The Shatzkin Files


What’s the greater fear for publishers? Amazon or piracy?


Pottermore changed the game this morning. Congratulations to Charlie Redmayne, their CEO.

The “aha” moment for me was when somebody on a listserv mentioned they’d bought Kindle editions of the seven Harry Potter books which, it had been announced, were available only from the Pottermore site.

Penny drops. First thought: Hnh? How did that happen?

Then the news came that Amazon was referring people off its site to Pottermore to buy the Kindle editions of Harry Potter ebooks. (It turns out that Barnes & Noble is doing the same.) There they register themselves and then can buy the ebooks.

This is, by far, the biggest concession that has been wrested from Amazon since John Sargent faced them down over the buy buttons on Macmillan print books on that January weekend in 2010 following the Thursday when Sargent flew out to Seattle to tell them Macmillan was going to the agency model.

In January at Digital Book World, in what turned out to be a prescient presentation, Matteo Berlucchi of Anobii (an ebook retailer based in the UK that is partly owned by three major publishers) observed that only by eliminating DRM could he sell to Kindle customers. He pleaded with publishers to do that.

Now Redmayne, who until November was working for HarperCollins, has demonstrated the truth in what Berlucchi said.

Back in about 2007, HarperCollins was instrumental in turning LibreDigital into an ebook delivery platform. At the time, Brian Murray, Harper’s CEO, articulated the vision that the publisher would just serve all the ebooks to customers, with no need to entrust retailers with digital copies. I believe one of the stated motivations was to reduce piracy by reducing the number of points of distribution of files. The idea was shut down pretty quickly because Amazon and other retailers wouldn’t go along. They would have said, and it would have been a reasonable point, that they had to control the service levels to their customers.

Redmayne and Pottermore have now demonstrated that if you will live with the anti-piracy protection of watermarking, rather than insisting on a digital hammerlock through DRM, you can gain extraordinary leverage.

Without DRM, as Berlucchi explained, anybody can sell ebooks that can be read on a Kindle. Once Pottermore decided they could live without DRM, they faced Amazon with a very difficult choice. The ebooks were going to go on Kindle devices whether Amazon wanted them there or not. Either they could ignore them or they could play along. I am sure the “play along” deal includes compensation to Amazon for the sales they refer (as it does B&N and, according to a quote from Redmayne, other distribution relations and affiliations will be enabled going forward.)

In other words, in a refreshing change from recent history, the content owner was able to present Amazon with a “take it or leave it” proposition. They decided to “take it”. They were wise. The game was changing either way.

The $64 million question is how the Big Six executives and strategists are viewing these developments. There is no author in the world with the power of J.K. Rowling to do this; she’s the Beatles. But, how about a big publisher? What would happen if Random House or HarperCollins (or one or more of the other four) told Amazon, “we’re taking off the DRM and we’re going to serve all our ebooks ourselves; you’re welcome to continue to sell our books on a referral basis”?

Could this change the strategy for Bookish going forward?

Obviously, this tactic won’t work if it is done by a publisher without tons of bestsellers and must-have backlist. In fact, it could generate a huge advantage for big publishers, assuming they can pull it off and smaller ones can’t.

I’ve been posing two questions in recent posts. “When does Amazon’s share growth stop?” and “Who’s left standing when it does?”

I put a new one at the top of this post. If publishers can overcome their fear of piracy, they will have, as Matteo Berlucchi proposed and Charlie Redmayne has just demonstrated, an enormous weapon to fight Amazon.

One entity that will definitely be “left standing” is Pottermore. And they’ll have the names of the people that were referred over to them by Amazon.

  Back to blog

  • http://www.facebook.com/people/Kare-Christine-Anderson/100000521862131 Kare Christine Anderson

    Mike
    Your astute, timely coverage continues to thrill me and, I am sure many other large and small stakeholders in this fast changing landscape. As an author and an avid reader (and speaker on connective cues + collaboration) I have been recommending your site to readers, audiences and colleagues. Mark Fidelman has a Forbes column, and is coming out with a book on social business…. he should interview you, and I am going to suggest just that
    Keep up this vital public service… yes I know I am gushing but it is well-deserved

    • /blog Mike Shatzkin

      Blushing is the only polite response.

      Thank you.

      Mike

  • http://twitter.com/jimnduncan J.N. Duncan

    Interesting thoughts as usual, Mike. I’m curious what Amazon would do if the big pubs suddenly became their own retailers. Instead of buying books to resell, would Amazon turn to charging publishers to list their books on the site? Would you get monthly fees to list a book? Pay big bucks for prominent ad space? I’d think Amazon has the market share size to be the place that instead of selling other’s books, they become the central referral/ad place. One way or the other, I imagine they’ll find the way to maximize the money-making potential. Be rather amusing if Amazon’s future in books would be to become the publishing world’s central curation hub. Though, I guess they already have a lot of that built into their system.

    • /blog Mike Shatzkin

      Well, we’re way off in a future speculation here. Let’s first see whether any of the Big Six a) has the guts to sell without DRM, b) can persuade all the agents for the authors they represent that it is okay, and c) can build a platform that will really work and then d) can make the right deal with Amazon. Or maybe Bookish can become a factor.

      If one of them can do it, then all of them can do it. But it isn’t necessarily the case that anybody *else* can do it.

      And Amazon is not without weapons here. They still sell all the print online; they can really inflict some pain on a trading partner if they want to.

      Redmayne and Pottermore have shown a path to an alternative model, but whether anybody will actually pursue what I see as possible is the next question. All others follow that.

