Harvard Common Press

We had a very successful debut annual conference for Digital Book World last January, even though we didn’t conceive the idea until June, put together a group of helpers (which we now call our Conference Council) until July, or draft the initial program until August. This year we’re way ahead of that schedule. We’ve put together a fabulous Council to advise us this year and we’re having a meeting of many of them next week to discuss the agenda and to start getting suggestions for speakers.

The Council gives us wide exposure and connections to the trade publishing industry. That way we make sure we don’t miss any ideas and we don’t miss knowing about any talented people whom our audience would want to hear.

We have several publishing company presidents and CEOs (Sara Domville of F+W, Marcus Leaver of Sterling, Maureen McMahon of Kaplan, Brian Napack of Macmillan, Dominique Raccah of Sourcebooks) and some presidents and CEOs from other companies and support organizations in the industry (Kristen McLean of the Association of Booksellers for Children, Tracey Armstrong of Copyright Clearance Center, Peter Clifton of Filedby, David Cully of Baker & Taylor, Joe Esposito of GiantChair, John Ingram of Ingram Content Companies, Scott Lubeck of The Book Industry Study Group, and Steve Potash of Overdrive Systems.)

We have other senior level executives, many with specific digital responsibilities (Peter Balis of Wiley, Ken Brooks of Cengage, Mark Gompertz of Simon & Schuster, Madeline McIntosh of Random House, Thomas Minkus of the Frankfurt Book Fair, Larry Norton of Borders, Kate Rados of F+W Media, Charlie Redmayne of HarperCollins, Adam Salomone of Harvard Common Press, John Schline of Penguin, Evan Schnittman of Oxford University Press, Michael Tamblyn of Kobo, Maja Thomas of Hachette, and Tom Turvey of Google.)

We have agents (Sloan Harris of ICM, Simon Lipskar of Writer’s House, and Scott Waxman of the Waxman Agency) and industry consultants and commentators (Michael Cairns of Persona Non Data, Ted Hill of THA Consulting, and Lorraine Shanley of Market Partners International.) And because he is our media partner, we have help from Michael Cader of Publishers Marketplace as well. And we also get great input from others on the F+W team: David Nussbaum, David Blansfield, Cory Smith, Guy Gonzalez, and Matt Mullin.

So we have all the Big Six represented, as well as small publishers, industry-wide associations and service providers, wholesalers, digital distribution partners, retailers, and agents. All of these people have real input into the topic list and speakers. Many of them are joining us for a meeting next week to review our ideas for the program, which we previewed on this blog about a month ago.

Because Digital Book World tries to be at the cutting edge of trade publishing and digital change, we often face one or both of two challenges. Sometimes we believe something should be happening, or be about to happen, but we may not know where or whether the publishers leading the charge will talk about it. Several topics come to mind that fit that description: vertical efforts inside general trade houses; what houses are doing to adjust to reduced expectations for print sales in bookstores; how houses are gearing up or changing their sales efforts to compete in and serve a growing list of digital intermediaries; how enhanced ebook and ebook first creation change the traditional order of things in product development.

The other challenge we have to work around is when people can say things privately but not publicly. One topic that is very tough to talk about is ebook royalties, which is a major point of contention between publishers and leading agents at the moment. The big houses are pretty adamantly trying to hold the line (publicly) at a royalty of 25% of net receipts. But upstart publishers like Jane Friedman’s Open Road appear to be willing to pay 50%; publishing through Smashwords yields 85% (but sells the books without DRM, which would frequently scare the copyright owners of valuable properties); and self-publishing through a distributor would deliver a yield somewhere in between. (Remember: self-publishing ebooks carries no inventory risk.) In that environment, some agents are able to wring some concessions from some publishers. But the agent can’t talk about that without jeopardizing her ability to get concessions for her clients and no publisher will volunteer to reveal the isolated concession and start turning that into a policy.

