The Shatzkin Files

More thoughts on libraries and ebook lending


On Thursday of this week, I’ll be at the Charleston Conference appearing in a conversation organized by Anthony Watkinson that includes me and Peter Brantley. Brantley and Watkinson both have extensive backgrounds in the library and academic worlds, which are the milieux of most attendees at this conference. I don’t. I am being brought in as a representative of the trade publishing community. Watkinson believes that “the changes in the consumer area will break through into academic publishing and librarianship.” I am not so sure of that.

I am imagining that what creates interest, and concern, among all librarians about trade publishing has been the well-publicized tentativeness of trade publishers to serve the public libraries with ebooks in the relaxed and unconcerned manner with which they have historically been happy to sell them printed books. Big publishers have expressed their discomfort with ebook library lending in a variety of ways. Macmillan and Simon & Schuster, up to this writing, have declined to make ebooks available to libraries at all. HarperCollins instituted a 26-loan limit for ebooks with libraries a little over a year ago. They received apparently widespread — certainly loud — criticism when they announced the policy, but it seems now to have been accepted. Penguin and Hachette delivered ebooks for lending and then stopped. Now both are putting toes back in the water with experiments. And Random House raised their prices substantially for ebooks delivered to libraries for lending.

So, six for six, the major publishers have struggled publicly to establish a policy for ebook availability in libraries.

The concern, as I’m sure my conversation-mate Peter Brantley will point out, extends to what rights libraries have when they obtain ebooks. I’ve expressed my belief before that all ebook transactions are actually use-licenses for a transfer of computer code, not “sales” in the sense that we buy physical books. When Random House declared the opposite in the last fortnight — that they believed they sold their ebooks to libraries — it only took Brantley a wee bit of investigation to find that Random House’s definition of “sale” didn’t line up with his.

Of course, his doesn’t line up with mine. I believe (he’ll correct me on stage in Charleston, if not in the comments section here, if I’m wrong) Brantley accepts the one-file-transferred, one-loan-at-a-time limitation that has been part of the standard terms for libraries since OverDrive pioneered this distribution over a decade ago. That control enabled ebook practices to imitate print practices (except for the “books wear out” part, which Harper was addressing with its cap on loans). Without it, one ebook file transfer would be all that a library — or worse, a library system — would need of any ebook to satisfy any level of demand. The acceptance on all sides of that limitation says clearly to me, without resort to any other information or logic, that there is an agreement — a license — that the library recipient of an ebook file accepts in order to obtain it.

People who spend a lot of time with libraries and library patrons are quite certain that the patrons who borrow books and ebooks often also buy books and ebooks. (Library Journal offers patron data that supports that idea.) Although library services are many-faceted and not primarily designed to serve as marketing arms for publishers, the libraries themselves see the ways in which they aid discovery by their patrons.

And they also see the patrons that couldn’t afford to buy the books or ebooks they borrow and therefore wouldn’t and couldn’t read them if they weren’t available in the library. Since these patrons become part of a book’s word-of-mouth network by virtue of being able to read it, it looks like this behavior by publishers is not only anti-poor and anti-public, but also counter to the interests of the author and the publisher itself. (In fact, most publishers acknowledge the importance of libraries to the viability and marketing of the midlist although that, until very recently, was adequately addressed with print alone.)

And, the libraries point out, the one-book, one-loan limitation means that all the hot books have long waiting lists anyway, so many patrons just cut to the chase and buy the ebook rather than wait. (In fact, schemes by which the libraries themselves can sell the ebook are beginning to develop as well.)

The view from the publishers’ perspective (and, it is important to add, from the perspective of the agents of many highly-compensated authors, who have enormous influence over publishers’ thinking) is quite different. Libraries, which can be the core market for many books published by academic and professional publishers, are more likely to be around 10 percent or less of an adult trade book’s sale. So the risk-reward calculation starts with a sharp limitation on what is the expected “reward”.

The risks are harder to quantify because they are much more complicated than just trying to figure out how many of the loans of an ebook licensed to a library cost the publisher a sale of that ebook through retail channels.

The big publishers are acutely aware that the ecosystem of bookstores they’ve depended on for a century is giving way to something new, which appears to be a mix of retail ebook platforms, community book information sites like GoodReads, author-based marketing, and, of course, publisher efforts to reach potential book buyers through community- and list-building, SEO, and collaboration with other websites.

Consumers will, of necessity, be changing their shopping habits as they migrate from reading print books to reading ebooks. Right now, as ex-Random House marketer Peter McCarthy points out, the key decision is which retailing platform they use. If you buy a Kindle, NOOK, Apple, or Kobo device, you’d be inclined to buy from their platform. It would definitely be easiest and on a Kindle, Nook, or Kobo device, it is really the only practical choice.

But on an Apple device or a tablet computer (or a laptop or desktop, for that matter, although fewer and fewer people will read ebooks on them), the consumer is actually free to use any of the ecosytem apps and, if they want to, choose by price. McCarthy makes the case that doing that on a title-by-title basis will become increasingly unusual. He’s probably right.

But we’re nowhere near the final stage of ebook development. It is going to get easier and it is going to become more widespread. Ultimately what concerns publishers is a vast reservoir of ebook content available on one website (your local library’s, or even a not-so-local library’s) for free while the merchants are trying to make you pay. That’s why such programs as KOLL (Kindle Owners Lending Library) have not gained favor with big publishers.

It really isn’t hard to imagine that in a pretty short time, libraries and KOLL (and some fledglings like the recently-announced “maybe we’re the Spotify of ebooks, or maybe we’re not” Oyster subscription service or Spain-based 24 Symbols) have robust selections available for free (libraries), as part of a broader offering (KOLL), or for very cheap (Oyster’s and 24 Symbols’ aspiration). If that happened, how many customers could be drawn away from the ebook retailer sites and effectively removed from the market for title-by-title purchasing of new books?

How many? Well, we don’t know how many. That’s precisely the concern.

Another thing we really don’t know is what is the future of public libraries. As the relative utility of a building full of printed books declines, libraries correctly point out that they serve many other functions. One that is often cited today, but which I think will be more dated than the printed books aggregation ten years from now, is that libraries provide hardware and Internet access for people who otherwise wouldn’t have it. As devices and bandwidth get cheaper, and the social and commercial benefit of having everybody connected grow and become universally acknowledged and appreciated, that deficiency is likely to be cured by other means.

What is an ongoing need that is not likely to go away is the need for librarianship. The more sources of information there are and the more sophisticated people become about demanding the right information for any task or need, the more that professional help navigating the choices has value. But how will that help be delivered? Online, I reckon, not in a building that you go to and seek out the help. I don’t know the business model yet, but I do know that communities are going to be sorely tempted in the years to come to devote the cash they now spend on public libraries with books and computers in them to providing wider access to more materials through the Internet and providing the information experts, the librarians, outside the confines of a building full of the materials. The materials — with a variety of access and payment models — will be virtual and the librarian will help you get what you need at the price you want to pay for access.

And all of that sounds, and seems, a lot like what booksellers do today (except a lot more complicated).

Which brings us back to publishers and their concerns. Right now, the biggest publishers’ biggest worry is that they will end up in a world where Amazon is the only path to a majority of their potential customers. (Right now, for trade publishers, that number is probably more like 20-30 percent.) That’s why three of the biggest publishers (one being Penguin, so ultimately, this could involve Random House as well) are continuing to struggle to launch Bookish, a strategy that looks increasingly dubious to me. It is why they were so eager to help Apple launch the iBookstore and why they root from the sidelines for NOOK and Kobo and Google to be successful competitors.

Anything that takes business away from the ebook retailing network might be depriving one of Amazon’s competitors of the oxygen they need to compete. (That’s one of the reasons Bookish is looking like a bad idea.) But, more important, with the Internet now making it pretty easy to deliver a selection of reading material larger than anybody will ever plow through at rock-bottom prices, having libraries offer and promote free ebook availability could foster habits that will cost authors and publishers customers in the future.

Of course, all of this is speculative. The library community’s belief that making ebooks available through them will stimulate sales of those books is speculative. But so is the fear of the commercial authors and publishers that libraries in the digital age will have a significantly different impact on reading and purchasing habits than they did for print.

When the problem is lack of information, one of the best antidotes is to enable flexibility and experimentation. That’s why I’m very pleased to be working with Recorded Books on a new ebooks-for-libraries program that will give publishers enormous flexibility in how they structure the license for each book: with granular, title-by-title control of availability, price, a number of loan limit, or a time limit. This requires RB to also give libraries the information and dashboards necessary to manage their ebook collections in ways their print book collections never required. The flexibility will mean that publishers can experiment with a variety of models. The multiplicity of models will be a nuisance for libraries — although RB can do a lot to mitigate it — but it will make a lot more ebook titles available by giving each publisher the ability to control the risks as they see fit. Recorded Books expects to put the program in beta early in 2013 and roll it out by Q3.

