Michael Cader

I spoke last Thursday at the 2nd annual IfBookThen conference in Milan staged by the Italian ebook retailer Bookrepublic. On Friday, I teamed up with the UK literary agent David Miller and Penguin US’s Molly Barton, formerly an editor but now the company’s Global Digital Director at a “workshop” session staged by the same organizers. Molly is also the empresario of the new author services site from Penguin for genre fiction called Book Country.

We got a bit of a cultural education. The Thursday conference was attended by about 300 delegates from across Italian publishing. Judging by appearances, this seemed to be a pretty senior crowd; there were very few people there in their 20s. That makes sense. The same thing is true at Digital Book World and Tools of Change and for the Publishers Launch events Michael Cader and I deliver. These conferences cost a fair amount and require a lot of time away from the office (a full day for IBT and for most PLC events, two or three days for DBW and TOC.) Junior staff can’t afford the money and can’t get the time.

But there was one distinct difference between the Italian audience and the audiences I’ve seen at those other events or at others I recall speaking at in Canada, Brazil, the UK, and Denmark. The Italian audience hardly asked any questions! I got one on Thursday. Most of the speakers that day got none. I found this baffling.

At lunch, I was standing at a round “rest your plate of food” station with four local attendees. They all spoke English well. (Simultaneous translation in both directions was available for anybody who needed it.) I said, “you in the audience need to talk more! Where are the questions?” One woman theorized that the problem was that Italians were just too polite; they were reluctant to call attention to themselves by asking questions. (Milan is in the industrial North of Italy. Most of the time I’ve spent in Italy has been in the South — Rome and Capri — and I certainly wouldn’t have characterized the wonderful culture down there as overly polite. Maybe the North is very different.) I agreed that questions are sometimes used as a platform to make a speech and that wasn’t welcome when it happened. But, still…

The event on Friday being billed as a “workshop” had a smaller, and not quite so senior, audience. There were perhaps 80 people. The focus was the changes in the relationship between publishers and agents. Molly explained Book Country, what Penguin had in mind when they launched it, and how it was an acknowledgment of the change in circumstances and choices for authors. David had been provided a list of questions solicited from attendees in advance. My job was to provide “context”, a sense of the environment in which these publisher-and-agent negotiations were taking place.

We brainstormed with the organizers how to encourage more participation. An alternate explanation for the reticence we’d experienced came from an Italian agent, who thought that people weren’t asking questions because their bosses were in the room. Well, it’s another theory…

I followed a suggestion, starting my talk at the workshop by asking the audience to self-identify a bit. I asked editors, agents, those who worked with straight text, those who worked with illustrated books serially to raise their hands. I made the point that I was giving people practice at putting their hands up; we were all hoping that they’d continue to do so throughout the show. I actually got a few questions. So did Molly.

But David had a different technique that, coincidentally or not, appeared more effective. He waved a box of fine British chocolate-covered mints in front of the crowd and promised a wrapped piece of candy to each person who asked a question. (When I asked David a question myself from the seat alongside him on the dais, he even gave a piece of candy to me!) Whether it was to get the chocolates or because David’s presentation and expertise evoked more active interest than Molly’s or mine, or because participation begets participation, he had a successfully interactive two hours with the audience. It was impressive.

The one question I did get the first day actually led to a provocative exchange that I think opened some eyes in the audience. I was asked how big I expected the Italian ebook business to get and how fast. I asked what percentage of Italian book sales were ebooks now. I was told “2%.” I asked what it had been a year ago. I was told “about 0.7%.” If those numbers were right (they could well not be, but I’ll bet they’re right on the growth rate), the percentage tripled.

“Is there any reason you’d expect it to slow down in 2012 or 2013?” I asked the audience. The consensus was “no.” I pointed out that one more tripling would take them to 6% and another after that would be 18%, which is not far from what the US number is now. (If you believe the starting percentage was low, then add one more year to get to 18%.)

The next day, David Miller talked about an author he represents whose percentage of ebook sales had gone from 1% to 11% in one year! I made the point to the audience that this might be the single most important fact they’d have learned in two days to illustrate the rate at which things can change.

Last year at the same IBT event, there seemed to be very widespread skepticism that Italy had much to worry about from ebooks. Then Amazon introduced the Kindle this past December, about 60 days ago. Suddenly, the skeptics are in hibernation.

Apparently the same thing has happened in Brazil since I went there to speak 18 months ago and found a lot of resistance to the idea that ebooks would spread or that bookstores would suffer. The Brazilians I’ve talked to since, and the non-Brazilians who are planning expansion of book and ebook sales to new markets, all see that a robust growth of the ebook market in Brazil is around the corner.

It always seemed understandable to me why ebook takeup, and its companion disruptor, online transactions for print, first got traction in the US. You can’t beat a market of 300 million people with one language, one currency, and one set of commercial regulations as a place to launch a new delivery mechanism for media. We see the dampening effect in Europe of high taxes (VAT) on ebooks and the relatively small language silos that exist side by side. We see the challenges to online ordering of print as well as to ebooks in less affluent parts of some countries, including Italy and Brazil, presented by the lack of capital for investment in infrastructure. Many people can’t afford readers for ebooks. Many can’t conveniently get to the Internet to order hard goods and, even if they can, the ubiquitous parcel delivery infrastructure our Internet merchants depend on doesn’t exist the way we’re used to it. And many people don’t have credit cards. All these factors slow things down.

The hard goods delivery bottleneck is difficult to address, but the readers are getting cheaper and the mobile phone has proven to be an effective banking-and-credit mechanism where none had existed before. I find it hard to believe that highly differential rates of screen reading to overall reading between countries is a permanent condition. Cell phones are proliferating everywhere. Printing and distributing books is, ultimately, a lot more expensive than delivering them to a cell phone. Readers are getting much cheaper; the Kindle costs about 80% less than it was when it was introduced four-plus years ago.

I think in time we’ll all end up in pretty much the same place in our ratio of ebooks to printed ones for straight text reading. If that’s going to be the case in a few years, then the places that haven’t been experiencing rapid change so far are in for a roller-coaster ride in the years to come that will make what we’ve lived through in the US and UK seem very tame by comparison.

I suspect that at IfBookThen 2013, the audience will feel moved to ask a lot of questions and whatever cultural barriers there were this year will be overcome by the urgency of adjusting to an environment which signals that cultural barriers are made to be broken.

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I think just about everybody has fun at Digital Book World, but it is hard to have more fun there than I do. It’s damn near a year of work coming together over a couple of days with dozens of smart speakers making me personally look good for putting them on the program. So they work hard and satisfy the audience and I get congratulated. What could be better (for me) than that?

(OK, I did do a little bit of work. Besides emceeing the show and co-hosting the final panel, I delivered opening remarks trying to set the stage.)

There were a lot of great takeaways this year. Perhaps the biggest news was the final presentation before the wrap-up panel Michael Cader and I hosted. That was by Matteo Berlucchi, the CEO of Anobii, a UK-based ebook retailer that has substantial investment from Penguin, Random House, and HarperCollins. Matteo didn’t exactly “call for the end” of DRM, but he certainly described a better world without it. And the main point he made was, “I want to sell to Kindle customers and the only way I can do that is if we get rid of DRM.” The combination of the message and the messenger made this the most newsworthy presentation of the show, I thought.

But the factoid that most grabbed me was delivered on the previous day as part of the data developed by AllRomanceebooks.com about the romance readers market. Very superficially, the point being made was also about DRM, but that’s actually a distraction. There was a much larger point buried within.

All Romance is a specialized ebook retailer. To serve the romance reader community more effectively, they’ve built out the BISAC taxonomy for romance, adding more categories. And they’ve added a metadata element called “flames” which basically measure the frequency and explicitness of the sex scenes in any particular book.

The romance world, particularly among the cognescenti in it, is a very anti-DRM environment. And an outfit like All Romance, which has no “device lock-in” working for them — essentially everything they sell gets “side-loaded” somehow, and DRM can often make that more challenging — is right in step with their community sentiment. So the survey contained questions trying to get at the audience attitude about DRM.

There were two relevant stats that I recall. One is that only about 20% of even All Romance’s readers really resist books with DRM. That is to say: 80% don’t. But the factoid that grabbed me is that 96% (that’s not a typo: ninety-six percent) of the ebooks they sell do not have DRM.

All Romance also reports that 91% of the titles they have available are protected by DRM. That makes sense, since all the titles from all the Big Six publishers and all the titles from Harlequin except those from their new digital-first imprint, Carina, have DRM.

What this means is that the nine percent of All Romance’s offerings that do not have DRM are selling 96% of their units overall. And since only 20% of their customers find DRM as a strong deterrent to sales, that means those fledglings are outselling all the majors for other reasons.

This provokes two very important lines of inquiry to me, and neither of them have anything to do with DRM.

