The Shatzkin Files


Thinking more about ebooks and libraries and what big publishers should do


The reluctance of most big publishers to make ebooks available through library lending is a topic of widespread attention and concern. The AAP turned a chunk of its annual meeting over to the topic and Dr. Anthony Marx, the President and CEO of the New York Public Library, used his time to volunteer his institution for experimentation to find a model for ebook lending that would work for publishers.

I had occasion to talk to a number of Big Six publishers in the middle of last year about their position on library sales. When they registered their concerns with me, some of what they had to say made a great deal of sense.

What really rang true was the fear that the consumers in an emerging ebook ecosystem would “learn” that getting “free” ebooks from libraries was just as easy as getting ebooks from retailers and paying for them. Given that all this requires is pointing your web browser in a different direction, it looked to many of the publishers like a really poor bet to enable ebook lending by libraries. Sales of ebooks to libraries isn’t a huge market so the upside is limited. And with many ebook retailers struggling to gain traction in an Amazon-dominated marketplace, the consequences of even a small loss in sales could knock players out of the game.

Withholding or limiting sales of ebooks to libraries shares an important characteristic  with agency pricing. In both cases, publishers are implementing policies that they know will result in their revenue being reduced immediately in order to develop what they believe will be a stronger and more diversified distribution network for ebooks in the long run.

It’s worth making a point here. It is reasonable to argue that publishers are wrong on both counts.  These policies are about influencing the future development of the channel and forecasting the impact of various policies over time, so there is not yet any data to prove they’re right or wrong. All we have are guesses based on limited and unprojectable knowledge.

But the publishers are most emphatically not engaging in “short term thinking”. They are sacrificing immediate revenue for what they believe will be a long-term gain. In that way they are like Amazon, which famously will deep-discount or loss-lead today’s sale to build a long-term customer relationship. But Amazon gets credit for long-term thinking; publishers usually don’t.

As most people know who are following the tribulations of libraries trying to stock ebooks, four of the Big Six publishers are not making any ebooks available to libraries at all (except titles already sold in the past.) Random House continues to supply all their titles to libraries as ebooks with only the “one loan at a time per copy purchased” limitation, but they have just raised the prices of those books to libraries substantially. HarperCollins was widely villified a year ago when they introduced a limitation of 26 loans per copy purchased, but this is apparently now more widely being seen as an acceptable limitation. (Random House pricing and the others’ total withdrawal from the market are making 26 loans look good!)

I accept the major premise. If it were just as easy to get ebooks from libraries as it is from retailers, over time more and more customers would migrate to the libraries. But, the more I think about it, the less I accept the notion that total withdrawal from the library market is necessary to create a clear advantage for the retailer as a destination for ebook readers. In fact, it is possible that putting ebooks into libraries, in the right ways, could increase sales at retail. And the only way for publishers to find that out is to do some controlled experimentation in that marketplace. To my knowledge, that’s not taking place.

I have two anecdotes that I think shed some light.

At a conference I organized a few years ago, we heard about a giveaway that publishers Spiegel & Grau did of a Suze Orman book through Oprah. They gave away 1.1 million unprotected PDF downloads in 33 hours on Oprah. The book sales popped immediately on Amazon, of course. But more impressive, and more important, is that the book acheived a return run of several more months on the NY Times Bestseller list. It had fallen off in October. In other words, the substantial number of giveaway copies sparked a rebirth of interest in what had already been a very successful book that appeared to have concluded its run some months before. (Of course, being on Oprah has an effect of its own whether or not there is a giveaway. I think the 1.1 million giveaways helped spur the sales, but, at the very least, they didn’t prevent the Oprah effect from taking place in a big way. The publishers had not expected anything like the commercial result they got.)

And here’s another. About two or three years ago, I was looking around for data that would tell us whether ebook sales were cannibalizing print or adding incremental units. Our friend Rick Joyce at Perseus said “they add incremental units” and he could prove it. I was skeptical, but he convinced me.

What Rick said was that Perseus had converted a number of backlist books that had an established print sales pattern into ebooks. Then they looked at what happened to sales of the overall “basket of titles”. Their print sales went up even though the ebook was selling too. Perseus attributed this to the increased awareness of the books generated by their presence in the ebook marketplace.

But perhaps of even greater significance, the beneficial effect on sales of the ebook publication increased as they went down the long tail. The deeper they went into the backlist, the greater was the lift created by the ebook publication.

It is a stretch to analogize the effect of an ebook being available in a library today with what making an ebook for sale did to print sales two years ago, but it is not a ridiculous hypothesis to test. What if a similar impact resulted from library availability? Might there be some titles you want to window, but others where it would even make sense to sell them to libraries cheaper because of a marketing effect? Could there even be some books that it would be worth giving to some libraries for free?

