The Shatzkin Files


Digital marketing and coping with Amazon are the two big challenges for publishers as we begin 2017


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I am getting ready to attend my first Digital Book World as a “civilian” (having programmed and moderated the first seven), Thinking about DBW entails recognizing how different the book publishing world today is from what I expected three or six years ago. Be that as it may, the big challenges for the industry — how to change marketing to hit customers who are mostly learning what to buy online (which, as you’ll see, is well covered) and how to cope with the steadily growing market share that is Amazon’s — remain the ones I would have anticipated.

Although I do actually know other people who, like me, consume just about all their books on screens, we’re a minority who are not really looked upon by those who have stuck with paper as the avant garde. Whatever market share ebooks achieve by evolution (and the data suggest that share has plateaued in the past couple of years), the expectations of revolution are at least temporarily over. I thought we’d be clearly on a path by now to most people reading most narrative books digitally. We aren’t, even though the one precondition I thought was necessary has been met: most people carry screens all the time that would work fine for ebooks. This clearly demonstrates that there is a limit to how much the appeal of convenience changes reader habits when the comfort level with a form is a competing consideration.

But a flattening ebook share has not prevented the market from consolidating in the way I thought was worth worrying about when I mistakenly saw a more accelerated ebook future. By anecdotal information gleaned from publishers, Amazon appears to be booking half or more of the print sales for many publishers and many books.

(I told this fact to a former CEO who has been out of the business for 20 years last week. He said, “you mean, if I sell 40,000 books, Amazon will sell 20,000?” I said, “yes”. He said, “wow.”)

One informed estimate I heard is that Amazon constitutes upwards of 95 percent of online print sales. Kindle has outrun its ebook competition, gaining share consistently from Apple’s iBooks, B&N’s Nook, and Kobo and Google. Amazon probably has an ebook share in the mid-60s for most publishers. However, with the ebooks they control and keep off other platforms — Amazon Publishing and many of their top indie authors — and with additional impetus compared to the other vendors from their subscription business, their overall ebook market share is perhaps 10 or more points higher than that.

That anecdata is supported by a December 29 Wall Street Journal story that says that only a diminishing minority of Americans does not shop at Amazon!

(There is one big caveat about any observations about Amazon “share”. Like Ingram, Amazon is a domestic U.S. account that sells what it buys here all over the world. Probably the third biggest topic-of-interest for publishers is how to take advantage of the increased export opportunities promulgated by topics one and two. But one must take note of the fact that some of the dollars that flow through Amazon should not really be considered part of the U.S. market share. That varies by publisher, by book, by time of the year. It is also not transparent to any vendor or statistical analyst.)

When I went fulltime into the business in the 1970s, publishers were concerned because Walden and Dalton combined threatened to become 20 percent of the business between them.

But even percentages as large as what Amazon owns and what share ebooks get are worthy of closer and more granular examination. It is always worth remembering that the 6-foot tall man drowns walking across a river that is an average of 3-feet deep. Using aggregated averages is an engraved invitation to mistaken analysis.

So my expectation this year is that the most important information DBW is going to have to deliver will come from Data Guy, Hugh Howey’s collaborator on the Author Earnings website, whom Michael Cader and I introduced to the DBW audience last year. (We put Hugh Howey on the DBW stage when “Wool” became an Amazon bestseller many years ago.)

Data Guy has broadened his remit, which was originally about understanding ebook sales, by joining forces with Nielsen Bookscan. That enables him to analyze print, audio, and digital sales through online and physical store channels, and to look at the books both by source (indies, Amazon-published, and “traditional”) and by genre. DBW has published a mini White Paper, available now, that tips to a lot of this information. It is particularly readable and informative with an introduction by Porter Anderson.

But the big payoff — the examination of data broken down in 44 discrete categories and genres — will be delivered at the show. That should provide a great deal of value and insight for all of us.

I am hoping that there will be price breakdowns as well. I have noticed that the last four or five ebooks I’ve bought have been pretty pricey — well above $9.99. These books are all non-fiction and they are relatively serious and nichey, not aimed at mass audiences. I’m pretty certain that both the publisher and the author are making more profit on those sales than they would on a print sale of that book. The information already revealed by Data Guy through the White Paper would support conjecture that the biggest ebook sales are going to much cheaper ebooks published in high-volume-per-reader genres (like romance, mystery, and sci-fi).