It is my hope and belief that the various models offered and the libraries’ reaction to them (agreeing to the licenses or not) will lead to some consensus-forming around particular formulas for these deals. Of course, everything is temporary because everything is changing. And that will continue to be true for quite some time.

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Trying to explain publishing, or understand it, often remains a great challenge


I went to the In Re Books conference at New York Law School last Friday and Saturday in hopes of curing some of my ignorance about the law and publishing. I learned some things, including the facts about a very interesting case involving a book publisher, the associations of publishers and booksellers, and a large general retailer that took place over a century ago and anticipated a lot of what we’re seeing today as the other players in the industry battle the power of Amazon.

But I’m afraid my major takeaway was, once again, that the legal experts applying their antitrust theories to the industry don’t understand what they’re monkeying with or what the consequences will be of what they see as their progressive thinking. Steamrollering those luddite denizens of legacy publishing, who just provoke eye-rolling disdain by suggesting there is anything “special” about the ecosystem they’re part of and are trying to preserve, is just part of a clear-eyed understanding of the transitions caused by technology.

So perhaps we have symmetrical ignorance and will never understand each other.

The conference was lively and well organized. The speakers were articulate and well prepared. There were two panels I wish had taken place in a different order.

On the first day, the In Re Bookstores panel had an antitrust lawyer who fully supported the Justice Department’s case against the publishers, although he seemed to be attacking the Agency model itself, rather than the collusion which, as I understand it, was the core of the government’s case.

But it was only on the very last panel of the conference, on the second day, that two speakers created some meaningful context for the whole discussion. Author James Gleick made a clear and cogent case for the agency model. (Essentially: because there is no investment in inventory or shelf space by the retailers, it is more sensible to consider them “agents” of the publishers than retailing intermediaries equivalent to what we have for print, where substantial investments are required and are at risk.) And Professor John B. Thompson of Cambridge, author of “Merchants of Culture” who is, as far as I know, the single person who has spent the most time and effort learning about trade publishing and synthesizing a coherent view of it, made it clear that Anglo-American trade publishing has challenges which make it unlike other endeavors, even other book publishing endeavors.

So that gives me three things to elaborate on: the blatant misunderstandings about the industry and its concerns about the DoJ case which came from the bookstore panel; the old publishing case that is so resonant with current circumstances; and a reprise of Thompson’s cogent analysis.

The lawyers speaking on the bookselling panel (and lawyers were dominant on just about all the panels; this was, after all, an event staged by New York Law School) were dismissive of the argument that any special treatment for publishing was called for because of the nature of our business. Then they proceeded to get two things startlingly wrong:

1. They dismissed the idea that any “predatory pricing”, i.e. sales of books below cost, ever took place. There was a wee bit of wiggle room there, where they might have meant “in the aggregate” as opposed to “title-by-title”. But they never made that distinction clear and, if that’s what they meant, there was further explanation called for. One is left with the impression that they simply didn’t understand that Amazon was paying publishers $12 or $15 for ebooks they were selling for $9.99. (And, in fact, there were far more dramatic examples of loss-leading than that!)

2. They seemed to think that the concern on the part of those opposing the DoJ was that Amazon would only lower prices to gain market share and would then exercise predatory behavior by raising prices to a captured market. That, actually is not the concern. Or at least it isn’t mine.

As I tried to spell out in a talk in Washington last July, what is concerning is that Amazon will restructure the pricing of books so that the profit for publishers is squeezed out, robbing us of a publishing ecosystem that invests in unwritten books tens of thousands of times a year. My argument and fear is that a restructured ecosystem will deny us books like Walter Isaacson’s Steve Jobs biography or Ron Chernow’s George Washington. Books that take years to write and require hundreds of thousands of dollars of financing to be written will never see the light of day if publishers can’t earn a profit by investing in their creation.

This is an argument and a concern which the attorneys on the platform at this conference made explicitly clear they never entertained. I don’t think the ones in the DoJ did either. Perhaps this has no bearing on the law, but I wish they’d stop trying to tell us the concerns of the industry are just the same old crap coming from a different source when they haven’t taken on board what we’re actually saying.

I tried to inject some of these facts and thoughts from the floor, as did a woman from a Big Six house who was similarly frustrated by the twisting of the reality to fit the antitrust narrative. The moderator cut me off from pressing the argument (which was appropriate; I hate it when people use the rubric of q&a to make their case from the floor at my conferences too!) But for the rest of the conference, at every break people from publishing houses kept thanking me for making the attempt to inject reality about our business into the discussion.

The old publishing case was Bobbs-Merrill versus Straus from the first decade of the 20th century. It seems that Macy’s, the department store that sold just about everything, also sold books at at discount. Bobbs-Merrill posted a notice in its books that the retail price was set at one dollar and that selling below that price constituted a violation of copyright. The Straus brothers, who owned Macy’s, insisted on selling these books for eighty-nine cents.

Both the trade association of publishers and the trade association of booksellers supported Bobbs-Merrill’s position, but the courts did not. There was a “horizontal” as opposed to “vertical” price-fixing angle explained from the stage that I didn’t fully grasp, but we can all appreciate both the irony and distinctions between this case and our present conversations.

Clearly, Macy’s was the Amazon of the time. They saw books as commodities — nothing special — and they simply extended their business model of offering lower prices to cover books. From the perspective of publishers, they were cheapening the perceived value of the intellectual property. From the booksellers’ point of view, they were subsidizing book sales with their ability to sell other things and clearly constituting a threat to what was then a very tiny bookselling network. So the entire publishing community of the time opposed the price reductions being offered by an interloper. In that way, they were creating the same price-fixing “problem” DoJ was “solving” with their lawsuit against Apple and the publishers.

But the difference, as explained by James Gleick a day later, was that the bookstores and Macy’s were, indeed, buying these books from the publishers (and, at that time, they might not have had a returns convention to cushion them from bad buying decisions) risking — or at least tying up — capital to provide stock to the public. In the case of ebooks, that isn’t true. No capital or shelf space (which also costs money) is tied up; all the retailer does is accept and display metadata and pay for the “goods” at some point after the customer pays for them. So the justification for the price-setting in the two cases is quite different.

Still, it was interesting seeing that history was — in a way — repeating itself 100 years later.

And now to Professor Thompson. He interviewed me a few years ago for his book “Merchants of Culture”, which has been out for a few years but which I’m just starting now to read. (Shame on me.) Thompson provided two absolutely fundamental pieces of information which could have been infinitely more helpful to the audience if they had come as the first thing on the program rather than the last.

1. The trade book business is quite different from other segments of the book business and has little in common, as a business, with school or college text or academic or professional publishing. Thompson made it clear that knowing one segment doesn’t mean you know another. After two days of hearing librarians complain that publishers were dissing their “biggest customers” because of the big houses’ concerns and restrictions on ebook sales to libraries, it was good to have somebody explain that publishers were different. In fact, libraries — relatively speaking — are not very large customers for general trade book publishers.

2. Thompson also emphasized — and this was critical insight coming, as it did, from the single speaker most knowledgeable about the transition trade publishing is making from print to digital reading — that nobody knows the future course of ebook adoption. Will it remain, as it is, in the 20% range for general trade reading? Will it go to 30%? 50%? The fact that nobody knows the answer to that question means that publishers’ policies have to accommodate uncertainty about a critical component of the publishers’ future commercial reality.

A couple of other points Thompson made bear repeating. One is that he sees big Anglo-American publishers fighting off threats to their margins. But he thinks the main source of margin erosion for American publishers is the agents, who exercise their power to drive up the cost of acquisition for the most desireable books; whereas for British publishers the source of the biggest problems are the big book retailers, particularly the supermarkets. It is ironic that America’s Robinson-Patman Act, which by requiring manufacturers to offer the same terms to like customers aims to protect small merchants, is actually the shield which protects American publishers from facing ever-escalating demands for margin from their largest accounts.

And Thompson showed a chart tracking the percentage of sales that were ebooks for trade publishers, year by year. The numbers were:

2006 0.1%
2007 0.5%
2008 1%
2009 3%
2010 8%
2011 20%

So the multiple from prior year sales is:

2006-07 5x
2007-08 2x
2008-09 3x
2009-10 2.7x
2010-11 2.5x

The indications are that when we get the report on 2012, it will be about 30%, or 0.5x.

No wonder Thompson makes it plain that we don’t know what’s ahead of us. Did you think that the rate of switchover would drop by 80% this year over last? I didn’t.

