Dominique Raccah

This blog and my speeches contain frequent references to what we see as the big shifts the book publishing industry, and some publishers more than others, are feeling. The horizontal and format-specific product-centric media of the 20th century are inexorably yielding to the vertical and format-agnostic community-centric delivery environment for content that will soon predominate.

In that context, we’ve observed that the most general publishers are the most challenged. The distinction between publisher and retailer is blurring; in a decade or two it will be a distinction without much difference. What has always been the source of competitive advantage to trade publishers is leverage; they could reach thousands, tens of thousands, or even millions of customers for their wares through retail channels that aggregated audiences for content creators and curated content for consumers.

The non-trade components of the book business: publishers of textbooks, professional information, databases, and academic content already tended to specialize by subject so the challenge of being audience-specific, a prerequesite to creating community, had already been met. Non-trade publishers had never depended much on horizontal intermediaries. Even in college textbook publishing, which depended (and still largely does) on the college bookstore to actually deliver the product and collect the consumer’s money, the marketing component of the bookstore’s contribution was and is minimal. The publisher works vertically through a network of professors to drive adoptions, and adoptions are what drive the sales.

Trade publishers, which are called trade publishers because they reach consumers through “the trade” network of bookstores, libraries, and the wholesalers that serve them, have been generally alert since the 1970s to the importance of what are generically called “special sales”. Those are sales that come from outside the book trade, often from retailers in other channels. Special sales experts learned pretty quickly that you did better when you had a selection of books for an audience. If you had one book of Jewish interest, you couldn’t do much with it. If you had a dozen, it could make sense to buy a mailing lists of rabbis. If you had one home repair book, you couldn’t afford the cost of setting up relationships with retailers of hardware or construction materials (particularly thinking back to days before those outlets had consolidated into giant retailers like Home Depot and Loew’s.) But if you had a list, then the mutual interest in a relationship was obvious to both sides.

Some publishers specialized. When I was consulting with Wiley in the 1980s as they were developing their fledgling trade program, they brought their philosophy of really covering the needs of a vertical market from sci-tech to trade. They didn’t want just one resume book for job-hunters: they wanted one at every sensible price point and different ones for different kinds of jobs. One day a sales rep called in from the road to suggest that they deliver a book on the cover letters that should go out with resumes. They already knew they had a market through specialized customers of all kinds and through their direct mail efforts. The lists that worked for resume books would also work for cover letter books.

The most “general” of the general trade publishers tended not to develop the same depth of specialized lists. When Wiley considered that cover letter book, they knew they’d be able to sell it very efficiently and they knew it would enhance their relationship with individuals and channel partners through and to which they were already selling a lot of books. Would the cover letter book be big? Possibly not, but it didn’t have to be to make it clearly worth doing.

But the big trade houses were not built that way. And the biggest books, the sexiest books, the most exciting books, don’t tend to be in niches. In fact, niche identification can dampen sales in a general trade market. The CEO of a major house told me a couple of years ago that he didn’t want to label a book that could become a betseller a “mystery” title. Mystery was a “category” (read: “niche”) and, while those books tended to meet theshhold expectations more readily, he perceived them as harder to break out to the sales levels they could achieve if they were perceived as unique.

We are now seeing the early signs of what will soon be a tendency, then a trend, and then a stark reality: you just can’t sell as many copies of most books if you don’t have a proprietary position with a vertical audience. The early signs are evident through companies like O’Reilly Media (computer programming and technology), Hay House (mind body spirit), Chelsea Green (sustainable living), Harvard Common Press (cookbooks and pregnancy-childbirth), and F+W Media (several niches, including writers and crafts), which have special retail channels and huge email lists of individual customers that the big houses simply don’t. Niche by niche, the big houses will find it impractical to publish in areas that were once productive for them. Their need for each book to be “big” individually — for the single title to provide its own critical mass — works against what you must do to be “big” in a niche. To do that requires a more across-the-list kind of thinking that is counterintuitive to a company that makes the lion’s share of its sales through trade channels.