The first one would be top of mind to me if I were a major publisher. What are these books that are selling like hotcakes? Why are these books selling like hotcakes? Why can’t we publish these books that are selling like hotcakes?

It is a virtual certainty that a lot more romance ebooks are sold through the “traditional” channels like the Kindle and Nook and Kobo stores than through All Romance. But they have a market big enough to get 6,000 respondants to a survey in a couple of weeks so they’re definitely serving a big clientele. They’ve obviously aggregated an audience that is buying a lot of books that major publishers are missing. Some of this is due to price, undoubtedly, since the All Romance stats also showed robust sales at price points below where the majors are usually most comfortable. Some of it could be attributed to a raunchier title selection being compiled by the smaller upstart title selection (remember All Romance’s “flame” ratings.) Some of it might be loyalty to authors who could be signed up by majors with the right offers.

But if 24 out of every 25 books being sold by a pretty damn big specialist retailer to the biggest ebook genre that I competed in were outside of my immediate competitive set (which, for the Big Six, is basically each other and Harlequin), I’d want to know more about the details of that. And I’d also be asking All Romance what I could do to get more sales from their audience. I have a feeling they’d say that better metadata, more sex (within the pages of the books, that is), and lower prices are all more important than stripping off the DRM, but it’s s conversation the big publishers should be having with them.

The second question that the data provokes to me is whether this phenomenon — all these successful books outside the purview of the major houses — is a unique characteristic of romance books. I don’t know if there’s an All Mystery ebooks vendor or an All Thrillers ebook vendor or even an All Sci-Fi ebook vendor (I’ll bet we’ll find out from our comment string after this is posted!!!) but, if there is, it would be interesting to find out if this is true there too.

These are the immediate questions All Romance’s appearance put in the front of my mind. I think they show another aspect of verticalization. As a vertical retailer, they invent new metadata elements that really help them merchandise to their audience. What that suggests is an opportunity for an All History or All Politics retailer as well; enhancing metadata might be even more valuable for non-fiction subjects than it is for specialized fiction.

There was an article about Amazon by Brad Stone in this week’s issue of Bloomberg Business Week in which I was quoted about Larry Kirshbaum, the former head of Time Warner Book Group (now Hachette) and currently the head of a new Amazon imprint whose mission it is to recruit mainstream authors to be published by the retailer. Many of Larry’s former colleagues and counterparts at big publishers take this decision of his to join Amazon extremely personally and it is reflected in what they say they now feel about Larry himself. That was reflected in my quote which says that Larry “has gone from one of the most well-liked people in publishing to the one of the most reviled.”

I want to make clear that I was not expressing my personal opinion. I still very much like Larry Kirshbaum and I’m a bit embarrassed to be quoted (even accurately) characterizing the feeling about him in these terms. The people running big NY houses see Amazon as a bare-knuckled competitor. With their responsibility for the continued success and viability of their own enterprises and the threat Amazon poses in that regard, contentiousness is built into the interaction and competition between Amazon and the big publishers. I believe my quote accurately reflected the degree to which that is transferred to personal feelings, even for somebody whom so many people have known and liked for years. Although I well understand the feelings my quote described, this is one case where I wish I hadn’t been so candid.

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If you imagine the publisher’s business as one that divides most of the consumer’s dollar between two core stakeholders in the supply chain — the retailer and the author — you’d have a pretty accurate picture. The publishers, at least theoretically, decide what the retailer’s “working margin” will be with their discounts and agency agreements. And they decide what the author’s share of the proceeds will be by the advances and royalty rates they offer and agree on through their contracts.

These are the essential, and basically non-substitutable, trading partners for a publisher. They can choose a different printer or publicity firm without changing the character of their business or their economics. But the author relationships are existential and defining and the intermediaries who reach the public and enable the consumer transaction are indispensible.

Plenty has been written, by me and others, about the challenges trade publishers face due to the decline of shelf space for books. But, in some ways, it looks at the moment like those (also including me) who have said that publishers are in big trouble as bookstores decline are mistaken. Sales in stores are declining and sales of print books are declining but total sales, including ebooks, are holding pretty firm and the big publishers are reporting pretty healthy results. So if declining bookstore shelf space, which we have clearly seen over the past few years, doesn’t weaken trade publishers’ commercial performance, what will?

I have written before about asking my friend and sometimes-collaborator Mark Bide a similar question about another segment of publishing. As a John Wiley stockholder, I was worrying 15 years ago about their reliance on journals for their revenues and profits. We thought way back then that journals were likely candidates for disintermediation. After all, the university pays the professor’s salary to write the journal article that the publisher gets for free and then monetizes by charging the same university’s library for a subscription to the journal. Even in the early days of the web, we could see the potential for professors to post their own articles and for peer review to be crowd-sourced, delivering the IP to the academic community faster and saving universities a boatload of dough.

At the time Mark said the thing to watch was whether the publishers stopped getting the submissions. If the professors didn’t need the journals, they’d stop getting the raw material that feeds the whole engine.

So far, it hasn’t happened (and I still own the stock). Despite lots of open source academic publishing, the journals remain important brands in their fields and the professors want the journal publication as a credential. (In books we know that lots of people read the book and have no idea who the publisher was. In journals it is the opposite: more people will know the professor published in the journal than will read the article.) The business has changed and library budgets grow considerably more challenged, but most of the journals, including Wiley’s, remain highly profitable and highly desirable to the authors.

In fact, Mark identifed the point of vulnerability for trade publishers. If the stores and other intermediaries they rely on go away, they have to find other ways to sell their books. That’s a challenge, no doubt.

But if the authors don’t play along, they have nothing to sell. Making deals with authors is the publishers’ price of admission to the game.

As the central player whose contracts and sales terms manage the distribution of revenues throughout the supply chain, how publishers view the commerce of our business is central to how it operates. This has, historically, been challenging. The activity of publishing is complicated and its economics are complicated.

A couple of months ago, Michael Cader pointed out to me that the big publishers were making a serious tactical error in the way they were accounting for sales under the agency arrangement. (Quick reminder: under agency, the publisher is considered the “seller”, not the retailer. The publisher sets the price which the retailer can’t change and pays the retailer, or sales “agent”, a fixed 30% of the set price paid by the consumer.) Publishers simply imitated their convention from the wholesale terms transactions they’d always done before. They book as revenue the 70% they keep of the sale, not the full price the consumer pays (and which, if they did, would make the 30% paid to the retailer a “cost of sale” like printing or shipping is in the physical world or like DRM costs might be in the digital world).

Cader spelled out two important benefits that would flow to publishers if they made a different choice of how to account these sales. (He says, and I trust him, that GAAP rules don’t require them to employ the methodology they do.)

One is that that their “top line”, their “total revenue” line, would be higher. That’s critical to foster a helpful perception in the investment community, which worries when they see declining revenues. And if publishers insist on sticking to booking only the 70% they get on the ebook sales as the total revenue, they’re locked into declining revenue for years to come as competition drives down ebook prices (probably) and as ebook sales continue to replace hardcover print sales (for sure).

The other perception publishers are manipulating against their interests is within their negotiating community. Both agents (on behalf of authors) and the big accounts publishers sell through look at the publishers’ margins as a percentage of sales to decide if there’s more there for them to get. Reporting ebook sales as they do, publishers are achieving about 75% margin on ebook sales (because they give 25% of the take to the author.) If they took the full price as the revenue, they’d be achieving 52.5% margin on those sales (although, of course, nothing really changes.)

There are fewer knock-on problems for the publishers when the big accounts move to convert this (apparently excess) margin into changed business terms than if they allow agents to change the author deal. Changes forced by Amazon or Barnes & Noble could conceivably affect only them, depending on how the change in terms were framed.  But were an agent to succeed in pushing up the contractual ebook royalty, that change could affect a whole host of other contracts because of most favored nation clauses. That could mean royalties are suddenly due on contracts that under the previously-negotiated royalties hadn’t earned out their advances.

So we acknowledge that the price of raising contractual ebook royalties could be high. But it still might be worth it. As we will see later, more margin given to accounts achieves no incremental gain for the publishers; more margin to authors does.

There’s one more very big reason for publishers to change their accounting in the way Cader’s insight suggests. Right now, every big publisher’s life is being disrupted by state, federal, and international investigations into the legality of agency selling, which is characterized by some as “price fixing”. The defense is that the publisher, not the retailer, is the seller and it isn’t illogical for somebody selling something to charge the same price to every customer no matter how they reach them.

If “I’m really the seller” is the defense, it would be much more persuasive if the accounting supported that paradigm. As it stands, the accounting contradicts it.

The total situation not only argues for publishers to change their accounting, it also argues for them to give a bigger percentage to authors and to do it now! Doing so would deliver them two important benefits. It would reduce the apparently excess margin that their retail trading partners are noticing and coveting. But — of much greater importance —  it would also reduce the differential between what Amazon (and who knows, perhaps B&N in the future) offers an author and what the publisher offers, making it more difficult for Amazon to lure their authors away with higher royalty terms.

