Digital Book World

The first Publishers Launch Conferences show outside the United States, “A Global Perspective on Digital Change”, will be at the Congress Centre in central London on June 21, with the Publishers Association serving as our partners in putting on the event. We also owe special thanks to the PA’s group of Digital Directors, who were extremely generous with their time and insight. If you can be in London that day, you couldn’t find a better way to spend it than with us.

We’re still putting the finishing touches on what will be a one-day conference packed with illuminating conversation, but we can tell you quite a bit about it already. We aim to deliver strategic, practical, and focused discussion of near-term issues and opportunities. This won’t be a showcase for cool products or a venue to debate what the future might look like some day. We’re examining essential issues — ebook “export” opportunities; what happens to territorial rights; hiring and retraining to meet today’s challenges; revamping publishing systems for a dual print and digital paradigm; getting “found” on digital shelves — that publishing professionals should focus on now to thrive in the days to come.

The UK market is in between the US and the rest of the world in its migration from print to digital reading. Kindle and iPad sales really took off last Christmas and, while ebook penetration may be a fourth or less of what it is in the US, it has grown enough to be disruptive and to generate a consensus acceptance that very substantial change in the industry is inevitable.

On the one hand, my PLC partner Michael Cader and I have followed the developments in the US very closely so we have some firsthand experience with some aspects of what the UK trade is going through. On the other hand, we know history won’t repeat itself precisely. There are important differences in the markets and there is a substantial group of companies with experience and capabilities developed in the North American market that can hit the ground running in Britain or anywhere else in the world. That alone will make everybody else’s experience different than what happened in the US.

In order to be sure we were talking with the UK industry, not at it, we took some preparatory steps. In February, we put a large number of ideas for panels and topics up on Survey Monkey and invited 70 players in the UK book trade to express their opinions on them. In five days, 40 of the people responded.

Then we followed up by spending three days in London meeting with about 50 people to discuss our ideas and theirs. Our partners at the PA provided invaluable assistance, hosting our conversations and inviting us to join a regular meeting of the Digital Directors to get the insights of the most knowledgable people in the UK market. Those conversations were crucial in helping us focus properly on topics and in locating some key sources of insight. Frankly, despite our long experience working with the British publishing community (I have visited London on business three or four times a year for 35 years), putting this conference together would have been impossible without the help we got.

But because of that help, I think we’ll be presenting the UK publishing community with a lot of very useful discussion that hasn’t taken place at the many prior gatherings that have discussed book publishers and digital change.

One topic that we identified very early is the opportunity we see for publishers in Britain and Ireland to sell into the US market now without payng for a distributor infrastructure or taking an inventory risk. When we started to explore this topic, we learned that, of course, people are definitely starting to plan for it. Some are starting to exploit it. This was something we thought should be happening below the radar, and it is.

This is a peculiar opportunity, because it might be more important for independent UK publishers large and small than it is for the biggest global players. We’re still filling out the panel for this one, but we have Helen Kogan of Kogan Page, an independent whose company was already working in the US market (and therefore has some helpful experience to pass along) but who is seeing the expanded opportunity presented by digital, and Jean Harrington of Maverick House Publishers in Dublin. Jean is also President of Publishing Ireland and we invited her to join this particular conversation for a reason. The Irish diaspora in the US has a particularly strong identity with the old country and we expect books of Irish history and Irish fiction will find a substantial additional market through ebook sales in America.

We’re working on adding another British publisher and an agent to that dialogue.

Another topic arose out of a conversation that longtime UK consultant Mark Bide and I had while we were at Tools of Change in New York in February. How long will it be, I wondered, before half of UK sales are digital? Mark said he wasn’t sure about the timing, but he was sure that the publishers’ systems, overhead allocations, staffing, and infrastructure would require a lot of adjustment to be ready for that day. That’s a good conference topic, we thought.

Then, in our conversations at the PA 10 weeks ago, Anthony Forbes Watson, the MD of Pan Macmillan, told us he had charged his team with thinking through the question exactly as we had defined it. Anthony wants to know “what does 50% ebooks look like? What do we have to do to be ready for it?” The next day we talked to James Long of Pan Mac who told us that, yes, he was actually the person in the company with the primary responsibility for thinking this question through.

We decided the best frame for this conversation was “thinking about the future.” James, as he will tell us on June 21, is largely focused on what Pan Mac needs to do in systems development and integration, workflow changes, and skills development to be ready for a 50% digital world.

But there are two other aspects of preparing for the future we felt could be illuminated by other panelists we recruited.