So for just about all the books that aren’t novels, memoirs, celebrity-driven, or epic works of popular history or politics, trade publishers are increasingly handicapped. Unfortunately for them, things are going to get worse.

The obvious problem is that the capacity of the general trade market to merchandise and move product is diminishing. I hate to invoke the old wisdom that many things happen “gradually, then suddenly”, but it is often true and we have been gradually losing bookstores for the past decade. What happens to the economics of the big publishers if we lose a big chunk of superstores pretty suddenly?

I recall a dinner conversation with the Chairman  of a large diversified multi-niche publisher two years ago. Even back then, we were speculating about the possible sudden demise of Borders. (Hey! It hasn’t happened; maybe we were wrong!) My dinner companion said, “you know, Mike, we’re as diversified as a publisher can be, but if Borders went out, we’d definitely feel it. It would really hurt us.”

“Temporarily,” I said. He needed me to explain.

“Sure, you’ll suffer a bad debt if they go out. That hurts right now. But over the next couple of years, you’ll get a lot of cheap and useful assets from competitors of yours that couldn’t withstand the blow. By a couple of years from now, you’ll be ahead.”

“You may be right,” he said.

So even with the obvious problem, a multi-niche publisher has a big advantage over a general publisher, just as it does over smaller niche players. But the ground for the general publishers is about to shift in ways that will be even more challenging.

Because “book publishing” in an increasingly vertical world is less and less about content sales in the unit of “books” (although that will be the lion’s share of revenue for a long time) and more and more about sales bigger than the book (databases that stretch across many books and other things too) or smaller than the book (chapters or fragments that naturally stand alone or which address a particular content need.) The iPhone app as a unit of delivery is accelerating the latter trend. The value of a database across titles has long been demonstrated by O’Reilly’s “Safari” offering, which generates more revenue for them than all but one trade account.

As the percentage of a publisher’s revenue that is generated by fragments and aggregations rises, so does the value of being vertical and, especially, so does the value of a direct relationship with the end users. The fragments piece is especially important, especially challenging, and requires new ways of thinking (and perhaps new contracts.) For example, Dominique Raccah, the visionary leader of Sourcebooks, whose Poetry Speaks is building a model for vertical community building, has found that many publishers of poetry aren’t sure they have the rights to license her vertical to sell individual poems! Does that mean she has to go directly to the poets for those rights? And how long will it be before it is more important to a poet to have their individual poems available for sale on Poetry Speaks than to have them available in a publisher’s collection bound as a book?

Bruce Shaw, the longtime empresario of Harvard Common Press, is demonstrating another aspect of this thinking that we’ve expected for a long time but hadn’t seen in practice before. He told us about a macaroni and cheese cookbook his house was considering for publication. Normally, Bruce reports, that’s a subject they’d skip because it just isn’t distinctive enough to make the ambitous sales targets he normally sets for print publications. But, in this case, he’s doing the book because his overall recipe database (all the thousands of recipes HCP has published in over 30 years in business) is light on mac and cheese recipes. So he’s willing to publish the book, knowing he’s going to make less profit than he normally requires, because it is a subsidized way to improve the value of his overall database of recipes.

The question of selling fragments opens up a host of other challenges: figuring out what is a saleable fragment, tagging it with an identifier and metadata, managing transaction costs for a much higher volume or low-value transactions, and retro-fitting accounting systems to process author royalties that will require increasingly complex analysis of smaller amounts of money.

In fact, there is opportunity on what might be viewed as a micro- or nano-level of transaction, too small for even a niche publisher to manage the customer relationship and the transaction. That is going to present new opportunities for our client, Copyright Clearance Center, which we’ll elaborate on in future posts.

There’s a great deal of new opportunity out there but a lot of it is in pennies, not hundred dollar bills.

