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It is customary for those of us who do crystal-ball gazing to make some calls about the year ahead at around the time the celebrants head for Times Square. I am not a man to flout custom. Here are some of the things I expect we’ll see in 2010.

1. At least one major book will have several different enhanced ebook editions. This will result from a combination of circumstances: the different capabilities of ebook hardware and reader platforms, the desire of publishers and authors to justify print-like prices for ebooks, the sheer ability of authors and their fans to do new things electronically, and the dawning awareness that there are at least two distinctly different ebook markets: one just wants to read the print book on an electronic screen and the other wants links and videos and other enhancements that really change the print book experience. (Corrolary prediction: the idea of an enhanced ebook that is only sold “temporarily” in the first window when the book comes out, which has been floated by at least one publisher, will be short-lived. Whatever is made for sale in electronic form will remain available approximately forever. Or, put another way, if you have a product that requires no inventory investment that has a market, you’ll keep satisfying it.)

2. Here come some new retail book outlets, but can publishers afford the risk of selling to them? The growing incidence of bookstore-less cities will provoke the mass merchants to explore a greatly increased title selection inside their stores as a magnet to attract disenfranchised bookstore customers. The early emphasis will be on children’s books and illustrated how-to: books for which there is high value to seeing them before buying them. They might even see this expansion as a margin-booster because if they’re responding to scarcity (as they would be), then discounting might not be as necessary as it is with their bestseller-only strategy now. Publishers will be wary of this new initiative, knowing that it could fail and lead to large returns but it will be on the drawing boards by the end of 2010.

3. Thanks to digital, there is no minimum length for a book anymore. Ebooks that are too short to be print books will become a real factor in ebook sales, opening up new opportunities for publishers but even more for authors. Short fiction is already well established in the romance genre and some major publishers have broken out stories from anthologies as separate items to be sold on Kindle. In 2010, authors and agents will discover that shorter-than-a-book works can be the subject of useful experimentation and learning through electronic publishing and, by the end of the year, it will become a frequently-employed device. Periodical media (newspapers and magazines) will also see this paid delivery mechanism as an alternative worth experimentation for them as well. After all, if a big publisher can unbundle a short story anthology to sell the individual stories as Kindle editons, why couldn’t The New Yorker sell the short fiction it publishes that way as well? This concept has been tipped by the announcement in 2009 than the web site Daily Beast will be delivering shorter books in a timely manner through electronic distribution.

4. Ebooks will require a new industry directory (and it won’t be printed.) Driven by new entrants in the field, self-publishing, and unbundled aggregations of print books, the gap between the items listed in “Books in Print” and the items that should be listed in a directory of “Ebooks Available” will continue to grow. There has been a robust conversation in a corner of the book community about whether all ebook editions need ISBNs, but that’s really only one part of a much larger metadata problem. In 2010 we are likely to see at least one serious effort to deliver a new online directory for ebooks.

5. Big publishers start to match their offerings to their marketing capability. The rearrangement of the big publishers’ IP portfolios will begin in 2010 as they emphasize what they do best: deliver narrative-writing and children’s books to multiple outlets in large quantities. This reshuffle will only begin to be evident in 2010, but we will see small slices of big publishers’ lists sold or licensed to specialist small publishers and we will see the beginnings of genre consolidation among the big publishers, with some publishers beefing up and others exiting romance, science fiction, and mystery. In 2010 the latter will take the form of list growth or cutbacks, not the sale of whole lists to a competitor. We’ll see that in 2011 or 2012.

6. Ebooks become significant revenue contributors for many titles. By the end of 2010, ebook sales will routinely constitute at least 20% of the units moved for midlist and the lower tier of bestsellers and at least 10% of the units for really big bestsellers. (These are predictions for narrative writing; illustrated books and kids’ picture books will lag considerably.)

7. Circumstances will outrun the ebook “windowing” strategy. By the end of 2010, the experiment with “windowing” ebooks — withholding them from release when the hardcover comes out — will end as increasing evidence persuades publishers and agents that ebook sales (at any price) spur print book sales (at any price), not cannibalize or discourage them and, furthermore, that this withholding effort does nothing to restrain Amazon’s proclivity for discounting. (Amazon can’t quit with so many competitors joining them; see number 11 below.) There will also be steadily increasing evidence that most readers distinctly prefer either digital books or paper for their narrative reading and the real minority is the people who routinely read both.

8. In the digital world, geographical territories will be found not to make much sense. The problem of managing territorial rights for ebooks will be a growing problem the industry will have to deal with. As ebook platforms are increasingly separated from dedicated readers (a move even Amazon encourages with its Kindle software working on PCs and iPhones by the beginning of 2010 with more to come throughout the year), people all over the world express their frustration about books they are blocked from obtaining by obsolete rights regimes. With the number of ebook platforms and outlets increasing, it becomes almost impossible to police these rights effectively. Authors with global audiences become increasingly sensitive to the frustration of their fans and, through their agents, lobby for “open markets” for ebooks to solve the problem. US publishers back the idea and smaller market publishers hate it, but by the end of 2010 it is obvious that territorial rights will be relegated to print books only, meaning the end could be in sight for the entire concept of territoriality (but, because of old contracts and lots of national laws, it will be a very long sunset.) Pushing back against this concept might be publishers in countries with large English-language populations (Israel comes to mind, but I know publishers getting offers from Nigeria) who want to carve out a national monopoly for their own local editions in English. But that would be print-only.