      Mike

  • Nate Hoffelder

    I’m sure Amazon is not all that unhappy with the situation. The ebooks do have  DRM once they have been passed through an ebookstore. This means that Amazon is at least getting the lock-in they like (though they’re not getting the money).
    http://www.the-digital-reader.com/2012/03/27/harry-potter-ebooks-are-not-drm-free-in-kindle-format/

    • Another Steve

      Or — if I’m interpreting this correctly — you can download the unprotected ePub format and convert it using software into .mobi, which the Kindle will like.  I’m also reading that you can download more than once.  I don’t know if this means that once you download the Kindle version, you can download another format later without paying an additional fee.  

      Also — I’m not sure what the significance is — I got an email from B&N announcing that Harry Potter is now available for the Nook.  And if I go to the Nook store I see a big promotion for Harry Potter.  I got nothing like that from Amazon, to whose emails I also subscribe.  

      • /blog Mike Shatzkin

        My understanding is that when you go to Pottermore you will be able to download to many devices and apps, including Kindle’s. You won’t have to do any converting yourself.

        And what you discovered (if it is widespread, and thanks for telling us) is that Barnes & Noble wants to promote the Potter availability and Amazon doesn’t. This arrangement for distribution is bound to be making Amazon a bit grumpy, and that could be evidence of it.

        Mike

      • http://twitter.com/Scath G. L. Drummond

        I went to the Amazon Kindle store yesterday, after reading your post.

        The Harry Potter books were advertised on the front page there. Amazon is promoting them to some extent.

      • /blog Mike Shatzkin

        Makes sense. If you go to their site, they want you to know “we’ve got them!”

        But if you weren’t thinking about it anyway, they didn’t want to promote them.

        Of course, this is just me speculating without a lot of facts.

        Mike

    • /blog Mike Shatzkin

      The DRM question is still a bit confused, despite what that post says.
      But you can be quite sure that Amazon isn’t happy. Rowling is going to get millions of names of Amazon customers. That has never happened before and you can rest assured Amazon would be happiest if it never happened again.
      Mike

  • Barbara A Genco

    Mike–I encourage you to think about this exciting model in relation to the library channel. I agree that they  (Pottermore) are really on to something exciting here. I can’t help but think that this concept could be added to your recently proposed ‘testing’ menu for publishers who want to re-enter the library market but desire to retain total control over their digital assets. Food for thought.

    • /blog Mike Shatzkin

      I don’t see the applicability here to the library channel. That channel can’t work without DRM, which is what controls the loan time, among other things.

      Mike

  • http://madhatter.ca Wayne Borean

    Amazon runs on relatively thing margins. I wonder where they will go to make up the margins they lost on this?

    I have my suspicions.

    Wayne

    • /blog Mike Shatzkin

      Amazon is on a perpetual quest for margin. In that way, I don’t really think they’re much different than any other powerful retailer. It’s in their DNA.

      The difference is that they have more power than any retailer has ever had in the book business and it is growing with no end in sight. Pottermore notwithstanding.

      Mike

      • http://madhatter.ca Wayne Borean

        Mike,

        Have you looked at what Baen Books is doing?

        Wayne

      • /blog Mike Shatzkin

        Not closely enough. They’ve been at the forefront of “vertical community” for years and yet we’ve managed not to meet each other. I really should fix that. Thanks for the prod.

        Mike

  • Tom Semple

    I was wondering how this would work; now we know. I see an opportunity for ebook vendors to offer watermarking services as an alternative to DRM. Maybe that would help encourage more publishers to take this step.
    I think Pottermore should have offered PDF as well, because of the accessibility features that it supports (when a PDF is authored properly).I would have preferred the option to purchase directly from the ebook vendor of my choosing. I don’t like needing to have Yet Another account to manage, and at least in this case, don’t really want a relationship with Pottermore. Unless one is interested in being part of the Pottermore community, it is just inconvenient.We need to get the ebook vendors that we’re already using to promote DRM free (just as Amazon and then Apple did for MP3), we don’t need dozens of new single-publisher ebook vendors (no matter how large the publisher), none of which would be ‘full service’ ecosystems (sync reading position, annotation backup, etc.). I purchase from O’Reilly, but that’s because that’s the only way I get access to different formats, and because that’s the only way to take advantage of promotions.I don’t agree with the premise that the Pottermore model is ‘an enormous weapon’ to fight Amazon. Amazon (B&N, Apple Google etc.) is not the party insisting on DRM. And publishers do not have legions of fans waiting to sign up at their web site to buy books, when they’d rather just buy them more conveniently from Amazon or B&N or Apple. 

    • Another Steve

      It was Apple, not Amazon, who was the first to promote DRM-free music from a major music company.  In February 2007, Apple CEO Steve Jobs wrote an open letter entitled “Thoughts on Music,” where he challenged the record companies to license their music to be downloaded without DRM.  In April of that year, EMI agreed to let their music be distributed at the iTunes store in an unprotected form.  Amazon didn’t open up their store until September of that year.  Amazon had offerings from all four of the big music labels, but for some reason the others didn’t agree to let Apple do it until later on.  (Some people think they didn’t like Apple to be dominating the marketplace, just like the publishers don’t like Amazon to dominate the ebook marketplace.)  

      Some of Jobs’ arguments about DRM in music files will apply to ebooks, and some not.  Apple, like just about every other developer of software for personal computers, includes DRM on their own software, so his arguments don’t work as an argument against DRM in general, just against DRM in music.  

      • Bill Rosenblatt

        Steve Jobs’ “open letter” on DRM is widely regarded in the music industry to be a pile of hooey.  

        The record companies were going to let Amazon have music DRM-free in order to get some leverage against Apple (it didn’t work; Amazon only has ~10% of the music download market).  Jobs put out that open letter to “get in front of the train as it was leaving the station.”  In addition, Apple had 70+% market share so it likely felt that DRM was starting to outlive its usefulness.  People were so accustomed to using iDevices and iTunes that DRM was hardly necessary for lock-in anymore.  Amazon has not reached that point (yet?).Furthermore, the iTunes music ecosystem has compensated for lack of DRM by doing certain tricks with their codec to preserve some of their walled garden.  See my blog post http://copyrightandtechnology.com/2009/11/12/good-old-fashioned-incompatibility/ for more on this.

