The Shatzkin Files


The future of bookstores is the key to understanding the future of publishing


One of the subjects we have been probing for a long time is the inevitable impact that increased purchasing of books online would have on the shelf space at retail and what that would mean to trade publishers. (You’ll see that this speech that is well more than a decade old also says publishers are going to have get audience-centric, or vertical, as well.)

Of course, there has already been one shock to the system — one “Black Swan” event — which was the closing of Borders stores in 2011. That suddenly took about 400 very large bookstores out of the supply chain. Since then, the anecdata about independents — which includes encouraging, but unaudited, financial information from the BEA and a lot of rah-rah from thriving indies (a fire we threw a log on with a great break-out session at DBW last week) — has been very upbeat (although Bowker data seems to suggest Amazon gained more from Borders’s passing than anybody else did). And while B&N has continued to show some sales slippage, its more drastic setbacks have been in the Nook business, not selling print in stores.

One distracting fact for analysts considering this question has been the apparent slowdown in the growth of ebook sales, suggesting that there are persistent print readers who just won’t make the switch. The encouraging fact is distracting because it is incomplete as far as predicting the future of shelf space at retail, which is the existential question for the publishers, wholesalers, and bookstores (and, therefore, by extension, for legacy authors too). We need to know about changes in the division of those sales between online and offline to really have a complete picture. If ebook takeup slows down but the online buying shift doesn’t, the bookstores are still going to feel pain.

This point about the key index being online sales versus offline sales rather than printed book sales versus digital book sales is a key one that we’ve been hammering for years. It was nice to see Joe Esposito emphasize it in a recent post of his addressing some of my favorite questions about Amazon.

We had a panel of four successful independent booksellers at DBW. One of them, Sarah McNally of McNally-Jackson, has recently been quoted as saying she worries about the future of her Soho bookstore when her lease is up. (Rents rise quickly in that part of the city.) Meanwhile, she’s taking steps to move beyond books to retailing design-heavy but perhaps-more-enduring retail goods like art and furniture. (And, in that way, McNally-Jackson takes a page out of Amazon’s book, not limiting themselves to being a bookstore brand.)

A friend of mine who is a longtime independent sales rep says that even the successful indies are finding it necessary to sell books and other things — cards, gifts, chotchkes — to survive. The mega-bookstore with 75,000 or 100,000 titles or more was a magnet for customers in the 1970s, 80s, and 90s. It isn’t so much anymore because the multi-million title bookstore is available through anybody’s computer. This is a fact that makes the number of successful stores a weak indicator of the distribution potential available to publishers. If replacement stores carry half the inventory of the ones that go out, we can have a lot of indie retail success stories but still a shrinking ecosystem into which publishers distribute their books.

In general, the proprietors of successful indie bookshops and their trade organization, the American Booksellers Association, paint the times as hospitable to independent bookselling. They dismiss the skepticism of people like me that believe that the current surge of apparent good fortune is due to a window of time (now) when Borders’s closing removed shelf space faster than Amazon and ebooks had removed demand for books in retail stores.

It has been an unspoken article of faith that bookstores would not go the way of stores selling recorded music or renting and selling video, both of which are segments that have just about entirely disappeared. The physical book has uses and virtues that a CD, a vinyl record, a DVD, or a videotape don’t, not the least of which is that a physical book is its own “player”. But it also provides a qualitatively different reading experience, whereas the other “physical” formats don’t change the consumption mode at all. Of course, that only helps bookstores if the sales stay offline. People ordering books online are overwhelmingly likely to order them from Amazon. In other words, it is dangerous to use the book’s ability to endure as a proxy for the bookstores’ ability to sustain themselves. The two are not inextricably connected.

But the fate of almost all trade publishers is inextricably connected to the fate of bookstores. There are only two exceptions. Penguin Random House is one, because they are large enough to create bookstores on their own with just their books. The other is publishers who are vertical with audiences that open up the possibility of retail outlets other than bookstores. Children’s books and crafts books are obvious possibilities for that; there aren’t a ton of others.

The feeling I had at Digital Book World is that most people in the trade have either dismissed or are wilfully ignoring the possibility that there could be such serious further erosion of the trade over the next few years that it would threaten the core practices of the industry. With more than half the sales of many kinds of books — fiction in the trade area, of course, but also lots of specialized and professional and academic topics — already online, many seem to feel whatever “adjustment” is necessary has already been made. They got support for optimism at Digital Book World. Stock-picking guru Jim Cramer touted Barnes & Noble’s future (because they’re the last bookstore chain standing) and, from the main stage, the idea was floated that Wal-mart might buy and operate B&N as part of an overall anti-Amazon strategy.

All that is possible, and I have no data to refute the notion that we’ve reached some sort new era of bookstore stability, just a stubborn feeling in my gut that over the next few years it will turn out not to be true. I don’t mean to ignore the positive signs we’ve seen over the past year or so. And the overall decline in physical retail versus online purchasing affects all retail, not just books, so it is possible — some might say likely — that the rent squeeze will ease. It isn’t just bookstore shelf space that seems to be in oversupply compared to demand; that’s broadly true of retail. So your gut may differ and would have some logic to support a contrary point of view.

But my hunch (and this is not a “prediction” as in “this will happen; take it to the bank”) is that shelf space for print in Barnes & Noble and dedicated bookstores could well shrink by 50 percent over the next five years. What CEO or CFO of a trade publishing house would consider it prudent not to consider that possiblity in their own planning?

Obviously, less shelf space and more online purchasing change each publisher’s practices in many ways. They will want to deploy more resources for digital marketing and less for sales coverage. They will want to own less warehouse space and less inventory, changing the overall economics of their business. As we’ve been saying for years, they’ll find it sensible to become more vertically consistent: acquiring titles that appeal consistently to the same audience. Each house’s own database of consumers will become an increasingly important component of their equity: an asset that provides operational value today and balance sheet value if they become acquired.

But, most of all, publishers are going to have to think about how they maintain their appeal to authors if putting printed books in stores becomes a less important component of the overall equation. It is still true that putting books in stores is necessary to get anywhere close to total penetration of a book’s potential audience. Ignoring the in-store market obviously costs sales in stores but it also costs awareness that reduces sales online. (After all, stores are very aware of the “showrooming” effect: customers who cruise their shelves with smartphones in hand, ordering from Amazon as they go!)

But that’s today when the online-offline division may be near 50-50 overall and is 75-25 for certain niches. If those numbers become 75-25 and 90-10 over the next five years, the bookstore market really won’t matter that much to most authors anymore. Whether through self-publishing or through some fledgling publisher that doesn’t have today’s big publisher capabilities but also doesn’t have their cost structure, authors will feel that the big organizations are less necessary than they are now to help them realize their potential.

Higher ebook royalty rates, more frequent payments, and shorter contract terms are all very unattractive ways from the publishers’ perspective to address that issue. So far the marketplace hasn’t forced publishers to offer them. If bookstores can hold their own, the need to move to them may not be compelling for a long time. But if they don’t, most legacy publishers will have very few other levers to continue to attract authors to their ranks.

We are already seeing big publishers quietly moving away from publishing books that haven’t demonstrated their ability to sell as ebooks: illustrated books, travel books, reference books. That implies an expectation that the online component — particularly the ebook segment of it — has already changed the marketplace or certainly will soon. Adjustment of the standard terms with authors is a shoe that hasn’t dropped, but if the marketplace continues to change, it might become very hard to keep things as they’ve been.

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  • Garry Martin

    Interesting assessment Mike. I think we are undoubtedly seeing the demise of the bigger book stores like B&N, physical books will become a more general store type merchandise. Small book sections in big stores, instead of big stores housing books.
    We have all seen the countless articles comparing the book industry with the music industry, the demise of major record labels and the large music stores.
    However after the pain of the last 25 years the music industry has adapted, there are now a multitude of independent music labels who are promoting more artists than ever. There are some studies that predict by 2017 the music industry will actually be in a financially stronger position than it was in the late 80’s.
    Mow its the turn of the Publishing / Book Store industry. They have to adapt become masters of content marketing/distribution and leave the traditional book business to become its own niche market.
    On that note my niece (18) just purchased a NEW ‘Vinyl Record Player’ to play the NEW records she is purchasing, and I have been told that there is an independent music label now producing albums on ‘cassette tapes’
    We are in very exciting times, authors have amazing opportunities to produce books and other content without the costs of creating physical media. Publishers have the power to create marketing platforms, create brands and leverage digital success into a physical market that will still be there for some time.

    • http://idealog.com/blog Mike Shatzkin

      I agree that the way forward is smaller book “sections” in other stores. The problem is that books are devilishly difficult to “buy” (much more complex than music) and nobody seems to have designed a good vendor-managed inventory system so that the individual locations don’t *have to *buy. That’s just one more bit of paved road we need in what is still a jungle.
      Mike

      • http://claudenougat.blogspot.com/ Claude Nougat

        Thanks Mike for a great overview of the situation and causing a stimulating follow-up discussion. I too see the way forward as smaller book “sections” in all kinds of stores from the airport lat-minute vendor and big supermarkets to the specialized garden store and kiddy toy store. That would mean that the amount of “shelf space” would not diminish over time but actually increase, when looked at across the economy.

        The other aspect we need to remember is POD or “espresso” print machines that might get much better and faster in future, so that a bookstore would never need to carry more than one book for every title available that would be used just for display/browsing and not for selling.

        Personally, that’s how I see the bookstore of the future, a place where you browse (because that’s what any reader worth his/her salt is what he/she really likes to do, I know I do!). But you don’t walk away with that book in your hand. No, you order a copy and go sit at the bar and sip a coffee while the machine spews it out for you!

      • http://idealog.com/blog Mike Shatzkin

        Claude, I have trouble with both aspects of your vision.

        Bookstores have SO MUCH space dedicated to books in relation to how much will be there as bits of other stores that I believe your calculation that shelf space would actually increase would never come to pass.

        And I personally think the Espresso machine, or the idea of “print in store” is a boondoggle. It only works if it doesn’t work. That is: if nobody is on line for a book at the machine, you can get your book in five minutes (or ten). But if it actually WORKS and lots of people want a book from the machine, then you’re on line.

        The bookstores that have “succeeded” with Espresso have done so by creating a local self-publishing business. I think they ‘d be much better of to focus on the “front end” of that business and send their printing to Lightning. (And though Ingram is a long-standing client, I would say that if they weren’t!) Very few self publishers walk in with a manuscript in a box and expect to have the book the same day anyway.