9. Authors with clout start looking more like publishers. Some authors who have developed huge followings on Facebook and Twitter and their own blogs start to demonstrate that they can have a serious positive impact on the books of other authors they favor. This leads to a variation on the time-honored practice of getting blurbs and jacket quote-lines as savvy editors and agents suss who the new author-megaphones are and line up to get their support. The prediction for 2010 is that this will start to become obvious. The likely prediction for 2011 will be that this leads to authors becoming quasi-publishers or, perhaps, getting “imprint” deals from established houses to select and promote other people’s writing.

10. The “shakeout” in ebook delivery mechanisms won’t start this year; proliferation rules in 2010. With the arrival of Google Editions in the first or second quarter of 2010, there will be multiple channels to the ebook market through a variety of players: Google, Amazon, Apple, Baker & Taylor’s Blio, Kobo (formerly Shortcovers, the ebook operation begun by Indigo of Canada), and Sony will not be alone! During the course of 2010, the industry will become aware that there are three moving parts here: the device ebooks are viewed on, the ebook “reader” software the device employs, and the retailing and merchandising experience for the consumer shopping (or searching) for a particular book. As it becomes clear that ebook readers employ multiple devices and can accept a variety of platforms, the shopping experience will become appreciated as the most important determinant of consumer loyalty for most books. This is a moving target; everybody will be working on it. But as we enter 2010, it looks like Kobo has figured this out better (so far) than anybody else.

11. Retailers will demonstrate that they have more at stake with each file they sell than the revenue from that sale. Because there are so many players fighting for a foothold in ebooks, discounting them deeply will be the “new normal.” This will enable publishers to keep their “established” retail price (and their revenue per unit sold) high, but consumers will increasingly see ebooks as the less expensive alternative.

12. We will see greater integration of ebook offerings with other products and services. The merchandising challenge for ebooks will ultimately be met web page by web page over the entire Internet. This future paradigm will be tipped in 2010 when we start to see ebook stores on more and more non-book web sites, each trying to deliver some sort of value-add with curation or follow-on products.

13. Book publishers will have to admit to real confusion about what the product is that they produce. The big meme coming out of 2010 will be “what is a book?” Publishers will increasingly be releasing productions that contain video, audio, animation, slide shows, and interactive game elements. Movie, TV, and game producers will see an alternate marketing and revenue channel available through “ebookifying” content they have and moving it through book channels like a “tie-in.” Where one stops and the other begins will become increasingly difficult to see (and increasingly irrelevant).

Bookmark It:

The rapid series of developments in the digital book space and my rising profile mean that I seem to be in an interview with a journalist just about every day. As I was yesterday. The focus of yesterday’s conversation was the Baker & Taylor“Blio” platform that I wrote about last week. How widespread did I think its uptake would be?

The interviewer and I covered a lot of ground, including ebook pricing and timing and whether publishers would be able to make enhanced ebooks work. Those are the topics of the moment (and they are all panel topics at Digital Book World.)

At one point we had a robust discussion about ebook pricing. My interviewer asked me about a pundit’s observation that hardcover books were just wildly overpriced. The implication is that publishers should consider themselves damn lucky that people would pay $9.99 for an ebook, which, after all, has far fewer bytes than a movie they can get for $1.99.

That’s an easy one to answer. What’s a “right” price? Well, from the publisher’s perspective, that’s a question with a clear mathematical answer. (The math wouldn’t yield the same answer for an author.) The right price is the one at which the total gross margin — revenues after all costs — is maximized. We all know more will buy if it is cheaper and fewer will buy if it is more expensive, but the “right” price is the one where customers times margin (margin being revenue minus costs) is the highest it can be.

There is no way in the world that a publisher would maximize margin cutting $28 print book prices to $9.99. So the author of this blogpost being quoted to me might be looking at the “right price” from a consumer perspective or a high-level industry observer perspective, but they sure aren’t looking at it from the perspective of the one who sets the price: the publisher.

At the conclusion of the interview, the journalist on the other end of the phone asked me whether, in effect, publishers would be able to save themselves. “Is there a model,” she said, “which assures that a publisher will profit selling their books in the future?”

Now, I must say before you read my answer, this expresses a long view, not an immediate one. But it sure isn’t comforting to people who sell content for a living.

Is there a model for success selling content? I think the answer to that question is “no.” I’ve spent my lifetime in book publishing and so did my Dad; I don’t like coming to this conclusion. But what I think I see is that selling content as a publisher is a business that is going to just get harder and harder until it won’t really be much of a business anymore.

This has nothing to do with piracy or DRM or Amazon’s promotional ebook pricing. It has to do with the most basic of economic laws: supply and demand.

Until the digital age, content was scarce. It wasn’t scarce because people didn’t create it; it was scarce because it required an investment to distribute it. That’s no longer true. Anybody with an Internet connection can make anything they write (or snap or video or sing) available to anybody else with an Internet connection. For just about free. That’s just one reason — among many — why the amount of content choices available to everybody has mushroomed in the past 15 years.