In fact, they might even get some sympathy from Barnes & Noble about having less excess margin to trade if they can make it clear that giving more to authors is keeping them out of Amazon’s clutches, which B&N and all other retailers absolutely need them to do.

Part of what prevents publishers from seeing merit in paying more to authors is their high cognizance of another accounting element they track: unearned advances. Unfortunately, either publishers aren’t looking at that category of expense in the right way or they’re eliding important distinctions when they discuss those unearned advances with agents.

Because all unearned advances are clearly not created equal. All of the biggest authors pile up unearned advances because they are intended to be unearned. When the agent for a megaselling writer sits down with a publisher to negotiate the advance, they are often negotiating around dividing up what they both see (perhaps without explicitly saying so) as the total revenue pie likely from the book. That leads to agreement on the advance against royalties, which divides the revenues at what is effectively much higher per-copy royalties than standard contracts call for.

But then, for reasons of “not establishing precedent” and, perhaps, not kicking in “most favored nation” clauses that could exist in other contracts (all in the publishers’ interest), the actual contract has conventional royalty splits. The book would have to sell a big increment over expectations to “earn out” on conventional royalties. That’s very unlikely because these are deals done with highly established authors where the track record is a good predictor of future performance.

So some of these “unearned” advances were never intended to be earned; they simply measure how much of a premium the publisher was willing to pay to get certain revenues into the fold.

In other words, publishers aren’t trying to manage all unearned advances down, just some of them. And if they don’t make that distinction (and some further nuance to their measurement) when they analyze this, they’re doing themselves a disservice in a number of ways. Right now, one of those ways is that it is persuading them not to pay higher royalties when doing so could well be in their interest, both because it will keep the author away from Amazon and because it leaves less margin on the table for their trading partners to pursue.

Declared royalty rates that are closer to what Amazon can offer are critical for publishers to turn around a PR war for new authors that they have been losing. The focus of a great deal of the author community buzz is around the ebook royalty differential. Disadvantages of self-publishing — the biggest three being the actual financial cost of necessary editing and core marketing (like a cover); the difference in risk between taking those costs versus taking a revenue guarantee in the form of an advance; and the additional marketing and sales a publisher generates (right now largely through the merchandising and additional revenue from print) — are too easy to ignore or elide. The royalty comparison is straightforward and apparently persuasive when it is as stark as it is now.

A 50% ebook royalty from an agency publisher on revenue after agency commissions would match the 35% royalty that Amazon pays when they pay advances and publish. But publishers don’t actually have to reach that number to be offering  a better deal because they offer sales through other channels Amazon currently either doesn’t reach or actually prohibits employing when they pay an advance to publish. It’s just a tough argument to make when they offer half that number.

One more reflection on unearned advances to bend your mind in the other direction, and then we’ll stop. When the publisher sells a copy of a book that has an unearned advance, the cash flow for this month on the book is better, because no payment to the author is triggered. If publishers paid authors higher royalties on ebook sales, they’d have fewer dollars in unearned advances (because books would earn out faster) very quickly. Of course, that’s not “good” for them because it means they have to pay new royalties on those books as they sell. This is just to say reiterate what I said above: publishing economics are complicated. Anytime you hear them oversimplified, like by somebody lumping together all “unearned advances” into a number or a percentage and wielding it like evidence or analysis, have your grains of salt handy.

I make no secret that my view of the world is publisher-centric. I was brought up that way and I’ve spent 50 years learning about the book business with that point of view. And I also make no secret of my high regard for the current leadership of the biggest publishing houses. With all due respect to the executives of my father’s generation and since, the current crop of leaders is the smartest and most thoughtful and innovative group I’ve ever seen in those slots. But (unless I’m missing something, which is, of course, always a possibility…) they all appear to be making the same mistake at the moment. I would sum up the observations from this post with three suggestions for today’s biggest publishers:

1. Change the way you account for ebook sales in the way Michael Cader suggests: call the consumer payment the top line revenue and the payment to the retailer a cost of sale.

2. Recognize that no excess margin will go unpunished. The forces of big author agents and powerful retail channels will assure that. You know there’s a minimum margin you need to survive; in fact there will also be a maximum margin you’ll have any prayer of holding onto.

3. Pay authors more so you can pay retailers less. There will be a direct connection between the two.

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As the shift from a print-centric book world to a digital one accelerates, more and more digital publishers are creating themselves.

The biggest publishers, with the resources of sophisticated IT departments to guide them, have been in the game for years now and paying serious attention since the Kindle was launched by Amazon late in 2007. But as the market has grown, so has the ecosystem. And while three years ago it was possible to reach the lion’s share of the ebook market through one retailer, Amazon, on a device that really could only handle books of straight narrative text, we now have a dizzying array of options to reach the consumer on a variety of devices and with product packages that are as complicated as you want to make them.

Free or very inexpensive service offerings through web interfaces suggest to every publisher of any size, every literary agent, and every aspiring author “you can do this” and, the implication is, “effectively and without too much help”. Indeed, services like Amazon’s KDP (Kindle Direct Publishing) service, Barnes & Noble’s PubIt!, and service providers Smashwords and BookBaby, offer the possibility of creating an ebook from your document and distributing it through most ebook retailers, enabled for almost all devices, for almost no cash commitment.

Is it really that simple? One suspects not, since literary agencies are creating ebook publishers (for example: The Scott Waxman Agency’s Diversion) and baskets of services (for example: The Knight Agency in Atlanta) and consulting to help their authors. And a bit further upstream, ebook distribution companies (for example: MintRight) and ebook-first publishers (for examples: Open Road, Rosetta, and the granddaddy of them all, Richard Curtis’s e-Reads) are creating more alternatives, sometimes propositions explicitly addressed to the agents. If publishing ebooks to all channels were really a simple matter of uploading a file, it would hardly seem necessary to build all this infrastructure.

We know that small publishers, literary agents, and authors are becoming publishers at an astounding rate. Two years ago when I was trying to organize a panel of literary agents to talk about working with authors on a charge-for-services basis instead of a share-the-royalties basis, it was hard to get volunteers to discuss new models. Two weeks ago, a major agent outside New York said to me, “we all have to think about it now; we have no choice.”

In short, it isn’t just the big publishers who are compelled to develop a digital strategy to adjust their businesses to changing times. Their smaller competitors, the agents they depend on to deliver their content, and even the authors that have always just depended on the publishers to handle the business of getting a book from a manuscript to a purchase, are all assessing the new landscape. They are considering what new approaches might reduce or eliminate their need for a publisher, or at least reduce the publisher’s share of the take.

Although the correct strategy for any entity would depend on the factors that prevail in each case, there are things it would seem that everybody entering this arena needs to know and understand.

First of all, what are all the things publishers do to get from manuscript to sale, are all the steps necessary, and what do they cost? Developmental editing, copy-editing, mark-up for design, creating metadata: these are all things publishers do routinely. Are they critical for every book? Would a purchaser-reader notice if a publishing newbie left any of them out? Will the services that promise to make and distribute an ebook without a cash investment do these things well?

The ebooks themselves have gotten increasingly complicated. The ebook standard epub (used for just about every ebook not intended for the Kindle ecosystem) has risen to the challenge posed by apps to be able to accommodate color and video and audio and software elements. Everybody who knows that “you get what you pay for” expects complicated ebooks to take more effort and money to create than ebooks of straight narrative text. But what constitutes “complex”? And how much more money does that additional effort cost the publisher that wants to deliver an ebook more complicated than just simple text?

Marketing ebooks also requires a whole new set of knowledge and skills. The key to all ebook marketing is the accompanying metadata: coding that travels along with the file specifying its core bibliographic information and price, but which can also tell a retailer or a search engine much more than that. Search engine optimization (SEO) is the art of delivering metadata that makes the book more likely to be found in response to various searches and queries; that’s yet another set of understandings new ebook publishers have to acquire.

That is just the beginning of what is possible (and therefore necessary) in ebook marketing. Sample chapters can be given away. Web sites can be invoked as partners.

And authors and publishers can, and therefore must, engage in “social network marketing”: using Twitter and Facebook and commenting in high-profile streams to catch attention and gain credibility with core audiences for the books. This is more knowledge to acquire.

Any new publisher will need to understand the paths to market. Yes, Amazon gets more than half of the US ebook sales and Barnes & Noble gets half of the rest. But it isn’t that way on every book, ignoring the others leaves a big chunk of the market unexploited, and things are changing quickly. Amazon’s market share has dropped by a huge percentage in the past two years.) OverDrive is the primary path to libraries. Ingram aggregates many independent stores. Baker & Taylor is opening up markets among mass merchants. Kobo is as important in Canada as B&N is in the US and works in markets all over the world. Google has the ebook ecosystem making the most serious penetration of independent book retailers. Sony is about to introduce new devices that could increase their importance. And Apple is doing its best to dominate sales to its own device holders, who constitute a large wedge of the ebook customer pie.

