The Shatzkin Files


No, Mike Shatzkin did NOT say that publishing is spiraling down the drain


As part of the promotion of the Digital Book World conference, I do some interviewing with the very capable Jeremy Greenfield, the editor of their blog. And Jeremy takes our conversations and chops them up into short pieces around the themes of our show. Since the focus of Digital Book World is “how digital is changing publishing”, Amazon is a topic of great interest and one we try to address in an original and enlightening way.

In my interview with Jeremy, for which he published very brief but entirely accurate excerpts, I did say that publishers would face a real selling job with authors when Amazon’s share grows by another 25% from its current base or if Barnes & Noble closed. Neither of those things is likely to happen in the next few years. If and when the day comes that one of those things does happen, not all publishers would be entirely defenseless even with today’s arsenal of capabilities. And Jeremy’s piece closes with my suggestion that publishers can help themselves by doing “digital marketing at scale, which is audience-centric in its thinking.”

Despite how this is interpreted in some circles, it does not add up to publishing “spiraling down the drain”.

Amazon is already truly disruptive and it isn’t clear to anybody but those on the inside of Amazon exactly how disruptive. I’ve written earlier that we know nothing about the used book marketplace they host and foster, which we must assume cuts into sales, particularly of bestselling books which have many copies in circulation. A recent discussion on a mailing list I’m on revolved around what we don’t know about how many ebooks are being published. Why? Because Bowker, which issues ISBN numbers and therefore helps us count the titles going into the marketplace, doesn’t necessarily get to touch (and count) titles that stay entirely inside of Amazon and therefore only use the Amazon “ASIN” substitute for the ISBN. Other ebook retailers will handle titles without ISBN numbers, but only Amazon has a large enough market by itself to make a substantial number of self-publishers work with them alone.

And now we have the anomaly of sales reporting from the AAP, once again working without totally internal Amazon IP, that suggests ebook sales are going down. Are they going down? Or are self-published titles exclusively inside Amazon taking share away from the part of the business we can see and count for ourselves and masking the ebook sales growth that is actually taking place? I have no evidence, but that strikes me as a more likely reality than that ebook sales have actually fallen year-to-year recently.

What that means is that we are developing two publishing businesses. One of them includes all of us: all the publishers, all the retailers, all the industry bodies counting books and sales. And one of them is “private” or “proprietary”; it is Amazon. They are publishing an unknown number of titles selling an unknown number of copies netting an unknown number of dollars under a numbering system nobody else can crack or track.

Actually, Amazon is not entirely alone in wanting proprietary titles. Perhaps there are some within Nook or Kobo, but hosting proprietary titles to establish themselves in the market is the declared strategy of upstart retailer Zola Books. Last week they announced exclusive titles from Joan Didion and her late husband, John Gregory Dunne. They think having showcase titles of this kind will enable them to crack the ranks of established ebook retailers. I think it would take a lot more of them than they’ll ever get to make a dent, but time will tell. And if they don’t sell a lot of the ones they have, it will become impossible to persuade anybody else to give them such an exclusive on any basis.

But Amazon, being more than half the market already for a lot of genre fiction, can use painless (to them) financial incentives to induce authors to give them exclusives through the KDP Select program. So they get them in numbers none of the rest of us can count but which could conceivably be large enough to actually make industry figures inaccurate.

My assumption is that Amazon can do more for a book inside Amazon than a publisher or author can working Amazon from the outside, all other things being equal (although the U-turn from the ambitious Larry Kirshbaum publishing program might cast doubt on that). And the publisher takes a big share of the Amazon-generated revenue. That means that the publishers have to make up the difference in revenue for the author in one or both of two ways:

They have to do a superior job publishing the book — editing, positioning it in the marketplace, selling rights, and sustaining a marketing effort that will be largely digital — so that it sells more even inside Amazon than it would without those efforts. In other words, they have to assure that “all other things” do not remain equal.

They have to sell lots of books outside of Amazon so that the revenue from the larger publishing ecosystem makes up for the Amazon-generated revenue that the author shares with the publisher.

The shift that has taken place so far is apparently not crippling publishers at all. There are no clear tallies about this, but it certainly feels like there are more authors moving from self-publishing to a publishing house (to borrow a term that usually has a different meaning in our business: “discovered” by publishers because of their self-publishing success) than the other way. So either they’re able to make more money, or they really appreciate the full bundle of editing and marketing services a publisher provides, or they value the broader exposure through a publisher’s entire distribution network more than the perhaps-higher revenue they could make from fewer sales through Amazon alone, or some combination of the three.

My point, and what should be a broad industry concern, is that the publisher’s challenge continues to get steeper. Amazon’s share is growing in relation to the rest of the market and more and more service offerings for editing and marketing are making it ever-easier for authors to entertain a non-publisher option. There is a very small but growing population of authors with lengthy backlists who have gotten their rights back, or secured their ebook rights alone, and are able to consider alternative paths to market.