The big news of the past few days, of course, is the proposed new Penguin Random House entity. I think the only surprise here is that it has taken so long for a Big Six merger to occur since the last one (which was when Bertelsmann, owners of Bantam Doubleday Dell, bought Random House in 1999). My back-of-the-envelope arithmetic says that PRH is bigger than the other four of the formerly Big Six combined. So I’d expect to see further mergers, but the title of “biggest trade publisher in the world” is secure for the foreseeable future.

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Thinking more about ebooks and libraries and what big publishers should do


The reluctance of most big publishers to make ebooks available through library lending is a topic of widespread attention and concern. The AAP turned a chunk of its annual meeting over to the topic and Dr. Anthony Marx, the President and CEO of the New York Public Library, used his time to volunteer his institution for experimentation to find a model for ebook lending that would work for publishers.

I had occasion to talk to a number of Big Six publishers in the middle of last year about their position on library sales. When they registered their concerns with me, some of what they had to say made a great deal of sense.

What really rang true was the fear that the consumers in an emerging ebook ecosystem would “learn” that getting “free” ebooks from libraries was just as easy as getting ebooks from retailers and paying for them. Given that all this requires is pointing your web browser in a different direction, it looked to many of the publishers like a really poor bet to enable ebook lending by libraries. Sales of ebooks to libraries isn’t a huge market so the upside is limited. And with many ebook retailers struggling to gain traction in an Amazon-dominated marketplace, the consequences of even a small loss in sales could knock players out of the game.

Withholding or limiting sales of ebooks to libraries shares an important characteristic  with agency pricing. In both cases, publishers are implementing policies that they know will result in their revenue being reduced immediately in order to develop what they believe will be a stronger and more diversified distribution network for ebooks in the long run.

It’s worth making a point here. It is reasonable to argue that publishers are wrong on both counts.  These policies are about influencing the future development of the channel and forecasting the impact of various policies over time, so there is not yet any data to prove they’re right or wrong. All we have are guesses based on limited and unprojectable knowledge.

But the publishers are most emphatically not engaging in “short term thinking”. They are sacrificing immediate revenue for what they believe will be a long-term gain. In that way they are like Amazon, which famously will deep-discount or loss-lead today’s sale to build a long-term customer relationship. But Amazon gets credit for long-term thinking; publishers usually don’t.

As most people know who are following the tribulations of libraries trying to stock ebooks, four of the Big Six publishers are not making any ebooks available to libraries at all (except titles already sold in the past.) Random House continues to supply all their titles to libraries as ebooks with only the “one loan at a time per copy purchased” limitation, but they have just raised the prices of those books to libraries substantially. HarperCollins was widely villified a year ago when they introduced a limitation of 26 loans per copy purchased, but this is apparently now more widely being seen as an acceptable limitation. (Random House pricing and the others’ total withdrawal from the market are making 26 loans look good!)

I accept the major premise. If it were just as easy to get ebooks from libraries as it is from retailers, over time more and more customers would migrate to the libraries. But, the more I think about it, the less I accept the notion that total withdrawal from the library market is necessary to create a clear advantage for the retailer as a destination for ebook readers. In fact, it is possible that putting ebooks into libraries, in the right ways, could increase sales at retail. And the only way for publishers to find that out is to do some controlled experimentation in that marketplace. To my knowledge, that’s not taking place.

I have two anecdotes that I think shed some light.

At a conference I organized a few years ago, we heard about a giveaway that publishers Spiegel & Grau did of a Suze Orman book through Oprah. They gave away 1.1 million unprotected PDF downloads in 33 hours on Oprah. The book sales popped immediately on Amazon, of course. But more impressive, and more important, is that the book acheived a return run of several more months on the NY Times Bestseller list. It had fallen off in October. In other words, the substantial number of giveaway copies sparked a rebirth of interest in what had already been a very successful book that appeared to have concluded its run some months before. (Of course, being on Oprah has an effect of its own whether or not there is a giveaway. I think the 1.1 million giveaways helped spur the sales, but, at the very least, they didn’t prevent the Oprah effect from taking place in a big way. The publishers had not expected anything like the commercial result they got.)

And here’s another. About two or three years ago, I was looking around for data that would tell us whether ebook sales were cannibalizing print or adding incremental units. Our friend Rick Joyce at Perseus said “they add incremental units” and he could prove it. I was skeptical, but he convinced me.

What Rick said was that Perseus had converted a number of backlist books that had an established print sales pattern into ebooks. Then they looked at what happened to sales of the overall “basket of titles”. Their print sales went up even though the ebook was selling too. Perseus attributed this to the increased awareness of the books generated by their presence in the ebook marketplace.

But perhaps of even greater significance, the beneficial effect on sales of the ebook publication increased as they went down the long tail. The deeper they went into the backlist, the greater was the lift created by the ebook publication.

It is a stretch to analogize the effect of an ebook being available in a library today with what making an ebook for sale did to print sales two years ago, but it is not a ridiculous hypothesis to test. What if a similar impact resulted from library availability? Might there be some titles you want to window, but others where it would even make sense to sell them to libraries cheaper because of a marketing effect? Could there even be some books that it would be worth giving to some libraries for free?

Both of these examples, being as they are more than two years old (and, in one case, about PDFs, which are a pretty limiting way to get an ebook file), can’t be simply taken as prima facie evidence of what would happen today. People who downloaded the Orman file and found they liked it and wanted to read the whole book would indeed have wanted to purchase a more readable copy. In 2008, that would have meant “print” for the vast majority of people. Perseus did their backlist analysis at a time when they had lots of good backlist not yet available as an ebook and not many consumers read that way. Neither of these things are true anymore. The migration of sales from print to digital is too rapid now for very many titles to maintain their recent print sales rate, let alone increase it on the back of some increased discoverability. (Overall sales might increase, but not print as a stand-alone.)

Nonetheless, these two pieces of anecdata together suggest at least the possibility that the sales the big publishers are losing by withholding from the libraries is a larger number than just the ebooks they’re not selling for loan. They may also be losing other sales that come from discoverability and library-reader-generated word-of-mouth.

It now seems to me that making ebooks available through libraries when the titles are on a downward sales trajectory at retail could generate new life for them, as the Oprah giveaway did for Suze Orman. Yes, this is windowing. If publishers did it on their big ebook titles, they’d be doing exactly what Hollywood is doing with DVDs of major movies, which are also withheld from library distribution until the theatrical and early DVD revenues have been harvested.

The big publishers I have spoken to seem most focused on keeping “friction” in the library ebook experience to approximate the inconvenience of print book borrowing, where you have to go to the library to pick up the book and then to bring it back. In fact, the imperfect interface from OverDrive already provides a good deal of that (except for Kindle loans, which bump over to Amazon and work seamlessly). The absence of any new titles from four of the Big Six may not provide “friction”, but it certainly would drive many readers to a retail channel. (In fact, without some huge change in the way publisher-library relationships operate, there will always be a much larger number of titles available from retailers than from any library.)

What publishers are correct to be worried about is the way the market could change over time. With most book readers still reading print, we don’t really know yet what the marketplace will look like in five or ten years when I’d expect the vast majority will probably read books on screens. That was part of what was behind Harper’s 26 loan limitation. It is also a principle behind Bloomsbury’s “Public Library Online” program (working in the UK for a while now and just being introduced here), by which a “shelf” of books is licensed to libraries one year at a time. (Public Library Online enables multiple users through any flash-enabled browser, but does not support even as basic a user tool as “place-holding”; each time you return to a book you would have to remember where you were.)

In general, time-limiting seems  a much better strategy to me than loan-limiting, although it might not produce the same level of additional sales on bestsellers as loan-limiting.

If any big publisher asked me for an opinion about a library policy (and none has), this is what I’d say today.

1. Start immediately experimenting with “baskets” of titles, because the data on sales trends for a group of titles will be far more reliable than on any single title. If titles are put into groupings of cohorts (fiction in a genre, topical non-fiction, big author brands), you increase your chances of getting data that lends itself to interpretation that enable useful adjustments in tactics.

2. One set of experiments that should be productive would be on titles that have already had their high-volume run. Put 10 or 20 of those titles into library distribution and look at their print and ebook sales results week-by-week for the period before and then after the library release. (And promote the library release to maximize the potential impact.)

3. Look at the “make” books on an upcoming list: those that aren’t by big name authors that are already guaranteed to sell well. Split them in half. Put one half into libraries and withhold the other half. See if you can detect a library effect, positive or negative.

