done as much homework as he has!)

New to me from reading Kohn’s paper:

1. Apparently, the law, as defined by the same court where this case is now (the 2d Circuit) in a ruling in 1981, defines pricing below marginal cost as “predatory pricing”, which is “presumptively illegal”.

2. Kohn interprets the Sherman Act to allow conduct that results in raising “illegally-low” prices.

3. The DoJ’s finding that Amazon’s pricing wasn’t predatory because the ebook unit was “consistently profitable” was inconsistent with the Court’s ruling in 1981.

And, for good measure, Kohn wants DoJ to turn over to the court (the linked article contains the whole Kohn brief) the evidence that led them to that conclusion. (I’m sure the whole industry would like to see that!)

Kohn is also urging the Judge to hold a hearing before ruling. He argues that to determine if the settlement “is in the public interest, it would be perverse if this decision were made without a public hearing.”

I find it hard to quarrel with his logic. I leave it to the lawyers to argue about his legal citations.

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OK, this one isn’t really from this week. But here is a survey of published authors from the UK, which I discovered this week and found to be very interesting. Seems like they got something over 300 responses (as of these results) with most coming from authors who were published by big houses.

Most seemed quite happy with the development of their book: the editing, the cover, the presentation. They were less enthusiastic about the marketing efforts they saw on their behalf. But, all in all, I thought it spoke to pretty high satisfaction with the publishers, particularly when you consider the highly disproportionate effort the big publishers put into a very small number of books whose authors are mostly getting very large advances and whom I doubt would take time for a survey like this.

What I found really interesting, and counterintuitive, is that of those authors who expressed an opinion about whether they’d have a publisher in 5-10 years, they thought by about 4-to-1 that they would. But asked if they’d have an agent in that time span, the margin was only 2-to-1 that they would.

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Perhaps the revolution has reached an evolutionary stage


The dizzying pace at which US consumers were switching from print to digital couldn’t last forever. Based on the numbers being published by the AAP, with a huge assist in interpretation by Michael Cader at Publishers Lunch, it seems that the slowdown has become very noticeable in the past 12 months.

Between late 2007 when the Kindle came out and late 2011, ebook sales doubled or more every year. Since September 2011, during which Cader reckoned sales were double the year before, the monthly numbers are showing much lower (and declining) year-on-year growth. The April numbers showed only a 37% increase from the year before.

I’ve been pondering this question about when ebooks uptake would slow down for a long time. In March of 2010, 17 months ago, I wrote that my hunch was that the switchover “won’t start slowing down until ebook sales are 20-25% of what a publisher expects on a new title.” And I guessed that would occur before the presidential election of 2012. That feels reasonably consistent with what appears to have happened.

Cader also cites reports from Penguin and Simon & Schuster to document the slowdown. Penguin says ebook sales growth was about 33% in the first half of 2012. And Lunch reports that Carolyn Reidy, CEO of Simon & Schuster, told them she expects about 30% growth in ebook sales during 2012. That would almost certainly constitute their (or anybody else’s) fastest-growing sales channel, but it sure isn’t the annual doubling and tripling (or more) we had seen for several years.

A couple of weeks earlier, Cader dissected the BookStats reporting of publisher sales numbers. As longtime readers of this blog know, what I think is the important metric to watch is “store sales versus online sales”, rather than “print versus electronic”. Store sales are all print, but online sales are not all electronic. The reason I think the channel distinction is more important than the format distinction is because scale is far more useful to deal with retail stores than it is to deal with any online account. The reasons are two: inventory and logistics.

BookStats reports that publisher-direct sales to online retailers — this includes both print and digital, but does not include sales that went through the wholesalers — were about 35% of the total of sales to store and online retailers combined. Online is said to have risen about 35% in the past year and brick stores have declined about 12.6%. My rough math says that the combined total of the two was pretty close to equivalent — down about one percent. Since ebook sales are rising and ebooks are generally cheaper than print books, this passes for “flat”.

The other thing to pay attention to is the difference in ebook sales by type of book. Based on anecdotal evidence, I believe that genre and commercial fiction sales might be approaching half ebook already. (BookStats reports that unit sales of all fiction are currently 64% print and 34% digital.) Narrative non-fiction is about half that. Illustrated books of all kinds are slivers of that.