Let’s hear it for Wifi in the air! This is the first post for The Shatzkin Files filed from an airplane. Boy, did I have fun at Spring Training!

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The idea of an “Ebook Tipping Point” panel for Digital Book World arose when I wrote a blogpost last August on the occasion of the regular monthly release of the IDPF’s ebook sales figures. It was clear then that very substantial percentages of the sale of new narrative fiction and non-fiction were going to move through ebook channels and this post raised the point that this would be disruptive right after Dominque Raccah and Sourcebooks started last Fall’s cascade of strategic moves by publishers to try to slow things down, at least for Kindle.

In October, really writing about the same situation I predicted that major publishers would be challenged to cope with the problem of de-scaling.

When I wrote the August post, I was in the early stages of organizing the program for Digital Book World and I decided to put together the “Ebook Tipping Point” panel. I knew that current C-level executives, focused as they must be on making numbers for this quarter and this year, not to mention always having to be aware of the impact their statements could have on their companies, wouldn’t be the right panelists. So I just decided to recruit the four savviest people I knew — about ebook publishing, about the finances of publishing houses, and about the ecosystem publishers live in — to discuss the topic with me on stage.

Yesterday that panel — Ken Brooks of Cengage; Michael Cader of Publishers Lunch; Larry Kirshbaum, ex-TimeWarner Books CEO and currently a literary agent; and Evan Schnittman of Oxford University Press — met in my office for a preliminary conversation to help me formulate the questions that will trigger the discussions.

Ken Brooks is my go-to person for all things related to ebooks and digital production. He the SVP, Global Production & Manufacturing Services at Cengage Learning. Before that, Ken created and sold a company called Publishing Dimensions that did digital format conversions in the early ebook days. He’s run warehouses and other operations for Bantam and Simon & Schuster and he even had a brief stint setting up an early attempt at ebook distribution for BN.com ten years ago.

Michael Cader is the creator Publishers Lunch and Publishers Marketplace, the new nexus for conversation and information about the publishing business, which he developed from scratch starting with a free email newsletter less than ten years ago. Before that, he was a book packager. Cader is the single person who knows more about book publishing — the people, the deals, the business practices, the view of the business from the standpoint of the investment community — than anybody else I’ve ever met.

Larry Kirshbaum turned over the reins at TimeWarner Publishing to David Young three years ago, just before the company was sold to Hachette. He was known for his eye for bestsellers and his ability to make them work. Since then, he’s been a literary agent. Kirshbaum knows exactly what it is like to run a big publishing company; he did it for more than two decades.

Evan Schnittman is Vice President, Business Development & Rights at Oxford University Press. In that role, Evan combines the zeal and focus of a sales executive with targets to hit with the vision of a strategic digital thinker, a very unusual combination. Oxford is a university press, of course, not a trade house, but they have a trade list big enough to make them real players in that sandbox. Evan knows and understands trade, but he has the objectivity and vision of somebody who is not entirely dependent on that business. He’s also a really entertaining and insightful blogger.

One scorecard worth keeping is this: Brooks, Kirshbaum, and I were all sure ten years ago that ebooks would happen much faster than they did. Cader was sure they wouldn’t. Michael has been the hardest among us to persuade that ebooks would substantially displace print anytime soon.

We had a rollicking two hour conversation that would have entertained anybody who could have heard it. I am not going to steal the panel’s thunder by revealing much about it except to say that there was a strong consensus that big publisher overheads are going to have to shrink dramatically, and soon. Michael Cader is particularly articulate — and particularly experienced — about the point that legacy businesses carry legacy cost structures that handicap them making a transition to a new paradigm. He lived that advantage as the David that slew the Goliath of PW.

So I awoke this morning to get the news in my mailbox that Simon & Schuster has redesigned its sales coverage to be “more phone”. Cheaper. Less overhead. But also (likely) less effective and (certainly) less differentiated from what any small publisher based anywhere can do.