Although she wasn’t the first, Jane Friedman saw this very early — and it is the opportunity that got things started for her Open Road Integrated Media, probably the largest new publisher built during our current shifting paradigm. Richard Curtis of E-Reads and Arthur Klebanoff of Rosetta were pursuing a similar strategy before Friedman got started, but she found the funding and added the promotional sizzle to build a bigger business faster. (It is still an open question whether the companies that are building themselves by offering more generous royalty splits for already-established backlist have a sustainable business model.)

We’ve said repeatedly in this space that the publisher’s time-honored core proposition has been “we put books on shelves”. That is changing and the new proposition has to be “we will help authors reach their whole audience”. A very smart executive from a major house suggested another formulation that makes sense: “publishers are experts at building author brands.”

Either of those, as a competitive statement against Amazon, will almost certainly reflect a potential advantage for authors. But as the difference between what is Amazon’s audience and what is the whole audience gets smaller, the publishers’ challenge gets harder. And only by doing a smashing job at both publishing in a way that sells more on Amazon and by maximizing the market outside Amazon will publishers retain their power to attract authors in the years to come.

The answers for publishers as seen from here are “verticality”, or “audience-centricity”, combined with scaled skills (and tools) to do digital marketing in ways the authors can’t on their own and which Amazon isn’t likely to develop. The two go together: focusing on an audience enables a publisher to build scaled capabilities to reach that audience that others without that focus will not have.

There have always been publishers that have gone “down the drain” or, more likely, seen themselves become part of some other publisher rather than a stand-alone entity. We will certainly see consolidation in various segments of the industry at the same time that we will see lots of new smaller entrants attracted by book publishing’s diminishing cost of entry. (We call this atomization.) But seeing that things will get harder is not the same as seeing a pending apocalypse, and recognizing there are benchmarks that would signal a real escalation of the challenge is not the same as saying we’re about to hit them.

The topics covered in this post will get a thorough airing at the Digital Book World conference on January 14-15, 2014. (Here’s the full program.) Our Amazon coverage will include presentations from Brad Stone, Benedict Evans, and Joe Esposito, followed by a panel discussion among them. Professor Dana Beth Weinberg combines her data analysis skills as a sociologist with her publishing interest and knowledge as a romance writer to present a unique perspective on the changing dynamic between publishers and authors. And Phil Sexton, the publisher of Writer’s Digest, will present the results of his organization’s survey of more than 5,000 freelance writers, capturing an up-to-date picture of how writers view the choice between working with a publisher and putting their material out on their own.

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  • InklingBooks

    There’s another and far more disturbing aspect of POD and ebook retailing than just ISBNs not being issued for in-house books. The problem applies to all ebook titles and to any POD title that’s printed in-house, such as by CreateSpace for Amazon.

    In traditional publishing, the publisher supplies retailers with copies of their book, for which the retailer pays. If all those copies don’t sell, there may be returns. But the publisher can rest assured that the retailer can’t sell MORE copies of the book than the publisher has supplied.

    That’s not true with any ebook or with POD books printed by a retailer. For an example, imagine a large retailer that sells ebooks as well as POD titles that it prints itself. It tells an author/publisher that in the month of October, 75 copies of the print version sold and 125 copies of the digital version sold.

    It there any way for the author/publisher to know that’s true? No, in the current state of the market he can’t. That retailer could have sold twice as many books and he would be none the wiser. The retailer considers that sort of detailed information confidential. In fact, a zeal to keep that data confidential is a hint that something might be going on.

    It’s not perfect, but there is a fix that wouldn’t be hard to either legislate or impose on retailers via a class action lawsuit. The retailer would not have to provide each publisher with detailed sales information, meaning the names and addresses of customers. But it would have to provide enough detail to catch anything dishonest.

    For that, the retailer would have to provide in timely fashion, say once a month, this information.

    – Title of the book sold, along with the number of copies.

    – The precise date and time of the sale as given on the sales receipt given the customer, along with the shipping date and time.

    – The delivery and charge card zip codes of the purchaser.

    That would permit an author/publisher to test the integrity of the retailer by having a friend, perhaps one at the other end of the country, buy a copy of the book. If the sale shows up, all is apparently well.

    If the sale doesn’t show up, that single discrepancy, backed by the retailer’s sales receipt, would be grounds of the retailer to be forced to pay for an independent audit of that book’s sales extending well into the past. Having one missed sale incur thousands of dollars in cost would keep retailers honest.

    That has two benefits:

    1. It makes this otherwise untraceable cheating much more difficult.

    2. It provides authors and publishers with useful sales data. They not only know where their books are selling but when. That helps with marketing.

    I suggest that because there are authors who’ve reported discrepancies in reports from friends who’ve bought their book and sales figures from Amazon. A friend tells them, “I bought your book in mid-April” and Amazon reports no April sales.

    Such a move would even be good for Amazon. During the closing decade of the Cold War, President Reagan stressed the need to ‘trust but verify.’ This reporting scheme would offer authors and publishers a way to trust but verify the sales data they get from Amazon. If the company has nothing to hide, then arranging to supply this data would cost Amazon almost nothing.

    The ball is now in Amazon’s court. Will they offer to supply this data?

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

      I am not sure that a posted comment on my site is sufficient on its own to make it valid to say “the ball is now in Amazon’s court” but it flatters me to think it might!