4. License titles for two or three years rather than limiting the number of loans. This will enable the publisher to withdraw them from library circulation in the future if the market shifts. This is a separate question from whether you allow multiple simultaneous loans. That limitation probably needs to remain (although with a loan limit like HarperCollins has applied, I don’t see why it is necessary.)

5. Explore ways for libraries to sell ebooks to patrons who discover titles through them but, for whatever reason, want to purchase them. Referral to existing retailers, with libraries getting the referral revenue, would seem like the cleanest and best way for this to happen. Libraries could sell the ebooks directly, but that approach could exacerbate the concern that library patrons would be “lost” to the retail network.

Publishers’ concerns about the impact of library lending are reasonable. But responding to that concern by simply “freezing” is not helpful to anybody and it may actually be damaging the sales of the books the publishers are trying to protect. I don’t know and the librarians don’t know what the marketplace impact will be of branded ebooks being made available through libraries, but the publishers don’t know either. It is time for all of us to start finding out.

I think big publishers have widely accepted a similarly flawed perspective about the impact of  piracy. It is likely that piracy, like library loans, will have a net cannibalizing effect on some titles and a net promotional effect on others. If you accept the truth of that statement, then you should see that telling which titles are which is the most important starting point to creating policy in either case. How many houses today are consulting their marketing departments when they make their piracy policies? It would seem like a good idea.

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I thought I was writing a blog, but it turns out I wrote a book!


An ebook of the first two years of The Shatzkin Files is now available and will be linked for the forseeable future from our left nav bar. This post is the introduction to the ebook, which explains how it came about.

My friend, Joe Esposito, first told me about blogs in the early part of the first decade of the 21st century before just about anybody else I knew had heard of them. I am not sure why it took me many years to start one of my own.

I’ve been training for this gig for a lifetime. My Dad insisted that I learn to touch-type when I started fooling around with a typewriter at the age of 8. (As he said, “either we teach him the right way, or he’ll teach himself the wrong way.”) Three months of twice-weekly lessons got me up to 42 words a minute on a manual typewriter, but trained my fingers to do the right thing so that today on a computer I can do about 3 times that speed. By the time I was 11, I was filing copy on a weekly basis on the Little League games for our local newspaper. I got paid too: 15 cents a column inch. The newspaper job actually continued for the next several years as I moved on to covering high school sports.

In my junior year of college, I started writing a weekly column I called The View from Underneath for the UCLA Daily Bruin. I don’t know how good it was or how many people read it, but it got me a certain amount of notoriety. Because of the column, I networked my way into the Bobby Kennedy presidential campaign and, after his death, a slot as an assistant to Pierre Salinger on the 1968 McGovern effort at the National Democratic Convention. (That was the one in Chicago that featured police against protestors in the streets and which villainized Chicago’s first Mayor Richard Daley to that generation of young liberal activist Americans.)

Between the end of The View from Underneath and the commencement of The Shatzkin Files blog, 40 years passed. I did plenty of writing in the meantime: some books (mostly about baseball), a bunch of articles about publishing in trade publications in many countries, and, starting in the mid-1990s, speeches on publishing and digital change delivered at industry forums and then preserved on my website. The posted speeches were a great boon to my professional career, making it possible to build credibility (and “brand”) among people who never attended these live events.

Others I know had blogged daily, or almost daily. Richard Charkin, now Managing Director of Bloomsbury, wrote every day when he was head of Macmillan. My friend Gwyn Headley, Managing Director of the stock agency fotoLibra, told me that when he started blogging, he did so with a list of 365 topics in hand so he’d always have something to choose from on a day he wasn’t feeling creative. Richard gave up his blog when he changed jobs and I don’t think Gwyn kept up the daily habit very long either.

In my case, I blogged six times the first two or three weeks, then five times the next few weeks, and it diminished from there to what is now a one or twice weekly post. It seems like it usually takes me about 1500 words to get in and out, although some posts run a bit longer. I find that I need to review what I’ve written at least three times a few hours apart after I think I’m done to make sure I’m happy with it. Occasionally, a post gets to that point and gets scrapped.

As I think must be normal with these things, the audience for the blog just grew. As of this writing, The Shatzkin Files has about 1700 subscribers who get the blog delivered as an email to their inbox. A number generally ranging from half that to twice that (and occasionally, quite a bit more) reads the posts on the site. The comment strings keep getting longer.

Fortunately, one of my regular readers is Cameron Drew, who, like me, came into the book business through the most honorable possible path: working for his father. I knew David Drew, one of the great book sales reps of my generation, long before I ever met Cameron. Since Cameron has gone to work for Kobo, the global ebook retailer spawned by Canadian retailer Indigo, he and I have seen each other at conferences and trade shows. He told me from the very beginning that he was a loyal Shatzkin Files reader.

Early in 2011, Cameron told me he often found it useful to refer back to previous posts of The Shatzkin Files but that doing so through the website was clunky and difficult. “Your stuff should be collected into an ebook,” he said. “If we did it at Kobo, would you give us a 30-day exclusive?”

I was extremely flattered. “I’ll happily give you 60 days,” I said.

And thus we have this ebook.

If you live in the world of trade book publishing — the publishing that has reached its audience primarily through bookstores for about 100 years — you know we are all in a different world than we were in when I began The Shatzkin Files blog in February, 2009. One of the early posts speculated that it might be  harder for Amazon to hold onto their stranglehold on ebook sales than their hegemony on online print sales. At the time, Kindle was extending its dominance of the ebook marketplace by enabling the Kindle owners to access their ebook content through the iPhone and other devices. And Amazon’s pricing policy of selling below their cost was beginning to scare publishers.

Then, around the first anniversary of the blog, Apple’s iPad and the iBookstore arrived on the scene, offering publishers the opportunity to implement the so-called “agency model,” under which the discounting of ebooks is effectively stopped. I attribute to that tactic, along with the introduction of the iPad, the Nook, Kobo and Google Editions, the stabilization of ebook distribution in a multi-retailer market with evolving global competition. So, two years later, it looks like that early post was right.

We’re going to see a lot more change in trade publishing in the years to come. I expect the next two years to present even greater challenges and more drastic change than the last two years have. Since The Shatzkin Files began, the extremely challenging times we’ve expected for bookstores have become very evident. Over the next two years, the extremely challenging times it has seemed to me must follow for general trade publishers will probably become equally evident.

One thing worth using this introduction to say is that I take no pleasure in the big publishers’ pain. It is a matter of professional pride to me to not allow my preferences to color my predictions. I love bookstores and libraries and consider the top management of the big trade houses to be intelligent, ethical, and creative people. I consider many of them friends. The fact that the transition from reading and distributing print to largely reading on screens and distributing print online makes much of their skill sets and business models obsolete is not their fault. Nor is the fact that preserving their old business, and the cash flow it still yields, sometimes interferes with inventing the new one.

There are serious initiatives in the big houses to acknowledge the importance of verticalization (mostly in genres), to create direct contact with audiences, and to employ scale in search engine optimization and in locating customer clusters online that it is hoped will enable a new version of the horizontal, big book publisher model to leap the chasm of change. At the same time, the big publishers are figuring out how to step back from the enormous overheads associated with doing business the way they have for the past 100 years. How much change is sufficient, and how fast is fast enough, are questions we’ll only know the answers to with the passage of time.

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It will be hard to find a public library 15 years from now


I spoke last week to a group in Montreal convened by the English-language Publishers of Quebec and the Quebec Writers Association in a small auditorium at the Atwater Library. The Atwater Library is a private library with very limited government funding which is more than 100 years old. (The Globe and Mail article that quoted me says it dates from 1828.) It occupies a nostalgia-provoking building on a downtown corner across from a small park and a long slapshot away from the site of the no-longer-present Montreal Forum, where the Canadiens played for many years (and where I was fortunate enough to see a game once in 1958.)

The topic of the talk was whatever I wanted it to be so I riffed on what I think are the two big themes of digital change in publishing: vertical and global. Readers of this blog have seen material on both. Vertical refers to subject-specificity, or, if you prefer, audience-specificity. I posit that publishing across subjects — as all the biggest consumer publishers do — is made possible by bookstores, who sort the books onto shelves that make sense to customers.

An important component of the “vertical” argument is the inevitable decline of bookstores. What leads to that is the inexorable movement of customers from shopping in stores to shopping online, combined with the “critical mass” requirement for a bookstore. Some people say a bookstore will close if it loses 10% of its business; I usually say 15%. Obviously, it varies with the store. Just as obviously, a store doesn’t need to lose all its business, or even half of it, before it would be economically unviable and forced to close.

As stores close, shopping in them becomes less convenient. As the remaining stores cut back on the shelf space they can devote to books, they become less attractive. All this drives more and more people to buy print online or to switch to ebooks.