So what distinguishes the big publishers from their competition are the capabilities of “scale.” And the albatross for big publishers going forward is the cost of “scale.” This is a tough box to get out of.

I think some eyes are going to be opened when this panel takes the stage on Wednesday, January 27.

I am getting increasingly excited about the 2-day Digital Book World conference coming up January 26-27. Now that the work of recruiting nearly 100 speakers and moderators (and, boy, do we have GREAT moderators!) is done, I am able to take some satisfaction from the body of work. (Take a look.) I am also really appreciative of the great marketing job that has been done by our partners in this endeavor, F+W Media. Just about everybody really is going to be there. Are you?

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I have been imagining “verticals” for more than ten years. My BEA speech earlier this year postulated that publishing power would shift from controlling “IP” to controlling “eyeballs.”

Lots of publishers have complimented me on my insights and have told me “we’re thinking along the same lines.” But what I see are mostly product catalogs organized vertically. Or some other variation of “we provide the content, you provide the audience.” That’s a start, but it isn’t a vertical that will lead to control of eyeballs.

Now, everybody’s got a model to follow. Dominique Raccah, the empresario of Sourcebooks, unveiled PoetrySpeaks.com today. THIS is the beginning of a real vertical portal!

Sourcebooks has already made the major breakthrough of creating poetry bestsellers (are they the first since Rod McKuen 30 or 40 years ago?) They did it by adding CDs with sound to the printed word and they did it with a printed book, not an online combination. So they already have demonstrated a commercial sense for the poetry market that is unique.

But PoetrySpeaks gets past the product and goes to the heart of community: they provide service. They give every poet a reason to come to them and use them. They provide tools to post poetry, critique poetry, share poetry, speak poetry, and sell poetry. They thought through the business models so that other poetry publishers can play and make money, and you can bet that, later if not sooner or immediately, they all will.

They’ve thought it through from the perspective of many stakeholders: poets, of course; but also poetry publishers, poetry professors, poetry fans, poetry devotees. Another way of saying “vortal” is “all things…” and PoetrySpeaks is on its way to being “all things Poetry.”

The revenue models, to start, all are based on selling poetry content and tickets to slams, readings, and online performances. That’s fine. But I’ll bet that within two years there’s another one: selling memberships to a premium level of access to other poets, teachers, critics, and workshops (a la the model of PublishersMarketplace.) And I’ll bet there will be databases of people and poetry and tools and ideas that will have been crowd-sourced, have extraordinary value, and effectively head off anybody else from competing for what it will have become. (As Publishers Marketplace has done.)

PoetrySpeaks is a vertical site that doesn’t lean on trying to sell you something; it presents itself as a service to the community. Hats off to a publisher that is still selling books by the boatload, even poetry books, but that also recognizes that future success requires an entirely different model.

Yes, there are thing missing. I didn’t see a blogroll (although there is a blog) and the site doesn’t appear to acknowledge whatever other poetry activity now exists on the web. I’m sure eventually it will. There’s room for a history of poetry, and a bunch of poetry bookshelves. They need more content about poetry. If there’s an FAQ there that explains iambic pentameter, I missed it. But their community will create these things over time. PoetrySpeaks has the bait that will make it “the online place the poets hang out.” All else will follow.

One observation by Michael Cader in his write-up on this that I want to echo and stress. He observes that you do not have to be a market leader in a vertical to take a leadership position. Undoubtedly, there are many publishers who, despite Sourcebooks’s poetry bestsellers consider themselves to be much more committed to poetry publishing than Sourcebooks has been. But anybody committed to poetry publishing will be saying one thing to Sourcebooks: thank you very much.

Dominique showed PoetrySpeaks to me and to Guy Gonzalez of F+W at the Frankfurt Book Fair under a strict NDA. We were sworn to secrecy and revealed nothing, but persuaded our colleagues to carve out a feature spot for Dominique to deliver our audience an update on this project as part of our first morning session on January 26. One more reason to sign up for Digital Book World.