        Mike

  • Jack McKeown

    Mike;
    I am not going to offer an elaborate rebuttal to your (admittedly qualified) prediction of a 50% erosion in bricks-and-mortar shelf space over the next five years. But I would ask you to consider that the vectors affecting shelf space are not just those of online vs. physical, or ebook vs. print. Sarah McNally’s comment at DBW underscored the fact that bricks-and-mortar retail is a real estate phenomenon. It is subject to the forces of shifting demographics, developmental pressures and opportunities, capital availability. As the US economy continues to rebound over this next five years, consider the impact on bookstores of the following:
    1. Continuing urbanization of the U.S. population, creating more higher-density neighborhoods, generally a boon to right-sized retail with a community focus
    2. The babyboomers shifting into retirement, with greater leisure time available for reading, and a browising-type shopping experience.
    3. Gen X,Y and Millennials shifting into new household creation and raising families, a boon to children’s books
    For the first factor above, think Brooklyn and the remarkable burst of bookstore formation that we have observed there over the last few years. For the second, I would offer up our own experience at Books & Books Westhampton, set in a resort-type community where the retirement population has been increasing steadily at over 2% per annum. And for the third, look to the recent AAP statistics on the health of children’s print sales nationwide.
    I don’t disagree that AMZN presents some strong headwinds, but let’s not ignore the positive currents!

    • http://idealog.com/blog Mike Shatzkin

      What you say is reasonable and your guess is at least as informed and intelligently-arrived-at as mine. I believe, in general, rents are going to go DOWN (because bookstores aren’t the only retail category that might be overbuilt or might find themselves to be in the next few years). But I also think the counterveiling forces of alternatives — ebooks for straight reading and the Internet overall for everything else plus the growth in online sales of print — will be more powerful. We’ll find out in the next few years whose guess is right.

      Mike

  • William Ockham

    The factor that folks seem to be overlooking is that the need for shelf space is determined by the number of titles which benefit from offline distribution more than it is by the number of books sold offline. I have been spending some quality time with the raw data from Pew Research when they asked people how many books they’ve read in the past year. Pew releases their raw data about six months after the survey, so the latest data I’ve looked at is Nov 2012. Their 2013 summer survey was in August, so we should get that data next month. In any event, the data is telling.
    Just like the bestseller list accounts for a substantial portion of immersive books’ sales, a relatively small part of the adult population is responsible for a large portion of the total books read. People who read 20 or more books a year make up 15% of the population and read 65% or more of all the books that get read. The folks who read 50 or more books a year probably read 40% of all the books. Online stores are the only ones that have the breadth of selection to satisfy folks who read a book a week.
    Think about where the power curve of mass sales intersects with the power curve of number of books read. Bestsellers are made by the buying habits of people who read 6 books or less per year. We are fast approaching the point where the number of titles that really need mass offline distribution is less than a hundred. There will a lot of specialty bookstores (for non-immersive reading), but the megastore (and thus B&N) is doomed. The current system has a large amount of inertial momentum, but the end is clearly visible.
    The consequences of this are pretty clear. Big publishers should be cutting midlist authors as fast as possible (which seems to be happening). By trimming the number of books they publish, they can cut costs and kill the return system. Publishers need to concentrate on the books that are evergreen (don’t get stale) or books that have broad appeal (Patterson, King, Grisham, et. al.). Bookstores that survive will create a niche that Amazon can’t replicate, e.g. by hand-selling like a jewelry store. More books will get sold in other types of retail (gardening books at the garden store, etc.).

    • http://idealog.com/blog Mike Shatzkin

      This is a very well-reasoned and thoughtful analysis, but I don’t agree with it. I have two distinct objections.

      One is that it doesn’t take into account that there are a lot of non-readerly-writerly books, and those tend to want to be seen before purchase more than straight text books do. A very high percentage (don’t know exactly what surveys say, but a lot) of books are bought as gifts. A lot of those are not novels and for a lot of those purchases the buyer would like to actually see what they’re getting. So there’s all that.

      But the other objection is that I think you’re looking through the wrong end of the telescope. For a much longer time than there will be lots of big bookstores there WILL BE books sold in stores. We don’t know what that will look like 10 or 20 years from now, but it will be there. And as long as that’s true, there will be copies of books sold by getting them to those stores that won’t be sold if they aren’t there. And that means the more successful publishers will be the ones that have that capability in their distribution when it is past the days past when it was mission critical.
      I am not going to take on the returns argument here but I couldn’t disagree more with the idea that publishers should end returns. Publishers should *manage
      *returns, a point I’m sure my Dad made eloquently and repatedly in both “In Cold Type” and “The Mathematics of Bookselling.” Maybe someday I’ll write a blogpost about it.

      Mike

      • William Ockham

        I don’t think we disagree about very much. I think I could have been clearer about what I meant about mass offline distribution. I’m talking about titles that will sell more than a few tens of thousands of copies offline. The titles you describe in your first objection are titles that, by and large, will not sell say 50,000 copies offline (or am I wrong about that?). Those are the books that I expect to be sold by specialty bookstores.

        About returns, I don’t think that there is any easy path to ending the practice. For a big publisher, it would be suicidal to try to do it in a single act. On the other hand, I think there are creative ways that they could start moving away from returns. For example, a publisher could select a certain set of titles and offer those on optional no-return basis for a discount (say 10%) off the traditional price. I assume that publisher would know which books have the right combination of high production costs and potentially extended shelf-life that would make that a good deal for them and attractive to booksellers. That strategy is not without risks, but it could help reward booksellers who know their customers and publishers need those booksellers. I’m sure there are other ways to start a gradual move away from the current system without alienating offline sellers.

        I just bought “The Mathematics of Bookselling” because I’m trying to learn how to model the current market and it looks like that book is one of the very few that has ever looked at the business as a system. Thanks for the recommendation. Ultimately, the fate of publishers will rest on identifying which capabilities they need to maintain, which they need to strengthen, and which they need to abandon.

      • http://idealog.com/blog Mike Shatzkin

        I think The Mathematics of Bookselling will make clear that publisher sales practices create returns and that good publisher sales practices can manage them into being a profitable tool. Eliminating them takes a tool out of the publisher’s hands. It isn’t a good idea.

        Mike

      • chris

        This is the problem with you Mike. Despite loving your voice and commentary here it’s unashamedly publisher centric. As it has to be, since that is what you are — a publishing consultant.

        But… returns are a great tool for PUBLISHERS. They’re probably not so good for authors. I know you’re going to suggest that it enables publishers to credit booksellers thus allowing new titles to enter the marketplace etc etc. But that’s kinda murky and diluted and full of horrible accounting that eats into royalties.

        Just reading this stuff makes me want to run a million miles from printing a book and distributing it. It’s no better than the fashion industry.

        Quick anecdote: I was recently told that a high-end department store chain here in Australia counts their online store as a “location”. This online store ranks as their third biggest location based on revenue. No wonder http://www.net-a-porter.com/ is huge. Physical distribution through stores really is slipping.

      • http://idealog.com/blog Mike Shatzkin

        Chris, the stubborness of your perspective is stopping you from seeing plain logic. The returns are ESSENTIAL for the authors. Without them, fewer copies go our and fewer copies get sold. It is the PUBLISHERS who are absorbing the cost of unsold stock and the cost of shipping and returns. The unsold stock point is exactly why I contradicted your advice to Hugh. It is one thing for a professional publisher who does this all day long to take those risks and have a big portfolio of books to balance them. It is quite another for an author. I agree with your sentiment that you should run away from printing a book and distributing, That’s a job for grownup professionals, not amateurs. But, then, why did you advise Hugh to do it?
        Of course physical distribution through stores is slipping. That was the whole point to the post!!! But it isn’t a trivial contribution to both sales and marketing if you have somebody who knows how managing it for you.
        The funny part of all this is that I’m being cast as the defender of the establishment. I think you’d get a lot of laughs from the people running the big companies over that idea.

        Mike

      • chris

        I take offence at you calling me stubborn, Mike.

        I’m just plain f**king stupid.

        Please get it right in future!

        As for the print/distribution with AMZN. Yes, that is a risk. But we’re not talking distribution in the true sense are we? It’s direct to a retailer. A singel retailer. Who operates online with warehousing capabilities.

        Of course, nobody in their right mind would dick around with this if they weren’t interested in running their self-publishing as a higher margin print business.

        From what I know (and have read about Hugh) he prefers to write rather than deal with ‘publishing’. Which is exactly what he should be doing. So, I accept that I’m way outta line on that front. Maybe a bloke like Bob Mayer is more in the offset print/distribution mold?

      • http://idealog.com/blog Mike Shatzkin

        Ultimately, it should be a seamless service provided by Ingram. They’re my client, but Hugh’s right that they don’t have it down for indie authors the way they do for publishers. But they’re the same 1-stop opportunity that Amazon is for global distribution of print and e.

        Mike

      • chris

        @Mike: “.That’s a job for grownup professionals, not amateurs. But, then, why did you advise Hugh to do it?”

        Firstly: Yep, I’m not a professional. I published a nationally distributed magazine years ago. The finances weren’t pretty. In my defence: I’m a creative type! ;)

        Secondly: ‘Why did I advise Hugh to do it?’ That’s easy, Mike.

        – Brand name author.
        – Bestselling series
        – Six figure revenue on CreateSpace.
        – Sales data.

        Are you seriously telling me this isn’t a someone that shouldn’t be offset printing? (Leaving aside his reluctance from a time/admin point of view).

        Hugh has current sales data, Mike. He makes six figures … on POD, for Christs-sake!! With one retailer! Plus he has a growing backlist and fans… connected to that retailer.

        Again, Hugh wants to focus on writing. I understand that. The profit isn’t worth the overall cost. He’s not a small publisher. Fine. He’s staying true to the self-publishing ethos – small, nimble, risk-free, low-stress. Which is a perfect set up.

        I’m just envious.

        And I like risk.

      • http://idealog.com/blog Mike Shatzkin

        I remain unconvinced.that it makes any sense.

        Mike

  • Nate

    Anyone who looks at Walmart and doesn’t come away afraid for the future of bookstores needs to look again.

    “the idea was floated that Wal-mart might buy and operate B&N as part of an overall anti-Amazon strategy”

    If Walmart wanted a bookstore chain they would own one. For example, Walmart could have bought up some or all of the Borders leases and created a chain from scratch.

    The fact Walmart doesn’t own a bookstore chain is probably a good indicator that they don’t see bookstores as a viable business model.

    The thing about Walmart is that they are so well capitalized that if they thought bookstores were a viable business they would have launched a chain by now (or bought one). After all, they already own a warehouse store chain, a mega dept store chain, a supermarket chain (Walmart Market), a drugstore chain (Walmart Express), and those are just the chains they own in the US. They even own the distribution center backbone which they would need for the new chain, and yet they haven’t launched the chain.

    ” shelf space for print in Barnes & Noble and dedicated bookstores could well shrink by 50 percent over the next five years”Isn’t that what we’ve seen over the past 5 years? When you factor in the closed Borders stores and the shrinking book sections in B&N and other bookstores, I think we may already have seen a 50% drop in shelf space for books. I cannot think of a reason that the trend can’t continue.

    • Nate

      A little digging uncovered the rumor that Walmart considered buying B&N and they passed.:

      http://qz.com/59515/wal-mart-passed-on-barnes-noble-before-but-maybe-it-should-look-again/

      I’d put money on Walmart as not being convinced that bookstores were viable.

      • http://idealog.com/blog Mike Shatzkin

        Things change.