One can go to all of these channels directly but there are also a slew of services to handle what is the increasingly complex job of delivering to and administering the multiple channels. Perseus Constellation, Ingram Digital, INscribe Digital, LibreDigital (just bought by Donnelley), and Bookmasters as well as the automated services like Smashwords, BookBaby, and MintRight we mentioned above, and others offer service packages to do that and to help with the creation and marketing needs as well.

As we said at the top, nowhere is the change in publishing greater than in the agent community. What has been a stable business model for generations is now, suddenly, changing. There seem to be as many new models and approaches as there are literary agencies. That adds another thing that all of the fledging epublishers — some of which are agents, others being small publishers and authors — need to know about and understand. The relationships among authors, agents, and publishers are getting much more complicated and everybody needs to spend some time thinking that through and discussing what it means.

If all this strikes you as a set of topics worthy of a day’s discussion, we’re in agreement. We think it is too. And that’s why our new Publishers Launch Conferences partnership with Michael Cader is delivering a day-long event called “eBooks for Everyone Else” in New York (in conjunction with The Center for Publishing at New York University’s School of Continuing and Professional Studies) on Monday, September 26 and in San Francisco (co-located with F+W Media’s new StoryWorld conference) on Wednesday, November 2.

Not only do we have an expert-packed lineup to deliver the information, we’ve carved out time for our attendees to get their own specific questions answered by the experts and by the providers of many of the services that are part of the new ecosystem. If the business of ebook publishing is part of your future strategy, you’re bound to get the knowledge and make the connections you need at eBooks for Everyone Else.

Among the leading service providers who will participate in eBooks for Everyone Else in New York and be available for “speed-dating” conversations with attendees are our global sponsors Copyright Clearance Center, Constellation, and Bowker, as well as supporting sponsors Ingram Content Group, INscribe Digital, B&N’s PubIt!, Kobo, and BookBaby. (Kobo and PubIt! will be speaking from the main stage as well.)

Our New York show features an all-star lineup of literary agents including Jane Dystel, Robert Gottlieb, Sloan Harris, and Scott Waxman. We have a distinguished group of publishing veterans — including Jack Perry and David Wilk, Smashwords founder Mark Coker, Renee Register, Iris Blasi, Rich Fahle, Ron Martinez, and Joshua Tallent — who will present advice and insight to help you develop a comprehensive ebook strategy. Most of them will be available at the breaks and alongside the speed-dating sessions to lead small group discussions and answer your questions about creating, marketing, and distributing your ebooks. (The San Francisco roster is slightly different, but just as powerful.)

Michael Cader and I will be moderating all the day’s activities, asking questions, and helping to put an enormous volume of facts into a strategic context for an audience with a staggering array of choices as to how to proceed with ebook publishing.

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Our Publishers Launch Conferences venture is doing two shows in Frankfurt: a full-day “eBooks Around the World” program on Monday, October 10 and our first conference dedicated to children’s book publishing, “Children’s Publishing Goes Digital”, which will be a half-day program on Tuesday, October 11. We’ve enlisted the capable help of Lorraine Shanley of Market Partners International to program the children’s show. This post will talk about what I’ve been developing for the all-day Monday program.

There are other things going on, but there are two central themes for Monday: data and retail.

We are always focused on data about digital change because in this transitional time we’re in, none of us can get enough of it. Things are changing fast and if you haven’t looked at the thermometer in the past week or two, you probably don’t know the temperature. That’s even more true on a global scale, because global data is that much harder to get and track.

We are focused on retail because the list of “major accounts” for all publishers will be changing in the next few years. Global players will often (but not always) be replacing local ones as each publisher’s biggest intermediary customers. The ebooks marketplace in the US demonstrates how rapidly new channels can rise with the Kindle and Nook.

To begin the day at Frankfurt, we will have what we believe is the most comprehensive research report yet produced about the digital transition country-by-country and region-by-region. The Milan office of the global consulting firm, A.T. Kearney, working in conjunction with Italy’s Bookrepublic, will update and expand some substantial research they did at the end of last year. They presented their findings at the IfBookThen conference in Milan in February.

The Publishers Launch Conferences team — Michael Cader, Emily Williams, and I — have suggested some additional lines of inquiry around the intrusion of English and the expansion of the global players’ activity which we believe will enhance the already-robust research the Kearney team did before.

We’ll have a data presentation of a different sort from Jonathan Nowell of Nielsen, the company which both is the guardian of a worldwide bibliographic database and the operators of BookScan, which collects point-of-sale information around the globe. Jonathan is going to focus on how metadata affects sales and specifically how deficient metadata costs sales. The lessons here will be the ones everybody will take home and implement immediately. Nowell will point publishers to the metadata fixes which are absolutely necessary to avoid sales leakage.

The retail conversations and presentations will be sprinkled throughout the day.

We wanted to focus our audience on what we consider to be a remarkable story, the resurgence of Barnes & Noble in the digital realm since the introduction of the first Nook device 20 months ago. B&N’s success in using their brick-and-mortar presence to combat Amazon’s two year head start with the Kindle is a case history that retailers in every country in the world will want to examine carefully. That’s why we’re giving it close attention.

Theresa Horner, B&N’s VP for Digital Content and Patricia Arancibia, Manager, Digital Content, International, will join Michael Cader and me for a conversation about how they did it. They started out with a Nook that was pretty similar in price and features to the monochrome e-ink Kindle, but then they carved out their own device niche by offering Nook Color and a touchscreen version which, to this point, nobody else has matched. The color capability enabled B&N to expand their ebook product offering to include content, like magazines and children’s books, that wouldn’t work well on a Kindle or original Nook device.

But they also expanded their content base of non-English publications, building a Spanish-language store for their domestic US market that is more comprehensive than any other in the world!

All of this has propelled B&N to a spot where they are a significant challenger to Amazon’s ebook supremacy in the United States. There have been some recent indications that Nook devices may now be outselling Kindle devices, although not everybody agrees with that proposition.

Many countries have a dominant brick-and-mortar retailer that is contemplating an impending challenge from Amazon. Whether or not the B&N formula is replicable in other markets, perhaps by licensing the Nook or the Kobo reader or the new Google reader or another device, is still a fair question. The answer might be much clearer after the B&N section of our show.

But B&N has not (yet) announced any plans for a global presence. Four other ebook retailers that will grace our Frankfurt stage are declared global players.

David Naggar of Amazon.com will talk about what publishers around the world should do to best benefit from Amazon’s continuing global expansion. We know that Amazon will be a market leader in every country they enter. They are the biggest account for most US publishers today and they will be a top account soon for every publisher in the world if they aren’t already. Tips from their experience about what works best for publishers to increase their sales are useful to every publisher in every language. We had a presentation from Amazon at our Digital Book World show in New York last January which attendees all agreed was helpful and enlightening; we’re expecting the same at PLC Frankfurt.

Tom Turvey of Google will also have a lot to talk about at PLC Frankfurt. Google has just announced a Google ereading device and we keep hearing rumors (although not yet directly from them) that they will be pushing their ebook capabilities hard this Fall when a host of new tablet computers hit the market. Google’s program is the only one really built for participation by retailers and web sites everywhere and there has been a pretty widespread uptake by independent stores in the United States in the program’s opening months. If the biggest dominant chains in each country will want to pay close attention to what B&N has to say, the independent stores around the world, and the publishers that depend on them, will be paying close attention to what Google has to say.

Kobo just opened a store in Germany, following quickly on Amazon’s heels in the biggest single European market with a title base larger that is larger than Amazon’s and larger than the German aggregator, Libreka and with a special reader for the German language. They have said they’ll have stores opening in Spain, France, Italy, and Holland in the next few months. We’re working out the details with Kobo about what they’ll discuss in conversations early next month, but we know they’ll be on the program. Kobo has been distinguished among their competitors so far by their declared willingness to share sales data with publishers and, indeed, they have established a reputation for revealing things we didn’t know about the market at presentations they have made before. Kobo is the purest ebook play among the global competitors that have been in the market for some time; all the rest have other fish to fry.

But there’s a new entrant to global ebook retailing that, like Kobo, is (at least for now) purely about ebooks. That would be the UK-based start-up, Anobii.Their CEO, Matteo Berlucchi, will explain their very enticing proposition to enable crowd-sourced curation and taxonomy for books. On Anobii’s format-agnostic discovery-social platform, you’ll be able to follow a book, an author, a reader, or a topic, and you’ll be able to name your own topics. The basic functionality is supposed to go live in the next month or so and we believe our October conference will be a debut of sorts for what promises to be an entirely new approach to ebookselling. And publishers will be excited to hear that Anobii intends to share data with their vendors as well.