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In the words of Emily Litella, the Saturday Night Live character of the 1970s invented by Gilda Radner, “never mind.”

I’m referring to my post about “debut pricing” from earlier this week. It can’t be done; at least not easily and at least not immediately.

The challenges we face require a continuing conversation and crowds really help. The collective wisdom and knowledge of the growing crowd reading this blog helped me find and face this hole in my own thinking. (It was also a bit of a comfort to be told in the course of previewing this post that other smart and informed people didn’t know what I missed either!)

What I should have known and factored in, but didn’t, is that ebooks aren’t sold like regular books, with a published discount schedule and no contract. Rather, ebook sales between publishers and their customers, whether intermediaries like Content Reserve and Ingram Digital or retailers like Amazon and Barnes & Noble and the Shortcovers business run by the Canadian chain, Indigo, are transacted under contractually defined and mandated terms. What those contracts say is both confidential and variable from publisher to publisher and customer to customer.

So the suggestion I made — that publishers adjust their ebook pricing by changing the discount schedule for newer books — can’t be achieved by unilateral decision of the publisher under most of the contracts that exist today. Any publisher that wants to implement my suggestion would have to wait for their contracts to expire and then negotiate new ones that would allow them to manage their terms of trade in ways that they can’t do now.

I am also told by publishers in the wake of my piece that Amazon has terms in place that very much anticipate the move that I suggested. At least some publishers have terms that tie the pricing of the ebook to the pricing of the print book (the ebook can’t have a higher suggested retail) and that tie the discounting of the ebook to the discounting of the print book. So the publisher couldn’t reduce the discount for the ebook without reducing the discount for the print book at the same time (and one suspects even that flexibility wouldn’t extend to all publishers and all contracts.)

Apparently some contracts go further than locking in the publisher to print book prices and discounts but also require the publisher to subsidize Amazon’s discounting. In one case I was told about, there is a maximum discount Amazon can require to be subsidized based on the publisher set retail price.

On top of their problems with Amazon, a publisher told me that they had contractually given Fictionwise the right to discount their ebooks and commensurately reduce the payment to publishers. For years, the Fictionwise policy was to do very little discounting and usually the discounts were about 10%. According to one publisher, new owner Barnes & Noble saw the opportunity in those terms to cut prices to the consumer dramatically.

So when Dominque Raccah said her choices with Bran Hambric were limited to when and whether to issue an ebook and not much else, she was absolutely right.

What this means is that publishers have largely dealt away control of their businesses, at least for the time being. All they can do right now to defend themselves is to set the retail prices high and let the marketplace do what it will. With competition fierce among the retailers to cut prices to the consumers, the prices at retail will not be as high as the publisher sets them.

A similar contractual situation exists between publishers and the wholesalers Ingram and Content Reserve, where discounts have been negotiated and are in place until multi-year contracts expire. The same situation exists with Sony which would be the next largest account for ebook sales for most commercial publishers.

So at what is really the dawn of the ebook era, publishers have very little leverage to manage the ebook pricing and distribution in the marketplace.

The way that ebooks transactions differ from print books could also argue that ebooks aren’t “sold”, they are “licensed.” That could present another problem for publishers because licensing revenue is often split 50-50; ebook revenues seldom are. Agents are sure to become increasingly aware of the distinction, just as they will be aware that almost all the sales right now can be achieved by making half-a-dozen deals. That’s not very tempting when ebook sales are 5% or 10% of a book’s total. But what about when they reach 25% or more?

There is one big new entrant coming to the ebook game and that’s Google. With the industry (including Google) other than Amazon coalescing around the epub standard, one can see another change in the wind coming. Google has already created a huge challenge to Amazon by making a million titles available in the epub format which Amazon would have to convert to their proprietary code in order to offer on Kindle. (These titles are public domain and the free epub code offered by Google should minimize that conversion cost, but a million times anything amounts to a lot and, whatever it costs, it won’t happen instantaneously.)