Perseus, a US company whose Constellation division that provides digital services to smaller publishers is a global sponsor of Publishers Launch Conferences, is one of several companies in the world (Ingram in the US is another; so might Random House be in the US and the UK) that are investing in warehouses and print book distribution capabilities at precisely the time many publishers are disinvesting in them, precisely because they know that most publishers will have to disinvest in them. They’re trying to be there for publishers who want to dispose of fixed cost overheads for the shrinking print book market. We put Rick Joyce of Perseus into this conversation to cover the sensitive topic of consolidation on the physical side (a subject that Dominic Myers, the MD of Waterstone’s, famously put on the UK publishing community’s agenda a couple of months ago.)

Copyright Clearance Center, the US RRO which is also a global sponsor of Publishers Launch Conferences, has steadily called our attention to another industry-wide challenge: the need to manage rights more effectively and on a more granular level to take advantage of emerging opportunities to license chunks and fragments for apps, ebooks, and web sites. We thought that the voice for this topic in London should be local, and we were pleased that Sara Faulder, head of the Publishers Licensing Society, agreed to join this conversation.

Mark Bide has agreed to moderate this group in what I think will be a dialogue about publishers and the digital future unlike any the audience will have heard before. (Except, that is, if they are at our Publishers Launch BEA show on May 25, where we’ll have a different version of this conversation, one more focused on export and rights sales than infrastructure, but also covering the change we’ll see to selling more and more fragments.)

We’re not above stealing our own ideas and giving them a local spin. One panel that was extraordinarily successful at Digital Book World last January was one we describe in shorthand as “new skill sets”. It’s about capabilities publishers need to get that they don’t have and it is about process and workflow changes and the use of cross-functional teams as well as hiring in or training people with new skills. Charlie Redmayne of HarperCollins did that panel for us in New York in January and is reprising it at our BEA show. In London, he’ll be joined by Juan Lopez-Valcarel of Pearson and Jacks Thomas, the CEO of Midas Public Relations, on a panel moderated by Jo Howard of Mosaic Search & Selection Ltd. One of the key elements in the New York discussion of this, which we expect will arise again in London, is “when is it best to hire in the skills and when is it better to retrain the people I already have?” This is a subject every publisher needs to be thinking about that isn’t discussed in public very often.

We’ll have three of the top digital leaders of UK houses — George Walkley of Hachette, David Roth-ey of HarperCollins, and Sara Lloyd of Pan Macmillan — joining Michael and me for a dialogue about the big companies who have cut their teeth on the US market and are now taking their capabilities worldwide, starting in the UK. We’ll be talking about Amazon, Apple, Google, Kobo, Ingram, and Overdrive (the six clearly-declared and clearly-capable global ebook players) as well as Sony, aspirants like Copia and Blio, and US titan Barnes & Noble (which has shown no clear signs of global interest yet.) It looks to us like there is only one UK player with a global perspective, still-tiny cell phone provider Mobcast, but we’ll be learning from our panelists whether there are others we should be considering. And our audience will learn more about the North American companies which are bound to be a big part of the local market’s ebook life in the years to come.

We’ve reached a time when “metadata” is an important subject to discuss, no matter how dry or back room it has seemed. We were fortunate to get Graham Bell of EDItEUR to moderate a dialogue about this for us. He’s recruited Jon Windus of Nielsen and Karina Luke of Penguin to discuss it with him. We’re now looking for a retailer to join them. The condition of metadata in the marketplace is not good enough in enough places yet. This is costing publishers sales. This panel will explain why that is and what every publisher should do to make sure this isn’t a huge hole in the side of their boat as online sales, print and digital, grow and the impact of metadata grows right along with them.

We are also going to have a discussion of the future of territorial rights. Richard Charkin of Bloomsbury, a well-known skeptic about them, and David Miller, an agent with Rogers, Coleridge and White Ltd., have agreed to participate. We’re looking for a full-throated defender of the current territorial regime to join them in what will be more of a conversation than a debate. We wonder whether territorial rights make as much sense in a 50% ebook world as they do in the 5% ebook world we might now be in. The agent’s voice in this conversation might be the most important one because, after all, they decide whether the deals are acceptable or not.

One thing that the territorial rights dialogue will certainly entertain is what we should expect to see in terms of author initiatives. That topic is bound to come up in two other discussions as well. There’s one we’re now calling “experiments, best practices, and out of the box thinking” which is really about innovation. But we are going to focus on innovation in business models and practices and innovation in marketing, not on product innovation. We are still working on putting this group together, but we were very impressed with our preliminary conversations with two of the panelists.

Marc Gascoigne is at Angry Robot, a sci-fi imprint started by HarperCollins and then bought by Osprey. Angry Robot’s better mousetrap is its community focus; Gascoigne will make the case that doing that right (which many publishers say they want to do) requires that everybody, and that means every editor and everybody else, communicate directly with the audience. It is hard to see putting that across in many established trade houses.

Richard Mollet of the PA will moderate the conversation with the innovators.