There are many things we don’t know.

We don’t know how much of the sales growth decline in the past year is due to the publishers’ success at driving up ebook prices. To the extent that’s the cause, we might see the pattern change again when (as I expect) the DoJ settlement is approved and the shackles come off Amazon’s pricing policies.

We don’t know how much of the sales growth decline in the past year might be due to the consumer switchover from dedicated ereaders to multi-function devices that offer them other media and games — and email for that matter — to compete with books. To the extent that’s the cause, the slowdown trend might well be extended because it is likely that a lot of people will switch from eink readers to multi-function devices as those devices continue to get cheaper.

We don’t know to what extent store traffic is affected by the continuing shift of bestsellers, particularly in fiction, to digital consumption. In the short run, there is probably a positive impact on the display space and sales opportunities for illustrated books and children’s books. But, in the longer run, how many stores can survive if the bestseller business continues to move away from them?

We don’t know whether mass merchants will continue to see books as worthy of their shelf space. They sell a lot of genre fiction, which is the most challenged by inexpensive independently-published (and not all of those are self-published) ebooks. And they can switch square footage from one thing to another at great speed and with no sentimentality at all.

But, all in all, the slowdown we’ve seen is good news for the legacy publishing establishment and it will be better news if the trend continues. Anything that slows the decline in brick store market share and the rise in Amazon’s buys time for big publishers and competing retailers to adjust their infrastructures and build new business models that are more effective for the future.

Unfortunately for them, the denouement of this round of DoJ activity is about to give things a sharp shove in the other direction.

If understanding new business models and other new ways for publishers to do their business is important to you, our Publishers Launch Frankfurt event on October 8 should be on your calendar. We are featuring a number of Publishing Innovators from around the world: executives who are inventing those new business models that will enable publishers to thrive in our new digitally-influenced publishing environment.

This conference is worth a post of its own, and it will get it very shortly. But the bottom of this post felt like a good place to point that we are going to feature many outstanding industry- leading publishing executives (and not just from the English-speaking world) who are doing things almost nobody else is. Yet.

And we’ve changed our event time from the normal 9 to 5 to 10:30 to 6:30 to allow people to arrive in Frankfurt on that Monday morning and not miss any of what will be one of the most illuminating events we’ve done.

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Going where the customers are might be an alternative to selling direct


The news that Faber in the UK has partnered with a company called Firsty Group to offer direct-to-consumer services to their distribution clients again calls the question about publishers selling direct. In my recent post about the likely outcome of the DoJ settlement being accepted by the Court, I said I was re-thinking my admonition that all publishers should sell direct because it would appear that Amazon (and all retailers) will now be free to discount ebooks to their heart’s content and therefore can undercut any publisher’s prices if they want to.

It would appear that the wholesalers would have the most to gain from publisher-direct selling. The win for them would be complicated, because the ones with the most to lose would be the retailers who are the wholesalers’ best customers. But, ultimately, as Amazon demonstrated clearly nearly two decades ago and, most recently, F+W Media proved again, anybody can become a retailer of a large selection of print and digital books simply by setting up an account with Ingram or Baker & Taylor. (Amazon started out by having the wholesalers ship the books to them which they then re-shipped to the consumer. F+W works with Ingram on the same model, probably because their own books are combined in many of the orders and they’d lose margin unnecessarily if they had Ingram ship their books.)

Ingram brings a staggering selection of printed books through its warehouse holdings and the millions of titles available to print-on-demand through Lightning, as well as the Ingram Digital ebook wholesaling capability that represents most of the ebooks published. (Setting up distribution for an agency publisher through Ingram also requires the active cooperation of the publisher.) Baker & Taylor is trying to couple its Blio ebook platform, which handles illustrated books but does not have anything like the title selection Ingram has, with its warehouse print inventory, to provide a slightly different combination of titles.

The bottom line is that you don’t have to own inventory to offer a wide selection.

