The tipping has really already started

Posted by Mike Shatzkin on January 6, 2010 at 9:31 am · Under Digital Book World, General Trade Publishing, Industry Events, New Models, Publishing, Supply-Chain, eBooks


The idea of an “Ebook Tipping Point” panel for Digital Book World arose when I wrote a blogpost last August http://www.idealog.com/blog/ebook-growth-explosive-serious-disruptions-around-the-corner on the occasion of the regular monthly release of the IDPF’s ebook sales figures. It was clear then that very substantial percentages of the sale of new narrative fiction and non-fiction were going to move through ebook channels and this post raised the point that this would be disruptive just before Dominque Raccah and Sourcebooks started last Fall’s cascade of strategic moves by publishers to try to slow things down, at least for Kindle.
In October, really writing about the same situation, http://www.idealog.com/blog/a-coming-new-obsession-how-to-handle-a-smaller-print-book-business, I predicted that major publishers would be challenged to cope with the problem of de-scaling.
When I wrote the August post, I was in the early stages of organizing the program for Digital Book World and I decided to put together the “Ebook Tipping Point” panel. I knew that current C-level executives, focused as they must be on making numbers for this quarter and this year, not to mention always having to be aware of the impact their statements could have on their companies, wouldn’t be the right panelists. So I just decided to recruit the four savviest people I knew — about ebook publishing, about the finances of publishing houses, and about the ecosystem publishers live in — to discuss the topic with me on stage.
Yesterday that panel — Ken Brooks of Cengage; Michael Cader of Publishers Lunch; Larry Kirshbaum, ex-TimeWarner Books CEO and currently a literary agent; and Evan Schnittman of Oxford University Press — met in my office for a preliminary conversation to help me formulate the questions that will trigger the discussions.
Ken Brooks is my go-to person for all things related to ebooks and digital production. He the SVP, Global Production & Manufacturing Services at Cengage Learning. Before that, Ken created and sold a company called Publishing Dimensions that did digital format conversions in the early ebook days. He’s run warehouses and other operations for Bantam and Simon & Schuster and he even had a brief stint setting up an early attempt at ebook distribution for BN.com ten years ago.
Michael Cader is the creator Publishers Lunch and Publishers Marketplace, the new nexus for conversation and information about the publishing business, which he developed from scratch starting with a free email newsletter less than ten years ago. Before that, he was a book packager. Cader is the single person who knows more about book publishing — the people, the deals, the business practices, the view of the business from the standpoint of the investment community — than anybody else I’ve ever met.
Larry Kirshbaum turned over the reins at TimeWarner Publishing to David Young three years ago, just before the company was sold to Hachette. He was known for his eye for bestsellers and his ability to make them work. Since then, he’s been a literary agent. Kirshbaum knows exactly what it is like to run a big publishing company; he did it for more than two decades.
Evan Schnittman is Vice President, Business Development & Rights at Oxford University Press. In that role, Evan combines the zeal and focus of a sales executive with targets to hit with the vision of a strategic digital thinker, a very unusual combination. Oxford is a university press, of course, not a trade house, but they have a trade list big enough to make them real players in that sandbox. Evan knows and understands trade, but he has the objectivity and vision of somebody who is not entirely dependent on that business.
One scorecard worth keeping is this: Brooks, Kirshbaum, and I were all sure ten years ago that ebooks would happen much faster than they did. Cader was sure they wouldn’t. Michael has been the hardest among us to persuade that ebooks would substantially displace print anytime soon.
We had a rollicking 2 hour conversation that would have entertained anybody who could have heard it. I am not going to steal the panel’s thunder by revealing much about it except to say that there was a strong consensus that big publisher overheads are going to have to shrink dramatically for them to survive. Michael Cader is particuarly articulate — and particularly experienced — about the point that legacy businesses carry legacy cost structures that handicap them making a transition to a new paradigm. He lived that advantage as the David that slew the Goliath of PW.
So I awoke this morning to get the news in my mailbox that Simon & Schuster has redesigned its sales coverage to be “more phone”. Cheaper. Less overhead. But also (likely) less effective and (certainly) less differentiated from what any small publisher based anywhere can do.
So what distinguishes the big publishers from their competition are the capabilities of “scale.” And the albatross for big publishers going forward is the cost of “scale.” This is a tough box to get out of.
I think some eyes are going to be opened when this panel takes the stage on Wednesday, January 27.