When the supply of something goes up faster than demand, the price of the something drops. Or, put another way, money flows to scarcity. And content is anything but scarce. That, in a nutshell, is the inexorable problem publishers face. And every day it gets worse. More backlist and out of print and public domain and orphan books get digitized and made available. More bloggers blog. More commercial operations put content online to satisfy their own stakeholders. More videos are uploaded to YouTube and more documents are uploaded to Scribd. All of it is processed and made discoverable by Google and other search engines. And the cumulative effect of all this content being created as something other than new publications for sale is cutting into the market for content that is being created with the expectation of sale.

What is the new scarce item that will attract the dollars if IP is so common that it becomes hard to sell? The answer is the attention of people: eyeballs. And the winning trick for publishers will be to use the content they control — which today does have value — as “bait” to attract the attention of people and then to keep that attention and build a business around it.

Note to some publishers who think they’re doing this: it is not the right answer to simply grab email names and web site registrations as a way to offer the same product catalog over and over again by email blasts. That doesn’t create value for a community and, before long, the community will lose interest and move on. You will lower your marketing costs temporarily with that strategy, but you’re still building a business of selling content and you’ll still, ultimately, deal with the problem that something roughly equivalent to much of what you want to sell will be available elsewhere for free.

I’m far enough ahead of the wave with this insight (if, indeed, time proves it to be an insight) that I can’t really point you to any examples yet from established publishers who followed Shatzkin’s formula to success (although I’m working on a couple that might be worthy of mention by a year from now.) So far, all that is clear is that publishers that stick to an audience fare better in the digital world than the ones who don’t. Their marketing costs are lower and their reach to the audience is both more effective and less dependent on intermediaries.

A stark illustration of this hit my radar screen last month.  A major agent told me that he sold a Mind, Body, Spirit author’s book to Random House, which sold 12,000 copies.  He sold the next book by the same author to niche publisher Hay House, which sold 200,000 copies! And Hay House, with over a million email addresses of people all interested in the same type of book, probably spent less on marketing to sell eight times as many.

There is one example that points the way for all of us in this business right under our noses every day. It is Publishers Marketplace, the creation of Michael Cader. He didn’t have book content to use as bait for the publishing community, so he created a free daily newsletter, Publishers Lunch about ten years ago. The formula he used — which was novel then and is now a commonplace — was to find the stories of interest to his community every morning and deliver the links to those stories, along with a little commentary, for free. That created an enormous number of sign-ups very quickly and a corresponding amount of grumbling from the established trade press, which would have a) never wanted to show anybody else’s story rather than their own and b) would have expected to sell any content they generated rather than giving it away as Cader did. After all, selling content was the model! (Sound familiar?)

I don’t think it took a year before Cader established his community, Publishers Marketplace, built from the eyeballs that were attracted by the free content in Lunch. Soon he made the “free Lunch” an abridged version, so the “full Lunch” became one of many benefits of “membership” in the community, which comes at a monthly subscription price for the unaffiliated and at site license prices for big companies. It is important to note that the full Lunch content alone wouldn’t keep and hold a community. Rather it is databases of information, many of them created by the contributions of the audience and additional tools and services (such as a free web page for every member) that keep people signing up and paying each month without dropping out.

Publishers have always focused primarily on the content. Survival in the future will require focusing on the market.

Publishers Marketplace and Hay House (and Harlequin and F+W and Interweave and Chelsea Green and all publishers who are dedicated to serving the same community over and over again) are on the right path, one that is very difficult for general publishers to tread. Taking steps to preserve the current marketplace for content — tinkering with DRM and fighting piracy; grappling with the timing and pricing of the content in various formats; even building out from the book as we’ve known it to take advantage of new ways to deliver information and entertainment — are, at best, holding actions. They don’t attack the fundamental problem that is developing for publishers which is this: if you don’t own the audience, the cost of reaching it for one book at a time will be prohibitive.

In the digital age it will make much more economic sense for the owner of the audience to find the content rather than the way we’ve always done it, which is the other way around.

Bookmark It:

We’re about to see the Next Big Thing in ebooks next month and it’s coming from Baker & Taylor. Baker & Taylor?

For the past ten years, Baker & Taylor in relation to Ingram has looked remarkably similar to Borders in relation to Barnes & Noble. Ingram and B&N are family-owned companies (although B&N has the very significant complication of being publicly traded which, with Ron Burkle as a publicly disaffected shareholder, has been well-reported lately) while B&T and Borders are highly leveraged and controlled by private equity. Ingram and B&N with their long-view management styles have made significant infrastructure investments that the always-looking-for-an-exit B&T and Borders ownerships haven’t matched. Ingram built a great supply chain support structure and digital capabilities and B&N built a well-oiled, customized-to-their-needs internal supply chain. And B&T and Borders have made publishers’ credit managers bite their nails while B&N and Ingram are financially solid.

Over the past couple of years, Baker & Taylor has been cobbling together a team of third party vendors attempting to match the service offering Ingram has bought and built internally. To compete with Ingram Digital’s content conversion and digital repository offering, B&T teamed with LibreDigital. To match Ingram’s ability to set up retailers to sell ebooks, B&T created a partnership with OverDrive’s Content Reserve. And to create a print-on-demand capability like Ingram’s Lightning Print, B&T teamed up with Donnelley, which put a machine in B&T’s Momence warehouse.

