The Shatzkin Files

No-inventory publishing changes everything for everybody and nobody will escape making adjustments

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A somewhat overwrought article in Wired calling ebooks an “abomination” because they “price people out of reading” provokes thinking about how much the business models for the trade book business are changing. The article’s weakness stems from its focus on the pricing decisions publishers are making in selling print and ebooks to libraries when those changes are taking place in a larger and indivisible context. The industry is finding less and less uniting what it has been for the past 70 years, since the end of World War II and the advent of paperbacks, and what it will be in a future that is already being disruptive but not necessarily clear.

This is reflected on a micro level in a discussion that arose at our Marketing Conference last week from a question asking “what is a book”? That question used to have a physical answer which described an object, not necessarily describing what content it contained. We’re getting away pretty fast from requiring a book to be printed and bound; the words of an author feel no less real or worthy to many of us coming from a screen. Screen delivery is also relieving the need for a book to have any minimum length, which printed books transacted individually require for physical (we want them thick enough to bind with a spine) and commercial (selling and tracking an individual item practically requires a minimum price) reasons.

I think the questioner in this case was also trying to pull us into a disussion of video, audio, interaction, and linking, which I resist for two reasons. One is that, so far, the preponderence of ebooks that have sold any appreciable quantities have not had any of those attributes. They’re just the same words as in the printed books made reflowable for a screen. The second is that my world is the world of book publishing. My belief is that if books were to become something heavily dependent on video and audio, they won’t be made by people who today are book publishers. They’ll be made by movie studios and animation houses and digital game creators. In that case, discussion of them belongs on some other blog.

Restricting one’s thinking to assume that the future of books encompass only digital versions of what has existed as a book for the past several hundred years doesn’t, by itself, make the future clear. The changes in business models and in the configuration of the industry provide plenty of potential variation that, from my perspective, is more useful (and more fun) to think about than trying to redefine the book itself.

One of the things that has characterized books for me is the incredible diversity of markets they reach. Trade publishing has always had remarkably low barriers to entry compared to other media. It has always been easier to publish a book and make it work on some level than to launch a newspaper or a magazine, or make a movie or a TV show or a record. It costs less and the distribution channels have always been relatively democratic and accessible to outsiders. The cash comes back slowly, and profits are often elusive, but you don’t need a fortune to publish a book.

Because books inherently require a small number of sales to make money (the breakeven point gets raised by big advances to authors, but, if the author guarantee is low, most books will recover core production costs on the sale of a few thousand copies and, in some cases, less than that), they frequently target what any other industry would consider mini-markets. A publisher that mines a niche can profit on something incredibly esoteric. For example, the chances are that Osprey, a military history publisher, has made money on books about wars you’ve never heard of. But their audience has and, because they know their audience, everybody wins.

The giant general trade publishers have built big and expensive machines that can make a book a mass sensation and put it in front of the public in a big way. Other publishers have pursued other models. HarperCollins or Simon & Schuster might pay big money to an author and build an organization that can maximize marketing impact on pub date. Other companies have specialized in a market like craft books or art books or computer books, not paying the same advances and necessarily having a different emphasis in their distribution and marketing strategies.

But what has united all the business models was the commitment to make and market a book, which meant printing inventory. The minimum investment to publish a book was much less than the minimum investment to publish a magazine or a newspaper or to make a film or a record. But there still was an investment.

And that brings us back to something that made books special for their authors: the prestige conferred by somebody (preferably somebody highly professional with a brand name like some publishers have) making a unique investment in their content. That’s an investment that’s not sold as part of a magazine, or on the back of a star’s name, but in one person’s work: the author’s. When the subject of what a book was came up at our conference, one observation from a publisher of books about public affairs was how much the speaking fees of their authors went up when a book of theirs was published. The mere fact of the book conferred credibility on the author that raised their value in the marketplace, regardless of how the book sold. (Or didn’t.)

This is something inherent to the definition of a “book”. This is, also, likely to change.

The core change in publishing economics that will ultimately change the shape of the commercial industry is that the already-low investment required to publish a book has plummeted even further. As printed books become less important, then the investment required to fund them becomes less important too. Already we have seen many authors — I’ve written about John Locke and hosted Hugh Howey on the Digital Book World stage, but there are scores of others — build a career as an author without any significant print sales. We have seen other authors with long backlists, some who had only achieved modest success for publishers, turning the opportunity for higher margins and direct audience contact into financial bonanzas in digital publishing.