It could well be that the retailers we will have on the stage at PLC Frankfurt will be delivering half the sales or more for most of the world’s publishers in a few years, or perhaps even sooner than that.

Data and retail are our features, but there will be much more covered in the show.

Tracey Armstrong, the CEO of Copyright Clearance Center (which is, along with Perseus Constellation, one of our Global Sponsors) will talk about the importance of collective licensing to capture revenue that will otherwise be lost in a world where any fragment of any book might be a key component of somebody’s new app or web site.

A panel of agents will discuss the emerging new models in that segment of publishing’s value chain.

We’ll have what I think will be a very provocative panel of trade publishers who are benefiting from the fact that their company works in segments other than trade which made the digital transition sooner.

Octavio Kulesz did a pioneering study of the digital transition in the developing world that suggests that entirely new tactics will be called for if publishers are going to realize revenue from the masses who will read books on cell phones, but can’t afford to pay much.

Chris Bauerle, the Director of Sales for Sourcebooks, a mid-sized (or perhaps we should say small-major) US trade publisher, will explain their transition to a digital workflow, done a few years ago but paying off in big ways now that they want to use their content in new creative ways.

And Michael Cader and I will have a thing or two to say as well.

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It looks like we’re going to have a bit of an unintended debate stretching across several of our panels at the Publishers Launch show in London. Since I’m the guy who put the show together, I can speak with authority to the fact that it was really unintended. But I consider it serendipitous and proof of Branch Rickey’s axiom that “luck is the residue of design”.

I first started probing the question of new business models for agents two years ago when I was organizing the first Digital Book World conference. I had been asked by F+W Media to create a program that would be (in their words) “more practical” than they found Tools of Change to be. I was in partnership with O’Reilly at that time working on a “StartWithXML” show to take place in London. I wasn’t really looking for a reason to compete with them; we were collaborators.

But as I thought about what they did (which I like) and what I might do, I realized that our approaches would be different and our shows would be different. In my mind, the clearest delineation of the difference was that I put agents squarely into the middle of our show planning. This move is a bit counterintuitive in the conference business since agents have never been big ticket-buyers for the industry’s digital education events. But I thought then — and events have subsequently confirmed — that agents were key actors in the digital transition. You can explore the tech challenges of digital change without them, but you can’t really think about the changing economics of trade publishing without bringing them into the conversation.

What seemed logical then — also confirmed by subsequent events — is that agents might become ebook publishers. This had actually happened a decade before, when agent Richard Curtis set up his E-Reads business at a time when most publishers just wouldn’t do ebooks for most titles, if at all. Richard had run into political problems with the agents’ association (AAR) which I believe he headed at the time. They have a code of ethics which could be interpreted to prohibit an agent-publisher such as he had become. In fact, I was a bit surprised (but definitely sensitized and enlightened) when a good friend of mine who is a successful and highly ethical agent told me she couldn’t possibly participate in a conversation that might be seen to endorse the idea of agents becoming publishers.

We put together a panel on “new models” for agents at DBW 2010. We repeated it last year (even though there’s a natural reluctance to repeat things year to year), and we surely are going to include the topic at DBW 2012 next January.

And that brings us to what is going to happen in London on June 21.

We have four prominent agents speaking on different panels on the program. At least three of them are likely to renew the conversation about whether an agent can become a publisher and still be a credible representative for an author.

One of the panels I’m most looking forward to on that day is called “An Emerging Opportunity: Selling into the US”. Charlie Campbell, an agent at Ed Victor Ltd., will participate on that one. We wanted Charlie on the panel based on a conversation we had with him a few months ago about the possibilities he saw for his office’s clients to capture sales in the US through ebooks. When Victor’s office announced the creation of a new publishing operation to handle their own authors’ books, our interest heightened. So Charlie will be explaining how that publishing operation will work and how it benefits the authors in their stable within the context of capturing US sales from a UK or Ireland base. His fellow panelists will be publishers.

Our last panel of the day has Michael Cader and me interviewing four leading luminaries of UK publishing. Three of them are publishers, but the fourth is the agent Jonny Geller of Curtis Brown. Curtis Brown is frequently rumored to be about to start an operation similar to what Victor has announced. (In the US, by the way, agent Scott Waxman — a member of the DBW Conference Council and one of the original participants in our conversations about this — has created a publishing adjunct to his business called Diversion.) Our focus in that panel was not intended to be on the ethics of agents starting publishing companies, but now I think the topic is likely to arise.

Why? Because a third agent on the program that day, Peter Cox of Redhammer, has placed it front and center with a post he published yesterday called “Your Agent Should Not Be Your Publisher”. Peter is on a panel about “Innovation in Marketing and Business Practice.” He caught our attention because he’s been training his authors in digital marketing for years and because he told us he was thinking that the agent’s model had to change to handle fewer clients for a higher-than-standard percentage of the revenue. We didn’t ask Peter at the time how he felt about agents becoming publishers.

It turns out he is very firmly against it and is very clear and articulate about why he thinks that. The moderator of that panel is Richard Mollet of the Publishers Association. I’m sure his membership will very much want him to invite Cox to expand on his ideas. Cox’s panel takes place after Campbell’s but before Geller’s. The juxtaposition of the commentary across the panels will probably be of great interest to the audience and should make for some very interesting tweeting. Maybe we’ll need a special hashtag just for #agentsaspubs!

It was the fourth agent on the program that we thought was going to have the trickiest assignment. David Miller of Rogers, Coleridge and White Ltd. will be discussing “Territorial Rights and Open Markets” with Richard Charkin and Toby Mundy. Since the future of both practices depends very largely on what agents will agree to as the publishing landscape changes, I had thought David had the most politically challenging conversation of the group. It turns out that he’s excused from what will certainly be one of the most controversial aspects of the day’s discussions, although in our very open format, everybody’s free to say pretty much what they want. Perhaps Philip Jones, the moderator of that panel, will want to touch on this question with his panel as well.

It might be that at Publishers Launch Frankfurt we’ll stage this more directly as a debate (but that’s a crowded program and it might be hard to fit it in). You can bet it will be aired thoroughly at Digital Book World next January. And you can be pretty damn sure we’ll be generating some news on this topic (and others too, I’m sure) out of “A Global View of Digital Change”. If you’re in (London) town on June 21, you ought to be there.

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The first Publishers Launch Conferences show outside the United States, “A Global Perspective on Digital Change”, will be at the Congress Centre in central London on June 21, with the Publishers Association serving as our partners in putting on the event. We also owe special thanks to the PA’s group of Digital Directors, who were extremely generous with their time and insight. If you can be in London that day, you couldn’t find a better way to spend it than with us.

We’re still putting the finishing touches on what will be a one-day conference packed with illuminating conversation, but we can tell you quite a bit about it already. We aim to deliver strategic, practical, and focused discussion of near-term issues and opportunities. This won’t be a showcase for cool products or a venue to debate what the future might look like some day. We’re examining essential issues — ebook “export” opportunities; what happens to territorial rights; hiring and retraining to meet today’s challenges; revamping publishing systems for a dual print and digital paradigm; getting “found” on digital shelves — that publishing professionals should focus on now to thrive in the days to come.

The UK market is in between the US and the rest of the world in its migration from print to digital reading. Kindle and iPad sales really took off last Christmas and, while ebook penetration may be a fourth or less of what it is in the US, it has grown enough to be disruptive and to generate a consensus acceptance that very substantial change in the industry is inevitable.

On the one hand, my PLC partner Michael Cader and I have followed the developments in the US very closely so we have some firsthand experience with some aspects of what the UK trade is going through. On the other hand, we know history won’t repeat itself precisely. There are important differences in the markets and there is a substantial group of companies with experience and capabilities developed in the North American market that can hit the ground running in Britain or anywhere else in the world. That alone will make everybody else’s experience different than what happened in the US.

In order to be sure we were talking with the UK industry, not at it, we took some preparatory steps. In February, we put a large number of ideas for panels and topics up on Survey Monkey and invited 70 players in the UK book trade to express their opinions on them. In five days, 40 of the people responded.

Then we followed up by spending three days in London meeting with about 50 people to discuss our ideas and theirs. Our partners at the PA provided invaluable assistance, hosting our conversations and inviting us to join a regular meeting of the Digital Directors to get the insights of the most knowledgable people in the UK market. Those conversations were crucial in helping us focus properly on topics and in locating some key sources of insight. Frankly, despite our long experience working with the British publishing community (I have visited London on business three or four times a year for 35 years), putting this conference together would have been impossible without the help we got.

But because of that help, I think we’ll be presenting the UK publishing community with a lot of very useful discussion that hasn’t taken place at the many prior gatherings that have discussed book publishers and digital change.

One topic that we identified very early is the opportunity we see for publishers in Britain and Ireland to sell into the US market now without payng for a distributor infrastructure or taking an inventory risk. When we started to explore this topic, we learned that, of course, people are definitely starting to plan for it. Some are starting to exploit it. This was something we thought should be happening below the radar, and it is.