        At the conference, what was discussed (among other things) was companies (including Wal-mart) that are fighting Amazon owning bookstores or selling books online just to distract them.

        I suspect that when the day comes that B&N gets bought — whether two years from now or five or ten — it will be bought by somebody who had considered it in the past and declined.

        Mike

      • Hugh Howey

        Amazon will own and operate physical bookstores before Walmart does. I’m willing to make a very public wager on this if you’re interested.

      • Steven Zacharius

        Amazon is a middle man in printed books. They buy much of their supply from jobbers like Ingram. They would not be able to sell the books at or below cost, printed books that is, while having rent and labor to pay for. It would be a business model that is quite different than having a website and a warehouse.

      • Hugh Howey

        Amazon prints most of my books. They are a manufacturer as well. Sure, they outsource some of their production to LSI, but they also print at their distribution centers and at their primary facility in Charleston, SC. I think this could expand. Their first 20-50 physical stores would be in major metropolitan areas, and each one could have a printing facility behind the counter. Every book in print ready for you while you enjoy a coffee. They’re going to need the back rooms to handle the same-day delivery, anyway. The retail space will work much like an auto parts store, with the garage and warehouse taking up most of the square footage.

        And yeah, it’s a different model. One prime for disruption. I’m not betting against Amazon being the company that does it. Everyone else is standing around.

      • Steven Zacharius

        Amazon does do POD and also sub-contracts a lot of it out of house. Most people don’t even realize that many times when they are getting a book it might be coming from a book jobber in an Amazon carton. But POD is not a profitable model for the long haul. Although it’s continuing to develop and it’s wonderful for selling one and two copies at a time; the costs are too high for a retailer to make money. It costs about $ 4.00 to print a book and if the book is going to retail for 14.00 and they’re paying 7.00 for it….that leaves 3.00 margin to pay royalties and any other costs. These costs will continue down but they have a long way to go yet.

      • Hugh Howey

        Keep in mind that publishers print nearly two books for every one copy they sell, so you have to halve their efficiency. The returns and remaindering systems are horrid. Those costs won’t improve as POD gets more and more efficient.

        As for scale, I sell thousands of POD books a month and clear well above 6-figures per year just off my print sales. I make quadruple per book what a publisher would pay me, so there’s room for publishers to profit with POD. As for distribution, B&N and major indie chains carried my CreateSpace-printed book and even gave the title merchandised floorspace with zero dollars from me. Anecdotal, sure, but it’s a proof of concept. And many of my indie-writing friends are having far more success than I am.

        This transition is so very young, and yet we see things like this already happening. That should shock and amaze everyone.

      • Steven Zacharius

        POD is a wonderful process and it allows us to print one copy at a time or small runs. But the numbers I quoted above are accurate. On a $14.00 book that’s being traditionally published the retailer is getting 7.00 and the books is costing them around 4.00 to print, approximately. That leaves 3.00 to play with. Using a 7.5% royalty would take away another 1.05. So there still is a very small profit, but a profit nevertheless.

      • http://idealog.com/blog Mike Shatzkin

        Hugh, publishers do *not *print two books for every one they sell in most cases or across the board. That happens, but it is not usual.

        And you’re selling print books, but not nearly as many as you would if they were prominently available in stores. Returns are the price publishers pay to make that happens, and it is a tool that benefits stores, publishers, and authors (as well as printers and shipping companies.)

        There’s a great story about when Harcourt Brace stopped returns in 1981. They decided they’d just give bookstores bigger discounts instead. They abandoned the experiment in less than 90 days.

        Mike

      • chris

        Hugh, why are you not offshoring this printing? Or contracting a printer on the US side?

        Seriously, just grab your top-selling title and get a decent print run and sign up for AMZN advantage or whatever the hell they call their seller program.

        Go get some trade paperback quotes and price hard around the 55% discount that AMZN will take. Forget the book stores. Just supply AMZN. Yeah, you’re going to have to have a couple of pellets of books in storage but the reader should win out with some keen pricing and better print quality.

        You must be leaving some serious coin on the table if you are making six figures out of CreateSpace.

        Of course, it may not be worth the headache. Printing and dealing with any distributor sucks.

        @Mike: Look at me. Commenting like demon!! :)

      • http://idealog.com/blog Mike Shatzkin

        Chris, I’d advise Hugh the opposite. Stick with Amazon and POD. The print revenue is an increment and you don’t need to take on the capital expense, the learning curve, and the admin. It MIGHT make sense to set the books up at Ingram as well (where they WILL do a press run for you if you want or if sales warrant). But a bit of additional margin on the print is not worth the hassle. Or the risks.

        Mike

      • chris

        Yep, the admin would truly suck.

        The capital expense shouldn’t bother Hugh. He’s not busted-arse broke. It’s been a while since I got anything printed but 5000 units shouldn’t send him to the wall.

        And, yes, I agree … at the very least, I’d certainly be looking at Lightning instead of CreateSpace. For offset reasons alone. Which should kick in if Hugh is running six figures in revenue.

      • http://idealog.com/blog Mike Shatzkin

        The main reason for Lightning isn’t saving. You do both Create Space AND Lightning. The reason to do Lightning is because other bookstores won’t order from Amazon and because both bookstores and libraries “shop” from what’s available at Ingram. It’s about increasing sales, not reducing unit costs.

        Mike

      • Hugh Howey

        I used LSI before I went to CreateSpace. They nickel and dime you to death, which I didn’t care on the financial side, but it was annoying to have to log in and pay for little invoices to have my works indexed every year (or some nonsense). Also, the setup fee seemed dumb to me. So I pulled my books from them and haven’t been happier. No more annoying emails. Set up a book once (for free), and never do anything again. Ever.

      • http://idealog.com/blog Mike Shatzkin

        Hugh, there’s nothing irrational with deciding that some sales are too much hassle to get, but not being at Lightning will cost sales. I can certainly see why you’ve come to the conclusion that you have and I think minimizing the hassle is absolutely critical for a self-publishing author. Writing has to be number one. Marketing has to be number two. All this other stuff has to be as simple as possible.

        Mike

      • Hugh Howey

        Exactly. Increasing sales is the last thing I think about. I don’t even do basic things like put links at the end of my books for my other works, or send out review copies, or ask people to read my work. I usually publish rather quietly. For me, the aim is to write and enjoy life. Some companies make that easier than others. Those are the companies I choose to work with.

        I think if I was in this for the money or fame, I would have burned out a long time ago. Or I would have given up.

      • http://idealog.com/blog Mike Shatzkin

        I think one of the great virtues of the trail you’ve blazed, for you, is that you can pretty much choose to do exactly what you want. I’ve pursued a career path that offered a similar opportunity. I can relate.

        Mike

      • Hugh Howey

        That’s what I love about you. Neither of us has to worry about the state of our hair.

      • Hugh Howey

        Why take the risk? I make more on my POD paperbacks than a Random Penguin author makes per hardback. Zero risk; zero work; infinite supply; no returns; available well past my lifetime; great product.

      • http://idealog.com/blog Mike Shatzkin

        Absolutely right, Hugh.

        Mike

      • http://idealog.com/blog Mike Shatzkin

        POD is great if you’re adding a sale you wouldn’t otherwise have gotten. As you suggest, it cripples margin if it is used instead of a book from a press run.

        Mike

      • http://idealog.com/blog Mike Shatzkin

        If Amazon opens physical stores, I will go on record right now saying “I will be very surprised”. It seems like a dumb idea to me. But, if they do it, I’ll stand ready to revise my opinion. They don’t do anything dumb.
        As for the Espresso machine-type solution, it only works if it doesn’t work. If you’re the only person who wants a book printed right now, the wait will be tolerable and your coffee won’t get cold. If you’re fifth on line, or heaven forfend, 10th or 20th on line (which means the idea is REALLY popular), the waiting time will kill it.

        Mike

      • Christian K

        Wouldn’t a physical presence be required for things like Pantry, “the drone” (AKA automated same day delivery, AKA the scary pipe-dream) and grocery delivery? It’s a pretty short step to have a showroom at the same location. It’s primary purpose would be warehousing and delivery, but a showroom or pick-up/returns counter seems logical.

        Side point: I wonder how much non-fiction/fiction play into the different views in the comments. When HH or JAK comment then are referencing a fiction-only paradigm, whereas the numbers from publishers are fiction and non-fiction.

      • http://idealog.com/blog Mike Shatzkin

        Amazon already has broadly distributed warehouses. It is *not *a “short step” to a retail presence. It’s a big step. I can see lockers in somebody else’s store. I can see pop-up stores for specific opportunities. But I can’t see an ongoing retail presence unless Amazon becomes much more of a “products” company than they are now.

        Fiction and non-fiction is a division, but books-you-read versus books-you-look-at or look-things-up-in is an even more important division. And a lot of the self-published fiction community is further clustered in *genre
        *fiction: thrillers, romance, sci-fi.

        Mike

      • Christian K

        Consider a franchise opportunity similar to a UPS store, or a CostCo like warehouse outlet mixed with a customer service/pickup counter.

        Yes, genre fiction. AKA the money makers. :) (at least outside non-fiction/self help)

      • http://idealog.com/blog Mike Shatzkin

        Unless it makes the franchisee profitable, it won’t work. And, if it does, the economic challenges aren’t trivial.

        Mike

      • Steven Zacharius

        Let’s not forget the tax implications to having physical stores for Amazon. Once they have a store they have charge and collect tax on all sales made in that state. Plus it would be adding to Amazon’s overhead in terms of having prime real estate locations instead of warehouses in the middle of nowhere. They’d also need to have higher skilled labor rather than just people who can pick and pack in a warehouse.

      • Christian K

        Note that in the states where Amazon is expanding services they already collect sales tax, and is partially taking over direct delivery. Also, remember when places like CostCo were on the edge of town in the “warehouse” districts? A small experiment like Amazon Fresh makes a lot of sense.

      • http://idealog.com/blog Mike Shatzkin

        Right.

        Mike

      • http://idealog.com/blog Mike Shatzkin

        Part of this explains why I believe they aren’t interested in stores. But it isn’t primarily about the tax implications. They are already conceding that ground, state by state.

        Mike

      • Steven Zacharius

        WalMart doesn’t have to compete with a bricks and mortar store. They announced the other day they will be competitive with Amazon with their online business within two years. They’re in the process of building new distribution centers now. And they certainly have name recognition to compete.

      • http://idealog.com/blog Mike Shatzkin

        Good luck to them. Competition there would be good for everybody. But aspirations are one thing, accomplishing something like that is another.
        Mike

    • Steven Zacharius

      I wonder how Amazon sees the publishing business. First in terms of their own publishing program with which Larry Kirschbaum is now gone. Secondly none of us knows if Amazon makes any money at all from books. With selling NYT bestsellers below cost; that’s not a great long term business model. With only getting 30% of indie publishing at heavily discounted prices; that’s not a good business model. Laura Resnick mentioned about publishers reducing their overhead. Do we have any idea how many multi million dollars of overhead Amazon has? Many times that of publishers, I can assure you of that. Amazon is making money, barely I might add, from other services. From their web hosting and distribution deals primarily. But we’ll never know since they don’t share any sales data publicly. And Joe their 2012 readers may have gone up….what happened in 2013. I believe Mike is talking about 2013 ebook growth slowing.

