The Shatzkin Files


End of General Trade Publishing Houses: Death or Rebirth in a Niche-by-Niche World


Good morning. And welcome to a cheerful start to this year’s annual celebration of the trade book business. This speech is called “The End of General Trade Publishing Houses: Death or Rebirth in a Niche-by-Niche World.”

I want to start with a jump to the bottom line, just to make clear what we are saying today and just as much to emphasize what we are not saying.

What I hope to make clear is that the world of information and entertainment which constitute the ecosystem in which trade books live is changing in already defined ways. Even though we can only see a hundred feet in front of us an the journey is bound to be many miles, we know that many of the business forms and commercial models that succeeded in the 20th century will not make it far into the 21st. No big news there; we’ve watched media models come and go so often that we’re actually getting used to it.

We can see that format-specific as opposed to audience-specific is not the right strategy for media going forward. And that leads us to conclude that the general trade publishing model — by which we mean publishing across subjects on very much a title-by-title basis and with the organizing principle being that books are produced for general audiences — will, mostly, not survive the changes of the next 15 or 20 years.

We are not saying that general trade bookstores will disappear, although we think there will be fewer of them and the consolidation in that sector will continue.

We are not saying that everybody will read on screens and paper books will disappear, although we already know that certain kinds of information formerly best housed in books is now better delivered through electronic media.

We are not saying that novels will be replaced by multi-media interactive adventures, although we think those will continue to grow and thrive. They are more likely to cut into movies and games than they are into books.

And we are definitely not saying that long form reading is doomed over the next two decades, although we don’t think anybody really knows how much it will be reduced by changes in attention spans and information absorption habits of the generations that are kids today and those that will follow them. We don’t see any indications that long form reading will increase, but, given the unpredictable ways that change works on the human psyche, we wouldn’t rule it out.

But we are definitely saying that every general trade publisher of 2007 must have a plan to change over the next decade or two if they want to survive. And we will make some concrete suggestions about what that change must entail.

We all see what’s happening in today’s increasingly online an gadgetized world. People are spending more and more of their time interacting with the internet through more and more different means: desktops, laptops, cell phones, and PDAs. Internet 2.0 tools are making it easier and easier for each of us to contribute our experience and insight into collective knowledge. Things are easier to find, to tag, to collect in logical piles, to link. Nothing ever is truly lost —  the relevant commentary for any subject is increasingly easy to both aggregate and to filter, and members of the community are increasingly able to stay in touch with each other.

The lines between author and editor and aggregator and audience are blurring, with people shifting roles as they like, or as is convenient or useful in any particular conversation. All sorts of formerly free-standing intellectual creations are now being wikied, sliced and diced, and mashed up with IP that came from somewhere else. It’s sometimes hard to tell who owns what or how people are getting paid. Rules about copyright and fair use that were formerly almost exclusively the province of professionals are now being flouted through ignorance or disdain by the masses.

It seems intuitively that the explosion of reading on screens — which has happened — will ultimately result in ebook reading on screens, but exactly how is not evident yet. Ebook take up has been minimal. Relatively scarce product offerings — counterintuitively, even production of new titles in the trade area has slowed in recent years — combined with a consumer-unfriendly combination of formats, proprietary offerings cut off from normal book retailing channels, klunky merchandising, and anti-viral DRM have prevented book reading from being among the first things besides email to be read on devices.

In fact, books will be among the last. That’s not something for us to be proud of as an industry.

We are being propelled into a future of accelerating digital change. The single most eye-opening thing I learned at Google’s Unbound conference in January was that the equivalent of Moore’s Law related to digital storage capacity translates into an iPod in 2020 that would hold every movie, every TV show, every sound recording, and every book ever created in the history of man. That’s what somebody could carry around in their pocket, without being connected to the Internet. Add to that what’s going to happen with wireless connectivity, and we can see that the paper books of today will have absolutely unimaginable competition for what you could hold in your hand and read. Or look at.