Setting up new arrangements with Google presents the next opportunity for publishers to “get it right” and to take back some semblance of control over the products they publish and sell. But Google won’t want to be buying at lower discounts than everybody else and they won’t want to be selling at higher prices than everybody else either.

There are some hard negotiations ahead on the ebook front.

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Three weeks ago, the community had a big discussion about the timing of ebook releases which was triggered by Dominique Raccah’s announcement that Sourcebooks would hold back the ebook of Bran Hambric for some period after the hardcover release. The expressed concern was to insulate the $28.95 hardcover from the price competition currently taking place in the ebook space, where Amazon has started working to establish a $9.99 retail price for new commercial titles, forcing BN.com to match them.

This post doesn’t quarrel with the suggestion that there’s a problem; it is a quest for a better solution.

Although Amazon has pushed some smaller publishers to a different discount structure, the established commercial houses usually sell ebooks to retailers at about 50% off the publisher’s retail price, about the same terms they have established for print books. But ebooks, title for title, add more margin (i.e. profit) to the publisher at the same net revenue because the books don’t have to be manufactured and shipped and there is also no cost of returns. (They would also generate more margin for the stores than print books if they the stores sold them at the same price as the print book, but, as I pointed out in an earlier post, under current practices, they never will.)

Both my “current commercial” and “futurist” instincts say that cutting off the ebook market from purchase at the time the book comes out, is being assertively marketed, and when interest is probably highest, is the wrong strategy.

There are non-pecuniary reasons for publishers to protect the print book sale. Except for the USA Today list, which records Kindle sales but no other ebooks, only print book sales are reported to determine “bestsellers.” And enlightened publishers, including Dominique Raccah, want to protect print book sales to protect brick-and-mortar stores, who are still the most important merchandising and marketing tools publishers have (even if many of them don’t know it.)

To the most avant garde digerati, who advocate eliminating DRM and pushing prices to the consumer down as the antidote to piracy (which the most conservative defenders of the old model would liken to putting a bullet in your brain as an antidote to having taken poison), keeping the book off the market to maintain higher content prices is multi-faceted anathema. Among the inevitable consequences of this, they would tell you, is that there will be more pirated editions available and otherwise-inclined-to-be-honest consumers will be “forced” to the pirate editions because a legitimate ebook edition is not available.

I am not a 100%-no-DRM guy. (Actually, I’m a nearly-100%-social-DRM guy.) And while I believe that the price of content is in an inexorably downward spiral, to the point that the day will come some years from now that it won’t be much of a business to control and sell it, I also believe publishers (and authors) need to preserve content margins as effectively as they can for as long as they can to finance the transition to the new publishing economy where eyeballs and human bandwidth, not IP, are the currency of the realm.

I was surprised recently when a Very Smart Friend defended the Sourcebooks strategy by saying, in effect, “what’s so special about the ebook consumer? The paperback reader waits for the book to get it cheaper; why not have the ebook reader wait for the book to get it cheaper?” My argument that the ebook readers and print book readers are two separate markets carried no weight. First of all, there’s also a split between paperback readers and hardcover readers. But also, my debate opponent simply didn’t buy my paradigm, and frankly, it is currently unprovable.

But I still find the Sourcebooks solution very unsatisfying. I think it hurts the overall sale of the book and the profits of both publisher and author in the long run. Although I think the impact is marginal, I have to agree that ebook readers will more frequently obtain a pirated edition if no legitimate edition is available. And it is “unnatural”. The publisher’s job is to get the author’s work in front of as many paying eyeballs as possible and to generate as much revenue as possible in the process. This strategy works against those objectives.

So here’s another solution, one that:

1. Allows the publisher to sell the ebook at the same time as the print book;

2. Makes it much harder for retailers to discount the ebook way below the print book price; and,

3. Increases the profit to the publisher and author on every ebook sold.

For the first six months of a hot new book’s life, publishers should establish “debut pricing”: reducing the discount at which they are sold to the trade to 20%. And, at the same time, the publishers should sell these ebooks as digital downloads from their own site at full retail price. After the early “debut pricing” period, the discounts are restored to normal, but the publisher’s own site should still continue to sell at full retail (except as part of bundle or subscription offers, of course.)