Both of these examples, being as they are more than two years old (and, in one case, about PDFs, which are a pretty limiting way to get an ebook file), can’t be simply taken as prima facie evidence of what would happen today. People who downloaded the Orman file and found they liked it and wanted to read the whole book would indeed have wanted to purchase a more readable copy. In 2008, that would have meant “print” for the vast majority of people. Perseus did their backlist analysis at a time when they had lots of good backlist not yet available as an ebook and not many consumers read that way. Neither of these things are true anymore. The migration of sales from print to digital is too rapid now for very many titles to maintain their recent print sales rate, let alone increase it on the back of some increased discoverability. (Overall sales might increase, but not print as a stand-alone.)

Nonetheless, these two pieces of anecdata together suggest at least the possibility that the sales the big publishers are losing by withholding from the libraries is a larger number than just the ebooks they’re not selling for loan. They may also be losing other sales that come from discoverability and library-reader-generated word-of-mouth.

It now seems to me that making ebooks available through libraries when the titles are on a downward sales trajectory at retail could generate new life for them, as the Oprah giveaway did for Suze Orman. Yes, this is windowing. If publishers did it on their big ebook titles, they’d be doing exactly what Hollywood is doing with DVDs of major movies, which are also withheld from library distribution until the theatrical and early DVD revenues have been harvested.

The big publishers I have spoken to seem most focused on keeping “friction” in the library ebook experience to approximate the inconvenience of print book borrowing, where you have to go to the library to pick up the book and then to bring it back. In fact, the imperfect interface from OverDrive already provides a good deal of that (except for Kindle loans, which bump over to Amazon and work seamlessly). The absence of any new titles from four of the Big Six may not provide “friction”, but it certainly would drive many readers to a retail channel. (In fact, without some huge change in the way publisher-library relationships operate, there will always be a much larger number of titles available from retailers than from any library.)

What publishers are correct to be worried about is the way the market could change over time. With most book readers still reading print, we don’t really know yet what the marketplace will look like in five or ten years when I’d expect the vast majority will probably read books on screens. That was part of what was behind Harper’s 26 loan limitation. It is also a principle behind Bloomsbury’s “Public Library Online” program (working in the UK for a while now and just being introduced here), by which a “shelf” of books is licensed to libraries one year at a time. (Public Library Online enables multiple users through any flash-enabled browser, but does not support even as basic a user tool as “place-holding”; each time you return to a book you would have to remember where you were.)

In general, time-limiting seems  a much better strategy to me than loan-limiting, although it might not produce the same level of additional sales on bestsellers as loan-limiting.

If any big publisher asked me for an opinion about a library policy (and none has), this is what I’d say today.

1. Start immediately experimenting with “baskets” of titles, because the data on sales trends for a group of titles will be far more reliable than on any single title. If titles are put into groupings of cohorts (fiction in a genre, topical non-fiction, big author brands), you increase your chances of getting data that lends itself to interpretation that enable useful adjustments in tactics.

2. One set of experiments that should be productive would be on titles that have already had their high-volume run. Put 10 or 20 of those titles into library distribution and look at their print and ebook sales results week-by-week for the period before and then after the library release. (And promote the library release to maximize the potential impact.)

3. Look at the “make” books on an upcoming list: those that aren’t by big name authors that are already guaranteed to sell well. Split them in half. Put one half into libraries and withhold the other half. See if you can detect a library effect, positive or negative.

4. License titles for two or three years rather than limiting the number of loans. This will enable the publisher to withdraw them from library circulation in the future if the market shifts. This is a separate question from whether you allow multiple simultaneous loans. That limitation probably needs to remain (although with a loan limit like HarperCollins has applied, I don’t see why it is necessary.)

5. Explore ways for libraries to sell ebooks to patrons who discover titles through them but, for whatever reason, want to purchase them. Referral to existing retailers, with libraries getting the referral revenue, would seem like the cleanest and best way for this to happen. Libraries could sell the ebooks directly, but that approach could exacerbate the concern that library patrons would be “lost” to the retail network.

Publishers’ concerns about the impact of library lending are reasonable. But responding to that concern by simply “freezing” is not helpful to anybody and it may actually be damaging the sales of the books the publishers are trying to protect. I don’t know and the librarians don’t know what the marketplace impact will be of branded ebooks being made available through libraries, but the publishers don’t know either. It is time for all of us to start finding out.