This is a peculiar opportunity, because it might be more important for independent UK publishers large and small than it is for the biggest global players. We’re still filling out the panel for this one, but we have Helen Kogan of Kogan Page, an independent whose company was already working in the US market (and therefore has some helpful experience to pass along) but who is seeing the expanded opportunity presented by digital, and Jean Harrington of Maverick House Publishers in Dublin. Jean is also President of Publishing Ireland and we invited her to join this particular conversation for a reason. The Irish diaspora in the US has a particularly strong identity with the old country and we expect books of Irish history and Irish fiction will find a substantial additional market through ebook sales in America.

We’re working on adding another British publisher and an agent to that dialogue.

Another topic arose out of a conversation that longtime UK consultant Mark Bide and I had while we were at Tools of Change in New York in February. How long will it be, I wondered, before half of UK sales are digital? Mark said he wasn’t sure about the timing, but he was sure that the publishers’ systems, overhead allocations, staffing, and infrastructure would require a lot of adjustment to be ready for that day. That’s a good conference topic, we thought.

Then, in our conversations at the PA 10 weeks ago, Anthony Forbes Watson, the MD of Pan Macmillan, told us he had charged his team with thinking through the question exactly as we had defined it. Anthony wants to know “what does 50% ebooks look like? What do we have to do to be ready for it?” The next day we talked to James Long of Pan Mac who told us that, yes, he was actually the person in the company with the primary responsibility for thinking this question through.

We decided the best frame for this conversation was “thinking about the future.” James, as he will tell us on June 21, is largely focused on what Pan Mac needs to do in systems development and integration, workflow changes, and skills development to be ready for a 50% digital world.

But there are two other aspects of preparing for the future we felt could be illuminated by other panelists we recruited.

Perseus, a US company whose Constellation division that provides digital services to smaller publishers is a global sponsor of Publishers Launch Conferences, is one of several companies in the world (Ingram in the US is another; so might Random House be in the US and the UK) that are investing in warehouses and print book distribution capabilities at precisely the time many publishers are disinvesting in them, precisely because they know that most publishers will have to disinvest in them. They’re trying to be there for publishers who want to dispose of fixed cost overheads for the shrinking print book market. We put Rick Joyce of Perseus into this conversation to cover the sensitive topic of consolidation on the physical side (a subject that Dominic Myers, the MD of Waterstone’s, famously put on the UK publishing community’s agenda a couple of months ago.)

Copyright Clearance Center, the US RRO which is also a global sponsor of Publishers Launch Conferences, has steadily called our attention to another industry-wide challenge: the need to manage rights more effectively and on a more granular level to take advantage of emerging opportunities to license chunks and fragments for apps, ebooks, and web sites. We thought that the voice for this topic in London should be local, and we were pleased that Sara Faulder, head of the Publishers Licensing Society, agreed to join this conversation.

Mark Bide has agreed to moderate this group in what I think will be a dialogue about publishers and the digital future unlike any the audience will have heard before. (Except, that is, if they are at our Publishers Launch BEA show on May 25, where we’ll have a different version of this conversation, one more focused on export and rights sales than infrastructure, but also covering the change we’ll see to selling more and more fragments.)

We’re not above stealing our own ideas and giving them a local spin. One panel that was extraordinarily successful at Digital Book World last January was one we describe in shorthand as “new skill sets”. It’s about capabilities publishers need to get that they don’t have and it is about process and workflow changes and the use of cross-functional teams as well as hiring in or training people with new skills. Charlie Redmayne of HarperCollins did that panel for us in New York in January and is reprising it at our BEA show. In London, he’ll be joined by Juan Lopez-Valcarel of Pearson and Jacks Thomas, the CEO of Midas Public Relations, on a panel moderated by Jo Howard of Mosaic Search & Selection Ltd. One of the key elements in the New York discussion of this, which we expect will arise again in London, is “when is it best to hire in the skills and when is it better to retrain the people I already have?” This is a subject every publisher needs to be thinking about that isn’t discussed in public very often.

We’ll have three of the top digital leaders of UK houses — George Walkley of Hachette, David Roth-ey of HarperCollins, and Sara Lloyd of Pan Macmillan — joining Michael and me for a dialogue about the big companies who have cut their teeth on the US market and are now taking their capabilities worldwide, starting in the UK. We’ll be talking about Amazon, Apple, Google, Kobo, Ingram, and Overdrive (the six clearly-declared and clearly-capable global ebook players) as well as Sony, aspirants like Copia and Blio, and US titan Barnes & Noble (which has shown no clear signs of global interest yet.) It looks to us like there is only one UK player with a global perspective, still-tiny cell phone provider Mobcast, but we’ll be learning from our panelists whether there are others we should be considering. And our audience will learn more about the North American companies which are bound to be a big part of the local market’s ebook life in the years to come.

We’ve reached a time when “metadata” is an important subject to discuss, no matter how dry or back room it has seemed. We were fortunate to get Graham Bell of EDItEUR to moderate a dialogue about this for us. He’s recruited Jon Windus of Nielsen and Karina Luke of Penguin to discuss it with him. We’re now looking for a retailer to join them. The condition of metadata in the marketplace is not good enough in enough places yet. This is costing publishers sales. This panel will explain why that is and what every publisher should do to make sure this isn’t a huge hole in the side of their boat as online sales, print and digital, grow and the impact of metadata grows right along with them.

We are also going to have a discussion of the future of territorial rights. Richard Charkin of Bloomsbury, a well-known skeptic about them, and David Miller, an agent with Rogers, Coleridge and White Ltd., have agreed to participate. We’re looking for a full-throated defender of the current territorial regime to join them in what will be more of a conversation than a debate. We wonder whether territorial rights make as much sense in a 50% ebook world as they do in the 5% ebook world we might now be in. The agent’s voice in this conversation might be the most important one because, after all, they decide whether the deals are acceptable or not.

One thing that the territorial rights dialogue will certainly entertain is what we should expect to see in terms of author initiatives. That topic is bound to come up in two other discussions as well. There’s one we’re now calling “experiments, best practices, and out of the box thinking” which is really about innovation. But we are going to focus on innovation in business models and practices and innovation in marketing, not on product innovation. We are still working on putting this group together, but we were very impressed with our preliminary conversations with two of the panelists.

Marc Gascoigne is at Angry Robot, a sci-fi imprint started by HarperCollins and then bought by Osprey. Angry Robot’s better mousetrap is its community focus; Gascoigne will make the case that doing that right (which many publishers say they want to do) requires that everybody, and that means every editor and everybody else, communicate directly with the audience. It is hard to see putting that across in many established trade houses.

Richard Mollet of the PA will moderate the conversation with the innovators.

Also on that panel will be Peter Cox, an agent with Redhammer. Cox is changing his own business model (providing more in the way of services to his authors, but charging them more for it and looking to represent fewer authors, not more) but he’s effectively changing the author-publisher relationship as well by making the author an active marketer and community gatherer. He’ll have examples and he’ll have ideas that will challenge the thinking of many publishers and agents in the audience.

The last panel of our day is intended as a Grand Finale. Michael Cader and I will sit with Stephen Page of Faber, Rebecca Smart of Osprey, John Makinson of Penguin, and agent Jonny Geller of Curtis Brown. We’ll get their take on the speed of the ebook takeup and its consequences.

How will British publishers cope in a market that may soon have no full-line bookstore chain? How will the industry cope with the rise of self-publishing? Is there any real danger of a consolidated English-language world in which London becomes subsidiary to New York? Or, in some companies, might it be vice-versa? Will both agents and publishers be changing the core business models which have prevailed for the past century over the next few years?

What excites me about the last panel — aside from the sheer smarts and savvy of the people we got to join us — is the diversity of their perspectives. The publishers run companies of different sizes and with very different approaches to building their publishing lists. The agent joining us has gained a reputation as one of the most digitally savvy players in the UK market. Michael and I thrive on spirited conversations with very smart people; we think we’re going to finish the day very stimulated and with big smiles on our faces.

And we think our audience will too.

Of course, before we get to London, we’ll be running our “eBooks Go Global” show aimed at international visitors and their trading partners at BEA. At that show, we’re particularly excited about two panels we won’t be doing in London. One is with a few booksellers already working with the new Google Ebooks capability reporting on how it is functioning for them. The other takes a slightly different approach to the “selling in the US” opportunity. Patricia Arancibia of Barnes & Noble, which has aggregated about ten times as many ebooks in Spanish as most people in Spanish markets will tell you exists, will open a lot of foreign publishers’ eyes to the possibilities that exist for them in the US market. We’ll also have a chat with Barry Eisler, the author who turned down half-a-million bucks to self-publish. And that’s not all. Tickets still available… And tickets still available for London as well.