Some things are just hard to discuss. Do booksellers, or even the publishers and wholesalers who supply them, want to talk about the possibility of their impending demise? But how can one plan for the future and ignore that elephant in the room? If a publisher suddenly sees the necessity of developing direct selling relationships with end users, after years of telling booksellers he was against it, does that publisher want to talk about those efforts in public?

When competitors participate in industry education initiatives, they must draw lines around what they will reveal and what they won’t. One ebook-responsible executive we know at a major house is persistently reluctant to reveal what he’s doing or what he’s thinking. But he has a boss, one who is proud of what he does and what their house does, who pushes him forward as a speaker.

Frankly, I think these challenges are greater for us than they are for other conferences on digital change that focus more on technology than they do on business practices. Very few publishers are masters of tech; usually they’re working with outside suppliers who are happy to share best practices. But business practices are different; they’re more sensitive. Sometimes the reluctance to share them is sound. Sometimes constraints are even legally required. Since our job is to focus on business practices, we’re glad to have relationships with very knowledgable players who will candidly engage with us on these challenges so we can figure out the best way to protect true proprietary knowledge but still disseminate valuable information.

We’re really proud of the illustrious group we have gotten to advise our efforts, and we get great value from them even though their first responsibility is to the company they work for. We feel confident that this group helps us cast a net that is wide and broad enough to assure us that any major development in the trade book world will hit our radar screen and that we’ll know if there are informed people willing to talk about it.

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As readers of this blog know, I’ve been on the “vertical” trail for a long time and I try to stay abreast of book publishers’ efforts to realize the advantages of subject specialization and community building. I wrote a whole post about the Sourcebooks initiative, Poetry Speaks, when it launched last Fall. I have often referred to the vertical efforts of Hay House and Harvard Common Press. And I’m proud to have had a small role in Sterling’s creation of Lark Crafts and their forthcoming Pixiq site for photography.

But of all the efforts I’ve seen so far, the book publisher who seems to have taken the vertical vision we espouse the furthest — one that elevates community-building above content-selling as the first priority — is Cool Springs Press in Nashville, Tennessee. We spent some time earlier this week talking to Roger Waynick, their founder and CEO, to learn more about what they do, looking for lessons that other publishers can apply.

The thing that was most striking about our conversation with Roger was the frequency with which he referred to “our industry”, by which he did not mean the book business! He meant the lawn and garden business, which is the vertical that Cool Springs Press serves. This is a nuanced but massive differentiator. If a company thinks of itself as a “book publisher”, it is already off on the wrong track. If it thinks of itself as a content- and information-provider for an industry or a community, its self-image will lead to it doing the right thing much more often. And the very first right thing a book publisher with community aspirations has to do is to create a site that has very little reference to books, which they have.

Waynick knew nothing at all about publishing when he started Cool Springs Press in 1994. He was looking for a book about gardening and he started from the highly logical presumption that what he needed was local information, since gardening has to match the geography. A visit to a large and well-stocked local bookstore yielded nothing except confirmation that what he wanted didn’t exist.

So he created it and he created a formula. He found a local gardening advisor with a media presence and created a “Tennessee Gardening” book. Waynick had intuitively done the right thing. Finding content knowledge and promotional capability combined meant that he had recruited what the smartest publisher with experience would have called the best possible author. Before long, he was extending his franchise, creating gardening books by state, one after another. (At this point, Cool Springs has state-specific gardening books for 48 states.)

In 2003, large Nashville publisher Thomas Nelson embarked on a strategy to expand out of their religious publishing niche. (They didn’t ask me…) They acquired a few smaller publishers with non-controversial publishing programs and Waynick took the opportunity to sell his business. For the next few years, until Nelson management changed and the strategy changed to re-focus on their core business, he consulted to them and stayed somewhat in touch with the business he’d created.

But when the strategy at Nelson changed, Waynick was ready to buy his company back and turn it into a real content vertical. In 2007, he regained control of Cool Springs Press, set up trade distribution through Ingram Publisher Services, and started to invest seriously in the capabilities he needed to be more than just a book publisher.