    • /blog Mike Shatzkin

      Amazon is perhaps not the one *insisting* on DRM, but there is a widening understanding that they are, at least, a principal *beneficiary* of DRM. Nothing you said makes me feel like elaborating on or defending anything I said.

      I fully understand being an O’Reilly buyer if you are in their audience. They do a great job of giving value to the people that buy their content.
      Mike

      • Peter Turner

        Looks like Amazon is reporting that Pottermore insisted on the DRM. via Nat Hoffelder @4d8a3543508bb575e2772a27a02fa413:disqus The Digital Reader http://bit.ly/GXn8s 

      • /blog Mike Shatzkin

        All well-explained by our friend Philip Jones at The Bookseller.

        http://futurebook.net/content/pottermore-gets-its-wand

        Pottermore wanted the DRM if they weren’t serving the files because their alternative is individual watermarking for each purchaser, and they can’t deliver that if they aren’t handling the files.

        The core of this piece — that the willingness of Pottermore to sell unencrypted files made this liberation possible — is undisturbed.

        Mike

      • Peter Turner

        Got it. Thanks.

  • Pingback: Harry Potter e-book reaction roundup | Ebooks on Crack()

  • Peter Turner

    Your comment below, that “Rowling is going to get millions of names of Amazon customers” is the prize here. She’s in the position to take advantage of this customer data. I only wish publishers were poised to do the same. That would be the game changer. To paraphrase Deep Throat, “Follow the customer data.”

    • Nate Hoffelder

       But wound’t Pottermore would have gotten that info anyway? It was always going to be immensely popular.

      • Peter Turner

        My understanding is that Pottermore is the retailer and Amazon the referring website for Kindle customers. Without processing the payment Pottermore wouldn’t know who actually made the purchase, their email address, etc. The email list of paying customers–or to use the old parlance, the “house file”–is always the most profitable segment of visitors to a website, email subscribers, etc. 

        But perhaps I’m misunderstanding. There has been a good bit of confusion in the reporting on this.

      • /blog Mike Shatzkin

        There is absolutely no way that Pottermore would have gotten as many people to hang around to register if they didn’t have to do that to get the ebook. And they certainly wouldn’t have gotten them to put their credit card on file!

        Mike

    • /blog Mike Shatzkin

      Absolutely true. The big question now is what her plans are to do just that. The most obvious thing would be to write more Potter stories. But she seems to have said “been there, done that.” If she write a Potter short-story once a month, she’d undoubtedly have a huge number of people who would pay a couple bucks each for them. Would that interest her? It’s hard to put oneself in the position of somebody who has in the bank what she does.

      Mike

      • Peter Turner

        Short stories, sure, but how about related products, deluxe editions, other books that Ms. Rowling might want to recommend. The retail opportunities around that brand are dazzling–if you have the customer data.

  • arshield

    I like the access to Harry Potter. But I am not thrilled about registering at another store. Especially one that really wasn’t all that well designed. I also don’t want to register a new account with every publisher. But if you are going to do that then pushing the file to my Amazon archive is the rigt way to do it.

  • EricWelch

    What I find most interesting is Pottermore’s pricing which is totally in line with the pricing objected to in the Amazon/Macmillan battle.

    • /blog Mike Shatzkin

      What will also be interesting will be to see if Pottermore *changes* its pricing and, if so, how so.

      Mike

  • http://profiles.google.com/kevins.studio Kevin McLaughlin

    It is a really interesting development.

    I haven’t tried Pottermore yet. I have heard secondhand, from some rather tech savvy folks, that getting the files to one’s reader is a much more complex process than they’re used to dealing with.

    I can sympathize; I was given a free copy of “11/22/63″ for my Klout score. Simon & Shuster’s website, download, and making the file work on a Nook app was pretty much a nightmare, and I *am* very tech savvy.

    That simply isn’t going to work for most book consumers. Almost didn’t work for me. If publishers even consider doing their own retail sites, then a fast, easy, reliable way to get the books directly to the devices is essential. Smashwords does OK; loading the files is easy as pie. But they’re still faced with the huge issue that the major retailers simply squirt the books out directly to the ereader.

    While that advantage remains, it puts any competitor in a very difficult position.

    And if Pottermore is really as complex to use as many folks are saying, it could end becoming a customer service nightmare, even a money sink.

    • /blog Mike Shatzkin

      I’ve been privvy to a lot of sophisticated conversation about Pottermore. You have to register yourself, so that takes a bit of time. But they actually have worked it out very well so you can put what you buy into 8 different ecosystems, actually, including a non-DRMd epub that you can do whatever you want with. It works.

      As for the others, they haven’t focused on it. It is absolutely required that something actually *work* if you’re expecting people to use it.

      I loved “11/22/63″ by the way. but I paid (digital) retail. I have no idea what my Klout score is.

      Mike

      • Kevin O. McLaughlin

        The important thing, if publishers go down this road (and I would at least be looking at it, if I were them), will be ensuring they make the purchase to read process as smooth as possible. But that’s doable; it’s just a tech issue, and the tech already exists.

        Another component to consider: if they want viable online bookstores competing with Amazon, even if they don’t go to retail themselves, going DRM free is an important step. If I wanted to start an online bookstore tomorrow, I’d have to choose between only offering indie work (like Smashwords) that was DRM free, or only offering epub (the Google model) because publishers insisted on DRM. Google’s bookstore is much less an efficient competitor for Amazon’s customers than it could be because they are blocked from offering Kindle readable formats.