I think big publishers have widely accepted a similarly flawed perspective about the impact of  piracy. It is likely that piracy, like library loans, will have a net cannibalizing effect on some titles and a net promotional effect on others. If you accept the truth of that statement, then you should see that telling which titles are which is the most important starting point to creating policy in either case. How many houses today are consulting their marketing departments when they make their piracy policies? It would seem like a good idea.

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  • EricWelch

    Before I retired I was a librarian and library director for 30 years, and I totally fail to understand the publisher’s attitude with regard to ebooks and libraries.  Many of their concerns apply equally well to paper books.  They sold hardcover books to libraries without fear at discounts of 45% off the retail price for free circulation to patrons  without any remarkable effect on trade sales.  A study done by a library system in Minnesota showed that even paperback copies of trade books could last for as many as 100 circulations without having to be replaced so the 26 circ limit was pulled out of a hat at Harpers.

    I think there are people who buy books and people who borrow books with little crossover in my experience, but both kinds create buzz for titles.  By cutting off library access, publishers are, again, shooting themselves in the foot.

    As long as the publishers continue to treat ebooks as not really books and somehow different they will be consigning themselves to the dust heap. They need to remember they are in the business of bringing content to the market, not the paper and distribution business.  The format is much less relevant.

    • /blog Mike Shatzkin

      Eric, you’re obviously a smart guy. You’re not trying very hard if you can’t see any difference in the potential for sales impact between lending ebooks and lending print books. At the risk of belaboring the obvious:
      1. When you buy a print book, you get something that you can read, write in, use as fuel in a bonfire, sell to somebody else, lend without limitation. When you buy an ebook, you get none of those things. Less value to buy.

      2. When you borrow a print book, you go to the library to get it and you go the library to take it back. When you buy a print book, you might have to go to a store, but that’s only one trip, and you might get it online. When you borrow an ebook, you just point your browser at a different web site. If we get to the point that many people understand that and has the accounts set up in their computers, why would anybody buy a book they wanted to read in the next three days when they could borrow it?

      The publishers’ intuitive fear here is neither irrational nor particularly hard to understand. But the challenge calls for a much more nuanced response than it has gotten.

      Mike

      • EricWelch

        #1 is an excellent argument for why ebooks should be priced much lower than print books. And, if they are priced lower, people will buy them rather than borrow them which translates into more sales for the publisher.

        #2 doesn’t address my comment with regard to two kinds of readers, those who buy and those who borrow. Of the many readers I know there is little crossover. (Ironically, I’m a book buyer, I read a lot of books at once and hate loan periods-weird for a librarian) Many of my friends borrow lots of books, or, if they buy one ALWAYS will buy a used copy, UNLESS they are a book buyer in which case they’ll buy for their Kindle or in print and rarely borrow. 

        The way ebooks are set up now, regardless how they are loaned, only one copy can be loaned at a given time and they are available only for a set period of time so you still have queues and long waits for popular titles. Access is denied on the device at the end of the loan period.

        Admittedly, I am biased toward the library POV, but still think library availability will increase interest in individual titles. 

      • /blog Mike Shatzkin

        You really are seeing things from the library POV.

        Lowering prices of print books to discourage lending could also be an argument for just not allowing the lending so you can avoid lowering the prices of the books! The point is not to decrease revenues, from the author’s or publisher’s point of view.

        And of course I addressed your point about the “different kinds of readers” you know about from your print experience! The whole point is that the paradigm is changing. Who says there will be “different kinds of readers” when, as I explained in my last reply, the *value* of owning the IP changes when you don’t own something physical? Why would you assume behaviors remain the same in the digital world as they were in the print world? They might change. That’s a risk libraries are asking publishers and authors to take. After all, if more people switch over to library lending, that isn’t bad for the library!

        And, to your last point, it only matters to publishers if “interest is increased” in some titles if *sales *are also increased. From your library POV, you wouldn’t much care about that.

        Mike

      • EricWelch

        One of the reasons I really like reading your posts and responses is that you emphasize the importance of data. Too often we, myself included, have a tendency to conflate personal experience with the macro world, each of us developing a belief based on a very limited set of experiences, something I think you try hard to avoid, which I why I so enjoy bouncing my personal observations on POV’s off against your wider perspective.

      • /blog Mike Shatzkin

        I am a fan of data! Although I’m also sensitive to situations where it is hard to apply. This is actually one of them.

        Mike

  • http://profiles.google.com/cjewel Carolyn Jewel

    ::If it were just as easy to get ebooks from libraries as it is from
    retailers, over time more and more customers would migrate to the
    libraries.::

    But it’s just as easy to get a print book from the library as it is from a retailer. And it’s well settled that readers who like a book they borrowed from the library go on to buy that book in print. Why are eBooks different?

    • /blog Mike Shatzkin

      You have to take the print book back.