      • http://idealog.com/blog Mike Shatzkin

        My understanding is that Amazon is still going forward with publishing in niches, just not going after the high-profile general titles that are Kirshbaum’s meat and potatoes. And I believe they’re making exactly the margin they want to make on their book business. On the print side online, they hardly have any competition. They want to maintain the volume and they have other ways to benefit from having the customers.

        Amazon tends to monetize its overhead through selling services (cloud computing and their marketplace, for examples).

        But publishers can only cut overheads if they can cut functions. Selling books to stores is still important, even if the self-publishing advocates aggressively ignore it.

        Mike

      • chris

        @Mike: “Amazon tends to monetize its overhead through selling services (cloud computing and their marketplace, for examples).”

        Correct.

        But it gets better.

        Every time an ebook sells a data cost is deducted from the sale by AMZN. This cost is way over and above the current charges for the company’s A3 services. So, AMZN makes more than just the 30% margin. They essentially found another way for their cloud business to make higher margins via a third party ie, amazon KDP/retail.

      • http://idealog.com/blog Mike Shatzkin

        I believe the data charge only applies to sales outside the US, or at least that’s the case with US-based authors.

        But, sure. Big companies aren’t dumb. That’s true of Amazon. It’s also true of the Big Five publishers.

        Mike

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  • Peter Turner

    Another way of looking at this whole dynamic has to do with consumer behavior and with habits formed over time. How will the appeal–the quality of the experience–of shopping (browsing & purchasing) in physical stores vs. stores online change over time? Will whatever perceived superior user-experience in physical stores be replicated or improved upon online given new technology, user interfaces, and a better understanding of user experience? I pretend to know the answers to these questions–any thoughts would be more than welcome, Mike. But, my gut tells me that the extent to which publishers and booksellers commitment to understanding their primary customers (authors and readers) will tell the tale.

    • http://idealog.com/blog Mike Shatzkin

      In general, digital techniques have more headroom for improvement than physical ones. (The cliche that keeps rattling around in my head as we discuss digital stuff is “these roads are still being paved.”) In fact, because physical is going to be resource-constrained — brick stores are getting *smaller *rather than bigger as measured by number of titles, the opposite of online stores — the merching experience at physical is likely to get worse while digital for many reasons will continue to get better. After all, when shopping, the single most important item on most people’s lists would be the certainty that you can get anything you know you want, and second would be to have the biggest selection to choose from when you don’t already know. Online stores have the advantage on both of those inherently.

      Mike

      • Peter Turner

        I think one of the ways that online merchandising will improve is not around breadth of selection but depth of trust in the quality and relevance of the selection offered to them. We, rarely, are general consumers; most people only buy books in a very small handful of genres. In general, we are consumers with specific interests, aesthetic sense, values, and so forth. From this point of view, the “technology” wanted is how to customize user and consumer experience to them. So much of what is happening with eCommerce sites right now is remarkably focused around narrow bands of consumers; I don’t see any good reason why readers wouldn’t be well served in this way.

        –Peter

      • http://idealog.com/blog Mike Shatzkin

        An indie bookseller I knew used to say “if anybody walks up to my cash register with five books, I can sell them a sixth.” On the Net, the bookseller can know every book you’ve bought and, when you’re reading ebooks, which ones you read fast and finished and which ones you got bored with ten thousand words in. I’m quite sure, over time, the programming will be done so that the effect my late friend was able to achieve in his store will be done better on the Net. It’s a matter of time.

        Mike

      • Steven Zacharius

        Let’s also keep in mind that at some point in their business cycle that Amazon is going to have to make a reliable, steady and growing profit. Shareholders will keep waiting for a period of time but not forever. We don’t even know if Amazon makes any money on selling books especially when they discount books below cost on many bestsellers and indie books are so low priced to begin with. We do know that Amazon Web Services, their web hosting business, is a huge profitable very quiet business for them. I would assume they make a ton of money distributing other products as well because they get a distribution fee. I would be willing to guess that the book selling revenue is tiny, if anything to a company like them.

      • http://idealog.com/blog Mike Shatzkin

        That’s a misreading of Amazon’s business. They’re making plenty of money in lots of business, almost certainly including books. They look like a break-even company because they’re investing so heavily in their future. Drones, of course. But also in systems and warehouses that allow them to deliver quickly so they can offer perishables. They don’t need to raise prices to make money. They can just curtail their investments in things that aren’t expected to pay off for years.

        Mike

      • Steven Zacharius

        Yes I agree, they are always reinvesting their money. But as to how much they make on their book business, we don’t know and may never know. With bestsellers being sold below cost, which has to make up the bulk of sales, they can’t be having huge profits in the book business. Of course they have the long tail going for them but the big bulk of sales of course comes from new releases of bestsellers.

      • http://idealog.com/blog Mike Shatzkin

        Steven, several years ago, before Agency, I had a conversation with David Naggar of Amazon about their deep-discounting (below cost) of ebooks. What he told me then was that 4 percent of the titles were discounted below cost and those constituted 25 percent of the sales. Overall, their ebook business produced positive margin. I really doubt they’re operating their ebook business or their print book business at a loss. They don’t need to. Every competitor they’ve got has to make more money than they do on it to sustain it. I am working on a post about that now which I believe will go up late tonight or tomorrow.

        Mike

      • Bev

        And the DOJ settlement with the publishers won’t allow Amazon to sell ebooks below cost anymore. The least they can sell them is at cost but not below.

      • http://idealog.com/blog Mike Shatzkin

        I don’t *believe *that’s right, Bev. I think they (and everybody else, of course) can sell each ebook for any price at all, including below cost, but the *aggregate *of their sales for *each publisher calculated separately *can’t be at a loss. But any one book can be.

        Mike

      • Steven Zacharius

        What might be interesting for you to comment about Mike is the fact that now that the DOJ has allowed the Big 4 publishers to continue setting prices with Agency pricing, but allowing the retailers to discount them….called agency lite….how unfair it is that smaller publishers have to remain on wholesale pricing and aren’t benefiting by getting the 70% of the retail price from these ebook retailers. This shortage of additional revenue from the e-retailers is very dramatic with trade and mass market digital books. I would say it’s discriminatory by not allowing publishers now to come on board to Agency pricing and that only the biggest players are allowed onto Agency at all, other than with iBooks.

      • http://idealog.com/blog Mike Shatzkin

        Steve, you are exactly right. Although I have heard anecdotally that some publishers have moved their discounts on wholesale terms to be in line with agency. It is not sustainable for some publishers to have to sell at 50 off their suggested price when the big guys all get to sell at 30 off. I am really shocked that Every Other Publisher can’t get their collective act together to send a letter to the DoJ and the Congress explaining to them what was the practical effect of the Agency lawsuit. Too many people think it was a great thing that “punished” the big publishers when what it mostly did was punish every competitor to Amazon and every competitor to the Big Five.

        Mike

      • Steven Zacharius

        We are preparing a letter as we speak. And I’ve been complaining to Amazon.

      • Steven Zacharius

        I look forward to it. Unfortunately without hard data from anything they do, I can’t believe all the hype. I’ve heard those numbers before as well but all the major bestsellers are right around cost or below many times. The new Clancy and Grisham were $1.99. I don’t think they’d want the world to know what the honest percentage of book sales happen at that level. It would draw attention to their pricing policies.

  • jakonrath

    Hi Mike.

    I wanted to comment on some of the points you made in this post.

    “One distracting fact for analysts considering this question has been the apparent slowdown in the growth of ebook sales, suggesting that there are persistent print readers who just won’t make the switch.”

    The analysts you refer to don’t have access to all the data, and the data they have isn’t being interpreted correctly.

    First of all, the shadow industry on self-publishing accounts for tens of millions of sales (if not more) that aren’t being counted. Ebook growth may be slowing for legacy publishers. It isn’t slowing for self-publishers.

    Second, the idea of “growth slowing” was nicely refuted by Barry Eisler in his conversation with agent Robert Gottlieb.

    You can follow the links he cites on my blog, http://jakonrath.blogspot.com/2014/01/author-barry-eisler-and-literary-agent.html

    “This is at best a highly misleading way of describing what’s really happening, which is that the growth of ebook sales is slowing. Put more simply and accurately: ebook sales are not slowing, they are growing. Here, from Publishers Weekly: “Total e-book sales rose 44.2% in 2012, to $3.04 billion. The gain in e-book sales offset a flat performance by print sales which held virtually even at $12 billion between 2011 and 2012.” And here, fromFuturebook “If we look at these particular stats from Publishers Weekly, for this segment, sales of e-books rose to $2.07 billion from $869 million as units increased 210% to 388 million.”

    There’s more: in December 2013, Amazon revealed that a quarter of US ebook sales were by indies. The numbers for B&N’s Nook are similar. Hachette and HarperCollins both report that ebook revenues are increasing — indeed, by 40% for Hachette (of course, now we know why).

    Most astonishing of all is that missing from these figures demonstrating a still dramatically growing market are indie figures, because data is collected only from major publishers. That’s right: the ebook market is still growingeven when measured without including indie published books.

    Calling this kind of continued explosive growth “slowing” is like saying a car that went from 50 miles an hour to 100 and then to 130 is “slowing” because since it hit 100 mph its speed only increased by 30 percent. Would you honestly describe a car that just accelerated from 100 to 130 mph as “slowing”? Because that’s what you just did with the ebook market.”

    You also said:

    “The physical book has uses and virtues that a CD, a vinyl record, a DVD, or a videotape don’t, not the least of which is that a physical book is its own “player”. But it also provides a qualitatively different reading experience, whereas the other “physical” formats don’t change the consumption mode at all.”

    I talked about journey value and destination value four years ago dismissing the qualitatively different reading experience of print.

    http://jakonrath.blogspot.com/2010/02/you-can-pry-my-paper-books-from-my-cold.html

    And while books may be their own “player”, show me someone who doesn’t have a device that can read ebooks. Besides ereaders like Kindles and tablets like iPads, smart phones and computers abound. A book being its own player isn’t important when so many consumers already own devices that ebooks can be read with.

    CDs are still around because they can be ripped to mp3s and put on digital players. The CD is simply a hard copy of digital info. When was the last time you saw a CD Walkman?

    Books can’t be digitized without scanning. So while I can buy the new Tom Waits CD and put it on my iPod (or Kindle Fire), I can’t buy a hardcover and read it digitally.

    But the fate of almost all trade publishers is inextricably connected to the fate of bookstores.

    Actually, it is inextricably connected to authors.

    Years ago I realized that unconscionable publishing contracts and low royalties would lead to authors leaving legacy publishers and self-publishing. This will happen more and more. We don’t know how much it is already happening, because there is no data available, but B&N reported that 25% of Nook ebook sales were from indie authors, and I suspect the percentage on Amazon is larger.