Also on that panel will be Peter Cox, an agent with Redhammer. Cox is changing his own business model (providing more in the way of services to his authors, but charging them more for it and looking to represent fewer authors, not more) but he’s effectively changing the author-publisher relationship as well by making the author an active marketer and community gatherer. He’ll have examples and he’ll have ideas that will challenge the thinking of many publishers and agents in the audience.

The last panel of our day is intended as a Grand Finale. Michael Cader and I will sit with Stephen Page of Faber, Rebecca Smart of Osprey, John Makinson of Penguin, and agent Jonny Geller of Curtis Brown. We’ll get their take on the speed of the ebook takeup and its consequences.

How will British publishers cope in a market that may soon have no full-line bookstore chain? How will the industry cope with the rise of self-publishing? Is there any real danger of a consolidated English-language world in which London becomes subsidiary to New York? Or, in some companies, might it be vice-versa? Will both agents and publishers be changing the core business models which have prevailed for the past century over the next few years?

What excites me about the last panel — aside from the sheer smarts and savvy of the people we got to join us — is the diversity of their perspectives. The publishers run companies of different sizes and with very different approaches to building their publishing lists. The agent joining us has gained a reputation as one of the most digitally savvy players in the UK market. Michael and I thrive on spirited conversations with very smart people; we think we’re going to finish the day very stimulated and with big smiles on our faces.

And we think our audience will too.

Of course, before we get to London, we’ll be running our “eBooks Go Global” show aimed at international visitors and their trading partners at BEA. At that show, we’re particularly excited about two panels we won’t be doing in London. One is with a few booksellers already working with the new Google Ebooks capability reporting on how it is functioning for them. The other takes a slightly different approach to the “selling in the US” opportunity. Patricia Arancibia of Barnes & Noble, which has aggregated about ten times as many ebooks in Spanish as most people in Spanish markets will tell you exists, will open a lot of foreign publishers’ eyes to the possibilities that exist for them in the US market. We’ll also have a chat with Barry Eisler, the author who turned down half-a-million bucks to self-publish. And that’s not all. Tickets still available… And tickets still available for London as well.

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The fact that Publishers Launch Conferences will stage half-a-dozen or more events before our next big multi-day Digital Book World blowout next January doesn’t change the DBW calendar. Now is the time of year when we have to start thinking about what the big issues will be at the turn of the year so we can start planning the program. As we did last year, we’ll be calling a meeting of our Conference Council (the 2012 group is currently in formation) at the end of June to brainstorm the topics and our approach to covering them.

It’s my job to anticipate now where we’ll be in nine months. What aspects of digital change will be most important to us when we convene again at the New York Sheraton and have a couple dozen sessions to explore the issues? This post exposes the current state of my thinking on the subject; I am shamelessly using the opportunity to engage the very smart audience gathered here to help me refine these thoughts and point out what I may have missed. I count 15 discrete subjects here (some of which can certainly be combined) which have made my list so far. (I’ve italicized them so you can count along with me; they don’t all get their own paragraph.)

The biggest subject of all, of course, is “global.” The reality that every publisher anywhere is now able to reach any reader everywhere with no local presence, no inventory barriers, and many of the same intermediaries that deliver content to local customers is an industry-changer that will take a long time to deliver its full effects. Territorial rights allocation is only one of the many long-time conventions of publishing that will be challenged by the reality of global. It looks like the biggest publishers — those with local organizations in many countries — have the biggest challenge to adjust to the new global reality. We see this now as we’re putting together panels for our BEA and London events on the first biggest opportunity of global: the new ease of selling books in any language and of any origin to the biggest ebook market developed so far: ours in the United States.

Perhaps the second biggest subject is one we’ve discussed in this space for a long time: “vertical.” Even the most avowedly “general” of the big “general trade” houses are beginning to recognize the urgency of direct contact with individual customers. Once that becomes an objective, it quickly becomes apparent that audiences cluster around subjects or genres: verticals. We anticipate some dramatic reorganizing of the imprint, publishing, and marketing structures of the major houses as they develop their audience-centricity. There might even be enough development along those lines to warrant conversation about it at DBW 2012.

Two more categories of change will be in the “sales models” and “product models” publishers will employ, neither of which have had anything but the most minor adjustments since the mass-market paperback became a force just after World War II. We’d expect somebody big to try a subscription model, a la O’Reilly’s Safari or what we get with cable TV, for the consumer market sometime soon, maybe before next January. (In fact, a James Patterson Book Club, which is a sort-of new subscription model, was announced just today!) And the new Amazon Singles program for shorter-than-book-length content is accelerating the awareness of publishers and authors that the length requirements for printed books do not extend to digital ones.