Waynick’s key insight was that the lawn and garden customer was looking for solutions. And solutions, to be practical, had to be local. So he constructed a taxonomy around plants (roses, gardenias) and around actions (planting, weeding) to tag the content in his state-specific books. Waynick estimates that, since reacquiring Cool Springs in 2007, he’s spent a dollar on upgrading, tagging, and curating old content for every four dollars he has spent creating new books. And he invested that money upgrading his content repository with faith, but no clear plan about how he’d get it back.

In a formulation that echoes what we’ve heard earlier from Harvard Common Press talking about cookbooks and recipes, Waynick said he needed to see his content as a database of information, not as a collection of books. And just like Harvard Common, he looks at his database for “what’s missing” to direct him about what new content he needs to acquire.

He continued to build on his special retailing network. (Ingram handles Cool Springs’s trade sales, but Waynick maintains the relationships with the lawn and garden trade directly.) He recalls that, when he started, it seemed wildly counterintuitive to a national chain to put a Tennessee book in only the Tennessee stores, and so forth. But his sales were so robust that the skepticism quickly melted away. He built closer relationships with those special retailers by custom publishing: putting together books especially for a particular retailer. His path was smoothed in all these things by his author relationships; many of them were, like his first author, local gardening experts with radio shows popular with the core audience.

This year, for the first time, substantial revenue has flowed to Cool Spring from content licensing. About 10% of Cool Springs’s revenue will come from licensing content to web sites and creating apps for other players in the lawn and garden space. About 25% will come from the book trade, 35% from home center book sales, 15% from individual lawn and garden centers, and the balance from other special outlets like hardware stores.

The way Waynick sees it, the licensing side of the business has just begun to work. Next year will be far larger than this. He expects licensing sales to surpass book sales for his company in 2012.

Cool Springs has an online bookstore at gardenbookstore.net. In his retailing capacity, he sells the books of all his competitors. The day we spoke, Waynick pointed out that only two of the 15 books on his retailing front page were his publications; the rest came from other publishers. Perhaps because he’s a “customer”, he says that more and more of his competitors seems receptive to collaboration, allowing him access to their material for his efforts to provide content to retailers and wholesalers in the lawn and garden industry.

Waynick is not terribly concerned about competitors. Having been the first to act on the insight that gardening is local and that content has to be developed with a highly local point of view, and then having invested to put his content into shape for re-use, he really sees no other player that can deliver the variety of relevant content that he can. And now he’s moving on to a new opportunity that he is uniquely positioned to exploit.

Reflecting the initiative by First Lady Michelle Obama, school gardens are springing up all over the country. Waynick says that over 3000 new ones were created last year. Working with school administrators, Waynick is developing curriculum for the schools from his content. This also puts him in a position to help his retailers and his authors find additional opportunities. And how convenient is it for him that education in this country is organized the same way his book program is: state-by-state!

Waynick also recognizes the value of his author base. He does his best to keep his authors working, and not just on books. They blog for him and create content for his licensing clients as well.

One point that Waynick made in our conversation is an important one for all publishers to take on board: the presentation of content needs to be sensitive to the audience. Too often, he says (and he’s right), publishers end up with catalog copy meant to sell a book to a store buyer being presented on a web site to an end user customer. The copy is wrong for the purpose. He credits his distributor, Ingram, with having a system that helps him deliver the right metadata to the right places.

The future for Cool Springs Press looks very bright. Waynick is already providing content for a number of national retailers, including one of the brand leaders, which is what has jump-started his licensing revenues. These players see good content as a critical competitive requirement. They represent a growth market for web content, apps, and custom books and the growth opportunities they will offer will far exceed the rate of shrinkage in the traditional book market.