    You said:

    “It is still true that putting books in stores is necessary to get anywhere close to total penetration of a book’s potential audience.”

    I agree. But I don’t care, and neither do a lot of self-pubbed authors. Yes, it would be nice to have my print books in all bookstores and Wal-mart, but I made a million dollars in 2013 without that happening. I don’t need those sales to make a nice living. You go on to say as much in the next paragraph, but you may not realize this is happening right now.

    Don’t discount self-publishing as a Big 5 killer. For every publicized story of a self-pubbed writer taking a legacy deal, there are many who refuse deals, or don’t even bother submitting to publishers. What happens when publishers run out of good submissions?

    • http://idealog.com/blog Mike Shatzkin

      I think I personally have been a) fully cognizant of the possibility that what is in view isn’t totally taking indie publishing into account and b) clear about the fact that is *slowing *is the *rate of growth*, which would necessarily be the case as the market got so much bigger.

      But the effect is not really as big as you make it, because such a high proportion of the indie units are at very cheap prices and such a high proportion of the Big Five units are at prices you’d probably consider extortionate (although, thanks to both self-publishing and the DoJ, the prices for the Big Five books are coming down, probably to the detriment of fledgling writers who are losing their opportunity to make noise at the low end of the market.) So if 25% of Nook sales are indie authors, I’d hunch that the percentage of dollars they represent is closer to 10%. It might be less.

      And while I’m not in their number and obviously you aren’t either, there are still a very large number of print book readers, many of whom (as you point out) MUST have a perfectly serviceable reading device in their possession, who just DON’T WANT to read digitally, they want to read print. They may actually still be a majority of the people, all these years into the digital revolution! And a big chunk of *them *really want to buy their books in a store. Stubborn luddites though they may be, they do exist in substantial numbers. And they aren’t all geriatrics.

      I think the demise of the establishment happens a bit more slowly than some enthusiasts for the future may expect. I am sure you have the humility to reflect on that fact from time to time, even though it would probably be a bad strategy to admit it out loud (and I’ve never known you to do that.)
      Mike

      • jakonrath

        “(although, thanks to both self-publishing and the DoJ, the prices for the Big Five books are coming down, probably to the detriment of fledgling writers who are losing their opportunity to make noise at the low end of the market.”

        We’re still making noise, Mike. Ebooks aren’t zero sum. A $2.99 Hachette ebook doesn’t compete with mine. Instead, if gives readers the ability to buy more of my ebooks, because Hachette is no longer charging $15.99.

        “So if 25% of Nook sales are indie authors, I’d hunch that the percentage of dollars they represent is closer to 10%. It might be less.”

        Dollars for whom?

        Think about that. Those are authors making higher royalties than they can through legacy, and that’s 10% of all ebook revenue that legacy publishers are missing out on.

        An author can sell one $30 hardcover from a legacy publisher and make between $3 and $4.50.

        If I sell $30 worth of $3.99 ebooks, I make $19.75. And it is much easier to sell a $3.99 ebook than a $30 hardcover.

        there are still a very large number of print book readers, many of whom (as you point out) MUST have a perfectly serviceable reading device in their possession, who just DON’T WANT to read digitally, they want to read print.

        That’s fine. Writers don’t need those readers to make a living. And their may be a lot fewer paper readers than you believe, since the shadow industry of self-publishing isn’t being counted.

        I think the demise of the establishment happens a bit more slowly than some enthusiasts for the future may expect. I am sure you have the humility to reflect on that fact from time to time, even though it would probably be a bad strategy to admit it out loud (and I’ve never known you to do that.)

        All signs are pointing to it happening faster than I expected. Amazon released a statement saying it sold more Kindles during the 2012 holiday season than any previous year. Borders is gone. Random Penguins merged. Dorchester is gone. 150 self-pubbed authors sold over 100,000 ebooks each on KDP last year (I’d love to get the data on how many sold over 10,000 copies–I suspect lots.) Rowling opened Pottermore.com. Larry Block self-pubbed his latest (at $9.99, which means he keeps $7 per ebook sold, and he’s ranked respectably at #1200. I could go on.

        I’d love for you to address the facts brought up by me and Barry Eisler in my last three blog posts, which all came down to “Why do publishers believe authors are going to continue to submit to them when they can make 70% royalties on their own, keep their rights, and don’t have to sign unconscionable contracts?”

        You mention that “so far the marketplace hasn’t had to offer higher ebook royalty rates, more frequent payments, and shorter contract terms.”

        But I’m guessing you suspect they will have to, at some point. Because authors aren’t idiots. And we talk to each other. A lot.

        When I first started making money self-publishing, I was labeled an outlier.

        How many outliers does it take before they aren’t outliers anymore, but a trend? In the past few days Brenna Aubrey turned down a six figure legacy deal to self-pub, and self-pubber Theresa Ragan admitting to making over a million dollars.

        I’ve been in touch with many other successful self-pubbers who make hundreds of thousands per year. It isn’t my job to out them, but I suspect you’ll hear about them sooner or later.

        My ebooks are invisible to the NYT list and the USA Today list, even though I could have made both several times. And mine aren’t the only ones.

        I don’t have your faith that B&N will be around in five years. Bookstores will never go away, and paper books will never go away. But the book business only needs two parties: authors and readers. Everyone else involved in the bookselling process is a facilitator.

        Facilitators need to justify their cut, be they publishers or bookstores. Especially since authors today don’t need either.

      • http://idealog.com/blog Mike Shatzkin

        Joe, I have two pretty firm policies which we’re running up against here.
        One is that I don’t allow my comments space to be used for other people’s longwinded rants. I guess you’re used to having people read you at great length; I strive for an economy of words in my posts and in my responses. I don’t really have the patience to wade through somebody else’s lengthy dialectic and I make the self-serving assumption that my readers don’t either.

        So I’ll leave it with the answer to your prior post. That one will serve for this one too.

        Mike

      • Robgb

        Oh, brother.

      • Steven Zacharius

        I think there are two totally separate issues being discussed here. One that Mike brings up and I agree with, that indie publishing is a small piece of the publishing marketplace in terms of revenue…one that we don’t know for sure because Amazon and others don’t release data.

        The second issue that Joe and others are discussing is that it’s easier for indie authors to make a living self-publishing and make more than they would have made before if they had even gotten picked up by a publishing house. There’s nothing wrong with that.

      • http://idealog.com/blog Mike Shatzkin

        Nice summary. It explains why it feels to me like my comments string has been hijacked for a discussion I think is a very marginal one (affecting very few people and very few industry dollars) when I was trying to discuss something much bigger and more important.

        Mike

      • David Gaughran

        Hi Mike,

        You might dismiss the threat posed to large publishers from self-publishing by (rightly) pointing out that the portion of the dollar pie they have grabbed is significantly smaller than the unit sales pie. But I don’t think you should dismiss it so quickly.

        Unit sales could be viewed as a leading indicator here. By my calculations, self-publishers (and other non-traditional actors) have grabbed about a third (in unit sales) of the US ebook market: http://davidgaughran.wordpress.com/2013/04/12/self-publishing-grabs-huge-market-share-from-traditional-publishers/

        As I said there, talkingg about market share in dollar amounts might be important to publishers – who are anxious to replace falling print revenue with new digital income – but it’s way less important to self-publishers (who price at the lower end of the range and don’t really care if readers are paying less for digital editions).

        Talking about market share in terms of unit sales is, in my opinion, a much better metric for seeing where things stand and where they are headed – but I’m happy to debate that.

        Dave

      • http://idealog.com/blog Mike Shatzkin

        I am not quite sure how a post intended to wake publishers up to the real changes they will face as self-publishing grows turned into the “dismissal” you characterize it as being, but…

        All I was doing by pointing out the dollar metric in addition to the unit metric was trying to put things into a more realistic context than anybody who waded through Konrath’s screed might have absorbed. Here’s a bit more. He starts with Nook saying 25% of their ebook sales are indie, to which I say their sales volume might be 10% or less (almost certainly less.) Add this. They *also *don’t get any print sales! B&N’s print sales still exceed their digital sales on most Big Publisher books. So now we’re saying that the importance of the indies isn’t not-as-much-as 10 percent of dollar volume, but is actually LESS THAN FIVE!

        That doesn’t mean there isn’t a threat. That doesn’t mean that the indie share isn’t going to continue to grow. That doesn’t mean that publishers aren’t going to have cognizance of it and adjust to it, over time. But it does mean — to me — that any suggestion that indies are on the verge of taking over the world is either delusionary or self-serving crap.

        All that said, I agree that the unit numbers are worth taking seriously, not ignoring. But, you know what? So are the dollar numbers!

        Mike

      • Laura Resnick

        I agree that the dollars are well worth taking seriously. But, again, what I think the dollars tell us is that publishers have got to figure out how to lower their prices–and lower their overhead costs.

        For several months last year, I followed DBW’s tracking of the “sweet spot,” the price point wherein most consumers are buying the most ebooks. It consistently hovered at s $3-$8 or $4-$8 during the months I followed this.

        Anything higher than $8 is beyond the sweet spot. Who prices books there? Almost exclusively traditional publishers. The math:

        $9.99 x (let’s assume) 70% royalty = $7 x 75% of net (publisher’s share) = $5.24; 25% of net = $1.75

        $7.99 x 70% = $5.60….at which price the self-publishing author who prices within the sweet spot makes more money =per unit= than the traditional publisher (-or- the author) makes pricing a book higher than the sweet spot… while DBW tracking asserts that (presumably apart from bestsellers) that $9.99 (or $8.99 or $12.99) is also likely to sell fewer units than the $7.99 book

        That’s a per unit example. There are many, many permutations of this math wherein selling just a few more copies of a book priced in the sweet spot is overall more profitable to the self-publishing author than selling fewer copies beyond the sweet spot is to the traditional publisher (or to the traditionally published author). Again, DBW’s use of “sweet spot” indicating that more unit-sales is likely at below-$8 than at above-$8 regardless of who sells the book. So there are a LOT of pricing scenarios wherein more profit/dollars as well as more units are attributable to the self-published ebook.

        In any case, “We’ll price our similar product higher than the competition -and- also make less money on it than the competition,” is not good math for a company.

        And no matter how contemptuous or dismissive publishers are of self-publishing (again, many of whom these same publishers also happen to have under contract for traditionally published books), self-publishing is the pricing competition. Individual business people and small digital assistance operations (ex. Lucky Bat, ePublishing Works) have driven ebook prices down to a level that’s attractive to consumers and profitable for themselves. this is the challenge publishers have to meet.

        Because the only other solution for them is a very unlikely change in consumer behavior, wherein everyone suddenly decides to buy a lot of ebooks at $12.99.

      • http://idealog.com/blog Mike Shatzkin

        The math assumes both that print-in-stores (and maybe print at all) is irrelevant and that the sales for an indie-published original will be the same as if the same book were published by an established house, all else being equal. These are interconnected errors of fact that can only lead to erroneous conclusions.

        And what DBW shows you is their best guesses from the bestseller lists. There are a LOT of units of all prices sold that don’t figure in their calculations.