Phil Ollila of Ingram expanded on their approach to direct selling. They provide what they’re good at: inventory and fulfillment and the database of titles. They refer publishers to other service providers for the “cart and card” component of ecommerce. There are a variety of reasons, including potential tax issues involving “nexus” and the requirements of PCI compliance, the rules about what you have to do if you’re storing consumer data, that Ingram prefers to leave that portion of the business to specialists.

But Ollila also reports that Ingram found recently, surveying the top 100 web sites for which it does digital fulfillment, that about half of the top sellers were publishers. A few of them are selling books from other publishers, but most are just selling their own ebooks very successfully. So either my theory about Amazon undercutting these publishers on pricing is just wrong, or they haven’t turned their attention to these “competitors” yet.

Any business the size of a major publisher which has the ability to sell digital downloads (with or without the ability to sell printed books too) would find useful opportunities to employ it. Or, put another way, not having the ability to complete transactions with consumers would constrain a publisher’s ability to build the direct relationships with end users that so many believe are essential to the future of publishers. Being able to offer distribution clients what might soon be seen as an essential capability for publishers is probably what motivated the Faber deal with Firsty.

One vision of the future that appeals to me is that every web site that has any substantial traffic could offer books and/or ebooks as a combination service to its audience and enhancer of its revenues. I thought this would be the proposition we’d get from Open Sky when they first came on the scene but they changed the business model away from providing that capability. A fledgling retailing platform called Zola Books has a variation of this idea — individually curated “stores” that they host — built into their planning. I liked the idea when Open Sky had it originally and still do; it will be great if Zola can pull it off.

The creative minds at Random House have come up with a different approach to capitalize on the potential for the widely distributed retailing model. They’re prototyping it with Politico, which has a huge audience of the politically-interested.

Random House now merchandises Politico’s “Bookshelf”: its hosted bookstore. The store displays a wide range of titles from all publishers, divided by political category, on which you can click through for additional information. Then you can buy, offered a choice of retailers. I saw the choices Amazon, Barnes & Noble, Politics & Prose (a local store in Washington, DC) and Apple’s iBookstore.

In addition, on the bottom of many, if not all, of the Politico stories, there is a row of additional book offerings called “Related Books on the Politico Bookshelf.” The books in that row below the stories are all Random House books.

Aside from curating the store, which gives Politico both value-added information for its site visitors and an additional revenue stream from affiliate sales (which they presumably share, although I don’t know the commercial arrangement), Random House can help Politico publish.

Random House is developing technology to help them curate the offerings of all publishers for the Politico store. This is no small feat from a standing start. But building the technology that can curate from metadata has additional value. They learn how to combine the metadata associated with the title file with what they can learn about sales ranking and placement by observing what is happening at other retailers. And they’re learning about their competitors’ lists as well in a different way than they ever had before. It seems likely that this knowledge will someday help inform acquisition decisions for new books and the positioning — timing and pricing as well as marketing emphasis and metadata creation — of the books as they publish themselves.

This approach gives Random House what amounts to a gatekeeper position for book offerings to Politico’s substantial site traffic. If they’re acquiring a book appropriate to that audience, they have that marketing exposure and sales opportunity to factor into their revenue calculation (and into their pitch to the agent that they’re the “right” publisher). Other publishers’ books will be sold there too, of course. But they aren’t the gatekeepers, so they can’t be as confident of the boost, and they certainly can’t promise it to an author. And Random House has the exclusive opportunity to exploit the “related books” shelf on each story page.

Meanwhile, Random House is developing the curation and merchandising tools that will enable them to do similar things on sites that have robust traffic for different topic verticals. If the Politico experiment works, they have a very appealing capability to put in front of all of the most heavily-trafficked sites for which a curated book offering would be an attractive value-add.

Random House has essentially chosen to develop bookstores without cart and card. They’re not collecting customer names with their ecommerce or building an installed base of consumers whose credit cards they have on file. Rather, they’re organizing somebody else’s traffic to be distributed to the retailers they are already doing business with.

And, of course, in the same way that Amazon started out relying on the wholesalers for books before they went to buying most of their inventory direct, Random House can install the ecommerce engine any time they like and add a “buy direct from us” button to the choices.