What we think will be interesting to watch going forward is how much Cool Springs moves into the business of selling things other than content to the audiences they keep growing and nurturing. They’re certainly positioned to do that.

But the important thing is that they can readily withstand shrinkage in the book trade or even in the printed book business. They’re bound to become an increasingly important marketing mechanism for all their competitors, who will become increasingly dependent on them for exposure to the consumer audience. And they’re in that position because they’re vertical and because they were willing to invest in their long run value to their community.

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This is the third year in a row that we’ve put together the Making Information Pay conference for the Book Industry Study Group, in conjunction with Ted Hill of THA Consulting. We’ve repeated the formula we’ve applied for the past two years, doing an industry survey on the conference theme to provide some additional insight.

This year’s conference is called “Points of No Return.” It looks at things from the perspective of publishing’s employees and seeks to discover when the markets, technologies, and process changes make things so different that old skills don’t map, old organizational structures have to be completely revamped, and people really have to develop new capabilities, accept new roles, or be forced to move on.

Our survey this year tried to gauge the feelings of publishing’s labor force about the changes they’re seeing in their company and throughout the industry. We also asked for a reaction to a number of industry “buzzwords” (like “Twitter” and “vertical”.) A report on the survey results will be distributed at the conference, but here are three little nuggets:

1. The preponderant majority of workers in all parts of publishing — editorial, marketing, sales, IT, distribution — believe that significant changes caused by technology either have occurred or are occurring now. No surprise there, but the surprise will be that there is one function people think is changing much less than everything else. And wouldn’t you know it is one that I think will likely change more than any other over the next few years?

2. Half of our respondents think publishing will become a more profitable business in the future, but they split down the middle as to whether the business will be smaller and more profitable or larger and more profitable. There’s a similar split on expectations about whether there will be more jobs or fewer. (Half of those expressing an opinion think there will be more jobs! Stop the presses!!)

3. What I found to be a startling percentage of our respondents think Twitter is a fad, soon to fade away.

Making Information Pay delivers a concise program: two 90-minute sessions surrounding a 30-minute networking break that starts at 9 and concludes at 12:30. We designed the program so that the first 90 minutes delivers facts and insights about the industry and the second half features reports from the front lines of change.

After BISG Executive Director Scott Lubeck opens the program and I deliver a very short keynote, Kelly Gallagher of Bowker will begin the morning segment talking about what Bowker PubTrack Consumer has discovered consumers are saying that is relevant to publishers thinking about points of no return. PubTrack has delivered some great insights over the past year, from demonstrating how important in-store display is to book sales to quantifying consumer attitudes about ebooks in a special study done jointly with BISG. He will highlight the Bowker findings most relevant to our program’s theme.

The Gilbane Group is also working with BISG, doing research on the seven “essential processes” (which I still call “systems”) that publishers need to keep up to date in order to stay viable as their businesses change. Do your production processes support tagging chunks of content that you might want to sell separately from the whole book? If not, you will lose revenue as the market for fragments develops. Does your royalty accounting process enable you to report to authors on sales of this kind and divide revenues appropriately? If not, then you’ll have a different set of problems exploiting those new opportunities. David Guenette of Gilbane will tell the MIP audience what the seven essential processes are, why they’re critical, and what pitfalls await if they are not ready for what’s coming.

George Lossius of Publishing Technology will tackle one of the paralyzing challenges of our current environment: how can publishers make substantial investments in technology when the business climate is changing so quickly around them? Lossius maintains that there are things we do know that can guide us; he’ll be helping publishers see what truths are stable and reliable to guide their investment decisions, even when a lot is not.

Jabin White of Wolters Kluwer has worked through some major process changes within his own company. We’ve asked him to focus on the people-centered challenges of those changes. How do you bring people along when change might be making them uncomfortable or unhappy? And how does an organization deal with the changes in job skills required, which could mean changes in the particular people required, in the least disruptive way?