      And when you own the print book, you own something of much more tangible value than when you own the ebook. Something you could actually resell.
      AND more and more people get their print books from online shopping, not stores.

      Mike

      • TFQ

        Mike, why is the issue of having to take the print book back important?  With print books, I could just keep them out and pay the fine for turning them in late. I don’t get to keep the e-book after my borrowing period ends – I can’t even renew it the way I can renew an e-book.  If I don’t finish it before the borrowing period ends, I have to go back on the waiting list for the book, and if I’m that interested in the book, I end up buying it rather than wait.  

        I disagree with Eric Welch about readers being divided into buyers and borrowers.  Most of my friends are heavy users of the library AND regular buyers of books.  There are some books we want to own, without having to worry about taking them back or having to re-borrow them.  For some books, being able to borrow from the library just isn’t the same, regardless of whether we’re talking print or e-book.

        I’d like to note also that I have bought WAY more books as a result of trying out new-to-me authors via e-book.  Binge-reading an author via e-book is much easier to do than binge-reading in hard copy – when I find a new author via the library and there is a backlist, a lot more of those titles get purchased and find their way onto my Nook than ever found there way onto my bookshelves.

      • TFQ

        Sorry, that should say “can’t even renew it the way I can renew a print book.”  Time to go and eat dinner…

      • /blog Mike Shatzkin

        Knowing how the number of people who would buy more compares to the number who would buy less is precisely the point of doing some experimentation. I have no idea what the answer will be. Neither does anybody else.

        Mike

  • Dermot McCabe

    I think it is important to distinguish between the different genres of books. In recent years I have tended to restrict my purchase of print books to reference type books or books I will definitely want to re-read or refer to in the future. Most novels I w ill only ever read once and for that reason will either purchase them at low cost in eBook format, borrow or buy second-hand. I will discard them, give them away once I have read them because the physical book has no value for me; in fact it has a negative value, in that it takes up valuable shelf space.

    Where do the libraries fit in. In mys case the library is a source of books that I only want to read once. Reference books along with the Inrenet are my resource for information and learning and between those two, the reference book is my favoured resource for in-depth study. For example, my favourite way to learn about ancient history is through the Printed book. The eBook comes next, followed by on-screen research on the internet.

    My thinking is that publishers should definitely facilitate libraries by making their ref type books available. This allows the reader to check the book out and see if he/she wants to have it on a permanent basis on their own physical or virtual bookshelf.

    I can see how the publishers are reluctant to make their read-once fiction available to libraries. Perhaps they should adopt the same approach as the film industry. Availability of certain books in libraries is delayed several months or more after initial publication. New authors could be made available very quickly and if they are successful the dealy between intial publication and availabilty in the libraries will be lengthened.

    There is another type of book, the higly illustrated book which does not lend itself very well to eBook format just yet. Libraries will continue to be an excellent resource for these.

    As Mike Shatzkin says, publishers cannot simply sit on their hands and wait. They should start some trials and get real data on how different approaches might work. Libraries themselves should also come up with potential win-win strategies.

    It is fascinating to be an observer of this evolving impact of new technology on a traditional mode of learning and entertainment that is the library. It is worth taking a global view of this also because new technology is still the preserve of the rich Ist world. But, that’s another story. 

     

    • /blog Mike Shatzkin

      Looking at different genres and types of books would definitely be one of the aspects of the experimentation I am calling for. There are many varieties of book and many varieties of consumption and purchasing behavior. Anecdata tells us very little because there is an example of any behavior we can imagine. The question is how it comes out in total and that can only be surmised through analyzing what many people do under many different circumstances.

      Mike

  • Pingback: Shatzkin: Publishers Should Experiment With E-Book Library Lending | Digital Book World

  • http://twitter.com/coopertjon Tim Cooper

    Mike,

    Great post and thought provoking in your typical manner.  There’s another strategic dimension that library lending could help bolster–that is reader analytics.  If one of the conditions for library lending is that publishers could collect reader analytics from the ebook titles lent (assuming full disclosure/consent to the library patrons), then all could benefit and the emerging field of understanding how readers consume ebooks would evolve more rapidly.

    • /blog Mike Shatzkin

      Tim, I completely agree with you. But when I brought up this subject at a recent strat planning session I attended at NYPL, I found out that the thought makes some in the library community *very* nervous. Even though I explained that we’re talking about aggregated numbers that wouldn’t reveal anything about any individual, it became clear to me that this is a concept that will be hard to sell to many in the library community, no matter how much sense it makes.