Since the single most critical skill set for consumer publishers for the past 100 years has been being able to put books on bookstore shelves, this is a frightening development for any trade publisher paying attention.

The global trend is more encouraging for people in publishing today and it is particularly more cheerful for publishers in small countries who deliver content in big languages. That means Canadian publishers in both English and French should benefit enormously as the ebook infrastructure builds out and puts them closer to customers all over the world.

Partly because we were in a library and partly because somebody asked, I also ruminated about the future of libraries. The Toronto Globe & Mail reported it this way:

And libraries? “Libraries make no sense in the future,” Shatzkin said on stage in a library that dates back to 1828. Anyone with Internet access already has access to far more books than were in that library, he pointed out. “There is no need for a building.” There will be an ongoing need for librarians, however; their skills will continue to be in demand, as will those of editors.

This quote, which was really off-hand, is clearly annoying a lot of people. So I thought it would be worth devoting a post to the subject of the future of libraries.

First of all, the key word is “future.” I find myself making the point repeatedly that the infrastructure for printed book creation and distribution has had mostly organic change for about 100 years now. It’s a well-developed capability. Publishers know how to make printed books well and efficiently; they know how to find and serve the customers for them. They know how to print them at scale and, over the last dozen years or so, 1-at-a-time. The special requirements that libraries have to prepare books for shelving are met seamlessly by Ingram and Baker & Taylor.

The print book infrastructure is like a network of roads, sidewalks, and superhighways. Everything gets where it wants to go by well-established paths.

Ebooks live in a different world. There are no superhighways and, for many books and many markets, there isn’t even a beaten path yet. We’re still hacking our way through the jungle. So, for the most part, the world we’ll live in when there is a fully-built ebook infrastructure only exists in our imagination today.

The world I was describing in the quoted and paraphrased section of my talk is imaginary. It is expected (at least by me), but it isn’t here yet and I wasn’t trying to suggest that it is.

In a fully ebooked world, which I expect we’ll be living in 10 or 15 years from now, print books won’t be extinct, but they’ll be either exotic or very purpose-driven. They won’t be common or an ordinary way to deliver content, the way they are today.

I also expect a world where all of us will have access to, or personal ownership of, many screens. Through those screens, we’ll also have access to a variety of content that is suggested by what the Internet can deliver us today. My hunch is that, by then, our “basic Internet” (think “basic cable”) subscription will include access to more books than exist in most libraries today, with shedloads of others available for usually nominal and occasionally substantial additional fees. We may have to choose a screen (or two) to carry with us when we leave our house in the morning (or not — there will be screens to borrow at Starbucks and the hotel lobby and the waiting room at your dentist), but we’ll have access to content for it (or them) wherever we are and at any time. Since the same screen will deliver us our tools for personal productivity (the blog post I’m working on, the shopping list for the cheese store on the way home), probably connect us to our money, and, of course, contain our calendar and directions to the party we’re supposed to go to this evening, carrying additional “stuff” — whether a book, a magazine, a newspaper, or a notepad — will be a long-discarded anachronism.

The core purpose — the founding purpose — of a library, around which other things have grown, is to deliver access to printed words. Even the smallest local library almost certainly had more content housed within it than any individual had in their home and, in most cases, far more content than would be available at any local store. It was the books in the library that initially defined the library and attracted a core of patrons to it. When all of us have access to more books on our screens than are in the library, what’s the point to the library?

At least, that’s what I was thinking.

The very thoughtful Gary Price, who is a library and information professional who has spent far more time considering libraries this or any other week than I have in my lifetime, posted his ruminations on this subject, triggered by the paragraph in the Globe and Mail but going way beyond them. Gary raises some good points worthy of response (about which he has posted additional thoughts since I saw and wrote about them.)

He wonders what kind of libraries I’m talking about. Simple answer: consumer libraries. Libraries that serve a professional constituency — academic or otherwise — are outside the scope of these predictions.

Gary observes that statistics show that libraries are being used more than ever. I don’t doubt that but it doesn’t undercut my belief about where things will be in 10 or 15 years. Newspapers had record years for profits in the mid-1990s.

Gary observes that many people use the library for more than books, specifically citing their mission in providing technology education and to provide Internet access, and making the point that not everybody has access to the computer and the Internet at home. In my opinion, all these objections will be almost entirely mooted in the next 10 or 15 years.

(A parenthetical point. In the US, at least, the poor will almost certainly always be with us. People will be left behind by change; our country routinely permits that. I’m a liberal Democrat; that’s not an aspect of America that makes me happy. Libraries will vanish faster than the need for them does. I predict what I believe will happen, not what I want to happen.)

He points out that there are special collections, archives, and other materials found in library buildings and that they, as well as some books, might not be digitized anytime soon. Perhaps true, although a lot less true in 10 or 15 years. But what percentage of today’s libraries would that kind of material keep open? Particularly if we’re talking about libraries for consumers? A small percentage, I’d warrant.

As others have, Gary points to the community events that take place in a library as a counter to my argument. I don’t think it is. I didn’t say community centers would cease to exist. There are many community centers that aren’t libraries. The fact that it is convenient and sensible for a town to use its local library building for other purposes doesn’t mean they need to keep the library to serve those other purposes. In fact, there will be lots of empty former retail storefronts to use as community centers all over America in 10 or 15 years.

One of the people at the Atwater in Montreal told me that they are reducing their shelf space for books (like a lot of bookstores, I might add.) If we get to the day when the store is still called Barnes & Noble and it has one shelf of books and is otherwise full of stationery, plush toys, and reading gadgets, is it still a bookstore? If the Atwater converts itself over time into a commmunity center with one room that has some books in it, will it still be a library?

I don’t think so. Others may disagree, but I would call that a semantic argument, not a substantive one.

Gary’s last point, which has nothing to do with anything I said, is to ponder what happens to the books and other materials in a library if the library shuts down. He hopes they don’t end up in a dumpster. I take no position on that (if they have value at the time, they won’t), but I would point out that many libraries today, unlike the situation a few years ago, won’t take your contribution of books when you clean your shelves at home. They have no place to put them and many, like Atwater, have less space for books, not more. I know libraries try to hold used book sales to make money, but I imagine we’re going to find that libraries will be causing books to be destroyed in the future, from necessity.

I did make the point in Montreal, which the Globe and Mail picked up and Gary applauded, that librarianship will be needed by people long after buildings full of books are not. That’s going to require an entirely new business model that hasn’t been invented yet. Consider that part of the paved infrastructure that we’ll have in a decade or so, but can only exist in our imaginations at the moment.

How about writing a whole post about libraries and not mentioning the HarperCollins limitation on ebook lending? Maybe another day…

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New ways to sell ebooks aren’t easy to implement


A simple and perfectly sensible suggestion emerged on the Brantley email list yesterday but the conversation around it showed that some stark realities about the book world have not yet been taken on board, even in very sophisticated circles (which this list is.)

The list discussed a suggestion from librarian Josh Greenberg  that publishers take note of the “rental” model built into the iTunes store as an alternative way to collect money from readers for ebooks.

Greenberg’s piece calls out a fact that many people in publishing have a great deal of difficulty with: that all ebook sales must be licensing deals. They can’t be anything else. Greenberg says:

“When we think about iTunes, we think about a basic fee-for-purchase model. We’ll just leave aside the fact that you never truly “own” a digital file, you’re just buying a particularly-structured license to use it…”

He’s right. When you deal in printed books, you have a tangible object. When you deal in ebooks, you only have “code”. The first sale doctrine says you can re-sell the book or lend it or share it. But copyright law says you can’t re-sell, lend, or share copyrighted “code.” Many digerati (and many librarians not named Josh Greenberg) refuse to acknowledge this distinction.

But that’s a legal point, one that can be debated until a court or a Congress makes a ruling (and then beyond, actually, since we continue to fight battles even after courts or Congress have rendered their conclusion.) The challenge to Greenberg’s idea of switching to a rental model is not so debatable. It’s practical.

Implementing new models for book sales requires herding cats. It can never be done fast and many business ideas relating to content have foundered because it couldn’t be done at all.

What should be clear to anybody who has been following developments since the days a decade or more ago whenRocketbook and Softbook and Sprout were trying to get publishers to give them rights for their content propositions is that it takes a very persuasive sales pitch to get publishers to do so. That sales pitch must be delivered publisher by publisher, and then the impressive ability of publishers to discuss a problem to death takes over, and the new proposition might itself die before its owner gets an answer. Or certainly before its owner gets enough answers to get the new idea off the ground.