All of this will lead inexorably to more “ebook first” imprints, divisions, and initiatives. I’d guess that by January, several (if not all) of the major houses will have “programs” offering content for sale which is too brief to be delivered as a bound book. We first reported on a program of this kind from Harlequin at BISG’s Making Information Pay conference several years ago. It was an outlier then. It’s more of a pioneer now. This week we heard that Hachette has a short fiction program in its Orbit imprint. Last week in London we talked with friends at Pan Macmillan about a short ebook program they created at the end of last year to capitalize on the many Kindles and iPads that were delivered as presents for Christmas. (Of course, we’re putting that on the program for our London conference; the coordination challenges within an established operation to pull off something like this are not trivial.)

Part and parcel of verticality is direct audience contact and retention. When we wrote a couple of posts last summer about direct marketing techniques publishers had to make part of their standard operations, we were a bit early to get the true trade publishers’ attention. By next January, every publisher’s consumer emailing list will be a component of its marketing effort. A part of this work, of course, is effective use of social media, a subject publishers keep learning more about and which we’ll certainly try to cover — in our way, which is looking for scale and replicability — in January.

Metadata is a subject that just doesn’t go away. It is disappointing to hear from industry bodies and retailers that many publishers haven’t gotten the core metadata totally under control yet. We covered the basics at Digital Book World 2011; in 2012 I hope we’ll be talking about things like rationalizing the BIC (British) and BISG (US) subject codes, which have developed separately to address each market’s idiosyncrasies but which need to be harmonized to enable the full potential of globalization.

Over the next two years, I’m expecting the most disruptive change to take place in children’s book publishing and illustrated book publishing. When the catalyst for ereading was the Amazon Kindle, as it was starting in late 2007, straight text worked but not much else did. Now that Barnes & Noble’s Color Nook and the iPad are devices of choice for millions of people, illustrated material and rich color can be delivered as well as text. In the children’s book area, there have been a slew of new entrants, probably led by big publishing veteran Rick Richter’s Ruckus Media. The illustrated book business hasn’t really surfaced in a big way yet, but it almost certainly will by next January’s Digital Book World. I’d expect it to be a major topic of conversation since illustrated books are far more complex to “convert” and present the opportunity to enhance in ways that may soon become requirements.

The recent news from O’Reilly that they are using Ingram’s services to be able to deliver printed books without holding stock signals another new topic that will be of widespread interest: building a virtual inventory infrastructure. This topic also came up in a discussion at London Book Fair with Sara Lloyd and James Long of Pan Macmillan, one company we’ve found that is very consciously preparing for a 50% ebook world. Decentralizing their print production to reduce inventory and manufacture closer to the point of delivery is very much on their radar screen. (In fact, the whole question of how publishers have to adjust their organizations and overheads to cope with a 50% or more digital book marketplace is one we’re featuring at our Publishers Launch show in London.)

As I write this, it has been nearly a month since we’ve had a lot of conversation about authors doing their own publishing, but we got very familiar with the names Amanda Hocking, John Locke, and Barry Eisler in recent weeks because they’re doing just that. That trend can do nothing but accelerate between now and next January.

This is requiring agents to reconsider their own business models. We’re at the dawn of an era where agents will be publishers themselves and business advisors, not wholly dependent for their revenue on their ability to get advances and royalties from publishers. The first Digital Book World conference in 2010 was the first digital publishing conference to feature agents prominently in the conversation and we talked then about how business models might change. This January I expect we’ll be able to stage some conversation about how new models are working out for those who have tried them. (One of the agents we’ve put on the program at DBW is Scott Waxman, and his Diversion division doing ebooks has 20 books in the market and 10 more about to hit.)

And the last two subjects that we almost certainly should be discussing at DBW 2012 are the still-critical but diminishing segments of a publisher’s marketplace for printed books: brick-and-mortar retail locations, particularly bookstores and mass-merchants and the place so many people have discovered and acquired their reading material, the public library.

The decline of bookstores has been duly noted in The Shatzkin Files and, of course, the bankruptcy of Borders has everybody’s attention. Less well-publicized has been the decline of book sales in the mass merchants. (Tactics for arresting that slide will be the topic of a presentation by Tara Catogge of Charles Levy at BISG’s Making Information Pay conference, another one we get our hands dirty on, taking place on May 5.) As the brick channel for printed books continues its inevitable decline into insignificance, the state of play and the tactics to adjust to the loss of sales and, perhaps more important, merchandising exposure, will be a topic we’ll discuss again, as we did with independent bookstores and heads of sales departments last January.

And how to deal with libraries in the ebook world is a question vexing many publishers. Two of the Big Six just don’t sell them ebooks at all; one company has tried a number-of-loans limitation. We are intrigued by a solution pioneered by Bloomsbury in the UK — a “shelf” of books the library licenses a year at a time for online reading only. We aren’t covering it in our London show because we think most of the UK market is familiar with it but we’ll be putting it on the agenda for Digital Book World next January.