      Mike

  • http://thenoodledbrain.tumblr.com/ Vicki Fox Smith

    I borrow fiction using my local library’s Overdrive site. Very often, I have to go onto a waiting list, or the book I want to read is not available.  Currently, if I don’t want to wait, I buy the book on-line. I would happily buy the book through Overdrive if something were in place that resulted in my local library making a bit of money from my purchase.

    • /blog Mike Shatzkin

      I think a lot of patrons feel the way you do, Vicki. Because sales made through OverDrive would be “lost” to the ebook retailing network, my suggestion was that the libraries refer sales to a retailer for the standard referral cut. Of course, that might be problematic if OverDrive is providing their tech. it wouldn’t be in OD’s interest to enable sales to be made that they get no cut from. On the other hand, their business is enhanced if more big publishers make more titles available, so maybe there’s a deal there that can be worked out. But the sentiment you express that you’d like to be able to buy books in a way that supports your library is probably pretty widespread.

      Mike

      • http://thenoodledbrain.tumblr.com/ Vicki Fox Smith

        I’m clueless about how any of this works, but if Overdrive were to be both a retailer, like Amazon, and a supplier of library rentals, then perhaps the individual libraries could get referral income as other businesses do through affiliate relationships.

      • /blog Mike Shatzkin

        OverDrive is a wholesaler, not a retailer. That doesn’t mean that they* can’t *sell directly to an end user, just that they don’t through the normal course of business. They don’t really have a “store.” So they could solve the problem from the standpoint of selling to the consumer and giving a library “credit” for the sale. The problem is that publishers are worried about the negative effect of library business on the retailers who help them reach consumers every day: Amazon, of course, but even more the retailers competing with Amazon. That’s Barnes & Noble, Kobo, Google, iBookstore, etc. The preferred way, if we’re trying to make *publishers* happy,would
        be referral to them, not to OverDrive.

        Mike

  • Laree Draper

    Speaking as a very small publisher with a dozen titles, I’d be happy to test ebook sales to libraries. After uploading our titles to the common retailers, which to varying degrees is simple, I went to work on library sales. Guess what: OverDrive is a real bear. The application is impossibly difficult; I didn’t want to work that hard on something I have no idea will work, assuming our books were accepted, so I went off to do something I knew would be productive. OverDrive, you’re not getting what you want from the bigs, so make the signup easier if you want to get support from the little guys.

    • /blog Mike Shatzkin

      I always love getting commentary from the front lines. Thanks for that.
      Mike

    • http://francistapon.com Francis Tapon

      Although I haven’t tried using Overdrive yet, a couple of librarians have told me that they hate the interface. Just that alone has discouraged me from making my self-published books available on Overdrive, even though that’s what Mike Shatzkin advised me to do when I had lunch with him a few months ago.

      • /blog Mike Shatzkin

        Lots of people aren’t happy with OverDrive, but they are still the dominant player in the space. If you want to make sales of ebooks to libraries, they’re going to get you more of them than their emerging competitors, 3M and B&T. Francis, I would still give you the same advice. But a year from now it might be different.

        Mike

  • http://pulse.yahoo.com/_UA57KG7NTZA2M2LYVVMP5C67BE Kathy

    I borrow a lot of books from the library, but I also re-read books quite often. This makes be both a borrower and a buyer because when I’m in the mood to re-read something I don’t want to wait for whomever has the library copy to return it.

    Usually that would mean I’d go to the bookstore or purchase a paper copy online. Since I now have an e-reader I’ve been downloading these books because I usually have 3-4 books going at once and that way I can carry them all with me easily.

    The one notable exception to my current reading habits is graphic novels. I can’t see myself ever preferring to read graphic novels or comics on a screen. So much of the experience reading them depends on the artwork that I can’t see digital replacing paper as the preferred format. E-readers have made reading text easier, but they detract horribly from the experience of reading images.

    Assuming that we eventually have e-ink displays that do full colour and have an extremely dense resolution, there is still the issue of displaying the art in a way that is consistent with what the author and/or illustrator intended. The art either gets sized to fit the screen you’re using (which makes it harder to see/read) or you only get bits and pieces of an image at a time and have to scroll around or zoom. The experience is vastly inferior to reading the same book on paper.

    • /blog Mike Shatzkin

      Once again proving that there are many different reading habits in the world!!!

      The opinion you express about graphic novels fits with my general concern about illustrated material and ebooks. There are lots of publishers working on the problem because there are many who depend on sales of illustrated books for their survival and they don’t know what they’ll do when bookstore distribution fades away and more of the books are sold as ebooks. Many illustrated book share the problem you frame. We know how immersive reading can be handled successfully as ebooks; we don’t know about illustrated books. Yet.