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This is an unusually brief post today, but some worthy observations don’t require long explanations.

I wrote nearly 18 months ago about my concern that publishers’ interest in enhanced ebooks would bring on a repeat of the commercially disastrous CD-Rom era of the mid-1990s. Of course, since the CD-Rom era, a lot has changed.

* The opportunities in linking and multiple media have been explored every conceivable way through the web.

* The number of devices on which people can readily consume enhanced content has exploded.

* A number of tools have been announced that can enable one person working alone, even without much technical expertise, to put an enhanced product together, if they have the digital assets and the rights to use them.

The tools are really in the news lately. Vook, the start-up that has been pioneering video integration into ebooks, has a tool kit being trialed called Mother Vook. Packager Charlie Melcher has a new initiative called Push Pop which promises transmedia authoring tools for Apple’s iOS. And I see on the web a new company called Yapper, for “your app maker”, that looks like Smashwords on steroids.

There are also tool sets operating at a more sophisticated level, but still making development more efficient. Touch Press has just applied its capabilities — which, among other things, enable them to make objects “spin” to be viewed from all sides — to a third iPad app called “Gems and Jewels”. (They had previously done “The Elements” and “The Solar System”.) We’re working with a developer in New York on some sports encyclopedia apps that make use of their proprietary system development to convert large databases to app presentations very efficiently.

A question that will probably rise in importance is whether the system that enables you to make an app for the iOS operating system will also get you to epub or HTML5. That’s one the “do-it-yourself” system developers will also have to answer.

(It might be worth observing parenthetically — which is why I’m doing it that way — that we see Apple developing the huge monopoly position on apps that Amazon has selling independently-published ebooks through the Kindle platform. While it almost always makes sense to distribute content as broadly as you can to amortize the investment in intellectual creativity, Kindle gets you so much of the ebook market and Apple so much of the app market that the effort-reward ratio to doing the rest can only make sense if there’s very little effort required.

(A companion parenthetical observation is that iPad apps with no iPhone-size counterpart are another sign that the creation tools aren’t powerful enough. I know you can’t recreate “The Elements” as it is done for the iPad on an iPhone screen, but you certainly have, within what was done, the makings of a terrific alternative fitted to the form.)

I don’t know how good the enhanced ebook and app creation tools are…yet. (Other people will judge that and tell me.) There have been announcements like what we’re hearing from Vook and Push Pop before that didn’t deliver or haven’t yet, going back to the beginning of ebook time in the early 1990s. There was fairly recent buzz that disappeared about Zinio Fusion. There was a Google App Inventor for Android ballyhooed last year, but that hasn’t been heard from lately. In fact, robust tools were part of the early promise of Blio, which got us very excited 18 months ago, but they have failed to gain traction along with the rest of the Blio platform. The “so easy anybody can do it” promise hasn’t been really fulfilled yet.

But I know the tools will get great eventually. And that might be soon.

When they do it will mean that anybody can make a media- and link-rich ebook; just add intellect.

That’s a trend I’m not sure works in favor of big publishers who are looking for opportunities to apply scale. These tools, if they work, undermine scale by reducing the need for tech wizardry in product creation. Of course, editorial wizardry is still required.

There’s one more trend I expect to see over the next couple of years: a marked increase in the number of ebooks created from what was originally illustrated book content. Some of those books integrated visual images for practical purposes, to illustrate how to tie a tie or cut a piece of wood, or as the images do in the print version of “The Elements”. For some books, “coffee table books”, the illustrations are the featured content.

In either case, the ebooks of 2007-2011 weren’t really suitable for them; in the next couple of years, publishers will be learning how to make appealing digital products with intellectual property like that.

This will be a process of trial, feedback, and improvement on an industry-wide level as we all learn what people actually like, do, and value. But there will be skill development on a highly individualized basis as people develop and express their editorial “touch” for integrating the elements, managing them through Mother Vook, Push Pop, Yapper, Blio, or one of the next dozen competitors that arise.

Will small entrepreneurial publishers develop and relate to these resources best, or big ones? In the next couple of years, I think we’ll find out.

We have one segment of our “eBooks Go Global” show at BEA that will explore the strategy and approach to investing in enhancement, another that looks at what skill sets publishers need to find or get, and yet another featuring publishers managing their digital publishing without much in the way of internal tech resources. And we’ve just added a short demo from Charlie Melcher to show us the tools he’s about to deliver. Here’s the registration link.

On this Thursday, May 5, we’ll be taking part in BISG’s annual Making Information Pay conference. We worked closely with BISG’s Scott Lubeck in putting together this year’s show, which is called “Constructing the 21st Century Publishing Enterprise.” There will be a keynote by Hachette COO Ken Michaels and important presentations on discovery within the context of the semantic web. We’re delivering a presentation jointly with Heather Reid of CCC and David Marlin of Metacomet about what we’ve learned from talking to publishers and service providers about rights databases. Rights databases, like the other topics at MIP and like the topics discussed in the body of this post, will be moving from a peripheral position to center stage in the very near future.

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I had already been in the “publishing futurist” game for a few years when my frequent project partner Mark Bide and I put together a day-long conference in March 2000 at the London Book Fair called “Publishing 2010.” (As I look at what I wrote for that conference, I can see some things I got right, some I got wrong, and some look like good predictions for the next few years, but haven’t happened yet.)

Although it was an “innovation” when I included agents in the digital change conversation at Digital Book World in January 2010, Mark and I actually did it for the first time at that conference 11 years ago. One of the agents we recruited for this conference was Michael Carlisle. Just a week before the conference, and the day before I was leaving for the UK, Carlisle called me with bad news. One of his literary clients was the driver of Lady Diana Spencer’s car in the crash that killed her in August of 1997. The driver’s book was coming out, Carlisle represented it. The promotional book tour needed to take place during the week of London Book Fair and Carlisle just had to cancel his trip across the pond.

“But,” he said, “I can give you a replacement. I know you don’t know him, but his name is Michael Cader and I can assure you he’ll do a great job as my substitute.” With no time to find somebody else, or even to vet this fellow Cader, I just said thank you and good luck with the book tour.

The conference was a success. We made a little money, had a very provocative day of conversation, and a few people even told me it was the best such conference they’d ever attended. Cader was, for my money, one of the stars of the show. I hadn’t ever heard anybody say so many things about digital change in publishing that I agreed with but hadn’t really thought of before. It was easy to agree that we should stay in touch.

A month or two later, Michael sent me a prototype for an idea he had and was about to start: a newsletter called Publishers Lunch. It was a great concept: links to stories about publishing from all over the internet with a graf or two of summary, explanation, and comment. I was bound to think this was a great idea because I’d had a similar thought about six or seven years earlier, just before the Web changed all of our lives. I had suggested to my friend (and one of my very favorite people to work with) Lorraine Shanley of Market Partners that the publishing world needed a service. Since a story about publishing could appear in any one of several newspapers or magazines on a New York newsstand on any day, we should hire a kid to read the papers at 3 am and send out a FAX at 6 in the morning telling people what stories they shouldn’t miss!

We didn’t do it. Cader’s version, with the advancements of technology, was an infinitely better iteration of the idea. As it turned out, his ongoing commentary also added more value than we could possibly have added (unless, of course, we had his help, but we didn’t know him then!)

In the decade-plus since that London Book Fair and the start of Lunch, Cader and I have had the opportunity to work together from time to time on conferences and industry events. We’ve shared stages. At the last BEA in Washington a few years ago, I interviewed Michael in a 1-on-1 session. And we have endlessly discussed our views about publishing and digital change.

We are both, in different ways, already making our living delivering “industry education.” For public consumption, Michael delivers each day’s facts with a few words of wise context; my less-frequent Shatzkin Files posts select a context or a paradigm to explain with, usually, some supporting facts. The consulting assignments of my company often involve teaching a tech company about the publishing business or helping an industry service get a better handle on what their client base needs or can accept. We’ve talked about ways to formalize a partnership over the years. Before it disappeared, we talked with the Stanford Publishing Course about delivering a new digital curriculum. We’ve fiddled with live event ideas.

When David Nussbaum, the Chairman of F+W Media, came to me two years ago with his concept for a new conference called Digital Book World and asked me to organize the program, I suggested strongly to him that he figure out how to engage Cader as his marketing arm. David agreed, and for the past two years, Michael and I have happily collaborated on programming and promoting a 2-day event which, in two short years, has grown to the same size as the 5-year old, very successful, and very worthy Tools of Change.

Today, Michael and I have announced a formal partnership called Publishers Launch Conferences to deliver live events — globally and throughout the year — on publishing and digital change. It is an anchor of this business that we will continue to do the 2-day Digital Book World event in January 2012 and for years thereafter. We call Digital Book World a “State of Play” event, covering the landscape of digital change.