        I don’t pay much attention to Klout either, but when I get given a cool book for my score? My ears perked up a bit. ;)

      • /blog Mike Shatzkin

        The argument, first made to me by Matteo Berlucchi, that DRM-free is the way to break the Kindle stranglehold, is very powerful. Big shots must be paying attention.

        Mike

  • Pingback: More like Pottermore, Please… « Cognitive Surplus Media()

  • Pingback: Writing on the Ether | Jane Friedman()

  • Andrew Malkin

    Mike,
    Surprised to see that Kobo isn’t tied up with Pottermore (yet) though they list a Kobo Reader as compatible device (to move file over but not to purchase from the Kobo site or device yet so it seems). I imagine negotiations in the works for iBookstore to carry these too rather than consumers buying elsewhere and then reading through a free app on the iPad. That must sting for Kobo and Apple not to get the sale (or the data of course). One price determined by Pottermore with etailers driving the sale getting a %–speaking of which, do you have insight as to what they make on each sale of a $9.99 or $7.99 eBook? I’m curious what Charlie will do with his time once titles are available globally (both audio downloads and eBooks)…there is the library market as referenced in other comments. Maybe JK endorses other writers through her site? Do you think Pattersonmore is next?
    ARM

    • /blog Mike Shatzkin

      Somebody smarter than I am has shot down the idea I broached that he’d enable other authors by saying that would certainly *not *be Ms Rowling’s desire. I don’t know.

      And I also don’t know what anybody’s deal is for compensation from Pottermore.

      Mike

  • Pingback: Trendsetter’s Book-Biz Essential Reading, 3/24-3/30, 2012()

  • WillHoekenga

    Mike, great post! What about this strategy in the context of indie bookstores and local authors? I elaborate here: 

    http://www.sixwordsstudio.com/2012/04/01/how-indie-bookstores-can-stick-it-to-amazon/

    • /blog Mike Shatzkin

      I’m sympathetic but skeptical. Amazon’s reach is so much greater than any local store’s that it’s a questionable tradeoff.

      Mike

  • Pingback: Industry News-April 1 » RWA-WF()

  • Pingback: abiko free press: Truth, self-publishing and the Amazon Way: A … | franchising()

  • Bill Rosenblatt

    Mike,

    I think the DRM issue is way overblown here.  It has very little applicability to the rest of the publishing industry.  

    Rowling makes over 2x as much money from non-book revenue compared to book revenue.  See http://www.statisticbrain.com/total-harry-potter-franchise-revenue/.  Book revenue isn’t going to increase because she isn’t producing more titles (at least that we know of; she might resurrect him as A.C. Doyle resurrected Sherlock Holmes).  Therefore the books are best seen as marketing for all the other revenue streams.  Therefore DRM is counterproductive.  All else being equal, you want DRM when you want to preserve revenue at the expense of market exposure; for the opposite scenario it’s probably a liability.  Just ask any indie music act that got signed to a major label, or any indie film that got picked up by a major distributor.

    As you have rightly remarked, the real win here is that Rowling gets the customers and all the associated analytics.  The problem is that I can count on the fingers of one or zero hands the number of other “publishing” properties that can execute this strategy, especially when the publisher doesn’t own the copyright.  Maybe Suzanne Collins will try to emulate this strategy for the Hunger Games, given that the first movie alone is tracking roughly 1/3 of, and growing faster than, book revenue.  (Another property to which Scholastic doesn’t own the copyrights.)  

  • http://mindtherant.blogspot.com/ MindTheRant

    I’m a little late to the party here, but there’s one thing from your post, Mike, that I’m not sure I understand:

    “Without DRM, as Berlucchi explained, anybody can sell ebooks that can be read on a Kindle.”

    I don’t have a problem with the literal truth of this statement, but I do have a problem with the *marketing* truth of it.  I assume you’re talking about sideloading a DRM-free ebook on a Kindle.  Or perhaps emailing it to your Kindle’s email address.  In other words, adding a nontrivial level of inconvenience to a non-DRM Kindle purchase.

    I would think Amazon caved to Pottermore Shop not because it was worried about its Kindle customers getting DRM-free Harry Potter novels by such unconventional means but merely because they figured otherwise they’d miss out on the revenue share they’d see by cooperating with Rowling.

    In any case, you probably know that the ebooks Pottermore Shop serves to Kindle and Nook owners do indeed have DRM.  Only the ebooks the Shop allows you to download directly to your PC are unencrypted.

    If you have a minute you can read about my own experience buying Harry Potter and the Sorcerer’s Stone from Pottermore Shop and sending it to my Kindle Fire, Nook 3G, and my PC.  It was a relatively smooth transaction, at least until it came time to download a DRM-free file to my PC:

    http://mindtherant.blogspot.com/2012/03/harry-potter-ebooks-drm-free.html

    But it may be just as important to note, as I do in my blog post, that buying through Pottermore Shop does add a level of complexity to the purchase.  Because one must set up a Pottermore Shop account with a web browser — and use a browser to make a purchase — it’s virtually impossible to use a dedicated E-Ink reader to both buy and read a Harry Potter ebook.  So a central reason for the popularity of Kindle and Nook dedicated ereaders — that a single device lets you shop, download, and read ebooks — becomes impossible with Pottermore Shop.  Indeed, the Harry Potter enovels don’t even appear for sale on my first-gen Nook 3G store!

    Of course, now that the latest Pew Internet study has told us how many people read books on their PCs it may not matter that Pottermore Shop makes buying a Harry Potter novel a two-step transaction for dedicated ereader users.  Maybe that $1.5 million in sales during Pottermore Shop’s first week reflects mainly direct download purchases via PCs.

    However, as popular as Pottermore Shop has been out of the gate, and as skilled as its dev team has been in greasing the wheels for Kindle and Nook purchases (I’m still in awe that I bought one $7.99 book and can now read it on my otherwise incompatible Kindle Fire and B&N Nook), I wonder whether its sales model isn’t still a bit too complex for non-nerd customers.