Next week I’ll give you a preview of the first two Publishers Launch Conferences programs: for international visitors to BEA and the Americans who work with them (on May 25) and, with the Publishers Association, our program for UK publishers (on June 21.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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It’s a pre-holiday week and a busy one following a busy one last week. So time for blogging is limited and, besides, all you readers have presents to wrap.

But there is one subject to ruminate on just a little bit that came up repeatedly during last week’s business. Constance Sayre of Market Partners and I are doing a joint exploration of ebook royalty rates for a presentation at the Digital Book World conference in January. We created a survey to allow agents to tell us anonymously what kind of deals they were striking and we got about 130 responses. (Market Partners’ newsletter, Publishing Trends, has a report in their current issue, released today, on what the agents said and the full data will be released for our attendees at Digital Book World on January 26.) We decided to balance our presentation by giving publishers an opportunity to give their side of the story, also anonymously (except, since we interviewed them, we know who they are. The agents, having responded online and in privacy, can’t be tied back to their answers. Connie and I are good at keeping confidences.)

We spoke to seven CEOs last week, a couple of whom were joined by colleagues who actually do the contract negotiating. What they told us about ebook contracts is what we’ll talk about at Digital Book World.

But just about all of them made an ancillary point and that’s our subject today. The point they made is that the main task ahead of them in the next few years is to completely reinvent book marketing. There was clear acknowledgment across the board of something that has concerned us for some time: that inevitably declining retail shelf space means a commensurate decline in critical merchandising capability.

Changes are definitely occurring. The big publishers are undeniably SEO-conscious, investing real effort thinking about what search terms apply to each book they publish. They’re all experimenting with Facebook and Twitter and other social networking sites as well. Various community-building tools, including the very ambitious Copia platform that launched a few weeks ago and the John Ingram-funded start-up Rethink Books and its new Social Book capability, are now being tried out. The established ebook vendors, notably Kobo and Kindle (on my radar screen; I’m sure Nook and Google too), are building social capabilities into their platforms. And the established book discussion networks like Goodreads and LibraryThing are continuing to add participants, books, metadata, and conversation that constitute raw material for marketing the next book from any publisher.

There are two questions big publishers need to be asking about all of this. One is “does it scale?” The other is “does it adequately replace the stack on the front table of a highly-trafficked bookstore as a way to generate attention for a new publication?”

If marketing efforts don’t scale, then a newcomer or a smaller press isn’t handicapped competing against a major. And if the new techniques don’t compensate for the lost front table spaces, then publishers are going to need something more. And effort that doesn’t scale takes time, which costs money. Publishing margins have never been robust enough to allow publishers to increase the percentage of revenue allocated to marketing and remain profitable.

Of course, book retailers share in the difficulty. As much as publishers have depended on retailers to sort the books out into sections and featured areas and to bring the customers into contact with them, the retailers have depended on the publishers to make the public aware that a book exists.

This is a big problem with many aspects to it and this is supposed to be a relatively short pre-holiday post, so I want to drop just two conceptual thoughts on it: one a principle and one a suggestion.

The principle is that “investment marketing” must replace “expensed marketing”. “Expensed marketing” is what publishers have always done: promotion for a single title that has no lasting payoff or value. That’s an ad in the paper or online, a press release that gets picked up and run immediately and has no value next week, or a free copy of the book that might result in a review of that book or, most of the time, result in nothing at all. (Thank goodness that, at least, those review copies can be far less costly to distribute in digital form and for that it is worth mentioning another relatively new service called NetGalley that facilitates distribution of electronic copies for promotional purposes.)

What I’d call “investment marketing” is an effort that yields a result of ongoing value: a batch of email addresses that can be pinged at no cost to promote a future book or a relationship with a web site or a blogger that adds to the promotional arsenal available in the future. This concept is particulary important on the social marketing side, which is labor-intensive.

I was glad to have the concept validated in a conversation with a leading digital marketer that we recruited as a speaker for Digital Book World. She agreed that in order for digital campaigns to make sense, they should be on behalf of a block of books — by an author or on a subject — rather than pushing one title.

This is a sea change for publishers who have always marketed one title at a time. It is particularly important to implement as the distinction between backlist and frontlist for promotion — which was always partly rooted in the reality that backlist might not be available at retail months or years after its initial publication — makes less and less sense.

The suggestion is to attack the search and discovery problem, the browsing problem, the serendipity problem, the substitute for the stack of books problem. Or, maybe we’re better off envisioning this as the “replacing the marketing clout of the book clubs” problem.

Introducing a simple concept: the book shopping or book marketing app.

I would happily pay a subscription fee to somebody who would put into app or ebook form a periodically curated catalog of recently published books on baseball history. I want to see the title, author, precis, table of contents, sample material, publisher selling copy of all kinds, and reviews. I don’t care if the purchase is “in app” or if I can click my way to the landing page for the book at my favorite ebook retailer (and I’m easy: I have four of them!)