In the Bran Hambric example, where the book is $28.95, let’s say the ebook were priced at $26.95. Then a retailer (Amazon) buying at 50% off would pay Sourcebooks $13.475 per copy and have to take a hit of $3.485 per copy to sell the book at $9.99. But under my suggestion above, the retailer would be paying $21.56 per copy for the book and the cost of subsidy would jump to $11.57 a copy. That’s more than 3.3 times the amount per copy in the cost to the retailer to support the $9.99 price.

The math for impact on the publisher and author is a bit more complicated. How much additional profit over print books this would represent depends on what the print books cost to manufacture and what the split of revenue is between publisher and author. But it is likely that a change to this policy would mean that each ebook sold would generate  more than twice as much profit to the publisher as a printed book for the period of “debut pricing” discounting.

“Debut pricing ” is not a tactic that will work forever. We’re going to see accelerating change in the way ebook publishing works, including enhanced editions subsequent to the first one that will differentiate the ebook from the print book as we proceed into the digital age. But for the next couple of years, as we start to see ebooks take more and more share from print, this is a way for publishers to keep the pricing of ebooks closer to print books and earn more profits, for themselves and for their authors, at the same time.

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The Wall Street Journal was the first to announce, on Monday, (behind a pay wall, but Google “Publisher Delays E-book Amid Debate On Pricing” and you’ll get it) that Sourcebooks CEO Dominique Raccah was holding back the ebook publication of a new hardcover YA novel, Bran Hambric, scheduled for release this September. Raccah’s explanation to the Journal was that she was trying to preserve the perception that the $27 hardcover price was reasonable. Since she knew that any ebook would hit the street at just under $10 (the Kindle promotional price is $9.99 and B&N has suggested that their promotional price will be $9.95), Raccah felt that sales of the hardcover would be undermined.

What was left unsaid in the Journal piece was that Raccah might have been leaving money on the table with this decision. After all, the publisher still sells ebooks on roughly equivalent terms to printed books and has lower costs. So, depending on the royalties Raccah is paying the author, she is (most likely) realizing more margin for Sourcebooks on the ebook sale than on the printed book sale, regardless of how the retailer prices it.

Even more startling (in this day and age) is the possibility that the author’s royalty is higher per copy on the hardcover, so Raccah might be protecting author royalties, to the extent that withholding the ebook restrained cannibalization and resulted in more hardcover sales. I mention that possibility because the agent for author Kaleb Nation is Richard Curtis, one of the most ebook-friendly agents in town (and, indeed, the owner of an ebook publisher called EReads), who was quoted in the Journal supporting Raccah’s decision.

On Wednesday, Motoko Rich and Brad Stone published a piece in the Times on the same story (in which I was very briefly quoted.) Rich and Stone added some nuance to the story. The Journal said that agent Robert Gottlieb resisted simultaneous ebook publication “when he can prevent it.” In the same graf, they said that only one book of the Times’s Top 15 fiction bestsellers was not available in the Kindle store. Of course, that doesn’t mean that the Kindle editions were available at any particular time in relation to the first release of the hardcover, just that they are available now.

The Times reporting went further than the Journal, speaking to several publishers of upcoming major books about their ebook timing plans. Doubleday hasn’t decided yet about Dan Brown’s book but acknowledges that the impact of ebook sales on the hardcover was a consideration. S&S won’t reveal their ebook release plan for Stephen King’s November novel, Under the Dome. Ditto from Hachette imprint “Twelve” on the Ted Kennedy autobiography, True Compass, coming on October 6.

So the fact that everybody is thinking hard about this is confirmed by the Times’s reporting.

