Charlotte Abbott

Something caught my eye this week that has been very little commented upon elsewhere: the news that Hachette Book Group developed an app-making capability that they are now licensing out. Their first customer was Round Table Companies, a book packager.

I found this striking because big book publishers are not generally known for developing technology; they’re more likely to be buyers of it. This is not an ironclad rule: Scholastic has an ereading platform in development to satisfy the special needs of the children’s book market and it is trying to work with other publishers who might want to avail themselves of the platform.

But from the standpoint of one who has observed publishers wrestling with technology for many years, this deal is very unusual. When Random House bought Smashing Ideas, a technology company, that seemed like the likely course for big publishers to take: acquiring technology that could be useful to them after it had been developed by somebody else.

There are other companies and entrepreneurs developing app-making tools. Most big publishers would be trying those out and getting great deals to do so because the companies making the tools need the validation of having them used by major players. The fact that Hachette even attempted to develop this capability on its own is unusual; that they succeeded at making something useful and cost-effective to the extent that Round Table preferred their solution to one developed by technologists is why it is worthy of comment.

Even acknowledging that selling the tech to a packager is not quite the same as selling it to a direct Big Six competitor, I don’t know if this is a harbinger or an outlier.

But I do know that it challenges one of my long-held assumptions about publishers and technology.

When you invest in intellectual property, whether publishing a book or developing software, you normally want to monetize that investment across the widest possible range of customers which you can only do by distributing through the widest possible array of channels. That’s the handicap Amazon has right now being a publisher: they don’t have effective distribution to brick stores and, as long as they want to keep what they invest in restricted to the Kindle for ebooks, it is pretty certain that they won’t. Over time, the number of brick stores will diminish so that will matter less and less and, if Kindle retains its position of primacy among ebook retailers, what is a real handicap today may become trivial. But traditional or legacy or real (pick your adjective) publishers really do have a wider distribution base than Amazon for books published today. (That doesn’t mean they will necessarily sell more, but it does mean they should!)

By the same token, I never thought it made much sense for a publisher, on its own, to develop software for product development or distribution that should have industry-wide application. I figured it would be hard for one publisher to sell software to another; the buyer would be afraid they were just permanently strengthening the margins and the hand of a competitor.

That same fear of strengthening a competitor is the reason that other types of collaboration that would seem obviously synergistic, like for publishers who do science fiction books to join together to create a science fiction community, haven’t happened. There was a moment a couple of years ago when Macmillan’s Tor.com suggested they’d start selling other publishers’ books to their community and invite other publishers in to strengthen it, but that never happened, even though it can’t make sense in the long run for what are ostensibly genre-driven communities to be siloed by publisher. I felt the same logic applied to publishers doing software development.

But that long-held assumption of mine is being challenged, by Random House buying Smashing Ideas and planning to keep it going as a provider of services to competitors, by Scholastic developing its own platform for displaying digital content and recruiting other publishers to join them, by three US publishers combining to create the new retailer Bookish (and three UK publishers replicating that idea with a UK version called Anobii), and, most dramatically, by Hachette creating an app-maker that a leading book packager finds a cost-effective way to build apps.

We still don’t know what will work. Will Smashing Ideas thrive under Random House ownership? Will Scholastic succeed in establishing a new reading platform for children’s books that can find a prominent place in the market? Will Bookish or Anobii succeed at becoming an important force in ebook sales alongside Amazon, Apple, Kobo, Google, and B&N?

And will what Hachette has done with their app-making capability be a trick they can repeat, developing technology to meet other challenges publishers face? Will Hachette become a specialized software vendor, developing publishing-specific tools, as well as a book publisher?

If so, they have found at least one formula that can help them through what are bound to be increasingly challenging times for general trade publishers.

We’re staging a conference next week in San Francisco which is a reprise of the very successful and well-received eBooks for Everyone Else event that we did in New York on September 26. We have a great show in San Francisco, adding a talk with successful self-publishing author Bob Mayer; a presentation from Penguin’s Molly Barton about their new Book Country initiative; a very interesting group of agents that will be interviewed by Charlotte Abbott; and a reprise of our “speed-dating” 1-on-1 sessions for attendees with service providers and experts to enable everybody to get their specific questions answered.

One major highlight of the show is going to be a presentation by my Publishers Launch Conferences partner, Michael Cader, which sorts out the myriad distribution and go-to-market choices facing today’s self-publisher. Michael did thorough research for this segment and, having seen the outline of the talk, I am certain it is the clearest and most complete survey of what has been a confusing and cluttered landscape of services that anybody attending will have ever heard.

Undoubtedly, Michael’s summary and analysis will make it to the web in the days after the conference, but if you’ll be in or near San Francisco next Wednesday, November 2, it alone will be worth the price of admission to eBooks for Everyone Else.

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I really enjoyed listening to David Young and Maja Thomas, Hachette’s Chairman/CEO and top digital strategist, respectively, chat with industry veteran and blogger Charlotte Abbott on Blogtalk radio. All three are friends and people for whom I have a lot of respect. I generally prefer reading to listening as a way to take in information, but this was a crisp and informative conversation that is engaging from start to finish. I recommend it.