I am sure regular fans of romance, sci-fi, historical fiction, business books, popular science, and many other subjects share the same frustrations I do with shopping for ebooks now. Any search you do returns more dirt than diamonds, more chaff than wheat, more noise than signal and, for the subjects nearest and dearest to me, far more books I have either already read or already rejected than that are new and of interest. It would be ever so much easier to have all this information presented in an app or an ebook that I could peruse at my leisure, online or off, and which would have proper navigation rather than a constant struggle with pointless links and back buttons.

I think we’ll see publishers and retailers delivering this, or something like it, before the end of 2011.

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No new facts today, just some perspective.

Google has launched and Copia has launched. Kindles and Nooks are on sale in consumer electronics stores far and wide. iPads continue to roll out by the millions and recent evidence suggests that consumers are very happy reading ebooks on them.

I’ve made the point on the blog before that every book purchased online is another nail in the coffin of brick-and-mortar bookselling. All ebooks are purchased online (despite some charming, but futile, fantasies to the contrary.) Even with the Google proposition enabling all stores to participate in the ebook marketplace, which may motivate Amazon to try a similar proposition (and, considering the hostility of competing book retailers toward Amazon, good luck with that), it all adds up to less support for brick-and-mortar. Google ebooks might help some bookstore owners generate some margin, but that doesn’t mean it will keep more stores open.

(Look at it this way. If you ran a bookstore and found that through Google you were able to sell more and more virtual goods while your brick-and-mortar sales were declining, would you invest what you were earning through the new and growing channel in the old and declining one?)

This is not the moment for chewing over stats. We’re in the middle of a huge acceleration in digital reading. I have seen it suggested that this year might mark the first when Christmas will be the book business’s biggest sales day, because all those ereader recipients unwrap their presents and immediately go online to load up their machines.

There will be lots of opportunities for statistics-based observation after the turn of the year and we’ll be doing a lot of it at Digital Book World. (We just got some early data from iModerate, which is looking at ebook consumption on multi-function devices for us, and it is provocative.)

I’m expecting that what brick-and-mortar booksellers will experience in the first six months of 2011 will be the most difficult time they’ve ever seen, with challenges escalating beyond what most of them are now imagining or budgeting for. If I were programming a show for six months from now for the book industry, I’d plan for that to be Topic A.

Things happen “gradually, then suddenly.” I think the next six months will make what we’ve been experiencing for the past year look very gradual. I know smart people who have thought for the past year that there would be some flattening coming soon in the ebook switchover. It doesn’t feel that way to me.

I linked immediately above to a post of mine from last Spring in which I got something pretty damn wrong: figuring that iBookstore’s early success would be sustained and that Random House would find it “necessary” to switch to Agency, even though I saw the logic in their initial decision to stay out. As it has turned out, iBookstore’s share appears to have declined, even as the use of iPads and iPhones as ereaders has grown. Many more ebook titles are available for those devices through other sources which now, emphatically and ironically, include Google. Because Google is delivering a lot more illustrated and complex-page ebooks to the market than there were before, it will make the iPad even more valuable. So as Google Ebooks succeed, iBookstore doesn’t benefit but Apple very well may.

I’m a baseball fan and I think both hitters and future predictors should be happy if they bat .300. I’m not embarrassed to be pointing out one of the times that I made an out.

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A few things worthy of a pre-Thanksgiving comment have passed in front of my eyeballs in the past few days.

1. Sainsbury’s, one of the big supermarket chains in Britain, has announced that it will open a digital download store before Christmas. They’re starting with movies and music, but plan to expand to ebooks before long.

The working assumption has been that Amazon, Apple, and Google (even though Google Editions hasn’t launched yet) would be the major global players for ebook distribution. Barnes & Noble has taken significant market share in the US, putting them second in sales to Amazon at the moment. There are rumors that B&N is going to start competing globally before long; it would certain make sense for them to do that. (Perhaps B&N’s aggregation of books in Spanish is a step in that direction.) Sony and Kobo are already active all over the world; Copia intends to be and they have just opened for business.

But if Sainsbury’s wants to be in this business, so might mass merchants in every other corner of the globe. We had already had our eyes opened by a French publisher who expressed his fervent hope that local French book retailers would carry English-language ebooks. His reasoning was very simple. Since Amazon, Apple, and Google would be carrying ebooks in French as well as English, the local merchants won’t be competitive unless they carry English as well as French.

There is a tendency in some quarters to declare the ebook wars over and that somebody (usually Amazon or Apple is the one annointed) has “won.” It is important to remember that ebooks have about 10% pentration in the US and less than 1% everywhere else (except, as we’ll see below, China). Many more players will be competing for the ninety-something-percent of the 2015 world’s ebook readers that haven’t tried it yet.