But Cader, who as an industry expert and blogger has more scope and credibility to report unattributed information than reporters at WSJ or the Times, went further in Publishers Lunch on Thursday. He ridiculed the notion that Doubleday was (according to a spokesperson)  ”[more] worried about…security…than particular vendors” and he sees the motivation from publishers being to control the behemoth, Amazon. As Cader reports it, Kindle sales surged when the new device(s) came out, becoming as much as 50% or even 70% of Amazon’s sales of many important books.

Everybody (in the industry, but maybe not outside of it) knows that Amazon pays a standard discount for ebooks, which is about 50% off publisher suggested retail, and that Amazon actually takes a loss on a $25 or $27 hardcover book it sells through Kindle at $9.99 (as B&N will do if they follow through to sell books like this as ebooks for $9.95.) Nobody expects Amazon to do this forever although, as Cader points out, they are temporarily subsidized by the profit they make selling the Kindle devices. The widespread fear among the big publishers is that Amazon will soon demand lower prices for the books they put on Kindle so they can keep the $9.99 price point profitably.  As the Kindle unit sales grow, of course, the muscle behind such a potential demand would grow right along with it.

Cader makes the very important point that sales migrating to ebooks, and particularly to Kindle, weaken the brick-and-mortar channel that publishers depend on for most of their sales and profits. The Times reported that publishers could well be making bigger unit profits on each Kindle sale than on each printed book sale (a fact that I explained to them when I was interviewed and which appeared not to be clear to them before I did). Cader (who of course knew that without needing to be told by me or by the Times) makes the point that publishers do this because they are “looking out for what they believe to be their long-term interests — and are trying to protect the entire system of physical book retailing which supports the whole industry.”

While this was happening, Dominique Raccah posted her thoughts to Peter Brantley’s Amazing List and Kassia Krozser, on that list and proprietor of the Booksquare blog, turned her space over to Dominique for a version of that post. Dominique made it clear that she considered what she was doing with Bran Hambric to be an experiment. Her focus was on a “sustainable author/publisher model”. She made the point (again, clear to most people in publishing but perhaps not to those outside) that the music business continues to present inapplicable analogies, but one of the most egregious is that authors should give it away like musicians to get performance bookings: in publishing, there are no performance bookings (and few t-shirt sales…)

Raccah made it clear that she supports early ebook releases and her house is going to a workflow that will enable that. But then she gets to what is really the heart of the matter. “Etailers are suggesting that the ‘right’ price point for an ebook is maximally $9.99.  And they are proselytizing the price $9.99.  We can’t control what retailers charge for books or ebooks.” The publisher’s choices are whether and when to make it available and whether to sell to any particular retailer.

From there she explains that exploiting formats with “windows” is an old book business strategy (hardcover, trade paperback, mass-market paperback) and a common film strategy (theatrical precedes DVD release, with TV licensing once part of that picture as well, but not anymore.) And she concludes by saying that publishers need to make these decisions on a book-by-book basis (”strategically”, she says, although I’d call that “tactically.”)

My quote, by the way, was to the effect that ebook readers and print book readers are increasingly separate markets, which I believe to be true but cannot prove. A C-level friend at a large house disagrees with me, as I’m sure many others do, and my evidence on this is highly anecdotal (including myself: I have read one printed book of the 50 or so I’ve read in the past 18 months.) But my friend would have no more evidence than I to support his contrary position, so publishers will have to make decisions without really knowing, for now, whether they can push a Kindle or Shortcovers or Ereader consumer back to paper by denying or delaying a book.

That concludes the summary. I have a few thoughts of my own to add on this. I’ll be posting those shortly, probably over the weekend. I hate going much over 1000 words on any single day, and I’m already past 1200.

An  earlier version of this post had a couple of errors misconneting agents and authors which have been repaired. So if somebody tells you about a mistake they saw that you can’t find, that’s what it’s all about. Thanks to Michael Cader for setting me straight.

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