The second half of the program will start with Bruce Shaw and Adam Salamone of Harvard Common Press who will present an eye-opening view of how the strategy for new title acquisition changes when a publisher becomes sensitive to its role as a vertical player. They demonstrate convincingly that decisions change when an editor sees they are acquiring content for a database rather than simply publishing a book.

Phil Madans is deeply involved in Hachette’s move to a digital workflow for book development. This requires a shift from an “assembly line” way of working to a “collaborative” one. Editors no longer finish their work before they engage with design and production; there’s a lot more being done simultaneously rather than consecutively. Hachette is well along in building this new process; Madans will offer insights that will be very useful to other publishers still contemplating this switch

Matt Baldacci of Macmillan, who oversees all the marketing spending at his company, is covering the challenge of changes in where marketing dollars are allocated, and the processes and skill sets necessary to do successful marketing in today’s marketplace.

Maureen McMahon of Kaplan draws on her prior experience directing sales at Random House to analyze the changes in sales, which she sees as having moved from requring “closing” to requiring “connecting”, all of which leads to different hiring criteria than she would have applied only a few years ago.

And on top of that, BISG has two sponsors with useful messages. Steve Walker of SBS Worldwide offers his Electronic Distribution Center, which gives publishers completely new supply chain capabilities and a web-based tracking mechanism that cuts administration and communication costs at the same time. And John Konczal of Sterling Commerce has tools to enable new business models, such as those that the Gilbane analysis points out as requirements earlier in the conference.

We’re very excited about this program; we think people at every publishing house will have something to take home and apply that very afternoon, which is always our objective. As readers of this blog well know, I’ve been speaking at, running, and going to digital change conferences for almost two full decades. To my knowledge, there has never been one before that focused on people in their jobs. How will mine change? Will I still be able to do it? Will it still be here for me? And what do I have to do to make sure I can stay employed in publishing?

We think these are questions a lot of people are thinking about. If you’re one of them, join us at Making Information Pay on May 6!

I am interrupting the “What I Would Have Said in London” series to bring you this time-sensitive post. We’ll resume WIWHSIL with Part 2 tomorrow.

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I was interviewed a couple of weeks ago by a journalist who was working on a story about publishers and digital change. He was building something around my “Stay Ahead of the Shift” speech from last year’s Book Expo.

“I was impressed by that speech,” he said. “You were very prescriptive about what publishers should do. So my first question for you is whether anything has changed since that speech?”

“No,” I said.

“Well then, would you say that trade publishers are doing any of the things you suggested? Have they taken your suggestions on board?”

“No,” I said.

“What would they say, then, about the assessment you offered? If I put you and a major trade player on a stage together to discuss the content of that speech, where would they say you went wrong?”

“They wouldn’t,” I said. “They’d probably say I was right and that they’re doing what I suggested. But they’re not.”

We moved along and talked about how the world is indeed, as I said, moving to vertical. We talked about publishers like Hay House and F+W and others that have extensive email lists of book purchasers that they can target directly, and inexpensively, every time they publish a new book. These are advantages and marketing capabilities that the big general publishers don’t have.

After we’d been talking for a while, the journalist had a last question. “Can you suggest any top executives you think I should talk to for this story?”

I suggested one that I thought was interested in pushing out the company point of view. Didn’t work. “I’ve been trying to get to that person for a week and my calls aren’t being returned,” said the journalist.

Then I mentioned another. “Oh, yes,” I was told. “I talk to that person very regularly.”

“A very smart person,” I said. The journalist agreed.

“So take this on board,” I said. “We’re talking about somebody who is a friend of mine. We’re talking about somebody who understands everything I say very well, but who isn’t implementing it. What does that tell you?”

It tells me that big companies are in the business of acquiring rights, creating products called books, and selling them. They have numbers to meet every quarter. They can’t start switching over their businesses from a model based on selling products to a model based on owning communities just because Mike Shatzkin says that’s the future.