    • /blog Mike Shatzkin

      Very helpful commentary, and I appreciate it.

      But I don’t agree that Amazon is primarily motivated by money and margin, in this case or in just about any other. They didn’t want to have people coming to their site and not finding Harry Potter when it is available elsewhere; that was the big issue.

      As for the complexity. Enrolling is a pain, absolutely. But it’s not *that* much
      of a pain and wouldn’t be if there were books you wanted and couldn’t get them any other way. Sideloading is never going to be as simple as working directly with a store a device is tethered to. But what Pew also makes clear is that ereading is hardly restricted to that kind of device.

      Mike

      • http://mindtherant.blogspot.com/ MindTheRant

         I see your point about Amazon fearing they’d be embarrassed if customers noticed they weren’t carrying the Harry Potter ebooks.  (Interestingly, Amazon’s Audible.com and Audible.co.uk stores no longer sell the Harry Potter audiobooks you can buy on Pottermore Shop.  I guess you win some and you lose some.)  That’s likely the real reason they caved.

        I do disagree, though, if you think sideloading isn’t a meaningful inconvenience.  Let’s not forget that Sony was selling ereaders for years before the Kindle arrived, and that these ereaders suffered from just this inconvenience.  Indeed, I used to listen to Podcasts on an iPod and, now that I do the same using my Kindle Fire or my Android phone, I can scarcely believe I used to have to fire up my PC, launch iTunes, plug in my iPod, snych it, etc. to accomplish the same thing I do now merely by launching an app.

        To say nothing of the bother of locating a file on a PC and then making sure to transfer it to a folder on your Kindle or Nook where you know your device can see it.  I wouldn’t want to be saddled with the task of marketing such titles.

      • /blog Mike Shatzkin

        The point about side-loading is well taken. That’s why Pottermore is delighted to share the swag with the device owners to avoid it.

        Mike

  • Blulapis

    Mike, I’ve been reading your blog for awhile, and although I enjoy your intelligent analysis,  it seems to me that you usually leave the author out of this discussion, as if the author were a non-entity. 

    I believe the biggest fear here is neither piracy or Amazon, but that big name authors, who are the bread and butter of the industry, can decide to strike out on their own.  What will the Big Six do if Patterson, King and others decide to do the same?  

    The real dark horse in all of this power manuevering is the author.  It surprises me that you are virtually silent on this issue. 

    • /blog Mike Shatzkin

      I have actually commented on this subject. I completely agree that the biggest vulnerability for the big publishers in the long run is the authors walking, and if you look back around the 1st of the year (I think) I wrote a piece saying that the publishers really need to raise their ebook royalties *now* for a variety of reasons.

      But remember that most authors (big and small) have their backlists tied up, Even though the 1978 copyright law allows reclaiming those rights starting next year, they’d have to be clawed back year by year. So even the biggest other authors don’t have what JK Rowling had: a cluster of established backlist to launch their own ebook operation.

      I actually think we’re learning that the first authors to leave big houses will go to Amazon, not out on their own. You may have noticed that’s where I focus. I think that’s where the more immediate threat is.

      Mike

  • Pingback: The future of publishing « Insomniac memos()

  • James T Kelly

    Pottermore certainly has the potential to encourage the big publishing houses to sell direct to the reader. But I wonder if it couldn’t also encourage writers to do the same?

    The fact that publishers own the backlists has been raised as an issue and there’s no denying that. There is always the potential to claw them back, as you put it, but an initial lack of a backlist wouldn’t prevent the success of a personal author store. Said store could provide affiliate links to Amazon or other distributor and sell new works direct to the reader.

    The need for and the hassle of creating yet another account was also raised. But many people already have a PayPal account thanks to eBay and creating a PayPal store doesn’t take much work.

    Personally the only reason I as a reader use Amazon is because they compete on price. It’s almost impossible to “browse the shelves” and so it’s only use lies in direct purchasing. But if the work is available from the author at the same or a lower cost (because the author doesn’t have to give Amazon a 30% cut, for instance) I would happily buy from them.

    I’m not sure there are any more barriers to decentralised book sales. But please correct me if I’m wrong!

    • /blog Mike Shatzkin

      I just don’t think it will work for most writers. There’s not enough demand for any individual writer. Most of them rely on being available where readers are, rather than requiring that readers come to them, let alone enroll. Even writers with big backlists would almost suffer sales erosion this way. In fact, Potter would probably sell more if she did it the conventional way, but then she wouldn’t gather these names she can do so much more with. If it’s a gamble even for J.K. Rowling, it is not likely to be a good idea for many others.

      Mike

      • Blulapis

        Sorry, Mike, I think you’re underestimating the threat.  Authors don’t have to go solo.  A bunch of YA authors, for example, could band together and sell their books themselves, using Goodreads as a referral site.   As time goes on, it will be more and more likely that authors will do this – and money isn’t the only motivator here.

        I agree with you.  Publishers need to raise e-book royalty rates *NOW* or they will really live to regret it.

      • /blog Mike Shatzkin

        I think every thing we can think of, including what you sketch here, will happen. Because everything can. But I don’t see the model you’re sketching as likely to be widespread. Cutting the retailers out of the picture just seems like entirely the wrong starting point to me. And it will take a very powerful combination of writers to get them to play along the way that Pottermore did (which I still find amazing.)

        Mike

      • Bill Rosenblatt

        I agree with this.  I don’t see any group of authors banding together and creating an audience to rival Amazon or B&N, any more than I saw musical artist sites gaining any traction in terms of revenue on sales of recordings (i.e. none whatsoever).  People will go to where they can choose from “everything” over somewhere where they can’t anyday.