All of this made sense to me, but it didn’t add up to B&T presenting any serious challenge to Ingram. But they’ve now developed something that might not only give Ingram food for thought but might have them scratching their heads at Amazon and Google and Apple, as well as ScrollMotion and Vook and anybody else thinking about enhanced ebooks.

On January 7 at the Consumer Electronics Show in Las Vegas, K-NFB  will unveil a new “reading technology.” We in the book business will get to know it as a proprietary ebook platform from Baker & Taylor that has capabilities nothing presented previously can match. The platform is called Blio and creator K-NFB is a partnership of tech visionary Ray Kurzweil and the National Federation of the Blind.

Blio is a software client that can work on “any device with an operating system”, which means computers and iPhones, but not Kindles. Based only on the demo we saw from Baker & Taylor Senior VP Linda Gagnon last week (of course I’d rather be reporting on something I saw on my own computer or iPhone), the presentation is the best I’ve ever seen. The type is crisp and sharp, it has full multiple-media functionality (video, graphics, TTV, links to the web), and it does tricks, my favorite of which is that you can see (on a PC screen) many pages at a time dealt out like a deck of cards. Then you find the ones you want and hone in on them. There are many ways to use that capability, particularly for an illustrated how-to book or a textbook.

The deal B&T is offering the publishing community is pretty compelling. Publishers deliver PDFs, which B&T converts for free to the new format. The publishers get the ebook back with a tool kit that enables totally intuitive functionality that will change styles and layouts, embed links or video or audio and set up the TTV capabilities. If there is a recorded audio of the same text, the toolkit will synch it to the ebook automatically. And users can take notes, or mark up text with yellow (or other color) highlighting.

The setup and tool kit for the publishers is without cost; Baker & Taylor plans to make its money on the transactions. They’re “wholesaling”, on whatever the established terms are with that publisher. B&T will also host and provide ecommerce support to bookstores and publishers who sell direct. There are potential devils in those details but, to start, it is obviously hard for any publisher to resist incremental revenue for no setup cost.

So it is not surprising that Gagnon says B&T has 180,000 titles already committed to Blio, at least 50,000 of which will be available at launch.

If the ebook rendering and toolkit put to shame everything that has been done so far (and they do), the same is true of the retailing presentation. The virtual books look look like physical books on a shelf. They have spines. You click on one and pull it down, rotate it, open it, and flip through the pages. Unless you’re on a PC and want to look at 50 pages at once, that is.

If what I saw on Gagnon’s computer is matched in the actual platform launch, I’ll be shopping and reading on this platform on my iPhone starting immediately. But what is even more intriguing is what publishers — and authors — are going to do with the toolkit.

We’ll assume the Baker & Taylor K-NFB platform works as well in distribution as it worked in the demo I saw this week; then we’re about to see an even richer and more complex ebook world in 2010. We know Google Editions is arriving in the first half of the year. We know the bookseller owners of Kindle and Nook are now engaging every serious book reader in the conversation about reading on devices. We know that the iPhone is a book platform that works for many people, and we know that Android-system phones will be too.

B&T’s Blio system is raising the bar for all of them by combining simple authoring tools with a delivery platform that enables enhanced editions. It won’t take long before many books, and, one would assume, all books that have large audiences will be available in something far more interesting than just a digital rendering of what appeared in print. It will create enormous new opportunities for many of the players, particularly authors, publishers, and the retailers without the scale to push their own devices. And it will put a lot of pressure on all the existing players to take their game up to the next level.

In the spirit of full disclosure I should reveal that over the years both Ingram and Barnes & Noble have from time to time been clients of The Idea Logical Company; Baker & Taylor and Borders never have.

And, of course, we’ve booked Baker & Taylor to talk about Blio at Digital Book World. They’ll appear on the schedule shortly.

Bookmark It:

There’s a new publishing model afoot, which is to lead with the ebook and just print what you need. That might be POD, and it might be press runs, if you can sell out whole press runs. If the ebook becomes a substantial chunk of sales and if ebooks maintain their prices, this looks like it could be a new way to do much lower-risk publishing.

Some very smart publishing people are moving in this direction. It had been the plan of the meteoric Quartet, which has already flamed out. It is part of the plan of Richard Nash, an experienced publisher (Soft Skull Press) and a budding entrepeneur. It is the model for a young and aspiring Irish publisher named Eoin Purcell. And last week, tor.com announced that it would be publishing books (this is distinct from its “parent”, St. Martin’s sci-fi imprint Tor) with an ebook first and POD methodology.

Can no pressrun publishing work? That’s a subject for discussion at Digital Book World in January, but, based on an interesting post by Kassia Kroszer, one of the four principals in Quartet, I have real doubts.

Kassia’s post makes it clear that direct sales at “full margin” (meaning no cut to anybody else in the supply chain) were an important part of Quartet’s budget and plan. They figured that by sticking to niches, and the first one was going to be romance, they’d be able to build up a direct audience and avoid sharing revenues with retailers and wholesalers. Kassia points out that savvy ebook readers (who apparently also hate DRM, high prices, lack of interoperability, etc.) are willing to support their “local” publisher, knowing that more money gets to the author that way.