I thought back to two pieces of advice I dispensed over a decade ago. In about 1999, executives at Book-of-the-Month Club paid me a modest sum for a quick-and-dirty strategic assessment. My advice anticipated my later thinking, even before I had learned to articulate the concept of “vertical.” What I told them is “book clubs don’t map into the 21st century. Communities of interest do. So you have to take your hunting and fishing book club and turn it into a hunting and fishing community.”

“How would we monetize that?” they asked.

“I don’t know,” I said. “We’ll have to figure that out.”

So they said “thank you very much” and moved on. They apparently made the (perfectly rational) decision to keep extracting cash from the book clubs until they couldn’t anymore and then sell them, if they could. If you owned a blacksmith shop in 1910, you might not want to invest in developing an auto mechanic’s capabilities just because you could see it coming. You might want to just pull out your blacksmith profits and go into another line of work. Or put the money in a bank.

At about the same time, the owners of the Atlantic Monthly magazine asked me for thoughts about a web strategy. “What are you most known for?” I asked.

“Publishing great writing,” they said.

“And who are your top competitors?” I asked.

“The New Yorker and Harper’s,” they replied.

“Then my advice would be to partner with the two of them and create a web community dedicated to great writing.” That advice also went no further.

Looking back on both of those recommendations, I recognize how hard it would have been to follow them. But imagine there were a Hunting and Fishing community that had been built on the backs of the hundreds of thousands of names BOMC had a decade ago. Think you could sell some red checkered jackets and fishing tackle through it now?

And in this age of diminishing reviewers and proliferating content requiring evaluation for consumers of quality literature, do you think my Atlantic-New Yorker-Harper combo community would have some real power today that could be turned into money? I do.

I see the big publishers developing vertical presences in the few areas where they have enough of a content flow to attempt it: books for kids and teens and the genres, particularly romance and science fiction. And they’re leaving just about all the others to upstarts who are slowly and methodically building their presences in cooking (book publisher Harvard Common Press and web sites like Cookstr and Serious Eats), mind body spirit (Hay House), sustainable living (Chelsea Green), crafts (F+W and C & T, among others) and the list will just continue to get longer.

General trade publishers will soon find themselves handicapped trying to sell anything except the most challenging books: the sure-to-be-big ones that cost a fortune to sign and the fiction, memoirs, hot current topics, and other writing that is the most expensive to promote book by book. And they’re remaining dependent on a very fragile chain of intermediaries.

Just as BOMC pursued a strategy that eschewed converting book clubs to communities in favor of squeezing every penny out of the old model, it is also rational for today’s big publishers to pursue a “last man standing” strategy. It will be a very long time before major authors don’t sell lots of print books and they’re going to need a strong organization to print those books and put them on the shelves that are out there. They need a strong organization. But do they need six?

Aside from “last standing”, the other alternative to my “multi-niche development” suggestion is to convert from a rights-acquiring publisher to a service organization. HarperCollins seems to be at least exploring the development of that alternative.

We have had remarkable stability among big publishers since Bertelsmann acquired Random House in 1999. There are reasons for the owners of every one of today’s players to sustain their present operations for the greater good of the larger organization. But would a 10% reduction in the number of bookstores in the US change their mind? How about a 25% reduction? How many years do you think it will be before we find out?

I’d say no more than five, and it could be two.

I am addressing UK publishers at the Annual General Meeting of the Publishers Association at the end of April. I’m taking another look at the Shift speech to try to re-cast the advice for trade publishers to make it more “followable.” One thing for them is to start thinking about the day when they can sell ebooks globally and, in effect, get distribution in the US market without going through a US publisher. On the one hand, why should they care, since they’re all global companies anyway? On the other hand, we know they do care because the UK publishers have been on a pretty successful crusade to convert Europe from an open market where US and UK editions compete to one that is closed to US entries. I suspect that as ebooks grow to and past a quarter of sales over the next few years, UK publishers will be able to see the virtue in a less rigid territorial regime.

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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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