      Mike

  • William Ockham

    It seems very strange to me that an industry thinks that the winning long run strategy is to alienate consumers, their business partners, and the U.S. government. That is the takeaway I get from your last few posts. This post is about the Big Six working against libraries (who have historically been key partners with publishing) and the book consumer (increasing friction, limiting availability). Previously you have looked at agency pricing which the Big Six (minus one) arrived in a way that they knew or should have known would bring about an antitrust action. The antitrust perspective of the Obama DoJ were well known to anyone with the slightest interest in the subject. Your posts about Amazon were all about the publishers actively working to alienate their biggest business partner.

    It is possible that this is a winning strategy, but it seems so unlikely to me that I would expect the industry to be able to make a compelling case for it. It is reasonble to expect that counterintuitive strategies would require more justification than traditional business models. Instead, the industry has a very confused message.

    The fact that they are not pursuing the tactical moves that you outline in this post makes me think that you are giving them too much credit. The biggest driver of the publishing industry seems to be fear. Fear of Amazon, fear of libraries, fear of the digital world in general. That’s not too surprising for an industry in the midst of technological disruption, but it is a dangerous place for the incumbent dominant players. Reacting out of fear instead of acting to take advantage of innovation has been the doom of many dominant companies in other industries.

    • /blog Mike Shatzkin

      Accusing legacy publishers of defending an old business model in changing times is shooting fish in a barrel. Of course they are; that’s still where most of their revenue comes from. And, as I have said many times on this blog, what publishers *do* is “put books on shelves”. As bookstores fade away, the whole historical basis of a publisher’s existence fades away with it.

      The final chapter on Obama DOJ and publishing isn’t written. One rumor (of many) is that DOJ is most interested in getting rid of the MFN clause in agency contracts. If that’s the case, it will have almost zero effect on major publishers but it will really cramp Apple’s model with everybody else (because nobody else is allowed by Amazon to sell to them on agency.)

      I don’t know whether fear is the biggest driver or not, but it is definitely a driver. I think the managers of these big businesses would have to be stupid not to feel fear. They’re essentially being asked to change planes in mid-air without a parachute. It’s a lot easier to ridicule their efforts than it is to navigate the path they’re on.

      Mike

      • William Ockham

        It isn’t that they are defending an old business model (of course they are), it is the way they are defending it that confuses me. Why deliberately piss off everyone you do business with? I don’t mean that pissing people off is their goal, but they are pursuing various strategies that they know will alienate their partners. Destroying the goodwill that your business partners have towards you may not show up on a balance sheet, but it will have an impact on your long-term survival.

        Ultimately, the publishers need book readers to survive. Yet, every action they take makes the world a slightly worse place for readers. These actions are supposed to be in pursuit of a better future for publishers, but where is the evidence that they are actually working on that future? This is a honest question on my part. I haven’t followed the industry that closely. You say that their goal is “to develop what they believe will be a stronger and more diversified distribution network for ebooks in the long run.” Have they thought about what that means? Having a diversified network for the distribution of digital goods is completely different from having the same for physical goods. There are some really basic things they could be doing. If they want to displace Amazon as the top seller of ebooks, they need to ensure that people can move their ebooks off of their Kindle and on to other devices. Are the publishers doing anything to make that happen? Agency pricing implies that the publishers have a direct relationship with the consumer. Are they doing anything to take advantage of that? Are they building systems that would support a diverse distribution network? Have they even thought about what it would take to entice someone to take on Amazon in the ebook distribution business? Who do they think is going to do this? Microsoft? Sony? Google? (All of those companies have dabbled in the ebook business, but none of them is a credible threat to Amazon) Some startup? Are they putting all their eggs in the B&N/Nook basket? I just don’t get it. How is this strategy supposed to work?

      • /blog Mike Shatzkin

        Lots of questions here…

        First of all, three major publishers on each side of the Atlantic have funded an alternative ebook retailer. Over there, Penguin, HarperCollins, and Random House have funded Anobii, which is up and running. Here we have Penguin, Hachette, and Simon & Schuster funding Bookish, which has not yet gotten off the ground. In fact, Bookish has postponed its launch, changed its management, and has given no outward signs of life yet.

        As for “how is the strategy supposed to work”, it actually *is working*! When the publishers went to agency, Kindle’s share was much larger than it is now. Barnes & Noble, and to lesser extents Apple’s iBookstore and Kobo, have made dents in that share.

        The question of how to get people off Kindles is a good one. One answer, proposed by Matteo Berlucchi, who is the CEO of Anobii (which means, remember, that he is funded by big publishers) is to eliminate DRM. If the publishers would do that, Anobii (and anybody else) could sell content to load on Kindles. That’s a radical proposal to an industry always nervous about piracy, but it is currently in the industry ether.