This all makes me more skeptical about the model.

Savvy ebook readers are a large part of the current readership, but they won’t stay that way. If ebooks are going to become a business, than casual and uninformed ebook readers will have to join the party. Although I’ve been reading ebooks for 10 years, I’m one of those. I don’t shop around for my ebooks; I buy from what I deem to be the most convenient source. When I used to read on a Palm (in pre-Kindle days), there was no such animal, but Peanut Press followed by Palm Digital followed by ereader had to serve. Then Amazon and Kindle changed the game. And now B&N is providing me exactly what I need for my iPhone.

If a web site I was on anyway offered me an ebook I wanted that would work in my BN reader software, I wouldn’t be reluctant to buy it. But I will only be shopping at places that offer me a choice of things I want. It’s hard to imagine a single publisher doing that.

The web constantly reminds us of the value of monopoly. Amazon has a huge advantage in being the best place to shop for books because they’re the biggest. The size of the purchasing community adds value: more reviews, more data to make better suggestions or respond better to search queries, and it gives them the scale to add unique content through Kindle and BookSurge. In the same way, we’re likely to see a dominant horizontal ebook retailer emerge.

So no matter how good you are at selling your own stuff, if you want to sell to the public at large, you’ll almost always have to use intermediaries. And if you want to sell stuff to your own niche, you’re going to have to be an aggregator, not just a creator, to offer enough product to keep even a niche audience interested. And, if that’s true, then even within the niches, most of the small creators will have to share their revenue with an intermediary.

The loyal and informed crowd of romance readers may have learned that they can find the books they want at Harlequin.com or Ellora’s Cave, but there has to be a limit to the number of individual romance publisher sites the community will support. The right move for Harlequin would be to imitate tor.com and start selling their competitors’ books. (Tor hasn’t done this for ebooks, yet, but they have done it for print.)

The idea of building a niche presence for most subjects simply through publishing in it, rather than by building a real vortal or community site, seems futile. Another lesson from the web (so far; it could change) is that making your own content and selling what you make is not a viable model, except at the very highest price points. You have to figure out how to leverage other people’s content and community participation. That’s what Google does. That’s what PublishersMarketplace does. That’s what the future successful publishers I envision in the Shift speech will have done.

Cutting costs and cutting waste, which ebook-first publishing does, would certainly seem like a path to financial viability. But it takes revenue to pay the bills. If you don’t go out and reach customers where they are — at the big Internet retailers — you need to be selling ebooks to a very large community for sales to be substantial enough to run a business. And if you do use those retailers, they (quite reasonably) extract their share of revenue for delivering access to the customers.

It may be too soon for the ebook-first model to succeed, except in niches more tightly defined than “romance” (which, indeed, is a big part of Purcell’s initial approach) or when it is supported by another business (which is, if you think about it, tor.com’s approach.)

Bookmark It:

The transition from print to digital is going to be a continual lesson in branding for publishers and in merchandising for retailers. I got a dose of that trying to make use of modern technology to deal with an old common problem last week.

I knew two or three weeks before that I was going to Boscobel to see Much Ado About Nothing on Friday night. If you’ve never been there to see Shakespeare, I recommend you put it on your calendar for next summer (this season being about over.) Boscobel is a beautiful site above the Hudson on the eastern shore opposite West Point, with beautifully manicured gardens leading to a stunning river overlook.

They put on Shakespeare under a big tent. The direction is uniformly excellent and imaginative; the performances often very good. (I am not an expert in theater, but I did have the good fortune to act in several Shakespeare plays in my youth, including a turn as Tybalt in a Romeo and Juliet that had subsequently famous actor Peter Strauss playing Benvolio. Our duel in the first scene is a story I’ll save for another time.)

I didn’t think I had ever read Much Ado, and it turned out I hadn’t. But I was both busy and dilatory. So it was only last Thursday, the day before the show, when I got back from London, that I finally went on BN.com to buy a copy of the play to put in my iPhone so I could get it read over the next 24 hours.

And that’s where I encountered some branding lessons.

What you get on the first screen from BN.com when you search ebooks for “Much Ado About Nothing”, in order, is the SparkNotes Guide for $4.95 (that’s a dormant Barnes & Noble-owned brand, and I’m sure the notes are good, but at that point I wanted the play); a “Digital” (that’s presumably a brand) eBook for $2.99 on which I could get a free sample; then 8 free versions each labeled “from Google Books.”

I should have loaded the “Digital” sample (but didn’t at the time; I am not familiar with the brand) and I would have seen it was well worth the $2.99 to buy it. I tried 3 from Google; they all turned out to be from Princeton’s “William Seymour Theater Collection” and they were, to put it gently, unsuitable. The typography, design, and editing were old and impractical.

So I changed my search criteria to “Shakespeare’s Comedies” and bought a Modern Library volume by that name that came up on the first page of the search. It came equipped with a Table of Contents and it is quite readable. Only twenty bucks. I paid it. I needed it and in my disappointment over what I got from Google I had forgotten the much-cheaper “Digital” edition of the single play above all the Google-branded ones.