I see this as building future distribution with a trade publisher’s mentality, which is “I don’t need to own the customer; I need to reach the customer and I’m perfectly happy doing that through an intermediary that does lots of work to attract the customer.” If the combination of curation and publishing tools that it can offer site owners like Politico is sufficiently attractive, one could imagine Random House building a network of high-traffic sites with very extensive consumer reach which would, in effect, comprise a new distribution model.

The Random House approach has opened my eyes. It has long been clear to me that the web would organize people by vertical, as it has, and that ultimately specialized content would be found and transacted within the verticals. I leaped to the conclusion that the publishers needed to be the vertical, or own the vertical, in order to thrive in that environment. That is essentially the strategy being executed by F+W Media and Osprey, to name two outstanding examples (both of which have recently made an acquisition that substantially increased their size, F+W of Interweave and Osprey of Duncan Baird).

But Random House is showing another way: becoming the book specialists for the verticals. It is too early to know whether the experiment being executed at Politico will turn into a replicable business model. But it sure is a smart idea to try.

While I was Googling doing some research for this post, I was stunned to see this on the site for the Firsty Group [see update below] that I refer to at the top. It was disturbing to see that they’ve been lifting my posts verbatim and posting them without attribution to their own site. (In fairness, there is a link, but you have to intuit that it is there to find and use it!)

On reflection, it appears that what they’re doing is just publishing our RSS feed, which a) does include the whole post and b) leaves out any “author” name. In that case, this copyright violation is actually being done “unconsciously.” I’m checking out whether that’s true with this post, because they certainly wouldn’t be posting something where I call them out for copyright violation except in an automated way!

Once we see what happens with this post and confirm my hunch that the behavior is automated, we’ll send a polite takedown notice and suggest that Firsty change its policy to post only the first X words of an RSS with a link through. (We are also exploring changing our RSS feed, but we actually don’t want to inconvenience people who are using it legitimately.)

I cast no aspersions on Faber here. They’re a great company and I’m sure they and Firsty deliver a solid service together.

***Very quickly as this post went live, we got an extremely apologetic note from Firsty explaining that, indeed, they were working from the RSS feed, and they indeed did have a protocol of cutting off the article and then linking through. For whatever reason, it wasn’t working on my stuff and, apparently, only on my stuff. They did a takedown while they investigate and fix and asked that we agree to allow them to continue to host our RSS samples after they had. Of course, we agreed. Great to know that it was a mistake and that they were alert enough to jump on it quickly. All’s well that ends well.

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Somebody please tell me the path to survival for the illustrated book business


My eye was caught at the end of last week by a story in The Bookseller that acknowledged that ebooks just haven’t worked for illustrated books. It appears that the publishers of illustrated books they spoke to for the piece think that situation is temporary. The Managing Director of Thames & Hudson, Jamie Camplin, is quoted as saying “you have to make a very clear distinction between the situation now and the situation in five years time.” And Dorling Kindersley CEO John Duhigg emphasized that his team is being kept up to date with digital workflows and innovations, so they can “be there with the right product at the right time.”

But maybe, except for an opportunity that will arise here and there, for illustrated book publishers trying to exploit the same creative development across both print and digital, there won’t ever be a “right time”. There certainly is no guarantee there will be.

Duhigg characterized what he called “the black and white digital business” (but which I think would more accurately be described as “the immersive reading digital business”) as “flowing along” while admitting it is “very different” for the companies with “fully-illustrated lists”.

That’s accurate. Expecting that to change could well be wishful thinking.

Illustrated books in printed form depend on bookstores more than novels and biographies do. If the value in a book is in its visual presentation, then you might want to look at it before buying it, and the view you’d get of it online might not be doing justice to what you’d see if you held the book in your hands.

Camplin sees that optimistically. He has an aggressively modernist view of what will happen with novels. “I don’t see why print should survive at all for fiction, beyond the odd bibliophile” which he apparently believes could open up more bookstore display space for illustrated books.

But if the buyers of Patterson and Evanovich and 50 Shades of Gray aren’t visiting bookstores to make those purchases anymore, will there be any traffic to look at the illustrated books, however prominently they are displayed?