        Mike

  • http://francistapon.com Francis Tapon

    Great post, Mike. There is a common theme in your comments:

    1. Many prefer to buy reference books and/or books they plan to re-read. This implies that it’s safe for publishers to put such books in libraries. That’s what I think I’ll do since a few of my readers have told me that they’ve re-read my book as soon as they finished reading it the first time. 

    2. People will pay for convenience. Whether it’s Overdrive’s cumbersome interface or not wanting to wait in line for a book, people will pay for a book. However, I doubt they’re willing to pay much. Charge them $2.99 (the price of a movie rental), they’ll buy the ebook (just like they will avoid the hassle of getting the DVD from the library). Charge them $15, then they’ll prefer to wait in line and/or deal with a crappy interface.

    What the book industry desperately needs is the Netflix-of-books to come out: an all-you-read program for a flat monthly rate. That’s exactly what Amazon is trying to do, although I dislike that they’re demanding publishers to give them ebook exclusivity. Such a Netflix model will encourage avid readers to eschew libraries in favor of an elegant interface, low price, and a broad selection.

    I’ve taken a chance and given Amazon exclusivity for three months. I also lowered my price to $2.99 and $4.99. 

    http://www.amazon.com/gp/product/B005HG4Z76/ref=as_li_qf_sp_asin_tl?ie=UTF8&tag=francistapon-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=B005HG4Z76
    We’ll see how that pans out.

    • /blog Mike Shatzkin

      Francis, good luck with your Amazon experiment.

      I see your point(s), but I don’t buy the generalizations. Lots of read-them-once ebooks are selling in the $9.99 to $14.99 price range. We all expect prices to be forced down by the laws of supply and demand (or what others are now calling “abundance”), but there’s still a lot of life in higher prices for many books.

      Mike

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  • Peter

    How about giving ebook owners the option to obtain a discounted and/or customized print version of the book after they have finished reading it?

    I don’t want to pay $20 for a book I’ve never read when I can get it for free- and I certainly don’t want to pay extra for a “bundle”.  But I’d be more than happy to pay $30-$40 for a more tangible – and probably more permanent- version of a story I already know I love.

    And even though I’d rarely use it, the “option” for the print version would give me a reason to pay for the ebook in the first place.

    • /blog Mike Shatzkin

      The idea of bundling print and e is in the ether. Some people think it is a big idea. I don’t know well it would work as two disassociated purchases (as you suggest) but there are many people thinking about how to offer the two together at a discounted price.

      Mike

  • Mike

    Wow!  Mike, this was an informative and though provoking read.   My wife and I make our living publishing books through one of the “Big 6″, and ebooks have become a hugely divisive issue.  Back in the “Good Old Days” of paper,  while there were occasional grumbles about price, it seemed like readers, publishers, and libraries were all on the same side.

    We hear from readers who can’t borrow our most recent publications at their library, and they’re incensed.  How dare we (or our publisher) be so greedy.   We’re kind of caught in the middle.  We’d love ebooks to be available to everyone (reading shouldn’t be the prerogative of the 1%), but we’d also like our publisher to stay in business and, oh yeah, we’d like to make a little as well.

    I saw the title of this article and thought, “Oh no, another screed railing against the evil publishers and the perils of unfettered greed.”    However, you took a far more balanced view, and offered great data instead of ranting.   I hope the publishers start taking a few more chances, and accumulating some better data o which to base decisions.   I’d really like the current three-way war between readers, publishers and libraries to end, so we can get back to the business of reading (and writing) books.  Thank you for being a voice of reason!

    • /blog Mike Shatzkin

      Thanks for this.

      Big publishing organizations, like all big organizations, aren’t perfect. But they really do have smart and creative leaders trying to navigate especially challenging times. Our jobs are easier than theirs.

      Mike

  • Neal Goff

    Mike, I don’t want to let it pass unnoticed that in this post you coined a new word, “anecdata.”  Perhaps you took it from somewhere else, but it’s the first time I’ve ever seen it.  If it’s your coinage, congratulations; I hope it sticks in the language.  (It’s always been my dream to coin one new English word that outlives me; you now have a shot at realizing this dream.)

    • /blog Mike Shatzkin

      Neal, I wish I could take credit for anecdata. It is a word that I believe I’ve seen on a certain online email list operated by Peter Brantley of Internet Archive. I can’t remember who else has used it, but I’m pretty sure I didn’t think of it unaided. And I have seen other use it since I’ve started using it who I don’t believe got it from me.

      So I think we’re still tied at zero on that one.

      Great word, though, isn’t it?