        Moreover, I will repeat what I said elsewhere: the reason why J.K. Rowling can do this is because the bulk of Harry Potter revenue comes from sources other than books.  In fact books account for less than a third of overall Potter revenue, and because she isn’t going to write more (as far as we know), that percentage will only decrease as time goes on and more alternative revenue sources are launched.  Ergo books are almost “marketing” for the other revenue sources — many of which are or will be sold on Pottermore.com.  

        That’s why Pottermore can do this and other authors can’t.

      • /blog Mike Shatzkin

        Thanks, Bill, for building out the understanding of what Pottermore is doing. I’ve made the point repeatedly that they could actually sell more ebooks more profitably by taking a more conventional approach and not creating friction in the retail channels. There has to be a point to getting all those email names with back-end revenue to make the whole effort make any sense at all. Even for Harry Potter.

        Mike

      • Peter Turner

        I’m imagining we call all agree that Pottermore is an exceptional case–though a case of what we’ll need to see. I’d like to suggest that there is a key dynamic that we run the risk of overlooking when we’re talking about D2C transactions. 

        Customer behavior is simply not uniform. Customers value different things. Price is one only factor. (For those who think that online customers only value price–or convenience, customer service, delivery time, etc.–in the transaction for books, I have direct experience that contradicts this view that I’m happy to share.) 

        If a consortium of authors (or other potential retail intermediaries) can find a way to deliver “value” (however this is defined by their market) that isn’t easily replicated by other online retailers, then I would say they have a winning formula. This is old school stuff, but online retailers of books need to focus on what they can do that Amazon doesn’t/can’t do well and never try to compete with what Mr. Bezos does best.

      • Peter Turner

        Pardon me, I meant to say ”
        I’m imagining we can all agree . . “

      • /blog Mike Shatzkin

        There’s no disputing what you’re saying. But the devils are the details. The first question is “what value can you offer?” But the next is “is it good enough to pull *enough* people to make it possible to give up the channels that now exist?” (which was the original proposition). More likely “can you somehow offer this alternative and keep existing channels alive? (which is not something the existing channels want to make it easy to do…)
        I won’t ever say that the thing that nobody’s thought of yet can’t be, but let’s respect the fact that it sure hasn’t been yet…

        Mike

      • Peter Turner

        I’m not sure I understand why you’d have to give up the “channels that now exist.” A publisher hosting a successful online retail site might get it’s buy buttons pulled by Amazon but the other “value” that’s delivered to customers can’t be cut off. 

        I’m also not sure I understand what you mean by “I won’t ever say that the thing that nobody’s thought of yet can’t be, but let’s respect the fact that it sure hasn’t been yet . . . ” I used to work at a niche publisher that did a substantial part of its business direct to consumer, offering its books at list, but also offering unique bundles of books, time-limited discounts, etc. But every customer had to know he would get a better deal on price elsewhere. Why this was possible is open to debate but some “value” must have been delivered instead of price.

      • http://madhatter.ca Wayne Borean

         Bill,

        Amazon and iTunes already are loosing sales to newer companies, that offer the artists different, and better royalty arrangements. Rumor on the street is that this is one of the reasons that the MegaUpload raid happened when it did, rather than when the cops actually had their ducks in a row.

        If you haven’t been following the MegaUpload and RapidShare cases you should be doing so, while they aren’t directly hitting books, they do involve Copyright.

        Currently the MegaUpload case appears to have some major flaws, and may be on the verge of falling apart. The RapidShare case is even more interesting. In a recent court filing a third party study was cited showing that the most downloaded files were open source/free software applications. Since the claim was that the major reason that RapidShare existed was for Copyright infringement, this filing is a huge problem to the labels.

        Going back to books, odds are that Amazon will do a Microsoft, i.e. shoot themselves in the foot Real Soon Now. Remember Microsoft, the company that nobody loves?

        There are a lot of writers who are damned worried about Amazon. They don’t trust the company. Sure, they use it, but they don’t love it. Just like Microsoft.

        Wayne

      • /blog Mike Shatzkin

        Wayne, there is no way any writer can boycott Amazon and not seriously damage their sales in today’s world. I don’t see that changing anytime soon. A band of writers consequential enough to make a difference boycotting the biggest single source of their revenue seems really unlikely to me, whatever the provocation.

        Mike

      • http://madhatter.ca Wayne Borean

        Mike,

        Who’s talking about boycotting Amazon? I’m talking about using new technologies to gain leverage against Amazon, Apple, and the other distributors, as they used Amazon and Apple to gain leverage against the Big Six Publishers.

        Disintermediation is the term.

        Wayne

      • /blog Mike Shatzkin

        Disintermediating a company with direct contact and strong account relationships with a majority of the customer base that go far beyond the book business is a very tall order. It takes more than the general suggestion that it be done to make it seem plausible to me.

        Mike

      • Bill Rosenblatt

        Wayne,

        “Artist to buyer” (i.e. disintermediation) has been a pipe dream since a company of that name (A2B Music) spun out of AT&T in the late 1990s and then failed.  All other attempts have failed repeatedly ever since, for authors as well as musicians, except in a few cases where ancillary revenue exceeds content revenue, as in the Harry Potter case.  

        I don’t see how any “new technologies” change this.  E.g. Facebook is taking over the world as a place where everyone goes and where artists can get exposure, but  A) it sucks that much more time away from actual content creation, and B) it doesn’t put any more money in authors’ or musicians’ pockets.  In music, all Facebook is doing is giving retailers presence in exchange for control over valuable identity management and user behavior info.  Everyone is waiting to see what they do in book publishing, but it will undoubtedly be similar.

        At a minimum, small content creators need third parties to do the basics of order processing and fulfillment, and the marketing cost & effort are too high to be worthwhile.  Even MySpace failed to do much for indie musicians other than suckering them into giving their music away for free in hopes of “exposure” that may or may not lead to ancillary revenue.