This problem has been nagging at me for a while. Books are illustrated for two reasons: beauty or explanatory purpose, more the latter than the former. When they’re illustrated to better explain, such as showing you how to knit a stitch or make a candle or a piece of jewelry, wouldn’t a video be a better option most of the time? If the illustration is a map, isn’t it likely that being able to manage overlays digitally (for the movement of the weather or the troops on the battlefield or the adjustment of borders over time) will deliver more clarity than whatever stills were in the book?

Of course, these things can be done by book publishers for the digital versions. But they require creating or licensing and then integrating new content assets and rethinking and redesigning the presentation. And that’s not even accounting for the work involved in adjusting the content to multiple screen sizes, a problem that just keeps getting more challenging as more different tablet and phone screen sizes are introduced.

One major publisher I know really endeavors to make ebooks of all their new title output, which includes some imprints that do a lot of illustrated books. Like everybody else, they frequently see ebook sales of 50% and more of their fiction, and 25% or more on immersive-reading non-fiction. But the illustrated books are in the single-digit percentages most of the time, with some of the more successful categories in the very low double-digits.

This is in the US — two years or more after the launch of the iPad and Nook Color and nearly a year after the launch of the Kindle Fire. Poor sales of illustrated ebooks can no longer be attributed to a lack of devices that can deliver them effectively.

And the ubiquity of these highly-capable devices brings its own new set of headaches. We were discussing the recent Bowker reporting that more people are reading ebooks on multi-function devices than on dedicated e-ink readers with our favorite expert on reading habit data, Peter Hildick-Smith of the Codex Group. He concurs and says that, as a result, the ebook consumption per reader threatens to go down.

Hildick-Smith points out that the tablet is a sea change in the history of content and consumption. Up until now, each content form had its own delivery mechanism. Records and cassettes and even MP3s were delivered through devices made just for them, just like the programming on TV and radio. Books on Kindles and Nooks replicated that paradigm. When you turned on your Kindle, you were as buried in your book as you were when it was in paper.

This is no longer true. If the book you’re reading on an iPad or Kindle Fire or Nexus 7 gets boring or you get tired of it, you can switch to a movie, The New York Times, your favorite song, or Angry Birds with the same device. Or the chime on your iPhone will ring taking you out of your book to answer an email.

For the publisher of novels, this means the book is competing with other media that would accomplish a different purpose. For the publisher of illustrated books, the book also must compete with media accomplishing the same purpose (how many new instructional videos of knitting stitches or jewelry-making techniques are posted to YouTube every day?) But they can’t do it for the same price, because that price is free.

So the illustrated book publisher not only has to learn how to make videos (a skill they were never previously required to possess), they also have to come up with a business model that enables their videos to be part of a priced commercial product, competing with legions of them that are free. And they have to finance a substantial creative component that isn’t contributing value to the print version at all.

We know our industry is changing radically. Different business models are challenged in different ways. Most of our time on this blog, perhaps too much of it, is spent contemplating how that affects the biggest publishers and the biggest books. There’s a reason for that. Big books have always driven the consumer book business and that seems to be more true than ever, not less.

But the challenge for — very specifically — “general illustrated book publishing” seems much more severe. The big publishers I’ve talked to apparently see that. Nobody has been explicit about it, but it sure feels like they can see a profitable path to navigate digital change with immersive reading books but not with illustrated ones.

I’ve also talked to mostly-illustrated publishers. Nobody says “you’re wrong, Mike. This is how we’re going to continue succeeding using our content-development skills, marketing capabilities, and talent network when bookstore shelf space is insignificant.” A couple of them have said “I don’t agree” without specifics. Most admit that they see the problem but haven’t yet figured out a solution.

There may not be one.

Camplin of Thames & Hudson is quoted at the end of The Bookseller piece saying, “I think it’s sort of a waste of money to assume the market is there [at the moment]; however, it would be foolish to say it will be this way forever.”

It might be equally foolish to say, or bet, that it won’t.

Of course, there is one strategy that can work: a vertical one. If you’re using illustrated book output to build a community of the interested, then you’ll presumably be able to sell them other things (software, live events, databases, services) when illustrated books are past their sell-by date. That’s the Osprey and F+W strategy and you can see sense in it because books are only part, and almost certainly a diminishing percentage, of their sales portfolio.