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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  • Guest
  • Hi Eleanor,

    I'm not particularly knowledgeable when it comes to publishing, but I can tell you that in the broader sphere, personal is making a comeback, in the guise of social networks. I don't see any reason why publishers shouldn't benefit from the trend, if they can adapt to it.

    With regard to free ebooks, author David Poque commented recently on an experiment O'Reilly did with one of his books. The publisher provided a free download of an electronic version of his book with no negative affect on the sales of the paper version of the book. In fact paper books sales increased slightly - http://toc.oreilly.com/2009/12/david-pogue-revisits-drm-question-and-ebooks.html. Publishers might take note and look at incorporating ebooks into their marketing strategies.

    Nigel
  • Guest
  • Nigel,

    Many publishers have incorporated ebooks into their marketing strategies,
    including O'Reilly. There are many in science fiction (Tor, Baen) and in
    romance that use both ebooks and social networks. What characterizes the
    companies that can do that successfully is that they publish in a genre or
    to an interest group so they're brand develops meaning and their customers
    expect repeat experiences. It is not something the biggest publishers can do
    nearly as readily because it is about a direct relationship between
    publisher and consumer. Random House doesn't have as many of those as, say,
    Harlequin.

    Mike
  • Since the panel includes major publishers who are trying to justify paying
    20 or 25 percent of net as royalties on ebooks precisely *because* they are
    "not profitable" (yet), I think the point will be made.

    Major publishers and anybody who thinks it important that there be
    bookstores (which includes me) would actually prefer this slow down, not
    speed up. Amazon wants it to speed up. Barnes & Noble wants it to slow down.
    Every little publisher that wants to compete on an even playing field for
    distribution wants it to speed up. Every major publisher with a stake in the
    legacy business wants it to slow down. But what it does has mostly to do
    with forces much bigger than publishers -- like Apple and Google and lots of
    people selling lots of other things besides books.

    Mike
  • Guest
  • Covey's ebook deal is with Rosetta Books, and it is for 50% or more of the
    net receipts (publicly stated.) Rosetta, in turn, made a deal giving Amazon
    an exclusive for one year in return for what might be some kind of
    exclusive.

    Calculating the relative cuts is difficult because we don't know what
    Rosetta is getting from Amazon. We can assume S&S would get 50% of the
    retail price they set, regardless of what Amazon sold the books for. So
    their author would end up with 12.5% of the retail. If Amazon were paying
    Rosetta 50% of the actual selling price, Covey's share would work out the
    same. Maybe Amazon's giving them a lot more than that. And who knows what
    the marketing considerations are worth?

    But Amazon doesn't own any rights.

    Mike
  • Guest
  • Eleanor, a lot of the reporting on this conflated the deals and, of course,
    Covey almost certainly approved every step Rosetta took. But I'm quite sure
    -- because I checked this with authoritative sources while the mis-reporting
    was taking place -- that the way I described it to you is correct.

    Mike
  • Guest
  • Guest
  • Eleanor,

    Let's strive for brevity and conciseness.

    Whatever the virtues or drawbacks of selling by phone, *anybody* can do it!
    You don't need to be a billion dollar publisher owned by a gazillion dollar
    conglomerate to do it. There goes S&S's advantage of scale. That's my only
    point. The merits of phone selling are a somewhat different question.

    Mike
  • Mike, I don't know that I can make the conference, but would love to see and hear this and other panels. Do you have any plans to live stream any of the sessions or record video?

    Nigel Hall
  • The F+W Media folks and Publishers Marketplace have been talking about
    exactly what they'll do; all plans not finalized yet. But there will be some
    stuff on the web: audio, video, transcripts -- not sure what exactly and on
    what basis. But it will be announced around the time of the conference.

    Mike
  • Thanks, I'll keep an eye on the Digital Book World web site.
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