Repeated demonstration of the fact that it is totally possible to achieve fame and fortune as a writer without a publisher does not escape the attention of any author. Many literary agencies, the players closest to the hopes and aspirations of narrative text book authors, have been gearing up to provide digital services, primarily at first for established authors who want to self-publish their backlists. But by doing this they also create leverage for their authors in their negotiations for bigger advances and better terms from publishers, and they stamp themselves as able to continue to serve an author who decides publishers are no longer for him or her.

That means that publishers, who would theoretically always have been interested in maximizing a book’s revenue for the author and themselves, are goaded more than ever to do so. That in turn means every aspect of the business model gets questioned. Are library ebooks cannibalizing the sales of ebooks from stores? Might they? The question has to be asked. Does the fact that ebooks don’t wear out with repeated lending, as printed books do, require some different policy to make a library pony up again for frequently-loaned book? (HarperCollins has introduced such a policy.) Should a library that uses its copy of an ebook to satisfy many readers pay more than an ebook reader who has practical (and contractual) barriers to sharing? (Random House is trying this.) While some authors are asking themselves whether publishers are essential for them anymore, which makes sense, doesn’t it also make sense for publishers to be thinking hard about how the digital revolution might change their relationship with libraries?

In fact, nobody in the value chain in between the author and the reader of a book can be complacent about their position: not the agent or publisher or library, but also, quite obviously, not the bookstore, online or physical. The printer and warehouse operator must expect a shrinking share of the book business. No-inventory publishing, by lowering the barriers to entry for a written book of narrative text nearly to zero, is assuring that an ecosystem built around the reality that book inventory was the industry’s greatest cost will change profoundly.

The assertion that ebooks are making books less affordable to most people is total hogwash. For every book not available to be lent as an ebook by a library, there are probably ten from established publishers that are half the price they were before, to the consumer and to the library. And there are countless others which would not have been published before available directly from authors, which their sales tell us are valued by many readers, that are dirt cheap, priced less than the commercial transaction system for print could even consider. And the books the author of the complaining article wrote about that come with higher prices or some sort of other licensing restrictions as ebooks, are still (at least for now) still available in print at the long-traditional prices and terms.

We’re going to see marketing departments of publishers expand and sales departments contract as book distribution patterns change. We’re going to see more and more commercially viable titles launched with a no- or little-inventory-in-place model, starting with ebooks and print-on-demand availability as a low-risk launch strategy. We’re going to see books launched as serials, growing to a length determined by audience response, not based on a pre-publication plan. We’re going to see booksellers and libraries publishing and publishers building on book audiences to sell other things. And we’re going to see more and more virtual sources of books for consumers: publishers selling direct, of course, but also did you notice that Tesco is now in the game?

We’re going to see a lot of change as players of all sizes, in all parts of the publishing value chain, adjust to the “weightlessness” of a business shedding and shifting its biggest capital requirement: inventory cost. Picking on one tactic or another by one player or another, particularly from the perspective of preserving legacy behavior, is not likely to be very illuminating or helpful. The ability to put a book into the marketplace in a way that can reach more than half its audience with no inventory investment, making it possible to sell books and rights globally and only later, if it is warranted, put a bigger bet down on the book — combined with the increasing number of entities that have knowledge that could inform content and direct contact with a real market — is going to be transformative. Everybody in the chain but the author and the reader are fighting for their lives.

Smart publishers recognize that they have to completely rethink their business models and propositions in a no-inventory publishing world. Authors and agents are doing the same thing. So are many bookstores and libraries. The players in the publishing ecosystem who don’t rethink their business practices in fundamental ways will probably be relieved of the burden of thinking about them at all before long.

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  • Karen Myers

    It’s a mistake, I believe, to leave audiobooks out of the mix. They are the same words, just flowed into audio, and users perceive them that way, hence the popularity of Whispersync. The costs to produce and the channels are different, but for the readers it’s just another expansion of ubiquity of access to content.

    • I see the validity in what you’re saying. Worth thinking about. What is different about audio is the high cost of production. It’s not like an ebook in that way; it’s more like an *enhanced *ebook. And I don’t spend much time on that either. But I agree with your core point.


  • Joseph Sanchez

    I wish my colleagues would read your blog regularly. I ran one of the first libraries in the world to circulate ereaders, and all this became obvious to me within the first six months. Librarians love to point to half-baked surveys indicating that people who check out ebooks also buy, but the data is usually based on poorly framed questions.

    It is painfully obvious that ebooks are furthering the commodifying affect on books, and patron behavior will change. Who wants to buy a book if it is available through the library? Who wants to buy any commodity at boutique pricing?