What was further made clear by the participation of agents at Digital Book World, and particularly by the opinions expressed by superagent Robert Gottlieb on the ebook “timing” panel, is that the publishers don’t make this decision without consulting with their upstream gatekeepers. Gottlieb made clear that a) it takes a very small number of lost hardcover sales to make an author’s book slip notches on the New York Times Bestseller list, b) he and his authors believe that a much cheaper ebook, or perhaps any ebook at all not reported as a hardcover sale, can make that critical difference between being Number 1 or being much further down the list, and c) the difference in several places on that list is worth losing some sales over.

So just imagine how Gottlieb and his star clients (and all the other agents and star clients) would react to a rental model!

Let’s add one more point before the next great suggestion is made. The same thing will be true of an even better model than rental (which also has plenty of precedent in media even closer to publishers, audio books): subscription sales.

The switch that Apple has made to the “agency model” is not of equivalent complexity from a business perspective. There we’re still “selling the book” (although we’re really licensing access to a file) and the amount of money flowing to the publisher is comparable. But, even there, the switch will not be simple. Publishers have signed contracts governing almost all their ebook sales (which is a further demonstration that this is different from selling physical books, for which signed contracts between publishers and vendors is by far the exception, not the hard and fast rule) which one could imagine the purchasing party (Amazon, Ingram, Content Reserve, Barnes & Noble, Kobo) believes prevents the publisher from changing the rules in the middle of the game.

What Michael Cader reported last week which we expanded on in a blog post and a CNN interview is that publishers can use the new agency model to hold back books from channels where they can’t control the pricing. This very much underreported exchange between Steve Jobs and Walter Mossberg of the Wall Street Journal makes it very clear that Apple expects vendors who would undercut the pricing publishers set for them will be denied access to the content.

We can look forward to continued battles over pricing and over the terms of sale between publishers and the downstream players in the ebook supply chain. But I think it will be a while before real alternative distribution schemes to the public make any appearances. In fact, they’re likely to occur in vertical niches first, where the big agents are less involved and the number of publishers one needs to get on board is something less than “just about all of them.”

A quick thanks to everybody who attended Digital Book World (and there were a lot of you.) I am hoping that the fact that all I’ve heard is praise and enthusiasm for the two day event is not just a result of people being kind to the guy who put the program together. I think we really did generate discussion on some issues that had previously been neglected. But most of all I’m proud of the job we did selecting panelists; everyone I saw presenting was smart, well-prepared and entertaining. Some we had seen in front of audiences before; some we only knew through our interviews in person or on the phone. But picking them carefully and one by one certainly seemed to work and it is the same formula we’ll use putting together Digital Book World 2011. I hope we’ll see everybody again there next year.

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Why publishers need to understand brand


In the Internet world, brands will be more important than they’ve ever been before.

Why?

Because as the number of choices available to anybody seeking anything proliferate, brand is the shortcut that allows choices to be made quickly and reliably. And the Internet does nothing better than presenting us with more choices for any quest than anybody can possibly consider carefully.

In the next 20 years or so, the brands that will dominate for a very long time will be created.

Why?

Because the organization and delivery of stuff — including information — is being realigned into verticals; that is: subjects. The requirements of physical delivery required aggregation across interests that the Internet does not. So enduring horizontal brands of content like newspapers or book publishers but also outside content, among retailers, for example, that thrived across interest groups will find themselves challenged by new brands that are narrower and deeper. Being narrower and deeper permits a much more involved engagement with the audience. It strengthens the brand.

That’s how entities like Politico and Fivethirtyeight.com for political news suddenly challenged The New York Times and the Washington Post. That’s how Ravelry and Etsy arose out of nothing to become brands with real power in the crafts space, or how The Food Network or Epicurious became dominant in the web conversation about food.

The owners of the brands that matter will control access to the audiences that matter in the future. Content creators’ fates will be in the brands’ hands.

Publishers can compete in this environment, but only if they recognize the realities and try!

I am not an expert on brands (and I don’t even play one on TV.) But I have been paying attention this concept for about 15 years, since Mark Bide introduced me to it during our work together on the Publishing in the 21st Century program in the 1990s. There are a few simple truths that I believe are clear to anybody who spends any real time thinking about this.

1. For a brand to succeed, its message (often called its “promise” among the Brandanista) must be crystal clear and unconfused. You wouldn’t put the same brand name on toothpaste and tomato sauce. And if Ravelry wants to expand into gardening, they almost certainly should invent another brand.

2. Publishers particularly need to distinguish between B2B (business-to-business) and B2C (business-to-consumer) brands. So a company’s name might be an acceptable B2B brand, communicating things about commerciality, quality, and its marketing effort to bookstore buyers, librarians, and reviewers who will be interested in its offerings across subject matters. But consumers require brands that are consistent as to subject matter, or as to the problems the content offerings solve (which is what makes “Dummies” work.)

3. Healthy brands reduce marketing costs. If you want to sell a romance book, you have to find the audience. In Harlequin’s case, the audience finds them! Yes, Harlequin is one of the exceptions to the rule that a publisher’s name is not a B2C brand. Why? Because they have a consistent product offering. If they decided to expand into mysteries or thrillers, they’d need another brand. Even within romances, Harlequin has sub-brands to give their readers shortcuts to the particular lengths and types of books they want to buy.

4. Precisely the same product with precisely the same marketing expenditure will sell better under some brands than it will under others, which is a corrolary to point 3 above.

5. We all well know that not all brand promises are about content. “Community” (interaction among the interested) and “service” (solving problems or providing help, which is what the content in Dummies books do) are important components of brand as well. My paradigm is to use content as bait to attract eyeballs, but then to use community and service to strengthen the hold of the brand on its adherents.

The overall vision presented in the Shift speech is that vertical communities are forming and that the stakes being planted in the virtual ground are analogous to the land claims made by settlers when Oklahoma was opened up. Each of those claims will ultimately be branded and many of those brands will endure for a very long time. Will important gardening brands be owned by publishers or seed and fertilizer companies? Will important cooking brands be owned by publishers or a food manufacturer or a restaurant chain? Will important travel brands be owned by publishers or a hotel or an airline? It depends on who delivers the combination of content, community, and service that pulls together the interested and then leverages that interest into an enduring brand.

Publishers have great tools to compete but they can only succeed if they know what the game is. Establishing enduring brands is the great opportunity of our time and book publishers are very well-positioned to win. If they play. Understanding content and how to deliver it to markets is a great start, but that’s all it is.

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Aggregation and curation: two concepts that explain a lot about digital change