      Mike

  • Joel Haas

    1–I like the word “anecdata.”

    2–Why don’t the big 6 just GIVE the libraries their ebooks for free and
    collect a royalty on the number of times the ebook is checked out for
    more than, say 3 days?  If PoohBaah & Thistlebottom, Inc give a
    library six copies–or unlimited copies– of a bestseller on the condition the library pay
    PoohBaah & Thistlebottom 10 cents per reader check out, then a high
    demand book would yield the publisher far more than an outright sale and
    limiting the number of times a book could be checked out.   AND, the
    library wins, too.  They  may “lose” money on the bestsellers, but will
    save a bundle on having the huge back lists in stock.  In fact,
    libraries would have deeper back lists under this scheme, overall
    yielding publishers more ongoing income on their back lists. 

    3–The Overdrive experience with the Wake County/Raleigh, NC Public Library is hair pulling awkward.  The borrowing of audio books is even worse.  I will not go into the technical details, suffice it to say I have to have a Windows computer to download and transfer audio files to an Apple product and or most devices that play MP3 files instead of just WMV files.  AND I have to choose between wiping the music off my iPhone to have the  audio books on my iPhone as podcasts, or I can’t use them. 
    The net of the Overdrive “friction” publishers may love is to drive ebook and audio book library patrons to use the Kindle borrowing system which I have found much, much easier.  Moreover, I simply said to heck with it and signed up for Audible.com -also owned by Amazon-for my audio books.  The friction experience is really driving business towards Amazon, not away.  That’s my anecdata, at least.  Or they may spend just five minutes on Google and find the latest crack for the latest DRM and use that.  Honest to God, that is even easier than any of the current systems offered.  I know from personal experience it is a great temptation after nearly three hours of fooling around with Overdrive, etc, to just use a java script crack on the DRM and save a pile of time.

    4–Big 6 publishers are fighting the last war.  Their obsession with piracy/libraries, has made them overlook the growth of the 99 cent to $2.99 ebook.   Their sales will shrink as more and more people simply start trying out less expensive authors.  Genre publishers are already taking a heavy hit in this regard.

     A good analogy:  if I have $25 to go buy a new book by an unknown to me author at my local independent store (Quail Ridge Books, here in Raleigh, one mile away)  or walk three blocks down the street to two very large used book and CD stores, where I can buy, not one, but a dozen books or more for the same $25, where do you think I’ll go?   Let’s say I buy 12 books at the used book store and eight of them turn out to be duds (remember, these duds were published by commercial publishers), I am still ahead by four new authors I will read in the future.  Now there is where big 6 publishers might make some money on me: if I have read several used books by  an author and really like him/her, I will go buy a new $25 copy at the book store.  In the meantime, there are myriad people buying lots of dollar to three dollar ebooks and finding authors they like.  They have less and less incentive to keep buying big 6 books for $10 each.  It’s not piracy that will kill the big dinosaurs–it’s the small mammals eating their eggs.

    5–The local library has A LOT of self published or small publisher ebooks available with no limit on the number of copies available to read.  So many ebooks are on a waiting list from the big 6, that a number of readers are going to go to what’s available–and not come back to the big 6 as often after that.

    6–DRM is absurd.  It does not take much to find cracks for the DRM on both ebooks and audio books.  Having tied themselves into the Adobe Adept DRM system, the publishers of both audio and print ebooks are in the position that every time Adobe updates their DRM system to fix a new hole, the publishers have to wonder, “should I take these older books off the market a few weeks or days and update all the DRM files before putting them back out again?”   And what about those library copies?  Do they get suspended and re armed with new DRM updates for an indefinite amount of time?  Is it worth it? 

    If the publishers don’t want their books pirated, they should follow the iTunes model and make it not worth it to pirate the books.

    7–yes, under agency models the authors–and more importantly, the publishing executives–will make more money.  So do the unknowns publishing for one or two dollars if the big 6 come into their  playground.  The authors lose the most under the loss of agency, but I am not talking here about what SHOULD happen, rather what is going to happen in the long run.  So a new economic model will emerge in which the authors will make money again–I don’t know about the publishers, though.

    8–anyhow, that’s the thoughts of a newly 61 year old metal worker with a high school diploma and a welding certificate.

    • /blog Mike Shatzkin

      There are some realities that no tactics can change. Newbies are going to come into the market self-published, and they’re going to be perfectly fine with selling cheap. It would be folly for publishers to compete with them on price until they absolutely have to, although the point you make that readers will increasingly separate the low-priced wheat from the low-priced chaff is true. Ultimately, prices will be forced down, but there’s no benefit to making that happen faster than it otherwise would.

      Mike

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