In fact, it is companies like these that might use technology like Ron Martinez’s Aerbook Maker tools and be able to use their books as a springboard to digital products with commercial value. They’ll probably also want to discover fotoLibra’s “advanceImages” scheme for micropayment of royalties instead of advance licensing fees for photographs. What Aerbook and fotoLibra offer can reduce the cost of creating an illustrated or enhanced ebook by 80%. That would certainly help.

It’s been obvious to me for a long time that managing the cost side of enhanced ebook creation is critical, which is why I was a sucker for the original Blio pitch in December of 2009.

For any publisher who claims a vertical strategy is their solution, the metrics to track are the sales they make of things other than books and the sales they make outside of bookstores. That is: track what is sustainable and has the potential to grow, not what is bound to shrink.

Relevant piece of anecdata: I remember being told by somebody at Wiley a couple of years ago that a large portfolio of photographs added measurable revenue on their travel sites. For very little cost, they could make a selection of photographs available for browsing. People clicked through them pulling up a new ad each time they did. That’s the “illustrated book publishing” of the future, but it starts with having the audience.

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Just because the author does a lot of marketing doesn’t mean the publisher can’t help


The growing (but still tiny) group of very successful self-published authors and those who believe that they are a harbinger of the future have a big stake in the notion that “social network marketing” will replace the “legacy” techniques established over many decades and still employed by many houses. In fact, the houses themselves are increasingly committed to the various avenues that, unlike the megaphones they have historically relied upon, are available to the authors directly without their help.

But for the self-published authors, they’re the whole ball of wax. And when it is argued that self-publishing is the better course for authors, two assumptions seem to become tacit: 1) that the print-in-store sale doesn’t matter and 2) that if the marketing to be done is mainly in social networks, the publisher can’t or doesn’t add much value.

Since both the self-published community and the established author community lack any really useful data on the rates of success of any one marketing technique versus another or what an author’s chances of success are publishing on their own or with a publisher, we have a battle of anecdata.

It grew hotter this past week with the publication in the Guardian of an articulate and snarky attack on the idea that an author can Twitter and Facebook her way to success and an equally articulate (and snarky) response from a defender of the new way.

The debate around whether author efforts with social media provide an adequate substitute for the marketing done over the years by publishers (a big component of which, of course, is exposure of the printed book in brick bookstores and we all know that’s declining even though it is still more than half the sale for most books) is really a proxy for a larger question: does the publisher add value commensurate with their share of revenues? Some bloggers frame the question artfully but one is too-often left with the feeling that they feel think the author and reader really don’t need much help from anybody else.

I’m pretty sure that’s rarely true.

How effectively social network marketing can replace display in stores and reviews in newspapers is an open question that won’t really be answered for a long time. The social networks are growing and there are already more possible outlets to work (Facebook, Twitter, Amazon, YouTube, Pinterest, GoodReads, and the comments section of every relevant blog are just the starting point) than most authors would have time to handle effectively (even assuming they have the skills and interest).

It’s going to take technology and scale to do this effectively. For example. , Hachette announced last week a new tool called “Chapter Share” to enable easy posting of a chunk of a book on Facebook. They’ve chosen to make the capability available to other publishers as a SaaS (software as a service) offering. Some publishers will have it; some won’t. Authors will be hard-pressed to do something like this on their own (unless Hachette decides to enable them).

And with the number of influential blogs and sites and apps where relevant posts or author appearances could find a useful audience rising every day, it is hard to imagine one author alone possibly staying on top of all the possibilities that are important for them and their book.

So, long story short, we don’t know how effective social network marketing can be yet. And we can be pretty sure that nobody has all the answers about how to use it best. (Even if they did, the answers would be different six months from now.) But however things change, I’ll bet there will be a role for a publisher — an aggregator looking across the work of many authors — to be helpful with all the marketing, including the social network marketing. Managing metadata properly and search engine optimization, critical to online sales, are much more likely to be done well by a publisher than by an author.

All the big publishers are regularly really working on figuring out how to be helpful with systems and tools and collecting names to email and have been for a while.

And the print-in-store piece does still matter.

Without denigrating self-publishing as a serious alternative for many people, I think the odds are that most authors will be better off with publishers than without them for a long time to come.

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