        Mike

      • Steven Zacharius

        Why don’t we all agree that there is room for both models? I for one have learned a lot from partaking in the blogs over the past week or two. I’m looking at lowering prices of ebooks that are no longer available in print to help increase sales. Courtney Milan gave me some excellent advice on linking which we’re implementing. So traditional publishers can and will learn as I hope will indie publishers. I think we need each other.

      • http://idealog.com/blog Mike Shatzkin

        Nothing wrong with that sentiment! I can’t imagine any of us now living will see a time when the two will not exist side by side.

        Mike

      • Bev

        Wow, this is good to hear. Especially from you, Steve.

      • Peter Turner

        Pardon me for budding in, but it seems to me that the central point is not whether self-pub is a threat to traditional publishers or who gets what slice of the pie. The question is whether authors, indie publishers, traditonal publishers, booksellers are up to the task of being truly user-centric in their focus on delivering quality and relevance amid the rise of available text “content” (geez, I hate that word).

      • http://idealog.com/blog Mike Shatzkin

        I’m not sure there is any question which qualifies as “the” question. What interests me is when and how the indies force the establishment to acknowledge them in their strategies and tactics. To a certain extent, that has already happened, in that publishers are systematically looking at indie publishing as a farm system and signing up authors from them. As are agents. And I think that indie publishing has also affected pricing decisions. When they start to affect author contract terms will be another benchmark, but I don’t think that’s really happened yet in a big way, although S&S doing a print-only deal with Hugh Howey certainly qualifies. So far it is an exception, not a frequently-employed tactic.

        Mike

      • Hugh Howey

        My understanding is that the Big 5 have circled the wagons against print-only deals and hope to never sign another one. Which saddens me. It seems to me the fairest way to treat a work that is already selling well in digital form.

        As for whether indies represent a sizeable piece of the publishing pie, I think that looks at things a bit backwards. What if a large chunk of that pie no longer needs to be spent at all? Authors make more with a self-published $3.99 e-book than they make on a $25.00 trad-published hardback. Readers get the same story. Looking at gross revenue in the publishing biz might be a case of counting money that need not be spent at all. It would be like counting a travel agent’s fee as part of some tally on the health of the airline industry in the 80s. Travel agents are largely gone, and the consumer is better off for it.

        What matters is not the percentage of gross sales that goes to indies vs. traditional publishers but the percentage of revenue that goes to authors. That’s all that matters. Readers can now afford to buy more stories, and writers can now earn a better living. Counting the dollars grabbed by those in the middle is to count the rivets on a sinking ship. Might want to start pumping water instead.

        And every article that dismisses e-books by pointing to a flattening increase in sales is bound to be wrong. The rate of increase can’t go up forever. The fact that the rate of increase is as strong as it was in 2013 (the year of 50 SoG) ought to be worrying, not comforting. Velocity is the same, even if acceleration has stabilized. Add to this the fact that indies are ignored from this tally; major publishers are reporting what they are seeing in-house. That doesn’t reflect what’s going on with the industry at large.

        I’ve seen good estimates that put indie e-book sales at 25% of total e-book sales, based on placement in the top 1,000 rankings. The long tail is probably much stronger for indies (with a million books selling at least 2 or 3 copies each), so the number could be higher. Already, the totality of self-published e-books ranks above several of the Big 5, making indies a member of the new Big 6. And since each of those sales counts for FIVE TIMES as much earning power for authors as a sale from a traditional publisher, that’s more money going where it matters.

        The rest is fees to travel agents. That’s not a good thing.

      • http://idealog.com/blog Mike Shatzkin

        Hugh, your post is so thoroughly from an indie author’s pov that it is really not relevant to anybody else and, frankly, not to all indie authors either.

        Dollars are relevant to every retailer. Retailers are the path to the audience for everybody, not just big publishers. If the number of dollars being spent by consumers shrinks, so will the paths to the consumers and the sales efforts to entice them.

        It is doubtful to me that indies have 25% of all ebook unit sales everywhere, but, even if they did, they’d have a much smaller fraction of the ecommerce. As I pointed out earlier, it isn’t just the ebook dollars they’re missing, but the print dollars to. And your “equation” is a phony one because you know very well that no indie author gets substantial revenue without doing a LOT of work to make the book sell. Where’s the calculation for compensation for those efforts, or for the costs of making a cover, getting the copy-editing done, doing whatever marketing is necessary as well as supervising all of the above?

        Before your S&S deal, the big publishers all said they wouldn’t do print deals. I thought yours was a crack in the wall. I still think it is. I’ve been really wrong about these things before. Back for the few weeks that Barry Eisler seemed to be turning down publishing help and a substantial advance in favor of going it on his own (before he took a different advance and chose no-bookstore publisher Amazon instead), I thought he might be a harbinger of authors turning down real publishing deals to do it themselves. Turns out that was a false dawn and I haven’t seen anybody else step forward to claim that mantel. I know you and your valuable agent Kristin Nelson (you indie authors also seem ready now to throw agents under the bus too; let’s not forget how critical she was to your success) turned down a lot of US publishing deals for Wool before you agreed to the S&S print-only deal. But has anybody turned down a substantial advance for an unpublished book in favor of publishing themselves? Maybe Konrath, *after *he got his indie platform built. Are there three others? Five?

        I think victory is being declared more prematurely than it was by George W. Bush in Iraq!

        But, if you think the wagons are circled and these deals are not being made, I would urge you and your indie author brethren to take this on board:
        1. the big publishers are NOT stupid, particularly when it comes to defending their own interests;

        2. the fact that they’re not making the concessions the indie author spokespeople would like to see is an indication that *they *think that they don’t have to, at least not yet;

        3. when the day comes that they *do *have to, they will.

        In other words, you should read the intransigence as a sign that your (the indie) overall position might not be as strong as you think it is.

        Mike

      • Hugh Howey

        Yikes. I didn’t think my reply was aggressive or if you read it that way. Certainly wasn’t meant that way. Just pointing out my perspective, which is certainly biased. I’m the first to admit that.

        I’ve never had anything but positives to say about you and DBW, Mike. That won’t change. I think it’s great that we disagree about this stuff. Only time will tell who got lucky with their guesses.

        Cheers,
        Hugh

      • http://idealog.com/blog Mike Shatzkin

        I didn’t think your reply was aggressive, Hugh. I just thought it was wrong. And I think you’re a helluva good writer and have achieved independent success that any author would be foolish not to take on board. But let’s just say that my respect for your expertise does not extend to your ideas about how publishers ought to operate. And I think your analysis of what the indie successes so far mean for the overall business is flawed. We definitely have different ideas about those things.

        But I definitely agree with your close. It takes some luck to guess things right and the future reveals itself only over time.

        Mike

      • chris

        @Hugh: Don’t mind the cranky old bastard who runs this place!! Mike just likes to call a spade a spade.

        @Mike: As usual, this argument pisses us indies off because the fight is as personal as it gets. It’s ‘self’ publishing, after all. And, yeah, we get that the Big 5 are protecting their business model or trying to adapt to an altered business model. We just don’t like that authors get the scraps. Without us there is no book to sell. market etc. Blah, blah, blah… we’ve all heard the complaints before.

        Personally, I think there will come a time when self-publishing gets really serious. And by that I mean that the resources and infrastructure are going to be even easier to tap into for the fleet footed author. Sure, I know that it’s easy now. Authors get get a blog, write a book, get a pre-made cover, whack it all up on AMZN. Whatever. But it’s going to get much easier. Of course, it’s not going to get easier to sell the friggin books. But that applies to self and maintream publishers.

        Many years ago I used to go on about Facebook marketing on here. People still haven’t caught up – authors and publishers alike. Namely, because Facebook is a pain-in-the-arse, do-as-they-please platform. That said, BookBub now has 1.2 million followers and 2 million email subscribers. They’re not indie or mainstream, they’re just a tech start-up that saw an opportunity. (Why a Big 5 publisher hasn’t tried to buy them is beyond me. Maybe they have.)

        But back to the indie thing. I think publishers are going to struggle once the bestseller authors get savvy about indie publishing. As shelf space decreases those authors will inevitably question what it is a publisher is supplying. Cover design, interior design, editing etc is nothing but a tiny upfront expense.

        Personal anecdote: I just went through a process of contacting freelance editors for my current work. A dozen editors all of whom were at one time attached to big house publishers. I did some serious background work on all these editors (facebook stalking, blog trawling, emails to their contacts) … then I ended up vetoing all of them and going with a random editor that hadn’t worked in the mainstream book industry but has a travel mag background and is now attached to a small online erotic/romance publisher. Again, I worked hard to check out her past work and the sales rank of that particular epublisher’s titles. Oddly, I felt this editor wasn’t tainted by the ‘old school’ thinking. Imagine that, if you will … I’m choosing design and editing services based on current epublishing success/trends. Not print success.

        Ditto, web design, marketing etc.

        I understand that traditional publishers are making serious cash on ebooks … but I can not, for the life of me, understand why authors would still be signing up for that service in five to ten years time. Of course, I know what they can offer. But it’s not enough.

        I can’t even see the value of a print only distribution deal. I’m not sure how well it went for Hugh, but personally I thought he’d have only slightly more success than John Locke. The print business is a terrible business model. Mike, you know that. Even publishers know that. They can’t even get rid of the returns business.

        I actually had a friend loan me a book the other day. Well, she loaned me her Kindle because it had the book on it…!! She has an iPad, a phone, a laptop etc. So she just gave me her Kindle. As if it were a book.

        Also, my wife is a teaches high school. Not one kid reads print books. Except the ones she buys as class readers.

        Sorry for the lengthy comment. But you need to cut me some slack, Shatzkin, coz I haven’t posted here for years!! :)

      • http://idealog.com/blog Mike Shatzkin

        Chris, if you’re imagining a world where most authors — even most bestselling authors — self-publish, I think you’re in for a LONG wait.
        Hugh’s deal for print was not a distribution deal like Locke’s. It was an advance-against-royalty deal. I can’t see why every indie author wouldn’t do if if they had the chance. Hugh seems to think, at the moment, that he got an offer that the big publishers are no longer inclined to make.

        I know BookBub. What they’re doing is replicable. And most of the big guys have used them. They might get bought someday. But there’s no lack of engagement by the big publishers with them now.

        As for what authors will sign up with big publishers for in ten years time, that’s a legitimate question. It will almost certainly be a somewhat different value proposition than it is today. That was sorta the point to this post, which has been sorta overwhelmed by a discussion of indie publishing.

        Here’s how I look at it. Any indie publishing service that doesn’t have an exit strategy of being bought out by somebody in the current establishment is probably both stupid and rare. The fact is that indie ebook publishing is a much smaller part of the book world than it thinks it is. I mean, hats off to Mark Coker for building a $20 million business with Smashwords, but that hardly constitutes a threat to the powers-that-be and if he can get it to $100 million, somebody we know will buy him.