But then on Friday afternoon, I had hardly cracked the play and I was running out of time. I remembered that last year at Boscobel time I had bought a copy of Lamb’s Tales from Shakespeare for my Kindle. I found it stashed at Amazon online and downloaded it to my iPhone. When I looked at it, I remembered what was wrong with it: no Table of Contents. Last time I had to scroll through the entire book page by page to find the play I wanted to read. I remembered that what I had done was make the font on the Kindle the smallest possible size to make that laborious process go faster.

Then I remembered that I had figured out after the fact that I could search on the Kindle for the play title and find it! Great. But the Kindle for iPhone doesn’t have the search function! So I retrieved the Kindle from my wife (who got it as a hand-me-down when decided I could do all my reading on the iPhone), searched for “Much Ado About Nothing” and was taken to the opening page of that story. I noted the Kindle text chunk number, found that chunk on the iPhone and, bingo, I was in business.

That wasn’t easy. It uncovers a number of points worth noting as we enter the digital book age.

1. Google’s books will be acceptable if they are the only choice available for the title. They will almost certainly not be the version of choice if something really prepared as a digital version in a modern way is available. Their “brand” will rapidly be seen as “last choice” if you have a choice. This is not good.  And if they intend, as they suggest, to sell new books as well as giving away PD books, they better do something about it. Imprint branding may not be the most highly developed skill set at Google (but don’t get advice from a publisher!)

2. And the retailers shouldn’t interpret downloads as popularity when they present choices. It wasn’t good merchandising for BN.com to show me all those identical Google editions for Much Ado so near the top, which one might assumes might have happened because they are free.  B&N should note, if they’re keeping score, that I downloaded them because they were free. If they’re looking into my ereader for useful information (in ways that will give many people the creeps, of course), they will see that they’re already deleted.

1A and 2A. Both Google and any retailer selling their books would be very well-served if they tagged (”branded”) the books which are uniquely available in Google editions.

1B and 2B. Both Google and any retailer selling their books would be very well-served if they refrained from displaying multiple copies of what is effectively exactly the same thing, particularly since they do so without making that clear.

3. Random House’s Modern Library brand sold me a $20 book of Shakespeare’s comedies because I wanted to read this play and didn’t have time to fiddle around once I’d found that a presumably competent commercial publisher had an edition available. This undercuts my supposition that publisher brands are meaningless. I still think that’s true for most purposes, but in this case it wasn’t and the brand was worth a high-priced, high-margin sale to them.

4. Kindle for iPhone isn’t as functional as Kindle on the device. There’s no text search capability. There is such a capability in BN.com’s ereader, however. That’s a reason I’ll be buying and reading from BN, not from Amazon.

5. Non-functional (unlinked) Tables of Contents are a real no-no in an ebook.

Having found the right spot in Lamb’s, my wife and I were both reading the story of the play in our seats during the ten minutes before it began, she on the Kindle and I on my iPhone. This attracted a great deal of interest around us and no small amount of envy. I think it is highly likely that we inspired some of our neighbors to be doing this themselves next summer. By then there’s hope they will have a smoother shopping experience than I just did.

Two codas to this piece.

Right after I finished it, I got a note from Ami Greko of Macmillan to tell me that Tor is making its Wheel of Time series available on Kindle for the first time and, to do it, the full text of the books has been retypeset to better accommodate the ebook format and all original illustrations and maps will be retained in these new releases. Tor appears to be the industry leader in establishing a 21st century sci-fi brand and taking this kind of care with a flagship series is good for their readers and good for the brand.

On another front, a great discussion broke out on Brantley’s list about publishers trying to squeeze textbooks onto iPhones. A number of us made the point that books originally intended for 150 square inch presentation need to be rethought to be effective within 6 square inches. Andrew Savikas of O’Reilly was the most articulate and compelling on the point when he said:

The bigger issue I see is that thinking of the problem as “how do we get a textbook onto an iPhone” is framing it wrong. The challenge is “how do we use a medium that already shares 3 of our 5 senses — sight, speech, and hearing — along with geolocation, color video, and a nearly always on Web connection to accomplish the “job” of educating a student.” That’s a much more interesting problem to me than “how do we port 2-page book layouts to a small screen.”

Even when all a publisher is doing is presenting the same text in an ebook, the way Andrew suggests we be thinking is the right approach. And almost every publisher has a long way to go to cover even the basics on a consistent and competent basis. Defining what “competent” ebook-making consists of in 2010 will be a topic at Digital Book World.

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When I did my two recent posts on ebook pricing — first one proposing “debut pricing” and then one taking it back as not viable — I got a note from a major company CEO saying that, of course, no publisher could discuss pricing with me because of anti-trust concerns. At the same time, I have been trying to staff a panel for Digital Book World on ebook pricing and was told by one of my Board of Advisors, who is from another of the big companies, that I shouldn’t expect any publisher to be able to discuss that issue.

So it was mildly refreshing to see that Arnaud Nourry, the global CEO for Hachette Books, expressed some pretty strong opinions about ebook pricing to the Financial Times in an interview. Nourry said publicly what I have only heard expressed privately before: that the aggressive pricing by ebook retailers (led by Amazon) where they actually sold ebooks at a loss could come to no good end.