        As book author Rob Levine said at the OnCopyright conference, “Yes, I could do everything that publishers do myself, but then I wouldn’t have time to do the writing.  I could also grow my own vegetables.”  

        I suggest you read Jaron Lanier’s “You Are Not a Gadget” (or Levine’s “Free Ride”) to understand why what Lanier calls “the Lords of the Cloud” will always win in the foreseeable future.  

      • /blog Mike Shatzkin

        Thanks, Bill. I have an open position for somebody to answer questions on my blog when I don’t have the time. Would you like to apply?

        Mike

      • http://www.facebook.com/people/Peter-Turner/1179393690 Peter Turner

        Hi Bill: 
        I thought I’d jump in and say I’m not sure the challenge of A2C sales online is all that more challenging than B2C–I’m starting to wonder what the distinction is these days. Re Facebook, it’s worth noting this survey of publishers referral stats to their websites. Facebook drove more referral traffic than Google, Twitter, Pinterest, and StumbleUpon. Though sales conversion will likely show a different percentage via referrer. http://blog.shareaholic.com/2012/01/pinterest-referral-traffic/

      • /blog Mike Shatzkin

        Peter, A2C *sales* are mechanics that can certainly be worked out just like B2C *sales*. But marketing is another story. If you’re Pottermore, that’s once thing. But most authors can’t provide critical marketing mass to make it make sense. At least in anything like the current context. A couple of years down the road things might look a lot different. Any author with 100,000 Facebook friends might look at it differently.

        Mike

      • http://madhatter.ca Wayne Borean

         I’ll disagree with you. Small Content Creators don’t need third parties to do the work. They need automated systems that allow them to do the work themselves.

        How do I know this? Easy. I know a lot of writers, musicians, and film makers. The main reason that they use Amazon/iTunes/Bandcamp/Smashwords/Etc. is for the automation. If they could do it themselves, they’d be happier. This doesn’t mean they still wouldn’t use Amazon/iTunes/Bandcamp/Smashwords/Etc., because they would. They just wouldn’t be locked in. Freedom is a wonderful thing.

        I used to write software. Did some automation work, as well as designing Digital Restrictions Management systems. A lot of this stuff isn’t that difficult. What is difficult is providing a user interface that someone who isn’t computer literate can handle. I’ll admit that I suck at writing User Interfaces.

        Apple does a good job with that sort of thing. That’s why the iPad is the only tablet that is selling in really large numbers. That’s also why Mac computer sales are climbing.

        Of course Apple has no interest in freeing artists. Nor does Microsoft. The Free Software community on the other hand does have an interest in freeing artists, and that is where I see some really neat software being developed. Things like Word Press, or Joomla…

        Wayne

      • /blog Mike Shatzkin

        Wayne, *some* creators can get “the work” done by software. And I guess those are going to be the creators whose work will get made available in the future.

        But not all “the work” *can* be done by software.

        Mike

      • http://madhatter.ca Wayne Borean

        *****But not all “the work” *can* be done by software.*****

        Really? I’d like you to tell me what can’t be done by software.

        Besides the Creative part, which does need a human (at least until Artificial Intelligences with human level capabilities are developed).

        Please go ahead. Because I’ll bet that I can point to someone already doing it by software.

        Did you know that you can use a WordPress based blog to set up an online store? You need a PayPal account, but you can do it, and it really doesn’t take all that much work.

        Wayne

      • /blog Mike Shatzkin

        “Besides the creative part”? Precisely! And part of “the creative part” is gleaning from an outline what is worth investing time and money on to go forward. I think that’s the bit that is most frequently elided in these discussions. Certainly here.

        Mike

      • http://madhatter.ca Wayne Borean

         Mike,

        You didn’t answer my question. What can’t software do to support a creator?

        The problem that you mention is meaningless. If a creator can’t create, the current system doesn’t support them either. But it also doesn’t support a lot of creators who can create.

        Consider Amanda Hocking for example – Amazon gave her support that the mainstream publishers wouldn’t. What I’m talking about is giving creators support so that they don’t have to rely on Amazon/iTunes etc., so that they have more independence.

        Consider your blog. You wouldn’t be able to operate it without the software provided by Word Press. That software allows people like you and me to run our own websites easily. Extrapolate to software which would allow a writer for example to upload and put on sale their new book at all of the major websites with one click, as well as on their own website. Would this not make the writer’s life a lot easier, leaving them more time to write?

        Wayne

      • /blog Mike Shatzkin

        Wayne, first of all, I use editors as much as I can. I have two people who work for me who almost always read and critique what I do before I post it. I believe the quality of my posts would suffer if I didn’t do that.

        This is true *in spades* for a book, where even questions of structure (should chapter 4 come later in the book?) require human pondering.

        I have never met the writer whose work couldn’t be improved by a good editor. Mine certainly is, just about every time.

        But marketing at its best is also not a turnkey automated solution. I’m sure Amazon can choose the people to ping about a book with algorithms, and it won’t matter if they’re 94% or 88% right rather than 100% right. But what if you’re trying to get a book of literary fiction reviewed so that it will enhance the reputation of the academic who wrote it so they can get tenure? What if you have a story where interest can be built among lawyers or pimply teenagers or rugby fans if you can orchestrate the interest within that community?

        Read John Locke’s book about how he sold a million ebooks on Amazon and tell me what he did to market himself can be automated! It can’t! It can be *assisted *by automation, but it can’t be *done *by automation.

        I think my next post will elaborate on these points although that wasn’t
        its intent. I’m not through incorporating what I’ve learned from others
        reading it yet; I’ll probably post it on Monday morning.

        Mike

      • http://madhatter.ca Wayne Borean

         

        Wayne, first of all, I use editors as much as I can. I have two
        people who work for me who almost always read and critique what I do
        before I post it. I believe the quality of my posts would suffer if I
        didn’t do that.
        This is true *in spades* for a book, where even questions of
        structure (should chapter 4 come later in the book?) require human
        pondering.