Aggregation and curation: two concepts that explain a lot about digital change
Every time I read a story about why newspapers are failing that doesn’t mention the role of aggregation and curation in their troubles, it reminds me that something very fundamental is being missed, even by very sophisticated observers.
Aggregation is one of the core concepts of content presentation and commercialization. Any analysis of what happened to the record business, what is happening to newspapers, or the future of books and bookstores and magazines and TV that does not feature this concept prominently is almost certainly flawed. Aggregation, of course, simply means pulling together things which are not necessarily connected.
Curation is a term that has always referred to the careful selection and pruning of aggregates, such as for a museum or an art exhibition. But the concept in the digital content world means the selection and presentation of these disparate items to help a browser or consumer navigate and select from them. Aggregation without curation is, normally, not very helful. Curation creates the brand.
NOcontent makes its way from its creator to the public without aggregation. Agents are aggregators, pulling together the work of many writers to present an (agent-) branded offering to publishers. The business would be considerably more inefficient and expensive if agents didn’t aggregate the work of writers to present to publishers.
Publishers are aggregators, pulling together lists of books to present a (publisher-) branded offering to bookstores, libraries, and various review media.
Bookstores are aggregators, and their curation is reflected in front tables and shop windows and store sections that create a (retailer-) branded offering that consumers can navigate.
In the music world, record companies aggregated 10 or 12 or 15 songs by a single artist into a single offering (called an “album”, nomenclature that goes back to when it took a collection of 78 rpm records to deliver a concerto or a symphony, and those were delivered inside the sleeves of a bound volume.) When long-playing technology (33 rpm records) was perfected, the longer form became more cost-efficient than the single, on a pennies-per-minute calculation, so the longer form took over.
Or it took over until it wasn’t more cost-efficient anymore, which it wasn’t when the Internet happened. Aggregation and curation into 40- and 50-minute offerings no longer served the purpose that it used to. And since the unit of appreciation always had been the individual song, the aggregated album lost its sales appeal. It wasn’t just piracy that downloading enabled; it was the ability of the listener to curate for herself!
Newspapers are obviously aggregators and curators. The differences in their curation create their brand. The New York Times leaves out the comics. The New York Post leaves out the multi-syllable words. The Daily News beefs up its sports section and, for years, was known for having the best pictures. But one thing has been common to all of them and to all other newspapers: they cover the waterfront. (I have called that being “horizontal.”) They aggregate news of the world, the nation, and the city with sports, weather, stock quotes, advice to the lovelorn, and many other things. They sell almost all their advertising against the aggregate and against the brand, not against any specific item or interest being aggregated. And the competition for each paper is against other curated aggregates.
Newspapers sold the curated aggregate to people who didn’t want most of it because the total price was a good deal for the parts they did want, just like the album was a good deal even if you only liked some of the songs.
And now they are suffering precisely the same fate as the record album. The unit of appreciation is smaller than the whole. And for each unit of appreciation — each ball score, stock price, report from Washington, or political cartoon — there is a whole new host of competition.
So the long story short on newspapers is this: a business model of selling a horizontal (many-subject) aggregate, curated by something other than subject, was based on the economics of a physical world where aggregation produced efficiencies of production and distribution. The Internet changed that. It is no longer necessary for an aggregator to provide news to deliver me sports, or to provide a whole newspaper to deliver me the weather or a stock quote.
Horizontal aggregation was more efficient in a world of physical delivery. Vertical aggregation makes more sense in a world of digital delivery. And enabling the customer or user to have some control over the curation is possible in the digital world but hardly is in the physical.
What are the takeaways from this?
1. Don’t blame newspapers for not being ready for the new world. Their strategy of aggregation and curation was created for a physical world and it does not port to a digital one. This is not about whether the content is free or behind a pay wall. It is about the Internet rewriting the rules for what constitutes sensible aggregation and curation.
2. Booksellers must also take the new realities on board. Until the Internet, aggregating the largest possible selection under one roof had enormous customer value because the difficulty of obtaining what was not under that roof was high. It isn’t anymore. Amazon, Barnes & Noble, and any retailer served by Ingram has a nearly-universal selection available for delivery within days, if not hours. So the gap between what’s in the store and what’s not has narrowed dramatically. The relative power of the large aggregate has been diminished.
3. The importance of curation becomes more prominent. If having lots and lots of books in a store doesn’t have the power it used to, having the right books becomes more important.
4. Publishers’ aggregation and curation created their brand, and their brand (in most cases) was intended to communicate meaning to retailers, librarians, and reviewers, not to the public! In  world where the powerful intermediaries are becoming more responsive to subject than to format, publishers need to rethink what they publish and how they present the collection that they choose.
5. Recommendation engines aside (“based on what you bought before, have we got a book for you!”), online book retailers have a long way to go to enable the customized curation that seems both possible and desireable in the digital age. Even as sophisticated a retailer at Barnes & Noble will present multiple duplicate entries of a public domain scan from Google to an ebook search for a Shakespeare play. And even as sophisticated a retailer as Amazon will sell you a Kindle ebook that is a self-published tome in a way that is indistinguishable from a book from a legitimate publisher. These are failures of curation.
Except for the writers, all of us in the book value chain are part of the effort to aggregate and curate the offerings of writers to others. Every editor and publisher, every bookstore and agent, got to where they are by aggregating and curating writers’ work in ways that made commercial sense in a physical world. Some of those assemblies are challenged; I’ve been saying that the more horizontal is the collection, the less likely it is to work in the digital world.
But, remember this: when you are looking for reasons to explain why a winner in print media is losing on the web, it almost certainly starts with aggregation and curation and how it needs to change to suit changed circumstances.

Every time I read a story about why newspapers are failing that doesn’t mention the role of aggregation and curation in their troubles, it reminds me that something very fundamental is being missed, even by very sophisticated observers.

Aggregation is one of the core concepts of content presentation and commercialization. Any analysis of what happened to the record business, what is happening to newspapers, or the future of books and bookstores and magazines and TV that does not feature this concept prominently is almost certainly flawed.

Aggregation, of course, simply means pulling together things which are not necessarily connected.

Curation is a term that has always referred to the careful selection and pruning of aggregates, such as for a museum or an art exhibition. But the concept in the digital content world means the selection and presentation of these disparate items to help a browser or consumer navigate and select from them. Aggregation without curation is, normally, not very helpful. Curation creates the brand.

No content makes its way from its creator to the public without aggregation. Agents are aggregators, pulling together the work of many writers to present an (agent-) branded offering to publishers. The business would be considerably more inefficient and expensive if agents didn’t aggregate the work of writers to present to publishers.

Publishers are aggregators, pulling together lists of books to present a (publisher-) branded offering to bookstores, libraries, and various review media. Bookstore buyers would find it much more difficult to purchase tens of thousands of new books each year without this branding.

Bookstores are aggregators, and their curation is reflected in front tables and shop windows and store sections that create a (retailer-) branded offering that consumers can navigate.

In the music world, record companies aggregated 10 or 12 or 15 songs by a single artist into a single offering (called an “album”, nomenclature that goes back to when it took a collection of 78 rpm records to deliver a concerto or a symphony, and those were delivered inside the sleeves of a bound volume.) When long-playing technology (33 rpm records) was perfected, the longer form became more cost-efficient than the single, on a pennies-per-minute-of-sound calculation, so the longer form took over.

Or it took over until it wasn’t more cost-efficient anymore, which it wasn’t when the Internet happened. Aggregation and curation into 40- and 50-minute offerings no longer served the purpose that it used to. And since the unit of appreciation always had been the individual song, the aggregated album lost its sales appeal. It wasn’t just piracy that downloading enabled; it was the ability of the listener to curate for herself!

Newspapers are obviously aggregators and curators. The differences in their curation create their brand. The New York Times leaves out the comics. The New York Post leaves out the multi-syllable words. The Daily News beefs up its sports section and, for years, was known for having the best pictures. But one thing has been common to all of them and to all other newspapers: they cover the waterfront. (I have called that being “horizontal.”) They aggregate news of the world, the nation, and the city with sports, weather, stock quotes, advice to the lovelorn, and many other things. They sell almost all their advertising against the aggregate and against the brand, not against any specific item or interest being aggregated. And the competition for each paper is against other curated aggregates.

Newspapers can sell the curated aggregate to people who don’t want most of it because the total price is a good deal for the parts they want, just like the album was a good deal even if you only liked some of the songs. Or they could.

But now they are suffering precisely the same fate as the record album. The unit of appreciation is smaller than the whole. And for each unit of appreciation — each ball score, stock price, report from Washington, or political cartoon — there is a whole host of new competition.

So the long story short on newspapers is this: a business model of selling a horizontal (many-subject) aggregate, curated by something other than subject, was based on the economics of a physical world where aggregation produced efficiencies of production and distribution. The Internet changed that. It is no longer necessary for an aggregator to provide news to deliver me sports, or to provide a whole newspaper to deliver me the weather or a stock quote.

Horizontal aggregation was more efficient in a world of physical delivery. Vertical aggregation makes more sense in a world of digital delivery. And enabling the customer or user to have some control over the curation is possible in the digital world but hardly is in the physical.

What are the takeaways from this?

1. Don’t blame newspapers for not being ready for the new world. Their strategy of aggregation and curation was created for a physical world and it does not port to a digital one. This is not about whether the content is free or behind a pay wall. It is about the Internet rewriting the rules for what constitutes sensible aggregation and curation.

2. Booksellers must also take the new realities on board. Until the Internet, aggregating the largest possible selection under one roof had enormous customer value because the difficulty of obtaining what was not under that roof was high. It isn’t anymore. Amazon, Barnes & Noble, and any retailer served by Ingram has a nearly-universal selection available for delivery within days, if not hours. So the gap between what’s in the store and what’s not has narrowed dramatically. The relative power of the large aggregate has been diminished.

3. The importance of curation becomes more prominent. If having lots and lots of books in a store doesn’t have the power it used to, having the right books becomes more important.

4. Publishers’ aggregation and curation created their brand, and their brand (in most cases) was intended to communicate meaning to retailers, librarians, and reviewers, not to the public! In a world where the powerful intermediaries are becoming more responsive to subject than to format, publishers need to rethink what they publish and how they present the collection that they choose.

5. Recommendation engines aside (“based on what you bought before, have we got a book for you!”), online book retailers have a long way to go to enable the customized curation that seems both possible and desireable in the digital age. Even as sophisticated a retailer at Barnes & Noble will present multiple duplicate entries of a public domain scan from Google to an ebook search for a Shakespeare play. And even as sophisticated a retailer as Amazon will sell you a Kindle ebook that is a self-published tome in a way that is indistinguishable from a book from a legitimate publisher. These are failures of curation.