      The point about verification is well-taken, and I suppose could apply equally to other print-on-demand resellers, such as Ingram. I personally find it hard to believe that Amazon or Ingram would risk their substantial businesses nickel-and-dime-cheating individuals on POD, but maybe I’m naive.

      There almost certainly are some businesses that have large enough presences in CreateSpace and Lightning to make the cost of auditing potentially practical. I don’t know what the audit clauses say. But my fuzzy recollection tells me that one particular big university press I know had 10,000 or more titles in Lightning a decade ago and, at the same time (before CreateSpace existed) Amazon was that company’s biggest retail account. So I bet those books are in CreateSpace now. I think the individual authors who sell one book in April have to depend on the big companies with big presences to check on the overall system.

      Of course, perhaps the computers somewhere are programmed to “only cheat the little guy who won’t audit”. That’s a level of concern I wouldn’t have, but some might.

      Mike

    • Jeanne Tomlin

      Why should Amazon when other publishers don’t? The information you receive from Amazon far outstrips anything you receive from the Big-5.

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

        Jeanne, authors have audit clauses in their contracts with publishers. And, if they audited, they’d run into the same information block vis a vis these Amazon sales, IF the publisher were participating on CreateSpace and letting Amazon print on demand, that the publisher itself does. I think verification and transparency at some level here is essential. The problem from Amazon’s point of view is that, like the used book and proprietary ebook businesses, they don’t want to give the rest of the industry a real picture of how big the total business in the segment is.

        Mike

      • Jeanne Tomlin

        You know how rarely the audit clause is invoked, Mike, and the problems with transparency and accuracy in Big-5 royalty reports is hardly news, so I’d rather not pretend it isn’t a problem. But I agree on the Amazon stance as well. I’m not saying Amazon is perfect, by any means, but I’ll take Amazon over waiting 9 months for even a hint about what is happening with sales.

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

        I am just saying “apples and oranges”, Jeanne. How much of the issues with publisher royalty statements are due to the real issues of complexity, how much a deficiency of competence on the publishers’ parts dealing with the complexity, and how much is some sort of dark venality is subject to interpretation and not the same for every house. The fact that Amazon and Ingram are both printing books that they then report the sales on is its own unique reporting issue that affects every publisher and every author.
        Personally, I doubt very much that there is *any *conscious cheating going on by Amazon, Ingram, or any Big Five publisher. That’s partly based on knowing most of the people involved personally for a very long time which I know some people will take as evidence that my opinion might be worth something and will make others more certain than ever that I’m biased.
        Mike

      • Jeanne Tomlin

        I agree that they are apples and oranges, but since they were conflated in the post I responded to, I think both have to be mentioned. For example, they were brought up here: “But the publisher can rest assured that the retailer can’t sell MORE copies of the book than the publisher has supplied.”

        Well, the publisher may trust the retailer, but can the author trust the publisher? I realize you’re inclined to trust them, while some such as Kris Rusch don’t (doesn’t? Ok…), just to point out it isn’t just me who isn’t all that trusting of publishers. Transparency isn’t all that easy to achieve when you’re dealing with huge corporations.

        ETA: And dealing with complex contracts and/or agreements. I don’t know what information large corporations receive from Amazon, but as an individual (mostly self-published these days) author, I am largely happy with what I receive from Amazon.

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

        Jeanne, it is not my job to tell anybody not to be vigilant about their own income and business dealings. The staggering diversity of channels through which books and the rights therein can be peddled is the publishers’ opportunity to add value, but it also is fraught with the potential for both error and misinterpretation. But that has always been true. It was true 50 years ago.

        What did not exist 50 years ago was a customer who bought books from the publisher but also had its own ability to print some. Whatever one thinks of anybody’s integrity or where the holes in the audit trail may be, it is legitimate to say “this is a new problem”. Or question. It is.

        Mike

      • Jeanne Tomlin

        It is a whole new “thing” and maybe additional vigilance is called for. However, I don’t know that the ball is in Amazon’s court for a number of reasons. :)

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

        Ha! I agree with you there! I think it takes more than a comment post on Mike Shatzkin’s blog to put a ball in *anybody’s *court!

        Mike

  • Christa Wick

    On your point of untracked titles and sales of those titles, I self-publish and have about 24 titles out under this name. Most have a Smashwords ISBN because I used them as a distributor to Sony. So they are recorded as published. But my Amazon, BN, Kobo and Apple sales are not tracked by an ISBN number (and Smashwords sales are less than 1%). In 2012, I moved 50,000 copies. I will move at least 100,000 copies before 2013 closes out. From one group I am in of about 30 active self-publishers, I’d say I’m middle of the pack in volume — that’s 3 million sales uncounted if only ISBNs are used.

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

      Christa, I don’t know how BookScan deals with situations such as yours for counting sales. At least, in your case, we know the title of yours *exists *because
      it has one ISBN. However, you raise another point. People could be creating multiple ISBNs for the book in different digital formats. After all, *books *get different ISBNs in different formats. So even just counting titles is really getting ridiculously complex.

      Mike

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