        And you’re right that the argument is “personal” to many of the overlong posters on this thread. That’s part of my problem with it. None of these things are “personal” to me. The echo chamber of the indie author community (which Hugh Howey brags about as an asset, and in some ways it is) is leading you all to think you’re a much bigger piece of today’s picture than you actually are.

        Let’s remember that two years ago I thought (briefly, erroneously, and now have learned from my mistake) that Barry Eisler had signaled a sea change when he turned down money from St. Martin’s to self-publish. What happened instead is that he published with Amazon. We’re still waiting for the first author who hasn’t already built a platform self-publishing to turn down an advance of any significance for a future book in favor of self-publishing it. Or maybe you know one.

        Until you know dozens, this conversation is *highly *premature.

        As you said, I call a spade a spade.

        Mike

      • chris

        I agree with what you say here, Mike. But I think the author change will be closer than you think. Well, perhaps the contracts will change.

        And let me clarify this: I don’t think Nora, Roberts, Grisham et al. will be self-pubbing (exclusively) any time soon. But the next generation of bestsellers just might.

        That said, the average author really doesn’t have a clue about cover design, editing, marketing etc. And… self-publishing by its very nature attract tight-arses ie, people not willing to spend money to design, promote.

        So.. you’re probably right. Except for the top selling indies. And the clued-up mid-list trade guys and gals heading over to indie-ville.

        BTW: I remember why I don’t comment here anymore (sure, I have nothing interesting to say!) … it just robs me of writing time. Then my wife gets pissed at me. Then I get pissed at the kids. Then life all falls down.

        Stupid bloody blog!

      • http://idealog.com/blog Mike Shatzkin

        Well, then, I’m going to have to ban you. I can’t be part of any endeavor that is making a man get into trouble with his wife. And I do recall you running through that sequence of concerns once before.

        Mike

      • Steven Zacharius

        As I mentioned on some other blog sites last week discoverability is going to be a major issue with ebooks; it already is. With indies having books at low prices and traditional publishers also selling ebooks at deep discounts for promo purposes for short periods of times, how is the reader going to discover the indies going forward if there are a million books to choose from? Publishers have access to promotional vehicles not generally available to indie authors. They have meetings with editors at Amazon, they have all sorts of space they can get for promotion, etc… this makes it much easier for the reader to see the traditional publisher’s books. Also when people see the books in stores there is name recognition which also leads to name recognition and awareness online as well.

      • http://idealog.com/blog Mike Shatzkin

        Steve, publishers had better learn the techniques of digital marketing and be building their own NSA-style list of names of consumers to be competitive in the future. What you say here goes to the heart of my point that what publishers offer is “we put books on shelves” and, when that’s not as valuable as it used to be, they need other capabilities applied at scale.

        Mike

    • Steven Zacharius

      There was a story released today from the American Library Association that says that ebook lending growth has flattened. Here is the exact quote… E-book sales have flattened in the past year, and during the same period, according to new research from Pew, the number of adults who reported reading an e-book has grown only modestly, from 23% to 28%.
      So this is a report of users of e-books, not talking about indie authors versus traditional authors.
      Another interesting trend worth just mentioned is that libraries are starting to deal directly with publishers rather than middlemen…but that’s for another discussion.

      • http://idealog.com/blog Mike Shatzkin

        Interesting.

        Mike

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  • Laura Resnick

    The central challenge publishers face in the digital market
    is price competition for goods of equal quality. Not only self-published ebooks (I’ve read any number of self-pub ebooks in the past two years wherein the quality of packaging, editing, formatting, and writing are indistinguishable from a good traditionally-published ebook), but also the fast rise in the past year or two of author-produced audiobooks–a field which includes –many- traditionally published authors exploiting audio rights that their publishers (and agents) completely neglected. Publishers’ overhead makes it much harder for them to compete with the pricing of a few hundred thousand cottage industries in the digital market—so reducing overhead and increasing their ability to price their products competitively is surely where publishers’ focus should be placed. (Note: Authors are not overhead. We’re suppliers.)

    Publishers’ terror of price competition led 5 major houses
    to engage in illegal collusive price-fixing, which has been a =very= costly and counter-productive mistake for them. In the wake of that idiotic mess, what are their new strategies for lowering product prices, which is essential for them to compete in the digital market, given the enormous amount of good product out there at competitive prices (including a huge and still-growing amount of self-published/self-produced work from established writers from the traditional publishing world)?

    • http://idealog.com/blog Mike Shatzkin

      I really think your interpretation wildly misreads the question of price competition and, however you characterize it, what the publishers were trying to accomplish with agency pricing.

      In FACT, the publishers’ implementation of agency would have — at least in the short run — given indie publishers and authors a BIGGER competitive edge on price than they had before, with the retailers heavily discounting, or than they have had since retailer discounting was reinstated simultaneously with publishers adopting more flexible pricing strategies. It is my unprovable theory that fledgling authors are HURT by the end of agency because it resulted in bringing branded author prices down and undercutting the advantage that the indie authors like John Locke had in the early days.

      You’re right that publishers have overheads. It is an advantage to have overheads if they’re productive. Much of the overhead publishers have is not intended or expected to be productive in selling ebooks; it is there for the print business, and often just for the *distributed *print business (not just what goes through Amazon). The revenue and marketing from those efforts still matter for many books, even if independent authors working profitably without them ignore them. There is definitely a point of deterioration of the store market for print where the big publisher business gets extremely difficult, if not unsustainable. That was the point to this post!

      Mike

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  • http://www.quietwatermedia.com/ Jeff Bach

    One could look at other industries and see a similar evolution. One could view this simply as a “specialty” becoming a “commodity”, with the change being ushered along by the introduction of a new player that has finally achieved significant critical mass. History is full of upstarts pushing the giants to the curb.

    At a high level, the software world- Novell – MSFT – “open source” comes to mind. Not a perfect fit, but several bits come to mind.

    For starters, MSFT chugged along for years quietly getting bigger, until finally after several years of being ignored, it hit a home run and that was the end of Novell. Likewise, the open source movement yutzed around for years and was cast by MSFT as some little gnat buzzing around. Now years later, open source is too big to ignore and is sucking up lots of the oxygen that used to go to MSFT.

    “open source” still basically lacks the solid monolithic business/revenue model that MSFT enjoyed and still does. I think this is a great parallel to the solid mature offline book business model and how this newish ebook ecomm fragmented model is disrupting the old model.

    One could observe how the “buzz” factor goes to the latest figure atop the mountain. Back in the day not too long ago, MSFT was eagerly watched for in just about everything. It was the rock star everyone wanted at their party. It was on top and Novell was the aging relict struggling to find its way. Today one could say that MSFT is the new Novell as it gets beat up and cast as the aging, “out of step” dinosaur. Today, the software world is fragmented and could include services as much as pure software. Way different from the more streamlined glory days.

    On the upside for established models, there are other interesting parallels. MSFT is STILL the 800lb gorilla when one looks at quarterly profits, etc., but yet it is portrayed as this aging relict from another time struggling to find its way in a new world. Really though, I think it is still laughing all the way to the bank. Much like B&N, which everyone portrays as being on its death bed. I believe current reality for B&N still includes the phrase “nice quarterly profits”.

    The software world grew once people saw that there was a market. It grew as other advances made the market possible. Where, after all, would MSFT be without Intel? Importantly for the established giant, where would MSFT have gone if Bill G had agreed to do the dance with IBM? Basically, the established giant chose to ignore the upstart and that upstart went on to great things.

    I do like how “open source” in the software world seems to be a good parallel for “indie author” in the book world. One could see this turmoil in the book business merely echoing what has preceded it in many other verticals in our disruptive, destructive, capitalist economy. Like Rome, most things are built from the ashes of the model below it.

    my .02

  • http://mindtherant.blogspot.com/ MindTheRant

    Whew! It’s not usually necessary to browse the comments to a Shatzkin Files post, but this time I had to. Looks like you struck a nerve, Mike.

    As someone who has worked in book publishing and bookselling (for Barnes & Noble.com, including during the introduction of the Nook and its descendants) I have no ax to grind about whether physical or virtual books should — or will — prevail.

    However, it’s clear that economics can play a critical role in cultural matters — witness the Great Recession sounding the death knell to Borders. Since I take it on faith that virtual books are cheaper to produce and distribute than physical books — and since I agree with your previous contention, Mike, that physical book readers will increasingly migrate online to buy from Amazon because of its price and convenience advantages — I seriously wonder how much longer publishers can afford to create and sell physical books.

    Indeed, I’m not entirely sure that the population of readers who prefer physical to virtual books will serve as a brake to this trend. Back in the ’80s I stuck to LPs for several years after CDs were introduced; it wasn’t because I was a luddite: I found early CD players expensive and their sound too bright for my taste. I switched only when I visited my local record shop and discovered that LPs were now occupying only a small corner of the store; CDs occupied the rest. True, as long as Amazon stocks physical books those who prefer them to their virtual kin may keep the format alive indefinitely — even if brick-and-mortar bookstores continue to disappear. But I take it as axiomatic that Amazon will relentlessly market its Kindle devices to these buyers and that gradually the technology will become so inexpensive (think what your average pocket calculator costs these days) that even die-hard physical book readers will succumb to them.

    In short, to my mind simple economics may seal the fate of physical books. And the segment of the reading market that prefers them to virtual books — no matter how large it may seem at the moment — may prove unwilling to sustain them with their pocketbooks.

    — Dick Hartzell

    • http://idealog.com/blog Mike Shatzkin

      Dick, the great recession didn’t have much to do with the demise of Borders. Most of the self-inflicted wounds were delivered way before that. But shelf space had to shrink and probably B&N and many indies would have felt pain sooner if Borders had been better managed and stuck around longer.
      I think your analysis ignores some things. One is that many books are gifts and many of those aren’t e-bookable. Another is that the book has advantages over the record and CD and the bookstore has advantages for shopping and browsing over the record store that render the analogy a bit imprecise.

      No doubt print books will persist longer than there are many brick shops to sell them. But we haven’t quite seen the day when brick shops disappear. The print book has much longer to go than that. Maybe not much measured in *decades*, but certainly plenty of *years*. Publishers are far more dependent on the survival of the shops than on survival of the printed books.

      Mike

      • http://mindtherant.blogspot.com/ MindTheRant

        “Publishers are far more dependent on the survival of the shops than on survival of the printed books.”

        Wow — that’s an intriguing, slightly counterintuitive comment. Would you mind elaborating on it?

        Thanks.

        — Dick

      • http://idealog.com/blog Mike Shatzkin
      • http://mindtherant.blogspot.com/ MindTheRant

        I take it you mean publishers need successful distribution through bookstores to prove to authors that they deliver value-added services for them. And that anyone can self-publish a printed book as easily as an ebook (and sell it online, for that matter), so there’s no dependent relationship between printed books and legacy publishers.

      • http://idealog.com/blog Mike Shatzkin

        That’s the core argument, yes. Putting books into stores requires an organization operating at scale, inventory risk and management, and sales relationships and expertise. As long as that’s important, there’s a real need for publishers. If that’s not important, then it’s a lot easier to replace them.