    You are wrong about one thing though: you wrote, “For every book not available to be lent as an ebook by a library, there are probably ten from established publishers that are half the price they were before, to the consumer and to the library.” That is not true for libraries as first sale does not apply to ebooks and “established” publishers are charging us more for everything in digital formats.

    I am one of the architects of the Douglas County library model, and those are the only books available cheaper than their print versions. But they are not from established publishers.

    The biggest problem we have with publishers is that they are not willing to really talk with us about solutions. To be honest, there are few in the profession, including our leadership at the ALA, who really know what to talk about. My biggest goal would be for publishers to use our rich data on the shelf life of a book to create the pricing scale, rather than pulling them out of thin air, as they seem to be doing. This would create a bit more stability in the market moving forward.

    But it would still not solve or address the problems you describe above.

    • I didn’t think the situation of publishers charging libraries extra for ebooks went beyond Random House. If ebooks cost libraries more, perhaps it is because of the intermediaries, not the publishers. Publishers that sell wholesaler are and will be increasingly forced to lower retail prices because the retailers will be getting less interested in making title-by-title decisions about discounts except on the major titles.

      I am not sure I understand how knowledge of library circ can help publishers with pricing. But we will find out. I understand that Recorded Books will be making an ebook offer to libraries soon that will both inform publishers about circs and allow publishers to change their pricing and business models from a control panel.

      And thanks for the nice things you said!


      • John Andrews

        Are library ebooks cannibalizing the sales of ebooks from stores? YES Does the fact that ebooks don’t wear out with repeated lending, as printed books do, require some different policy to make a library pony up again for frequently-loaned book? YES Should libraries cease stocking eBooks? YES Should publishers stop selling loan copies of eBooks to libraries? YES. The exception I would make to these short answers is that libraries should make eBooks available to those who are able and willing to read them on the library premises. Publishers could then be generous in giving free or low-cost copies of eBooks to libraries so that readers have the advantage of free access and publishers have the advantage of free advertising.

      • I think the problem is more nuanced than that. I don’t have the answers. My point was that it is dumb to oppose publishers of either immorality or stupidity because they’re trying to figure it out. And that the notion that these policy decisions are making it hard to find lots of free stuff to read is just ludicrous. There is more free stuff more readily available to more people than ever before in history, through libraries and on the Internet for anybody with a connection.


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  • Nirupam Banerjee

    Excellent Article, on the overall. And the last line is spinal-chord-shivering.

    Usually the OASIS is a small part in a desert. But here, at present, the oasis is still huge in area. In this analogy, I mean: this new global desert is almost exclusively confined to the *ENGLISH* language only. But in my local language, for example, there’s no commercial e-book yet. Likewise is the case in almost all other languages (if we consider the whole earth).

    In other words, these NON-ENGLISH publishers (& associated other middlemen) still survive with drinking water & palm-like trees in the oasis. But in the future tense for them, I take your comment seriously that “…nobody WILL escape making adjustments.”

    It is curious to see, for example, how Amazon can penetrate the Indian languages.

    • The smaller the language, the longer it will be before this disruption hits. But the other sides to that are a) the smaller the overall economic consequences and b) the language becomes threatened because so many others have digital content availability.


  • Robgb

    This article is very 2010. The last paragraph, in particular, is exactly what Joe Konrath was saying back then.

    • He could have gotten it from me. I said it for many years before that, in some ways going back to the 1990s. But articles like the one in Wired (not exactly the single most backward magazine on the planet) that just appeared and to which you might have noticed I linked at the top, make it clear that the comment is topical now.

      But if this doesn’t inform you, I don’t think you should waste time reading it. And why waste even more time commenting on it? Perhaps some other agenda with the comment?


      • Robgb

        My point is that this is old news. Maybe not to Wired or whoever, but certainly to those of us in the trenches who embraced these changes in publishing back when Konrath (and apparently you) was making predictions about its future and took steps accordingly.

        Telling publishers and booksellers today that they have to rethink their business models is like telling the guy next to you to duck ten minutes after someone threw a football at his head.

        Not sure what agenda you’re referring to, but whatever.

      • Well, anybody who was already hit in the head by the football obviously will be too unconscious to listen. And apparently the guys from Wired didn’t. Have you thought about sending *them* a castigation!

        Bob, I really don’t think you should waste time with me. Just continue making the big bucks charging authors 50 percent of their take to help them manage their ebook presence. Or have you changed that model since I put you on a stage to promote it two years ago?

        As for the agenda, only you would be able to know that for sure. Passive-aggressive behavior is easy to identify but hard to explain when you’re not the person doing it.


      • Robgb

        Bob? I have no idea who you’re talking about and have no dealings with authors other than I consider a lot of them friends and happen to be one myself. Obviously you’re mistaking me for someone else—which I guess explains the hostility.