On Amazon’s current policy of selling many high-profile new releases at $9.99, FT quoted Nourry as saying: “That cannot last . . . Amazon is not in the business of losing money. So, one day, they are going to come to the publishers and say: ‘by the way, we are cutting the price we pay’. If that happens, after paying the authors, there will be nothing left for the publishers.”

Nourry also expresses concern about the reported one million public domain titles that Google is releasing as free ebooks. Although the article is wrong in its reporting that Amazon charges $9.99 “for all its e-books in the US” (Michael Cader has reported several times that many are higher than that and, of course, many are also lower), we can understand Nourry’s expressed concern that “all the rest will have to be sold at between zero and $9.99.”

I agree with Nourry’s characterization of the present condition as unhealthy and threatening, but I think things look a little better for him and his fellow large publishers than his comments would suggest. And as powerful as Amazon’s position in, there is reason to believe it is at a high-water mark in the ebook marketplace and that, at the very moment Barnes & Noble is stepping up, the conditions are perfect for a competitor.

The downward pressure on ebook prices has been apparent for some time. I reported that John Sargent, CEO of Macmillan, said at a panel discussion for agents (I was one of the panelists) several months ago that maintaining ebook margins was the key strategic concern for publishers over the next few years. Since Sargent made that statement, very shortly after the announcement of Kindle 2 and Kindle DX, we’ve had a reported surge in ebook sales, a host of new reader and retailer announcements, and the further entrenchment of the epub standard. These, combined with B&N’s entry into the market, are good news for publishers.

Epub is probably the publishers’ best defense against Amazon and the Kindle. With all other device manufacturers able to coalesce around a non-Amazon standard, we have a situation analogous to the VHS-Beta conflict of the 1980s and the Mac-Windows duke-out of the late 80s and early 90s. On one side, we have a standard that remains closed to enable “control” (Beta, Mac, Kindle.) On the other side, we have a wide-open standard to enable multi-player use (VHS, Windows, Epub.) In the two cases we know about because they are historical, the consensus was that the “loser” of the numbers race (Beta and Mac) provided a superior technological performance. Kindle does not seem to have even that element in its favor. Whether you use something larger that does e-ink (Kindle, Sony Reader) or something you’re carrying anyway that is backlit (the iPhone or any other smartphone) is a matter of personal preference. But does anybody doubt that a world full of hardware creators will soon make a device that is similar but demonstrably better than the Kindle?

Right now, Amazon has a huge head start on the narrative-reading consumer ebook market. By putting Kindles into the hands of (estimates are) 1 to 1.5 million of the heaviest book consumers, they jump-started ebook uptake and grabbed a huge lead in sales. Anecdotal information gathered from publishers and agents suggests to me that, right now, 70% of the ebook sales for most titles offered in Kindle and epub are Kindle. And a lot are still sold as pdf.

But Google just put a huge thumb on the scale by making one million public domain titles available in epub for free! Those can’t be read on a Kindle without a little bit of technological bridge-building. On the one hand, if Amazon makes that bridge-building transparent and shows that it is easy for people to load epub titles on the Kindle, they compromise the whole Kindle business model. But the perception of choice — and the relative number of titles that will show up under any consumer’s search — is attacking what has been one of Kindle’s greatest advantages: a bigger title selection.

Amazon made what looked from here like a major concession last winter when they released an iPhone app for Kindle. I am hesitant to read too much into my own behavior, but that was the catalyst for me to give my Kindle to my wife and do all my reading on my iPhone. So it was easy for me to switch over to B&N when they came back into the marketplace a month or two ago. And, you know what? The shopping experience is just as good as Kindle. My wife may buy Kindle books again, but I won’t. (The Kindle on iPhone mimics the worst fault of Kindle’s presentation on the device itself: it only presents justified lines, no ragged right!)

Of course, all this means that the blades and razors strategy is going too. When Sony launched the reader, it looked for all the world like they figured they’d make their money selling the books. That was Palm’s idea too nearly a decade ago. Amazon blew them away because they were real booksellers, which they parlayed into both more title availability (they had the contacts) and a better presentation.

It will be a big surprise to me if B&N and Indigo’s Shortcovers don’t rapidly become the dominant horizontal purveyors of epub-formatted titles. And every web site and blogger will sell ebooks in their niche (why not?) which will include offerings that might not make the full-line distribution system. The next question is how long it will take Amazon to start selling epub titles as aggressively as they sell Kindle and print books. Or make Kindle transparently epub-compliant, which amounts to the same thing. They’ll need to do one of the other to protect their overall franchise, but it might mean the end of a meteoric Kindle era (remember the Commodore 64?) when they do.

Oh, and one note on all that to Mr. Nourry. If I’m right about the overall situation, don’t worry about Amazon telling you they need more margin. Because they’re going to need your titles fully as much as you need their sales. Expect to start seeing movement on this first from the smaller publishers, some of which report that they have been pushed into relatively low-margin deals by Amazon. There will be competition among epub vendors; they’ll all want to have the biggest number of titles (and accept the challenge of curating and presenting that.) If you can get higher revenues by 25% or more in one channel, might you be tempted to try to “force” consumers to buy it there by withholding from the lower margin channel? You’d surely be tempted.