DBW is aimed primarily at US trade publishers and the extent of the show — 2 days and 4 parallel programming tracks for half of the time — allows us to cover more than two dozen distinct topics with panels and presentations. Publishers Launch Conferences will, in its first year (ending next January with DBW 3), deliver about seven shorter (1 day or 1/2 day) and more focused events in New York, London, Frankfurt, and San Francisco. Our first day-long conference will be at (and in conjunction with) BookExpo America in May, aimed at international visitors and the Americans who are doing business with them. Our event in London on June 21, being presented in partnership with the UK’s Publishers Association, will address digital change from a UK perspective.

It has already been an education for us to think things through from the point of view of the different audiences we’re delivering for. Our plans for our London show were greatly informed (and modified) by meetings we had three weeks ago (thanks to our partners at the PA) with about 20 different players in UK publishing to discuss what needed to be addressed, how, and by whom.

Some of the Publishers Launch Conferences events will be topic-targeted. We’re planning two niche shows in the Fall: one on juvenile publishing (which both Michael and I see as the segment of the book business facing the most potential intrustion from outside players because of digital change) and one we’re calling internally “ebooks for the rest of us”. That one will focus on the mechanics of ebook publishing — from content conversion to the ultimate sale — for the smaller publishers, agents, and authors who don’t have the IT and marketing resources of the big publishers. A number of small publishers and entreprenurial authors have achieved notable success in the ebook world already. We’ll focus on what it takes to do that so that more small players can follow in their footsteps.

We decided on doing a few things differently than most other conferences. We won’t have a zillion sponsors; we’re limiting sponsor participation in the interests of our audience and in the interests of the sponsors themselves. Our first two Global Sponsors, Copyright Clearance Center and Perseus’s Constellation service, have embraced our unconventional practices. There will be no sponsor pitches from the stage during our programs. There will be no email spam sent to attendees by sponsors after the programs. Even our printed program will be designed to be helpful and worth keeping and we’ll do our best to have it contain the information that our audiences need to take home, reducing their need to take notes during the show. As readers of this blog know, organizing conferences engages me in conversations that often turn into posts.

Part of my value — and Michael Cader’s — comes from talking to people who are smart and well-informed about the topics that all of us in publishing must inevitably wrestle with if we want to stay in publishing during this time of constant and roiling change. Planning these events and recruiting speakers for them as a continuous and year-round process will be a new ongoing feature of my life, and therefore of these posts as well. I hope we’ll see you at some of the shows but, whether you’re there or not, they should result in you should be reading a more informed blogger when you come to The Shatzkin Files.

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Sometimes, and it would seem quite often these days, the future comes faster than you expected it.

Followers of this blog, and of my speeches before there was a blog (this one’s from 2001!), know I’ve long been expecting ebook reading to supplant print book reading for many people. I’ve been wrong about the timing. (Ten years ago I’d have expected to be where we are now three or four years ago.) I’ve been wrong about whether a dedicated device for reading would make much of difference. (I read so comfortably on a phone, and before that on a PDA, that I figured few would want yet another device for reading only.) And I’m rethinking my expectations around enhanced ebooks and the utility of social reading.

But it has seemed clear to me for a long time that ebooks offered compelling advantages over print — portability, ease of purchase, and a lower cost basis that must inexorably lead to lower prices — that would increasingly sway many of the inevitably growing number of people who had a readable handheld screen in reach most of the time. And my long experience dealing with bookstore economics made it clear to me that the consequent sales subtraction from brick-and-mortar stores would lead to closures, which would lead to longer travel times for customers to get to the stores, which in turn would drive more people to purchase print or digital books online. And that would lead to more closures. This is a virtuous circle if you’re in the ebook business or sell print online. Or if you want to see Americans consume less gasoline.

It is a vicious cycle — a death spiral — if you’re a bookstore.

Michael Cader of Publishers Lunch reported (you have to subscribe to use the links) that BookScan numbers show a drop in unit sales of printed books of 4.4 % from 2009 to 2010. But don’t take that number to any bank. It is already out of date. Cader did a further analysis of more recent BookScan data shortly thereafter showing that print book sales have dropped by over 15% compared to the prior year over the first six weeks of 2011! And the share of print sold online keeps rising, so that almost certainly means that print sales in stores has fallen even faster. Could print sales in stores have dropped 20% or 25% from a year ago? They certainly could!

Sales of iPads, Kindles, and Nooks exceeded most expectations for Christmas 2010. Dominique Raccah, the head of independent publisher Sourcebook, a company with a diverse trade list, reported on her blog that dollar sales at her company in January were 35% digital!

No wonder she says, “We may well be at the tipping point. I suspect that we’re going to see some dramatic reassessment when publishers look at their numbers at the end of the first quarter, 2011.”

I have heard the argument from very smart people that ebook adoption will plateau at some point. Since it has been doubling or more for the past three years and was often placed in the mid-teens for new fiction and narrative non-fiction by the last quarter of 2010, we know that it can’t continue to double for the next three years without exceeding 100%. Nonetheless, predictions that ebook sales would achieve 50% in the next five years and that bookstore shelf space would drop by 50% in the next five years — which is what I thought would be the case — seemed pretty aggressive six months ago.

They don’t seem aggressive anymore.

The Borders share of the publishers’ revenue is estimated to be about 8%. They could be 10% or 12% of brick-and-mortar. So if Borders were to completely disappear tomorrow (and they aren’t about to do that) and even if every book they sold in their stores were somehow purchased at somebody else’s store (which won’t happen), the reduction of book sales in stores is so large that all the other stores would still, collectively, be looking at a substantial year-on-year sales decline.

All this means that 2011 that is going to be a real “fasten your seat belts” year for publishers. And Raccah is right that publishers are going to be a bit stunned at what they see when they look at their numbers for the first quarter of this year.

One impact that sophisticated publishers are well aware of but that is not obvious to the untrained eye is that as sales go down, returns percentages, inevitably and inexorably, go up. When a publisher calculates a returns percentage for any period — a week, a month, a quarter, or a year — they are measuring the returns received and credited in that period against the sales made in that period. But the returns actually come from the sales made in prior periods; even in the worst of situations, very few books are returned less than three months following their purchase.

So what’s happening right now is that shipments out are being depressed — no or very little Borders and diminished expectations everywhere else — while returns are rising because they’re coming back from orders placed against the higher expectations of the past six to 12 months. That means that the net sales numbers being created right now — shipments out minus returns — might, for many, be a disappointment verging on devastation.

And returns percentages aren’t the only percentages that are going to be troubling. Two others that publishers look at are also going to get more challenging.

The percentage of a book’s print price that is constituted by the “unit cost of manufacture” is one. The unit cost is extremely run-sensitive. If you’re printing fewer books and if you have to hold the line on retail prices (both of which will almost certainly be true), the percentage of revenue spent on creating the print books is going to rise.

The second trouble spot is that publishers like to think about the cost of “fixed overheads” as a percentage. Many publishers still follow the unwise practice of putting a percentage calculation of overhead into their unit cost calculations for every book. But if sales volume falls faster than overheads can be reduced, that percentage rises too. And you can’t fire your way to rapid overhead reductions very effectively. Shedding staff is often an illusion anyway; we keep hearing about freelancers getting work because publishers have fired the staff that used to do it. But, besides that, warehouse and office space costs and systems investments don’t rise or drop with volume (which is exactly why it is a logical error to calculate them as a percentage of revenue!) Publishers who are using a percent figure for overhead to calculate their margins on each title they acquire to sell are going to find those numbers need to be reconsidered as well.

While Barnes & Noble will be feeling the margin pain of all brick-and-mortar booksellers, they are, no doubt, also very well aware of their growing importance to all publishers in an upcoming Borders-less (or less-Borders) world. B&N will almost certainly be looking for better trading terms and publishers will almost certainly feel the weakness in their negotiating position dealing with those requests. And that’s aside from the fact that publishers really and truly want a healthy Barnes & Noble maintaining its ability to show their wares to the public.

So sales are going down, returns are going up, the cost of goods is going up, margins from sales are going down, and right-sizing overheads is going to be an accelerating problem. The good news is that ebook sales are rising and the margins from them — at least for now — have been pretty well preserved.

But the first significant sign that ebook prices are going to tumble has arrived with the news that 99 cent ebooks are now beginning to appear on the mainstream media’s ebook and combined bestsellers lists which come from The New York Times and USA Today. This creates some nasty problems. It puts previously unknown authors selling 99 cent books before the public as bestseller creators. And it encourages the established publishers to cut prices to register unit sales to get on those lists themselves.

At the very least, I’d expect publishers to start asking The Times and USA Today to consider the total revenue a book generates at retail (price times units) when creating the lists, not base them on unit sales alone. Since the established publishers buy a lot more ads than the 99-cent-book authors do, we should expect them to, at least, get a hearing.

Publishers are going to be scrambling to keep their business profitable and having second thoughts about many of their most time-honored practices in the weeks to come.

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