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I have found a way to describe the difference between the Digital Book World conference we organize for F+W Media and the O’Reilly conference Tools of Change which I believe is accurate and is certainly not intended to be a pejorative description of  Tools of Change. I go to TOC and I find it very valuable, but different from what we’re trying to do.

Tools of Change explores developments in technology that have impact or can have impact on publishing (in general) and helps publishers (of all kinds) understand how to apply them. Digital Book World explores business challenges to trade publishing (defined as book publishers who work primarily through the retail network, or “the trade”) generated by digital change and helps publishers address them. So if I were organizing Tools of Change, I’d want to scan the horizon for technologies that could have an impact and ask “how?” Because I’m organizing Digital Book World, I’m looking at trade publishing’s commercial environment and operations for the impact of technology and asking “what should we do?”

The next Digital Book World Conference is set for January 25-26, 2011. That obliges us to ask: what will the hot digital change questions be eight months from now? What should we be planning to discuss then that will be immediate and relevant to the attendees we’re targeting: the editorial, marketing, sales, and digital strategy people in trade book publishing houses?

To help us figure that out, we’re in the process of recruiting the DBW 2011 Conference Council. That group of about 30 people — CEOs, digital strategists, and marketers from publishing houses large and small, agents, retailers, and independent industry thought leaders — will help us define the panels and choose the speakers that can enlighten and inspire. I’ll introduce you to that group in a future post; the team is in formation at the moment.

Today’s blog is to recruit the readers of The Shatzkin Files to help too. I hope you will.

Here are 15 topics, or speculations, we’ve identified to start building an agenda for discussion next January. Do you have any thoughts on any of these to refine our thinking? Some of these are ideas looking for examples: do you know particular people or companies doing things suggested here (or not suggested here) we should be highlighting? And, most important, what are we missing?

1. What’s going to be in an ebook? We’re definitely moving past the stage where the ebook is a “straight lift” from the print: half-titles, blank pages, and all. As ebook sales are rising, publishers are paying more attention to presentation and quality control. And there have been a few experiments with “enhanced ebooks” that contain added content and features, some of which are presenting books as “apps” to increase the functionality that can be offered. Where will we be drawing the line between “standard” new ebook features — dictionaries and linked notes, for example — and enhancements that might be worth extra money? And what enhancements will we see working in the sense that consumers see them to be worth paying for?

2. What will ebook sales channels look like eight months from now? In addition to the main ones we have today — Kindle, iBooks and the App Store, Nook and B&N, Sony, Ingram Digital and Content Reserve — will we be seeing substantial sales through Google and the Android marketplace, B&T’s Blio, and Copia as well? Will the mobile phone service providers be creating retail outlets that matter too? Will the retailers newly in the ereader game — Walmart and Costco and Best Buy — also be motivated to create a branded outlet of their own to sell ebooks?

3. To what extent will publishers view single-title marketing as a practical endeavor? We’ve maintained that title-by-title marketing is the Achilles heel of general trade publishing and that the steady erosion of book-format-oriented marketing opportunities (book review pages in newspapers, radio and TV talk shows) and verticalization call for different marketing strategies. Where will publishers’ thinking be next January on the challenge of launching each new title into the marketplace?

4. How much progress will publishers be making on establishing direct-to-customer contact? What has characterized trade publishing is its dependence on intermediaries to reach the market. And what has made trade publishing possible is the leverage provided by those intermediaries, allowing publishers to reach millions of readers through mere thousands of touch points. But all publishers today acknowledge that the intermediary structure is breaking down and direct contact with end users is necessary. How is that working out? We may need two panels to answer that question: one of niche publishers that will find it pretty natural to do and one of general trade publishers who will undoubtedly find it very hard and complicated.

5. How important is the mobile phone market? How fast is it growing? What kind of books work best on it? And what do publishers have to do differently to please that market than what they do for larger-screen PCs, tablets, and ereaders?

6. How are publishers tackling the shrinking marketplace for printed books? Are they shedding warehouse space or considering consolidation with other players? Are they renegotiating printing contracts, reconsidering what constitutes a “minimum run” or acceptable print book margins? Are they developing new short-run and POD models to complement their prior pressrun models? Are they launching any new books with a no-pressrun strategy?

7. How much progress are publishers making toward changing their workflow, so that we have “ebook first” editorial processes? Since the beginning of ebooks over a decade ago, the standard technique has been to make them after the print book has been completed, and for the editor and author to focus their efforts on making the best possible print product. There is an increasingly widespread belief that this is backwards, and more complex ebooks help make a compelling argument for reversing the order of things. How far will we have moved in that direction by next January?

8. Does the growth of ebook sales change the thinking of publishers and agents about the efficacy of dividing up the territories for single languages? Do publishers start to see a growth in offshore sales facilitated by ebooks? Anecdotal reporting by O’Reilly, which owns global rights in all its titles, suggests that they’re seeing big sales growth in digital from markets that are hard-to-reach with print.