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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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We are working on a project in this office to “grid” the ebook world. We’ll have a hard time doing it in fewer than four dimensions. What we see as “major headings” are: 1) hardware/readingdevices, 2) software/platforms, 3) file formats, and 4) ebook retailers. And after we get that sorted out, we’ll start thinking about the various commercial terms. I surprised a reporter this morning (who is probably less well-informed than most readers of this blog) when I told her that Apple gets paid for what goes on an iPhone out of the App Store, but not on what goes on an iPhone from the Kindle store. (And that’s just an example…)

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The acquisition of Lexcycle by Amazon sure got all the digerati’s creative juices flowing. What is becoming increasingly clear is that general trade publishers have a card to play here that the niche publishers can only join in on: creating a collectively-owned ebook “store” that can provide an economic baseline for the emerging ebook marketplace.

Michael Cairns suggests this possibility in his piece this morning. But his focus is on epub and interoperability standards. Mine is, and I believe the publishers’ will be, on pricing throughout the supply chain.

Through laziness, thoughtlessness, carelessness, or inertia (or whatever combination thereof), the ebook supply chain has adopted discount structures that imitate the physical book supply chain. This is daft. There is no comparison between the retailers’ costs and risks associated with physical books and those associated with ebooks. There is no economic justification to providing the same level of discounts. But that’s where we are. Amazon may be arm-twisting to enforce this discount equivalence, but they didn’t think it up. It’s pretty much universal and it came from the publishers in the first place.

As I suggested in my ebook post from London last week, now is the time to change this, before ebook revenues become too great. The college publishers with CourseSmart have mapped out the way to do something about this legally, but the play is pretty obvious. The publishers need to jointly fund and substantially own a virtual retailer whose mission would be to deliver all conceivable ebook formats (whether epub or not!) The store should be competitive with other offerings as to interoperability, lightness of DRM (I favor social only), and customer service.

Establishing such a business would force publishers to figure out how much discount off retail is required to enable the retailer to be profitable. I suspect that number is about 20% and, at that level, would allow modest discounting (5% or 10%) on some titles to the consumer. To stay on the right side of the law, publishers would sell to the new entity on the same terms they sold to everybody else. But the objective here is to limit the ability of retailers to force higher discounts through boycotting publishers or titles with impunity. That is what his happening now. Sometimes the book you’re looking for now on Kindle isn’t there because the publisher won’t agree to Amazon’s discount schedule. I know specifically of one medium-sized trade house for which that is true and, if there’s one, there are probably more.

If publishers don’t do this, the excessive discounts they offer retailers will turn into high standard discounts for consumers that will create inexorable downward price pressure. Amazon may be subsidizing that $9.99 price point they like, but the publishers are subsidizing it too.

This idea can work because six publishers control the lion’s share of bestsellers, which is a big chunk of ebook sales in the short run. Bestsellers is the one “niche” in which the general trade houses have critical mass.

And if this idea can work, another one waits in the wings.

It has been bemoaned that Google and Amazon are on a path to control both discovery and delivery of books in the future. This isn’t even a particularly competitive situation between the two of them, since Google is much more interested in discovery and Amazon is much more interested in delivery.

Because Google is more interested in discovery, they are also not particularly interested in books. They are about “all the world’s information”, not “all the world’s books.” So as robust as Google Book Search is, the company is not focused on making it a competitive book discovery tool compared to Amazon. They are about incorporating the book information to make a superior information discoverytool.

That leaves another opening for publishers where the Big Six have a strong collective position: the metadataassociated with the biggest books.

What if the Big Six also jointly owned a book discovery site: Allaboutthebookyouwant.com. The play there would definitely not be to act as a retailer, but rather to help consumers find the book and the retailer that is best for them. All retailers that “play” would have their inventory and pricing made transparent on the site which would contain a publisher-assisted best possible aggregate of enriched metadata (excerpts, stories behind the book, video support, etc.) 

This initiative could solve a number of problems for the big publishers. It would create a “Switzerland” for enriched metadata: a place to make it available which would help all the online booksellers. To the extent that it grew in consumer acceptance, it would reduce the danger of being being buried or victimized by bad data on a retailer site (think of the recent brouhaha about the “adult” books on Amazon). It would enable the consumer to shop across many book retailers at the same time. And the referral fees the site could earn would reduce the degree to which it needed to be subsidized as a marketing expense.

The current effort by several general trade publishers to drive traffic to their own house-branded web sites is misguided and doomed. But Amazon (and Shelfari, GoodReads, LibraryThing, and our new entrant, Filedby.com) have demonstrated that sites with information across the trade book spectrum have real consumer appeal. With the support of the big publishers from the earliest possible moment to make the high-profile general trade books visible, at least a large portion of the discovery traffic could be liberated from being captive to Amazon, Google, or anybody else. And the consumer could be assured that the information she is getting on purchasing was being offered in her best interest, not based on what a retailer is trying to push.

Worth noting: the ebook site Smashwords already sells ebooks at 15% margin, returning 85% of the publisher- or author-set retail price to the content owner. Up until now, Smashwords has been about author-generated ebooks; it has not pushed out an offer to publishers. And there are elements of Smashwords’s solution — DRM free, working from PDFs and doc files — that might not be exactly what publishers would want . But they might be the ebook solution, and it might be close to being in place. Smashwords may be the game-changer but the publishers and public haven’t discovered it yet.

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