Some of what they said triggered some thoughts and observations.

Abbott observed that ebook sales are now reported as 3% of Hachette’s sales. All parties agreed that there are factors in place that should accelerate that growth, particularly new devices coming online bringing with them the ability to move ebooks beyond straight text to include juveniles, photo books, and how-tos that have heretofore been left out of the conversation. There was a brief acknowledgment that some observers expect ebook sales to triple in 2010 (data was cited to suggest that Hachette’s December over December ebook sales did much more than that). That could take ebooks to 10% of the business in 2010 and into the high 20s in 2011, unless it slows down.

What would make it slow down? What would the business look like if ebook sales were in the mid-20s before Obama runs for reelection? Neither of those questions were touched. Perhaps that’s just as well; it might have taken the whole show if they were.

Abbott challenged the contention by Young and Thomas that the agency model, by which discounting of ebooks would, effectively, be stopped (or extremely curtailed) would result in lots more ebook retailers on the web. Abbott may share my skepticism that there is much of a place for ebook vending for independents and, although I wrote about this before the agency model was introduced, I still think it is true.

But Thomas expressed a lot of confidence that new white label solutions for independents, combined with level pricing, will result in a much greater proliferation of purchase points on the web, and she thinks we’ll see that this year. While I do agree that price equality will enable much more diversity in points of availability, I think it will be monopolized by platforms. They will continue to include Amazon, B&N, the iPhone App Store, and Kobo (from the big retailers and Apple) for sure, as well as the new Apple iStore, Google Editions, and the platforms from Blio (from Baker & Taylor) and our current client Copia (an upstart, but an extremely well-funded upstart with six ereading devices and ubiquitous OEM relationships with major hardware manufacturers giving them a tenable foundation). All these will be around for quite a while. Considering that for the past couple of years, 80 or 90 percent of consumer ebook sales have been driven by Kindle, that’s great marketplace diversity by comparison. And independents can sell Google Editions and, possibly, Blio. But only time will tell if Thomas’s optimism or Abbott’s skepticism (and mine) will be borne out.

Abbott’s questions about the ebook backlist elicited some very useful new information. Young and Thomas explained that just about all of the straight text backlist at Hachette is now available as “straight” ebooks. There has been the impression promulgated by readers, and reported by Abbott, that a lot of backlist from big houses is not available. Not true from Hachette, they say. Young says there are only “a handful of authors” whose contracts were unclear enough to require further negotiation and he admits there it does rarely happen that an author who didn’t previously grant those rights just doesn’t want to be in that format. “In that case, their wishes must be respected.”

Thomas said that the iPublish experiment — a failed attempt by the Group (then the TimeWarner Book Group, some years before the Hachette acquisition) to create a digital-first publishing company — provoked them to change their boilerplate before other publishers did. That reduced the number of problems they had when they wanted to go to ebooks.

Good point, I thought. And it shows the benefits of early digital awareness, even if the overall iPublish effort failed.

Thomas also suggested that we might see quite a few experiments in enhanced ebooks coming from the house in the next few months. She said they were looking first to the authors they considered their “digital pioneers” to do the enhanced projects. But when asked to name them, she gave us pretty much a who’s who of the top of the Hachette list: Meyer, Patterson, Baldacci, Connelly, Meltzer. Thomas also made the point that they look at books to see what would work “in enhanced form or app form; they’re different.” That’s a distinction we’re all going to get to understand better in the weeks to come.

Both Young and Thomas made it clear that the enhanced ebook creation was still in its experimental stage. Young emphasized the fact that “we hear from our readers” as he noted was not possible previously in the history of publishing. It was the reader reaction, Young declared, that would tell them what was working and what wasn’t with the ebook enhancement experiments. The topic that this introduces which must be followed up on another time is, “how do big trade publishers make the best use of the direct consumer contact they get in the digital age?”

For me, the most poignant moments came at the end. Abbott asked an open-ended question about the industry’s future, and Young launched into an entirely true but painfully ironic tribute to the virtues of the brick-and-mortar bookstore. He said his biggest concern was that “we need bookshops, which are the heart of supporting new writers. We need these showcases and professional and enthused booksellers” to help people find what they didn’t know they’d want. Recent industry data from Bowker PubTrack underscores the point that many book purchasing decisions are made in retail stores or because of the merchandising that took place in retail stores.

Unfortunately, retail stores are increasingly threatened. They have been disappearing pretty steadily for about 10 years now with the pressure created by online and used book sales, with only minimal erosion (thus far) due to ebooks. This conversation made it clear that ebook growth will continue to be substantial and that bookstores are critical. Both are right. But the combination of the two is more than most of the big players can comfortably wrap their brains around. And it is the skill in navigating the continuing erosion of retail shelf space that is going to separate the survivors from the roadkill over the next few years.

Dominique Raccah of Sourcebooks gave a presentation about “running two companies” (the one in the old business and the one creating the new business) at TOC which I was sorry to miss. (I can’t remember what I thought was more important at that moment.) However, Book Business magazine has an article by James Sturdivant on that same topic which quotes me heavily. Are you surprised that I agree with a lot of it? (I hope Dominique does too.)

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