We have had a bifurcated publishing business before. In the 20 years right after World War II, mass-market paperbacks did “originals” that were sold primarily through magazine outlets and not much in bookstores. (One cultural note: at that time, one of the key genres was “westerns”.) Authors could “migrate” to a hardcover life, but there were many who didn’t. It took years for the established houses to buy up the mass-market houses. That — plus changes in the economic structure of mass-market (caused by an allocation system for placement that resulted in ever-increasing returns of the covers of unsold books) that made the books go up in price — over time blurred the line between the two separate production-and-distribution systems.

If the same thing is happening today, it won’t lead to the same result. There are no returns from ebooks.

There are a number of other items on the DBW program that pique my interest besides Data Guy. My Optiqly partner, Peter McCarthy, is on a panel about “what sells books now” that is increasingly important to keep reconsidering as the market shifts and consolidates. And as the reviewing of books and conversation about them moves from the book review pages of newspapers to an increasingly diverse collection of blogs and influencers. Susan Ruszala, who recently ran NetGalley, is talking about “influencer marketing”, which is largely replacing the relatively static list of reviewers that NetGalley was originally created to address.

“The Changing Role of the Agents” is definitely one of the continuing evolutions we all need to keep track of. My sense is that agents three or four years ago were really frightened that indies would keep surging and their role would be highly challenged. I’ll want to hear what this panel, which includes Ginger Clark and Brian Defiore, has to say, but my sense is that that the once palpable-fear has really dissipated. Whatever Data Guy says about the direction of the market, and the data already revealed says he sees the share of author revenue going to indies going down for the first time, that fear no longer seems to be present. What I want to get a better grip on is how agents view the author-publisher division of responsibility for marketing and, if they’ll tell us, which publishers “get it” on that front and which don’t.

There is also a panel about “taking control of the channel” which promises conversation about vendor-managed inventory, a subject that has gotten too little attention from the industry forever and should become more important in a time when we’re going to want to sell books in non-book retailers that can’t afford the buying expertise books require. That was a challenge we never addressed when I was programming. I am glad it is on this year’s agenda and I look forward to getting a picture of how it is viewed today.

And Peter Hildick-Smith of Codex, who was on our programs frequently over the years, has two sessions that will make my list. One is on “converting book browsers to book buyers”, which is the holy grail. The other one is on pricing strategies on a panel that includes Dan Lubart of Iobyte, another longtime friend who has been mining online data for many years (while he also served as an executive at two Big Five houses). I suspect I’ll get some confirmation that the higher pricing I’ve observed for niche non-fiction is part of a widely shared strategy at the moment.

DBW keynoter and Macmillan CEO John Sargent fingered “maintaining ebook prices” as a key challenge for the industry in a session I saw him do at an agents’ gathering at least six years ago. He was right. How pricing strategies have evolved is something we all need to understand.

The one big missing piece for me in DBW 2017 is Amazon. I know from my own experience that they only come and talk when they’ve got a message they want to deliver to your audience, which makes them no different from any other big company.

The big “get” for DBW 2017 is Sargent. Perhaps he intends to use the time to highlight an announcement or initiative. Not that that’s necessary! Sargent has a refreshing and original take on things, whatever he’s discussing. And DBW has added a nice wrinkle by soliciting audience suggestions for the questions Sargent will answer after his talk. *That nicely finesses a challenge I recognized when I was running the show. It is cumbersome to take questions in the plenary sessions: too many people, too big a room, and too much of an invitation to host an unwanted speech. This way, they get audience participation without those problems. Nice innovation.

(*Turns out I got this wrong when I first posted. The answers to the 7 questions ARE the keynote! So I guess if Sargent has any topics he really wants to cover, they could make sure they get a question for them.)

The Data Guy analysis will certainly produce some Amazon-centric insight. But considering their mushrooming importance to everybody in the book world, that’s a subject about which we can’t get enough information. At least there will be ample opportunity to talk about Amazon and how different publishers are looking at them with the other attendees. I suspect there will be a lot of such conversation. At least I’ll be having some!

One big innovation at DBW 2017 is that they’ve added a third day which is an IndieAuthor conference. They’ve lined up some great speakers including Pete McCarthy. One of real interest will be Jon Fine, whose career in publishing encompasses both Knopf and a long stint at Amazon. The agenda for that one is, as it should be, aimed more at the indie author I’m not than the publishing-establishment-analyst I am, but it will be very interesting to see how successfully they can pull an indie author audience to midtown Manhattan. 