        Frankly, I don’t think I’ve been passive aggressive at all. I pretty much said what I meant. If I said it to the wrong guy—as you seem to think—then my apologies.

  • Mark W. White

    Regarding your prediction that we’ll see more titles “starting with ebooks and print-on-demand availability [only] as a low-risk launch strategy,” it’s already happening. At U.S. News & World Report, we decided about 2 years ago to get out of the book business (except for magazines sold through book channels) because of disappointing revenues.But now we’re about to get back in, this time as the actual publisher rather than via a licensing deal as in the past. We’re close to launching “The U.S. News Guide to Paying for College” in e-book and POD formats. Because we’re working with Vook, which recently signed a distribution deal with Ingram, there’s also a path for the book to get into traditional bookstores via POD — without the upfront costs and risks that would be involved in a traditional book launch. This is a pretty easy path for what you call “new publishers” — non-book companies that have the content and brands to be successful with books once the barriers to entry are lowered.

    • Thanks for the report, Mark. I think somebody new comes into this arena every day or two…Good luck with it. It’s a great strategy for your publication.


  • I just buy books and read them. This month I have already bought three, all of them over $14, which is a lot of money for me. In the three years I have owned a digital reader I have purchased 300+ books (some for a couple of dollars, most for whatever passed for full price) and borrowed another 30 or so from our library. I’m not feeling priced out of the market.

    In the three years before owning an ereader, I purchased and read maybe 50 books.

    How can this kind of change be bad for the industry?

    • Vicki, if everybody were like you, there’s no way the change would be back for the industry. But people are different and we don’t really know how typical (or atypical) you are.

      And even if somebody were *just like you* with an ereader, would they be just like you when they got a tablet and could choose movies or games or email on their device instead of books?

      This is what we’re still finding out.


      • Actually, I’m betting I am pretty atypical, Mike ;).

        How people buy/borrow/steal books is probably going to be a movable target for the foreseeable future. I’m fascinated by the hoarding behaviour I am seeing, and not just of free books, either.

      • Vicki, when it comes to books, we are *all *atypical. That’s what makes the business so damn complicated! Consensus is rare.


  • Peter Turner

    You make a bunch of great points here, Mike. One that particularly struck me is your comment about how the “prestige factor” of simply being an author and the credibility conferred are linked to relative scarcity of books and the degree to which the publisher is a gatekeeper not a fire hose–or that’s at least the way I’d frame it.

    One other point you made raised a question for me. You noted that, “Trade publishing has always had remarkably low barriers to entry” and that to be profitable one had to sell only a relatively small number of copies. My question is about the cost of effective marketing today versus in recent years—and by “effective” I mean produces sales. It seems to me that this too is linked to scarcity and to the publisher or retailer brand as being able to confer some degree of credibility as to the quality of any particular book.

    • “Effective marketing” in bygone days meant “getting your book into the stores”. That had a cost: a relationship with a sales organization (distribution fees and the professionalism needed to make an impression on reps). Today effective marketing has other meanings but let’s remember that many entities that would get into publishing would do so because they already reach audiences in some other way.


      • Peter Turner

        True, but distribution and reach don’t equal sales, which is really the only value metric left open to publishers when wooing authors.

      • The question for the rational author is “how does the publisher put my book in front of readers more effectively than I could do it without them?”

  • Dave Bricker

    All this posturing about “what is a book” reminds me of the shift from vinyl records to digital downloads. The recording industry clung tenaciously to the idea that a record was a physical object that, if disembodied from its containing medium, should at least remain connected to its owner. While the RIAA was busy skewering Napster, Apple became the world’s largest music retailer. The major labels missed the very boat they tried so hard to keep tethered to the shore.

    Now that books are likewise distinct from their traditional paper containers, big publishers are wondering what to do with their dwindling bookstore network. Amazon became the world’s largest book retailer in spite of New York’s century-long book business history.

    What constitutes a book will likely remain a subject of debate as media evolves, but I’m not placing my bets on those who define it either by its containing medium or by any imagined prestige conferred upon its author by those who do.

    • I think it will take a long time for full-length narrative books to lose their halo effect for people who create them and put them into the marketplace: years.

      The “definition” of books *beyond *long-form narratives is definitely up for grabs. I have noticed from two recent conversations with cutting edge technology companies that their line is that they don’t like to refer to the more complex renditions they do as the digital version of not-narrative books as “books” at all. They are “something else”.

      So it may be redefine “book” or it may be that people very quickly say “I’m not one.”

      Music was considerably less complicated.


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