        Mike

      • http://mindtherant.blogspot.com/ MindTheRant

        “One is that many books are gifts and many of those aren’t e-bookable.”

        BTW: You may know that Rowling’s Pottermore Shop allows shoppers to give any of its ebooks or audiobooks as gifts. True, as one of Britain’s wealthiest citizens — and still one of the world’s bestselling authors — Rowling and her online store may be a technological outlier. But if nothing else Pottermore Shop shows that giving virtual books as gifts is an eminently solvable problem.

      • http://idealog.com/blog Mike Shatzkin

        Of course giving virtual books as gifts is solvable. I think it is quite doable on Amazon and B&N as well. But it isn’t as “satisfying” to the gift-giver as something tangible, I don’t think. And many “gift books” are other than straight narrative text, which is what really “works” as ebooks.
        The man who set up Pottermore is Charlie Redmayne. He’s now MD of Harper UK. So they have the vision and expertise right in their shop already.
        Mike

    • Mirta Ana Schultz

      I love books in any form, and there is a certain bliss to “real” books that most bibliophiles will admit to–the touch, details of cover art and etc. BUT…space is an issue for many of us, and as we grow older, clutter. BUT…I wonder how much the younger generations and their concern for the ecology/conservation issues will make an ethical push for e-books. “No trees died to make this reading experience. No truck spewed fossil fuel gases into the atmosphere to transport the book to you. No bookstore used up electricity and more wood or plastic for shelving or styrofoam for coffee cups to have a place for you to buy this story!” Kids coming up with smartphones and tablets and mindful of global warming may be a big nail in the coffin to “real” books. It becomes a “waste of resources” issue. And for gifts–I’ve been giving B&N gift cards as gifts to my niece and nephew for their reading, when before I bought lovely hardcovers. Now, I let THEM pick the book for their Nook.
      Legacy publishers better consider that whole eco-angle. It’s gonna nip the heels right after the indie publishers.

      • http://idealog.com/blog Mike Shatzkin

        I grew up in a house full of books with a Dad whose college degree was in “printing”. But I really only care about the *words in the books* myself. I have no sentimentality about the printed form. I suspect most people will care about the words, the price, the convenience, and the utility most. And I think ebooks will probably deliver on that better than print for most purposes for most people.

        I will say, before anybody else does, that eink readers that only do books might be more damaging to the environment than the paper, printing, shipping, etc. They, like tablets and smartphones, have lots of toxins they carry with them as waste material. At least the phones and tablets have lots of other purposes and people would own them whether they read books on them or not. The eink readers are dedicated. It will take some rigor and crunching. to figure out whether printed books or eink readers are the better environmental choice.

        Mike

      • http://mindtherant.blogspot.com/ MindTheRant

        My 2 cents: I think given all the advantages of digital content — its instant availability and utter absence of shelf space — young people today are less concerned than ever about collecting *stuff*. And to be honest, those of us who’ve bought shelves of books seldom read any one of them more than once … so young people may have a point. Of course, Mike is right about the toxins that lurk in the devices that are replacing books, CDs, and DVDs. Whether we’re cutting down trees for pulp or mining rare earths for circuit boards, environmentally there’s likely no such thing as a free lunch.

      • http://idealog.com/blog Mike Shatzkin

        The data on young people reading print versus digital is very mixed. And there are advantages for older people — specifically not having to deal with the *weight* of paper, the effects of arthritis on page-turning, and the advantage of being able to make the fonts bigger, that drive older people. I think the move is inexorable, but reaches a point of penetration where it becomes very gradual and that extends across generations.

        Mike

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  • Joel Haas

    Whether print publishers like it or not, frequent payments and transparent accounting are very attractive when offered by an online only publisher. My mother, Douglas (yes her name really is Douglas), is very happy with her arrangement with Piccadilly Press in England. They bought the online publishing rights to my late father’s Westerns. Ben Haas wrote under RIchard Meade, Thorne Douglas, and John Benteen as well as other pen names, using his real name only for his hard cover novels with S&S.

    Point #1
    The large publishers would have made more profit off his books if he had had time to write them.

    Dad’s paperback books were all pot boilers from his perspective. He had to write them because royalty payments were generally every 6 months and hard to audit in the 1960s. S&S would finally get around to sending his agent a royalty check and statement and a month or two later the agent would send a check sans their commission. None of this was ever predictable. I recall many times the family exchequer would be saved by a royalty check out of the blue from Dutch or Brazilian rights to some paperback. Had there been monthly turnaround on royalty payments he might well have not been economically pressed to write a few paperbacks a month to support a wife and three sons.

    Point #2
    Current niche markets are not the only game in town.

    Ben Haas died in 1977 age 51. Westerns were already facing declining popularity. Now, even my local used book stores hardly carry any Westerns other than Max Brand or Louis L’Amour. My family forgot about the Westerns over the years and figured they were nearly worthless. We had a basement full of Norwegian translations and Italian and German pirate editions of his Westerns. Dad’s Westerns made even more money in Norway than in the States, proof that one channel state TV and long winter nights will make a large portion of a population readers.

    Late in 2011 I received an email from James Reasoner, a gentleman in Texas who writes Westerns and a very good blog about Westerns as well.

    I looked into online Westerns and was astounded to find such a large and active community around the world. There are collectors who read any and all sorts of old pulp, but who had a hard time finding physical copies, people who read only Westerns, and a large number who still write Westerns and publish online.

    Point #3 What the niche on line publisher does…

    They pay royalties direct to the author’s account every 3 months along with a detailed sales breakdown. Mom’s delighted when a sum transferred into her account this month. She had lived years with an uneven income with Dad. In this case, she gets a much larger than usual royalty deal. Unbeknown to us, John Benteen, was hugely popular in the on line Westerns community.

    Just as you mentioned traditional publishers buying books that don’t pay out but bring in the readers to their site, Piccadilly may be doing so as well. I don’t not know that for a fact, but it is not unreasonable to believe an online publisher would have same motivation as bookstores and publishers.

    Since I had a good deal of hands-on experience with ebook production, problems and advantages, I negotiated a deal with Piccadilly Press in England after they and several other online sellers approached Mom. Piccadilly publishes only Westerns. They do all the scanning to text, proof reading, format the book for several different ereaders, plus they have new covers made for each book. They have built a low key but persistent presence on line with Facebook and other outlets.

    They release one of Dad’s John Benteen books a month–they have 60 some titles to go– so there is always a burst of sales on the newest one, but the back list sales hold up quite well.

    And Piccadilly offers the ebooks though their own site as well as other ebook stores including the UK and German Amazon sites. Language is no barrier to the Germans, most Germans buying Westerns read English well.
    So Piccadilly is a niche vertical press. New on line Western writers you’ve never heard of with a considerable on line following are out there and Piccadilly publishes those, too.

    Now, here is one overlooked aspect to this sort of bookselling: when it started becoming known on line that John Benteen was really Ben Haas, and that the Rancho Bravo novels and DoubleDay Double D ones under Richard Meade were his as well, used book dealers started seeing them fly out their doors. The real missed opportunity, though, is these other publishing houses, S&S included, could have made back more than their investment selling Dad’s fantasy, thrillers, hardbacks, even his history of the KKK, had they bothered to put their back list up.
    It might require looking into untapped markets and markets they never knew existed but I don’t think anybody in traditional publishing has done much of this,

    • http://idealog.com/blog Mike Shatzkin

      Interesting comment post (and worth the length!) and interesting history. You make a very interesting point about westerns, and that Piccadilly Press has a rich history of publications to mine.

      Make me wonder what Random House is doing with Louis L’Amour.

      Mike

  • Joel Haas

    I have not been to this blog in quite a while, so this point may have been made already. Don’t assume all the print-only hold outs are elderly or hard to convert.

    My 86 year old mother became a big believer in ereaders when I had to take her to the local emergency room several years ago. Shortly after finding seats, Mom said to me in her Virginia Tidewater accent, “Son, Ah do believe Ah have left books to read at home.” This was serious business. Mom lives in a fortress of printed matter. Mom even has a copy of Canterbury Tales in the driver side pocket of her car to read at long stoplights or in traffic jams.

    I had a new Kindle and a new B&N NOOK color. I offered one or the other. “Son,” she responded, “The very ahdeah of reading a book on one of those…well, Ah just think it’d be more trouble than it’s worth.”

    Addicts have limits, though. Ten minutes later, she agreed to try out the B&N NOOK. It took a little less than a minute to show her how to use the controls. Twenty minutes later, the doctor finally saw her and she seemed rather put out that he’d interrupted her reading.

    No longer having to choose between which doorstop size books to take when traveling appealed. Even more appealing was the idea of having so many of her books in one place. With an ereader, she’d only have to look for her tablet, not shuffle through the print mulch locating several print books. The real clincher was making print larger and brighter.

    Now, with her own NOOK, Mom makes sure any book proposed for her book club’s annual reading list is available on NOOK.

    Recently, she told me, “Son, last night when the powwah went off, Ah was able to just keep on reading since mah NOOK was charged and Ah could even use it as a flashlight.”

    When–and if–she passes away, we will have to bury her with an ereader and charger.

    • Mirta Ana Schultz

      I want her to adopt me! I’m a book hoarder, and I used to think I”d never move to e-reader, because REAL books were so pleasurable. As another addict, I kept dozens of books in the trunk of my car so I’d have a choice of reading material no matter where I might be. My first e-Reader in 2007b was a Sony. Cute, but not as easy to use as the newer types. A Nook and Kindle later, I was hooked by the ease of use, ease of purchase, and being able to carry 1000 books in my purse. I now have TWO Kindles, and also read on my computer, laptop, and smartphone. I can finally dehoard my 3K real book collection and move to smaller, cheaper digs . (I own a separate apartment for my book collection, and that’s not cheap.) I am middle-aged, 53, and if I can be addicted to e-readers, and your mama, the rest of us dinosaurs will follow when we see, “Oh, we can make the font WAY BIGGER.” :) Old eyes like bright pages and big fonts. :D

      • http://idealog.com/blog Mike Shatzkin

        I have often thought that most of the people who say “I insist on paper books” haven’t really given digital reading a try. This story has the virtue of confirming my prejudice.

        Mike

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  • Nirupam Banerjee

    The future of ONLINE PIRACY is — in turn — a key to understanding the future of Bookstores.

    Earlier we had been discussing about a rival future paradigm in Immersive vs Non-immersive book classification (over the Fiction vs Non-fiction paradigm). But another such rival awaits the future. Maybe it will be even more important than the Immersive-ness classification. This is: Static vs Dynamic books.

    And needless to say, that the physical bookstores can’t offer the DYNAMIC ones. On the other hand, the STATIC books need absolute protection from Legislation &/or Technology. In order to survive the book-piracy. They have no self-defense.

    But the Dynamic books (preferably E-books definitely) have a 3rd dimension of resistance — apart from the Law & DRM.

    • http://idealog.com/blog Mike Shatzkin

      The market for dynamic books — or for any kind of ebooks except straight text — is still an imaginary one. Maybe…someday. But not today.

      Mike

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