Except for the writers, all of us in the book value chain are part of the effort to aggregate and curate the offerings of writers to others. Every editor and publisher, every bookstore and agent, got to where they are by aggregating and curating writers’ work in ways that made commercial sense in a physical world. Some of those assemblies are challenged; I’ve been saying that the more horizontal is the collection, the less likely it is to work in the digital world.

But, remember this: when you are looking for reasons to explain why a winner in print media is losing on the web, it almost certainly starts with aggregation and curation and how it needs to change to be optimal in the new digital environment.

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Digital change: what’s an independent bookseller to do?


The question of how to plug the independent bookseller into the digital revolution is a knotty one. Nobody has really “solved” it. 

Two of the smartest guys in the UK, Francis Bennett and Michael Holdsworth, tried to tackle this question in a report for the Booksellers Association in a report published in 2007. While they touched on a whole host of issues, including that publishers are likely to sell digital downloads direct, they really didn’t manage to come up with an action plan for the individual bookseller. Rather, they focused on the need for booksellers and publishers to join collaboratively to solve the problem: start with a public conference, create standards, form a joint trade working party. This is, at best, a path to an answer.

From this I conclude there is no ebook-centric answer. If there were one, these guys would have found it.

Then, three weeks ago, PW did a story headlined “Indie Booksellers Debate the E-book Conundrum”. This article introduced a product/technology called Symtio, which stores (among them Tattered Cover) use to back into ebook revenues. Symtio is a plastic card, sold at a retailer, which entitles the bearer (gift recipient) to download an ebook, an audiobook, or both from Symtio’s web site. If this strikes you as something less than the perfect ebook solution for retailers, you’re seeing it the way I do.

The ABA plans to work ebooks into Indiebound. Len Vlahos calls it a “focus for the immediate future” in a white paper presented to the ABA Board. Ingram Digital offers access to 150,000 ebook titles to independent stores. And stores such as Vroman’s are quoted as enthused about the potential for them with ebooks.

Dick Harte, however, who runs BookSite, which provides Web hosting for booksellers and librarians, doesn’t agree. Not only were ebook sales low on the BookSite platform, often they were erroneous purchases (people thought they were buying a printed book!) which then required a customer service intervention. One particularly far-sighted bookseller quoted in the article is David Didriksen who sees ebooks as very low-margin transactions not worth the effort.

I agree. What distinguishes what independent booksellers offer: local taste and judgment, personalized service, intimate customer knowledge — these things just don’t provide much competitive advantage in the ebook space. And the competition isn’t just Amazon and B&N either.

So independent booksellers need to look elsewhere to participate in the digital revolution. I tried to sketch out a strategy in a previous piece:

1. Set yourself up (probably with Ingram) in the simplest way you can to be able to sell as many titles in as many formats as you can. That is, get the maximum choice you can for your customers with the minimum hassle and investment for you.

2. Don’t expect to make money selling ebooks: consider it an accommodation to your customers to keep them buying physical books from you. Restrain yourself from investing large amounts of labor improving your ebook presentation past the point of acceptable. If the margin from your sales starts to amount to something, you can do it then.

3. Spend all of energy that you might have wasted perfecting the sale of ebooks on social networking, trying to be in direct contact with your customers through Facebook, Twitter, and through postings on popular and well-read blogs in subject matters your store specializes in. Particularly focus on the opportunities to promote to specific groups, such as through hashtags (#s) on Twitter, which identify groups of people interested in a particular thing.

I neglected to add a fourth, very important element of an indie bookseller’s digital strategy, although it is hinted at in the marketing suggestion above. This one is the same as it is for general trade publishers: get vertical!

The bad news about digital change is that it brings the biggest companies in the world — Amazon, B&N, Apple, and every phone company — into the indie bookseller’s back yard. But the good news is that it also brings every customer in the world into that back yard. So a bookseller with a vertical specialty can build a global market. This was the pre-Internet strategy of CEO-Read (originally 800-CEO-Read; if Bezos had invented Amazon ten years earlier he would have chosen a 7-letter name…) They’re business book specialists and their customer base is truly international.

Independent booksellers need to build a reputation within vertical niches. That’s a matter of having the stock, having the knowledge of the vertical subject, and then getting involved in the vertical communities — blogging, commenting, tweeting, reaching out. The bookseller’s web site, if it has good content properly tagged, can rapidly be discovered for relevant searches. Tattered Cover may not be able to beat Amazon at everything, but they should beat them on searches for Pike’s Peak. A northeastern store that specialized properly could come up ahead of Amazon in a search for “autumn leaves colors” or “historical sites Boston”. (By the way, I just checked, an no bookstores come up in the first ten pages of “historical sites Boston”!) 

In just the same way that general trade publishers need to use the time they have left when “general trade” still works to build vertical presences that will last beyond that time, so do general trade bookstores. It will work for Barnes & Noble to be “general” for far longer than it will work for any local store. The trick is to be World Class at something, most likely something that has a local root will make the most sense.

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A slightly different take on the Google settlement


I have read and listened to a lot of dialogue about the Google settlement. I’m not a lawyer and I’m not a librarian or archivist and I’m not a scholar who would be interested in those “non-consumptive uses” I didn’t know about before this all happened. To the extent that I had a horse in the race, it was about liberating orphan books. I worked with a current executive who was inside a different big company 10 years ago. We were analyzing the whole world of out of print and the opportunities therein. We figured out pretty quickly that a lot of the good stuff we’d find would present devilish problems trying to locate somebody to pay royalties to, and determining definitively that something post-1923 was not under copyright was not an airtight propositon either. 

A few years ago, at the Frankfurt Book Fair before the Google Library project was announced, Michael Holdsworth, then at Cambridge University Press, related an observation from somebody he’d talked to who said “when we come back 30 or 50 years from now, most of the IP from the 20th century will have vanished. We’ll reach a point where if Google doesn’t report it, it doesn’t exist. Everything from before 1923 will have been scanned by somebody and everything post 2000 was born digital. Just about everything in between will be missing.”

That was very fresh in my mind when Google began to scan all those orphan works, breaking a logjam (one way or another; it now appears by this settlement) that the Congress had not resolved. In fact, legislation since the 1970s extending terms of copyright had actually made the problem worse. Under the laws I grew up under, I believe anything older than 56 years would have been in the public domain. That law today would liberate anything born before 1953. I would personally be out of copyright.

As a responsible member of the community, and a consultant who wants to help clients think through the implications of change, of course the Google settlement becomes a tennis tournament where I have to attend every match.

The part that interests me most is the potential revenue beyond the settlement. Where is the revenue for this going to come from? Who will buy what from the material Google has digitized and what will the revenue opportunities really be for those who “opt in”? And what will Google really have to sell?

I went to Michael Cairns, former CEO of Bowker with this question and he and I are starting to think it through.

All the focus on revenues in the conversations I’ve heard, including a very stimulating seminar at Columbia ten days ago, has been about digital revenue. And that’s what Cairns and I were thinking about too. What, besides the pre-1923 PD stuff do they have in the databases they can license to libraries? So how much can they charge? We saw Google’s pricing idea for ebooks. What will copyright owners do about pricing? And will copyright owners give Google books under this program, or under the Google Partnership Program? These are complicated questions.

Distracting, even.

Because that’s not where the money is. (This next part is purely a hunch; we haven’t done any numbers yet.)

Let’s remember that 99% of the consumer book business is still in print.

Think about how many orphan books would be worth a printing of 5000 copies or more. Start with this as a list from which to find probable candidates:

Any book that was made into a significant Hollywood movie.

Any book about FDR, Babe Ruth, Dwight Eisenhower, John Kennedy, Winston Churchill, etc.

Books about movie stars, TV stars, TV shows, pop musicians.

The number 1 fiction or non-fiction bestseller of any year (this could be a set used as birthday presents for special birthdays: 60, 65, 70, etc.)

My hunch is that the biggest revenue generator across the entire load of copyrights that the settlement will liberate for at least the next ten years will be books printed in press-run quantities. Who ever thought that the biggest beneficiaries of the Google settlement in the medium term could be agents and packagers? If somebody has previously mentioned the possibility, I hadn’t noticed. It only occurred to me day before yesterday.

Cairns reminds me that our friend (and fellow Michael) Cader thinks that the chances of any real “gems” being found in this orphan pile are remote. Of course, things that are remote possibilities happen from time to time over enough occurrences, and there will be a lot of books liberated. Surely there are many, in the categories mentioned above and others, that will warrant a first printing of  3,000 or 5,000 or 10,000, or with the right packaging and promotion, even more than that. Even in these troubled times, there might be some additions to staff at packagers or publishers to sift through these opportunities. Assuming these deals are to be made by the Book Rights Registry, let’s hope they have an agent on the staff along with the database sales manager.

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