9. Do non-US publishers start to establish more of a sales presence in the US exclusively through virtual means? We’ve been suggesting on this blog that the growth of online sales — print books and digital books — will soon enable reaching a majority of the US sales potential without inventory, which means without the need for a warehouse or a distributor. That should lead to greater penetration of our market by offshore publishers, in all languages. Will we see enough signs of this by January 2011 to build a discussion around it?

10. How does the future look for the brick-and-mortar bookstore marketplace? On this blog (and elsewhere), concerns have been expressed about the impact on bookstores of the increasing shift to online purchasing for both print and ebooks. Christmas 2010 is being viewed in the consumer electronics industry as the “ebook Christmas”. When we’ve had a chance to digest the sales numbers of new devices and we combine that with what we know about the impact devices have on a consumer’s print book purchases, how do we see the future of bookstores when next January rolls around?

11. Is “profitable self-publishing” an idea gaining credibility or is it a pipedream? In 2009, author J.A. Konrath made a bit of a splash when he blogged about the substantial revenues he was earning putting his short stories and out-of-print backlist on Kindle without a publisher. Will there be more stories like this by January? Will this look like a viable option for established authors?

12. What’s the best approach to ebook distribution for small and mid-sized publishers? Will the original DADs (digital asset distributors) like Ingram Digital and LibreDigital provide the full service suite and sales effort that smaller publishers need? Or will the publishers-as-distributors model — notably including O’Reilly, who went into the business last February, as well as trade publishers and trade distributors like Perseus and NBN and Ingram Publisher Services, be the better option? How much is effective ebook distribution dependent on technical competence and how much of it requires sales competence?

13. After many years of discussion, are we yet beginning to see some new revenue models with any impact, like subscriptions (Disney has tried it now, in addition to O’Reilly’s Safari), selling books by the slice, or new models to compensate for library lending? We know that publishers need metadata-labeled fragments of their books for marketing purposes, but, for trade publishers, is there yet any indication that there’s a real payoff for that kind of tagging in sales revenue?

14. How much of the print backlist is still locked up by rights issues and what impact can different royalty offers have in clearing it up?Jane Friedman’s Open Road has had some success signing up established backlist for higher ebook royalties than the majors want to pay. Is the reservoir of candidates for this treatment substantial? How are agents and big publishers going to resolve these issues?

15. Is the notion of publishers building vertical presences on the web, so often expressed and promoted on this blog, gaining any significant traction in the real world? How are Poetry Speaks and Oxford Bibliographies Online and the forthcoming Pixiq from Sterling doing at establishing a new publishing model? What other examples are emerging or will emerge of publishers using delivering vertical solutions to create new business models?

At the Digital Book World conference, we want to be strategic and we want to be practical. And we want to be focused on the real-world problems digital change is forcing trade publishers to face. Have we left out any of yours?

I have finished this but not posted it yet and am already thinking of things I left out. A substantial publisher I spoke to last week learned from having his trip to the London Book Fair cancelled that he doesn’t need to go there anymore. This company has already given up its BEA floor space in favor of a meeting room. And this CEO himself is no longer going to go to Frankfurt and can see the day not far off when his company will no longer take space there either. Are trade shows  an anachronism in the age of digital communication? I have a feeling you readers and the Conference Council will think of a lot more.

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One of the most significant pieces of news to come out of Tools of Change is that O’Reilly is going into the distribution business for ebooks. This is indeed, a “tool” of change. It is also a harbinger of times to come that threaten a lot of big companies: major publishers; the big distributors like Perseus, NBN, and IPG; the digital asset distributors including Ingram, LibreDigital, North Point codeMantra, and the fledgling operation at Bookmasters; as well as the digital wholesaling operations at Ingram, Content Reserve, and Baker & Taylor.

The O’Reilly offer is to do whatever conversion is necessary to deliver files to a wide range of ebook channels for free and then to make the ebooks available through that retailing network for a charge of 25% of the dollars received. One prospective client told me that O’Reilly is willing to do a one-year contract.

This both an object lesson and a serious shot across the bow of the legacy giants of the print book business.

We’ve made the point here before that big publishers have a competitive advantage built on print-world capabilities, among them being the ability to get fast printings and reprints; the ability to quickly move books in and out of a distribution center; the ability to ship books according to the receiving requirements of many intermediaries, large and small; and a strong sales network with accounts, mostly brick-and-mortar, that sell printed books. All of these things require pretty massive scale. You couldn’t consider doing them well yourself for a $1 million (in sales) company or a $10 million company and it would be challenging to be competitive doing them with a $50 million company.

The scale required to do effective print book distribution affects both the supply and the demand in the distribution business. It means there are a lot of companies too small to do it well for themselves (creating lots of demand) and very few companies with the scale to do it well (creating a limited supply of providers.) Even so, as the need for scale along with declining overall sales have driven the big publishers deeper and deeper into the distribution business (pushing up the supply of distributors), prices for distribution have fallen steadily for at least the past decade.