And, in conclusion, a hat tip to Ted Hill who took over the reins at DBW this year. The author day and the questions for Sargent are two of a number of innovations he’s introduced. I first met Ted in 1993 when I was programming my first conference — Electronic Publishing & Rights — in partnership with Publishers Weekly. Ted was selling “electronic rights” for Simon & Schuster and making a LOT of money for the company from sources they never knew existed before. Over the years, he’s seen publishing’s digital change from a number of angles, some on assignments we’ve worked on together. He put together a good team of vertical captains to help him. I’m looking forward to an enlightening couple of days.

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  • Bob Mayer

    Thanks for this summary. I have to present a talk tomorrow night on “Changes in the publishing industry” and find I have to throw out all my old material and am starting from scratch. It’s causing me to really think about all the different aspects, especially from an author’s point of view.

    • Wow, really? That’s incredibly flattering if literally true. I really do hope it is helpful. I have real respect for your actual experience on the firing lines.

  • Good stuff — Thanks.

    I’m like you and have migrated to reading almost exclusively pixels instead of paper. Like you, I’ve also noticed the increasing cost of eBooks. But when I see eBooks that cost more than the paperback (http://amzn.to/2hRKy64) or the hardback (http://amzn.to/2hRCPEY) or an eBook priced more than $25 (http://amzn.to/2iF9XBP) I have to wonder if the so called ebbing of eBook sales is for real. I have passed on buying a number of books due to the predatory pricing of publishers. Fortunately, there is no lack of options in the market.

    My personal opinion is that the manipulation of the market by the big five will be futile and fleeting.

    • I’m not sure how much of that I buy. Not all the expensive ebooks were from agency publishers. Amazon isn’t discounting like they used to but they’re still getting 50% of the sale price from the non-agency publishers over whom they have power. And I don’t know what is sustainable and what isn’t. You need more data than the price of the ebook to determine that.

  • David VanDyke

    “Although I do actually know other people who, like me, consume just
    about all their books on screens, we’re a minority who are not really
    looked upon by those who have stuck with paper as the avant garde”

    As a hybrid working author, the real question for me is not how many people read mostly on screen. The real question is book sales numbers and how much money is spent on books, and how that creates a living for me.

    For me as a genre fiction author (sci-fi/fantasy and mystery/suspense/thriller), what matters is that more than 50% of money spent in my adult genres (in other words, not children’s or even teen/YA books) is spent to purchase ebooks, not print. Some claim as high as 70%.

    In other words, voracious adult ebook customers massively compensate for the large number of people that buy far fewer print books a year. They balance the equation at the very least, and probably tip it in favor of digital.

    Add in audiobooks, which also skew digital, and we can see that the cries of “print is back!” and “ebooks are slumping” must be heavily caveated. In some areas, print has already take a back seat to digital. In others, such as illustrated children’s books, it probably never will.

    What we’re really talking about is segmented markets where sales skew one way or the other. The average of freezing and scalding may be livable, but if there is no actual average zone, you will die. By the same token, averaging multiple different markets may yield irrelevancies when individuals apply them to the real world. What matters is the genres, and sometimes even the niches within genres. (This is exactly in line with your observation: “It is always worth remembering that the 6-foot tall man drowns walking across a river that is an average of 3-feet deep. Using aggregated averages is an engraved invitation to mistaken analysis.”)

    From a diversified publisher’s point of view, print dominates. For an author of genre fiction books aimed at adults, digital is where a living can be most easily and reliably earned.

  • john zemler

    Hello Mike,
    You mentioned: “What I want to get a better grip on is how agents view the author-publisher division of responsibility for marketing and, if they’ll tell us, which publishers “get it” on that front and which don’t.”

    Could you elaborate on what “get it” entails?

    Does it mean publishers need to be proactive marketers of all the books they publish? Does it mean authors should be assuming more of those duties? Am I missing the boat completely here and “it” means something altogether different?

    What is the “it’ which publishers either get or don’t get?

    Thank You & Semper Pax, John

    • In brief, the “it” is SEO: search engine optimization, covering the whole landscape of making books digitally discoverable. It starts with the right orientation: thinking about the book’s *audie**nce* rather than its *contents.* But then it extends to understanding how to use a whole array of tools from Google Analytics to Moz and how to present books differently in different online environments. It helps if a publisher can direct an author’s own efforts sensibly, including helping build web sites (which ARE helpful, no matter that occasionally somebody seems to suggest that they’re not.) The degree to which publishers understand all this and can be helpful is wildly variable, even across imprints in the same publishing house. I think the agents would be properly reluctant to say “this imprint doesn’t get it” but maybe they can say “here’s how you can tell if your publisher knows what they need to know or not”.

      • john zemler

        Thank you! That helps a lot.