2. A story in China Daily puts the Chinese digital publishing business at $12 billion and at more than half of the Chinese book business. I have some immediate skepticism about these numbers since the US book business (all in: trade plus school plus college plus professional plus anything else you can think of) is only $30 billion and the US ebook business was just estimated by Forrester to be $1 billion. For China’s book business to be 80% or more of ours in total and for China’s digital publishing business to be 12 times ours seems very unlikely, if not impossible. Who knows what errors of methodology or currency conversion could explain these numbers? (I surely don’t.) But half digital is a powerful statement, even if the comparison with the US can’t be right.

The fact that China has moved so fast to digital opens up another line of thought to me: how translation might work in the future. Google Translate doesn’t deliver you a publishable version of anything. But it does deliver an intelligible version that a good writer or editor can turn into something publishable pretty quickly. How long can it be before a combination of Google Translate and a single literate person is delivering a perfectly acceptable translation of anything to anybody who can afford the single literate person?

(Added after publication: you’ll see a comment below pointing out that the statistics in the China Daily article referred to all publishing in China, not just book publishing. That makes the figures make more sense. It also means that much of what appears in the two paragraphs above has been mooted, except that Google Translate plus one good editor can deliver a readable version of anything in any language.)

3. Sarah Weinman, who is one of the more acute analysts of the commercial realities of digital publishing, just wrote a piece wondering whether the iBookstore is actually working. She suggests that iBookstore is trailing both Amazon Kindle and B&N Nook by a considerable amount in sales. She has data from one particular book for which the ebook sales were about 60% Amazon, 26% B&N, and only 6% iBookstore. When I asked a few publishers how those percentages broke down about four months ago, they put Amazon closer to 50% than 60% and put B&N and iBookstore pretty close to each other. The iBookstore, which I call the Walden or B. Dalton mall store of ebooks, has been a head-scratcher for me. They have far fewer titles than their competitors: Amazon, B&N, and Kobo. While they do a nice job of title presentation for the bestsellers, their lack of breadth is evident if you do any kind of subject or genre search. Meanwhile, Amazon’s very tough position (so far) resisting agency for any but the biggest publishers makes it very difficult for smaller publishers to put books in the iBookstore without exposing themselves to the danger of conflicting contracts and a downward spiral of revenue if Amazon decides to discount their books. (I have been told lately by two small entities that they’re going to get agency terms from Amazon; one actually wonders why Amazon would permit that right now since their current strategy seems to be working to keep the iBookstore uncompetitive on title breadth.)

On the other hand, it has been pointed out by others that iBookstore is going to develop a big offshore following. The iPad is making inroads abroad faster than Kindle and Apple’s iBookstore is the only book purchasing experience that comes already loaded on the iPad device.

I would never expect iBookstore to go away, but I do wonder whether it will be a significant force in ebook retailing, ever in the US and, in the long run, anywhere, unless they are willing to back off on requiring agency terms from smaller publishers. Or unless Amazon will back off on requiring wholesale to that same cohort.

4. PW reported yesterday that HarperCollins is shutting down its ebookstore. While there could be any number of factors at play, one has to assume that sales were not robust. The guess from here is that the problem of not enough traffic from consumers is going to be a generic problem for general trade publishers. You can only get traffic as a horizontal aggregator if you are a complete horizontal aggregator. iBookstore can’t do it with a fraction of the titles that Amazon and Barnes & Noble have and neither can a publisher.

With our good friends at Market Partners International, we’ve just launched a questionnaire on Survey Monkey to learn from agents what ebook deals they’re making with publishers. We’ll balance our inputs by interviewing publishers on the same subject before Connie Sayre of MPI and I deliver what we’ve learned at Digital Book World in January. If you’re an agent and you haven’t received an invitation to participate in this effort, contact Jess Johns at Idea Logical (jjohns@idealog.com) and she’ll get you included.

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One of the functions of this blog is to predict important changes in the business just a bit before they happen. We think we were a bit ahead of the curve in seeing the ebook acceleration and in seeing the likely pressure on bookstore shelf space. Today it would seem that the next great pressure point in publishing houses is going to be the sales departments. In the next couple of years they will probably change more than they have in the last half-century.

When I first became aware of how the publishing business worked in the 1960s, the field reps (referred to frequently then as “the men”) were the key connection between the publishers and the market. The closest thing there were to national chains in the early 1960s were department store buying groups who seemed to all be clustered in tiny little offices on 42nd Street in the block just west of 5th Avenue. The local department stores — Marshall Fields in Chicago, Rich’s in Atlanta, Halle Brothers in Cleveland, were big and important accounts.