Of course, anything that requires expertise benefits from some scale to develop it. And that’s what O’Reilly has in digital distribution. Partly because of the nature of the company’s audience, but largely because they have been aggressive and innovative about exploring every conceivable avenue for ebook distribution and developing a tool set that makes it possible for them to try new channels and opportunities quickly, O’Reilly has more scale, and therefore more expertise, than anybody else in consumer ebook distribution (except, arguably, some publishers in the romance space.) It is quite believeable that they can put ebooks into more channels with more efficiency than anybody else. And that’s an expertise that is largely (but not completely) topic-agnostic.

So we have a real Man Bites Dog story here. In the print world, O’Reilly is distributed by Ingram, which has invested heavily in ebook distribution. But not only does Ingram not get to be the distributor of their client’s ebooks, O’Reilly is issuing what amounts to an open invitation for all other publishers, including their fellow distributees at Ingram, to use them for ebook distribution.

(In his wrap-up talk at Tools of Change, Tim O’Reilly referenced a remark John Ingram had made to him at dinner the night before. On reflection, one wonders how the part of the the dinner conversation about ebook distribution went.)

This new challenge is playing itself out all across the distribution landscape. In the past week I have had two conversations with smaller publishers who have distributors on the print side. One is repped by one of the big independent distributors and the other by one of the Big Six. Both are planning their ebook distribution strategies, and neither of them intends to use their print distributor to help in any way.

The one distributed by an indie distributor is seriously tempted by the O’Reilly offer. This well-established company is quite comfortable taking responsibility for its own sales if they don’t need scale to handle it, so they have already pulled Amazon out of their print distribution deal. They planned to do digital on their own. They’ve had a digital workflow for a while, so their current books are in XML documents that make ebook conversion pretty straightforward. (If the offer of totally free content conversion is correct, then O’Reilly may have developed some tools helping them automate the way to from PDF or epub to XML. And they solve the problem of getting from XML to anything else that comes along for all their books.) But this publisher still have an extensive backlist that needs conversion to XML. This company sees a 1-year contract with O’Reilly as a possible way to get the conversion done and to get a line on a large number of points of ebook merchandising that they might otherwise not have known. In any case, the big print book distributor — with all its sunk costs and infrastructure and years of performance and relationship — isn’t even getting consideration.

The other company, distributed by a Big Six publisher, has also decided that digital distribution through its print distributor is a non-starter. They have been looking at the many Digital Asset Distributors to handle their conversion and distribution and have been close to settling on one. This company also has a legacy conversion challenge. Might they now want to put the deal they’re close to on hold and explore O’Reilly?

I would if I were in their shoes.

Cader wrote Wednesday (behind his pay wall) about the smaller trade publishers who have been slow to enter the ebook marketplace. He springboards from the results of a survey Perseus did of its clients and which formed the basis of a presentation they did at Tools of Change. Cader observes that 2/3 of Perseus’s 300 clients don’t use their Constellation service, their digital publishing assistance program (book distributor as DAD), at all. And, of those that do, he says:

Making ebooks available at all though looks to remain the biggest challenge for the survey group. The largest segment, 33 percent, said that fewer than 10 percent of their titles would be available as ebooks in 2010. Another 26 percent said half or fewer would be available, with just 30 percent expecting to have 75 percent to 100 percent of their titles available.

As ebook sales climb to very desireable levels, publishers of all sizes will pursue the revenue opportunities they represent. Trade book distributors have always lived on the reality that they provide the necessary scale to enable publishers to do what they do well that needs no scale: pick, develop, and deliver books people want. What requires a bit more scale but less to the publisher that specializes, and most small publishers do, is marketing. Distributors have never been much help there, frankly.

This perspective of the distributor was made very clear by the best-delivered presentation at Tools of Change, the one from Skip Prichard, the CEO of the Ingram Content Group. Skip was basically saying to the publishers: you do the content, we’ll do the rest. I know that Ingram’s perspective on a problem I’ve written about before — that publishers will have increasing trouble supporting the big infrastructures they have built for print — is that the publishers’ challenge creates opportunity for them.

And on the print side — the diminishing side — that is definitely true. What is not nearly as clear is whether on the ebook side — the growing side — they will face new, smaller competitors who have built a strongly competitive infrastructure without needing to be nearly as big. If that’s also true, then, one suspects, O’Reilly is not the only relative upstart that will be taking real business away from established players in the very near future.

There is actually a nice extension to this post that ties in nicely with my prior one on title P&Ls and the Motoko Rich piece in the Times about ebook pricing, but I’m going to leave that as a teaser for another one I may write someday because I’ve gone on long enough for now.

While I’m in Florida watching baseball games, as I am now and will be for the next few days, take a few minutes to respond the BISG survey supporting the “Points of No Return” Making Information Pay conference we’re organizing for May 6.

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