        I have never met the writer whose work couldn’t be improved by a good editor. Mine certainly is, just about every time.

        You should read my article on why Writers need to learn how to edit themselves. Most of us don’t have two people who work for us to check our writing. Unless our name is Steven King…

        Learning editing is like learning grammar. If you don’t do it, you’ll never be as good a writer as you could be.

        But marketing at its best is also not a turnkey automated solution.
        I’m sure Amazon can choose the people to ping about a book with
        algorithms, and it won’t matter if they’re 94% or 88% right rather than
        100% right. But what if you’re trying to get a book of literary fiction
        reviewed so that it will enhance the reputation of the academic who
        wrote it so they can get tenure? What if you have a story where interest
        can be built among lawyers or pimply teenagers or rugby fans if you can
        orchestrate the interest within that community?

        Read John Locke’s book about how he sold a million ebooks on Amazon
        and tell me what he did to market himself can be automated! It can’t! It
        can be *assisted *by automation, but it can’t be *done *by automation.

        A lot of it can be automated. Take your Academic, I’m willing to bet that they have either Microsoft Outlook or Apple Mail installed on their computer, and that they use those programs, or programs like them to keep mailing lists and contact lists current, to keep their emails filed correctly, etc.

        The problem is that those two programs aren’t as good as they could be. I’ve worked with major Customer Relations Systems. None of the ones I’ve worked with worked as well as it could either.

        But they do work. They just need tweaking to work better.

        I think my next post will elaborate on these points although that wasn’t its intent. I’m not through incorporating what I’ve learned from others reading it yet; I’ll probably post it on Monday morning.

        I’ll look forward to reading it. Have a good weekend.

        Wayne

      • /blog Mike Shatzkin

        Wayne, the editing I’m talking about has nothing to do with grammar. It has to do with the value an independent eye can bring to the creative process. I have at least a dozen people whom I can give things to who, if I asked them for comment, would *without fail* add value to the work.

        It isn’t just about where you you put your commas.

        Mike

      • http://madhatter.ca Wayne Borean

         Mike,

        I think you are missing the point I was trying to make. I’ve never argued that an outside editor has no value.

        What I am arguing is that the better a writer is at Editing, the better the writer’s works will be.

        Editing is a necessary skill set for a writer to develop. A writer has to learn how to edit, at the level of an editor. The writer has to learn how to be that “Independent Eye” on their own. If they choose not to learn, it will have a negative impact on their works.

        My aim is to write at a level where I don’t get edited. Ever.

        I may never reach that level (and let’s face it, a lot of edits are a matter of taste). But I am damned well going to put forward the effort.

        Wayne

        PS: Yes, this was a very popular article. Nicely done.

      • /blog Mike Shatzkin

        Wayne, in my opinon, it is simply not possible for one brain to do the work of more than one brain. So nobody can be their own editor as well as somebody else can. Furthermore, the interaction with an editor is (or at least can be) one of the most rewarding parts of writing.

        I agree that we should all self-edit. I try to read my pieces over the period of 24 or 48 hours before I post them, *after* I’ve gotten editing input, so that I can tweak and tweak. I don’t find that a substitute for another eye.

        So I don’t think what you’re doing is really possible (at least for most people, so it isn’t worth spreading as an ethic) and I personally wouldn’t find it more fun. I’m sure it wouldn’t produce better work, for me.

        Mike

      • Peter_Turner

        I agree, Wayne, that software is going to play an increasing big and important role in publishing content. The bigger challenge is creating scale-able marketing solutions (software driven or otherwise) for connecting content to readers who will pay for it. As content becomes more abundant, I have a feeling that the software tools that aid pre-publishing and publishing will see trivially important compared to the value of emerging marketing software platforms.

      • /blog Mike Shatzkin

        Thanks, Peter. I’d add “vertical” of a component of this. The helpful marketing software of the future will almost certainly be niche-specific.
        Mike

      • Peter_Turner

        Great discussion here! By the by, the term I’m liking these days, when it comes to content marketing strategy is *affinity*–that is the affinity between a piece of content and the interests of the reader.

      • /blog Mike Shatzkin

        Oh, it’s a fine conversation. It’s also a month-long! I just had to go back and look to see when I posted this; it was March 27. We’re writing this on April 28th!

        Those of you who are frequent conversationalists here might want to know that I get these comments in emails that I respond to. I see the name of the post, of course, but I don’t necessarily place the post itself in my mind if it isn’t the last one I did. (Or a unique one, like the ones on The Drongos or Dick Wade or Caroline Latham.) So I’m very focused on responding to the body of the comment and I could readily lose the context (the post itself.) I write a lot of words every day — quite aside from the blog — and I have never had a very good recollection for granular detail.

        Anyhow, I figure this far down the comment string, we’re all just pals and I should let you know this level of detail.

        Mike

  • Pingback: Things learned and thoughts provoked by London Book Fair 2012 – The Shatzkin Files()

  • http://madhatter.ca Wayne Borean

     Hum. You have a non-standard Word Press installation. It doesn’t handle HTML coding all that well. You should get someone to look at your settings.

  • Pingback: We’re getting SaaS-y, going Hollywood, and starting to plan Digital Book World 2013 – The Shatzkin Files()

  • Pingback: The ebook marketplace is a long way from settled – The Shatzkin Files()

  • Pingback: Smashing Daily #18: Hiring, Detecting, Singing | Steve deGuzman()

  • Pingback: Referencing Contemporary Technology & Culture in Fiction (June 17, 2012) - Pathetic Fallacy | The writing of A.D. Warr()

  • Pingback: Shatzkin: ‘Pottermore changed the game this morning’ | Digital Book World()