Because the reps were the key to getting books into the hands of readers, everything revolved around passing information and excitement to them and through them. Thus were publishing “seasons” necessary to group the books, organize them into catalogs, and to prepare sales materials (tip sheets, jackets, blads for illustrated books) in an orderly way. This pretty much required that publishing lists be frozen some weeks before the sales conferences which themselves were a couple of months before the first books on the list would ship.

Today the field reps are probably responsible for anywhere from 5-to-15 percent of a house’s sales. The major accounts: Amazon, Baker & Taylor, Barnes & Noble, Borders, and Ingram for everybody (and the mass merchants like Costco, Target, and Wal-mart for the biggest players) are now at least 70% of the business, often more. These customers are almost always covered by national account staffs, not by field reps.

National account sales almost never work with catalogs or seasons; they work by months. Each national account has its own rules and regulations governing when they need to know about a particular month’s books. Whether sales calls occur monthly or less frequently, the structure of the presentation is around each month’s deliveries, not around seasonal catalogs.

It seems transparent that the shift in sales resources has not kept pace with the shift in sales channels. The ratio of national account business versus field business has gone from what was probably about 50-50 20 years ago to 80-20 now. But field forces haven’t shrunk by anything like that proportion. The fact that 80% of the business is now season- and catalog-free hasn’t changed the procedure in most houses of building marketing around seasons and catalogs.

I checked in with a couple of veteran salespeople to confirm my notion that the structure of publishers’ sales organizations hasn’t changed as much as the structure of the account base. One of them made a couple of important points. He posited that field sales force reductions had been slow to happen because the field reps are highly visible in the industry. Outspoken independent stores, which have a public profile larger than their sales, want to be called on and complain if they’re not. Publishers in the houses who are fighting for attention for their books don’t like to see fewer reps selling more and more titles.

This same sales veteran also underscored that both marketing and publicity are living in a similarly restructured world and haven’t changed as much as they should either. He points out that Amazon coverage really calls for marketing talent and thinking, not sales talent and thinking. Sales, as this person sees it, is often about talking an account into taking a chance on stocking a book. Amazon works by algorithms and you can’t talk them into anything. (Furthermore, it doesn’t really cost you any sales if Amazon is out of stock; they’ll source the book from a wholesaler to satisfy the customer. If you’re not on the bookstore shelf, on the other hand, you aren’t going to make a sale.) So the Amazon coverage needs to be about keywords, marketing programs, and metadata. It isn’t about salesmanship, as it is in an independent account, or about navigating a complex supply chain, as it is at a chain or mass merchant.

Experiments have been tried. Ten years ago, Random House tried putting reps into the field specifically to call on the branches of bookstore chains. That has always seemed like a good idea to me: store managers and clerks affect sales; being faced out affects sales; and there’s a lot of display opportunity that is locally controlled. Only a rep calling on a chain branch can affect those things and good merchandising of the books in the store will mean fewer returns. Different chain managements (and some chains have changed their managements the way some people change their shoes) have different attitudes about those calls. Very few actually see the benefit and encourage it. Some quietly discourage it; some try to forbid it. Whether or not Random House continued that effort, it certainly didn’t become widespread.

But as independent bookstores continue to diminish in size and number, publishers need to come up with other things for reps to do to keep them in the field. Calling on chain stores would be one productive thing. Calling on local newspapers to push books or calling on special market (non-bookstore) accounts would be two others. We know of one major publisher that was trying things like that three or four years ago but it apparently didn’t work for them. That same publisher fired a bunch of reps a couple of years ago and shifted a lot of sales coverage to telemarketers.

Catalogs are slowly moving to electronic. Harper started the movement with their own initiative a couple of years ago; now Edelweiss from Above the Treeline is providing an industry solution. But seasonal list planning is still the predominant go-to-market mechanism in our industry.

I just don’t believe the status quo can hold a lot longer. Selling by seasons in the digital age is nutty. Preparing printed catalogs that are out of date before the ink on them dries in the digital age is nutty. And making the entire publishing house’s marketing staff work around sales conferences and list preparation when most of its customers don’t buy that way is beyond nutty. There needs to be a complete re-think of how publishers put books into the marketplace. The divisions of responsibility among national account reps, field reps, telesales reps, marketers, and publicists need to be rethought.

With a new step-increment drop in print book sales almost certain following what we all expect to be an ereader Christmas (and our new biggest sales day: December 25), I think we can expect some very hard thinking around this subject at many publishing houses in the first six months of 2011.

I belatedly realized that this was a very important topic that hadn’t been covered at Digital Book World. It is now. We have a great panel: Rich Freese of National Book Network, Alison Lazarus of Macmillan, and Michael Selleck of Simon & Schuster will discuss the changing role of the publishers’ sales department on a panel moderated by David Wilk, a veteran of trade book sales and distribution. I consider this a prime example of what I’ve tried to make DBW’s distinguishing proposition: discussion of business challenges caused by technology even if the topic itself isn’t primarily about technology.

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