While the engineers will be building storage capacity and bandwidth faster than we can create intellectual property, our audiences are going to be organizing what we do create, and organizing themselves to discuss it, add to it, and mash it up in various ways. That’s the other thing that we can already see that is a critical change dynamic challenging general trade publishing: people moving from the horizontal media we’ve always known to niche communities of the interested.

Every obsession, no matter what it is, will be ultimately indulged. All of the books and movies and songs and more– many articles from periodicals and journals and people’s private notes and amateur and professional commentary on all of the above — will have been sorted through, or will be being sorted through by the community. It will be gathered, rated, graded and hyperlinked. And it will all exist in such a way so that your own observations and insights can become part of the wealth of knowledge anytime you want them to be.

And, of course, it will all be delivererable in book form if you want it that way. The announcement last week that Dorling Kindersley will now enable customized travel information to be delivered in book form is both an echo of premature startups from a few years ago and a harbinger of what’s to come.

All of this has profound implications for brands.  Credibility is a critical component of brand. In a niched world, credibility, and therefore brand, will move to an increasingly granular level.

There are people trusted in the left- and rightwing blogosphere that aren’t at all known in the mainstream media. That’s true for every subject. We’re close to a tipping point, or maybe we’re past it — nichiest subjects first — where web-based branding will have more credibility than print, because print, needing more horizontal reach to be viable, won’t deliver the attention of the real experts and megaphones in each field.

As brands become established, of course, they try to transact more business with those who embrace the brand. The political bloggers will charge for speaking engagements or organize seminars. They’re already selling some books. They’re going to sell a lot more.

What creates lock-in for a brand in a niche is a real community and, on the web, user-generated value adds — like Publishers Lunch’s deal database, a truly classic example — and, also look at PublishersMarketplace here — the completeness of the offering within a niche. If you establish a brand and bring in the community, can you satisfy the breadth of the community’s needs, or do you have to share the niche? Will there ultimately be one central Civil War site or three or six? One central site to find recipes or will that market niche by nationality, difficulty, or other audience division?

These questions will be answered, thank you Charles Darwin, by a version of natural selection. Twenty years from now we’ll be talking about why gardening branding ended up being organized around the flower but farming branding ended up being organized by the size of the farm. These taxonomies will evolve, they will not be determined by fiat, although they will be amenable to better or worse strategies and executions thereof by the competitors in the years to come.

The take-away point, for the purposes of the point of today’s presentation, is that this is the way that most of us will be getting our information and finding our cohorts for the things we’re most interested in. This is how most of the information about most of our reading choices will come.

It has only been about 12 years since the emergence of the Web enabled a number of enterprises that have changed media businesses and even the forms of media themselves. Since the era of network TV dominance, there is really a 35-year history of change, going back to the beginning of cable TV. Think about the changes we have seen.

The record album, a form that came in with the Long-Playing Record, has just about been undone by iPods, a form of consuming music that breaks away from centralized formatting.

The TV networks, which 40 years ago shared about 95% of a US viewing audience among three networks undistracted by other home video capabilities, now shares a bit more than a third of it among four or five networks, and many of the viewers have technology to make skipping the commercials really easy.

The shrinking of the newspaper business has reached the point where the only questions about change are ‘how much?’ and ‘how fast?’  The flight is to the web, to crowd-sourcing, to intensely local, to anywhere but where the papers have been for the past 125 years.

The movie distribution business is in constant transformation. Blockbuster was replaced by NetFlicks, and both of them replaced network TV revenues, all while theatrical play becomes a harder and harder business. When we get to digital downloads as the primary revenue source, it will sharply diminish the advantage of the major studios in distribution; then it will just be about who has the money to make the movie.

We have seen in the past five years that a disruptive technology can turn an industry upside down overnight. IPods, YouTube, TIVO, and CraigsList — for what it has done to newspaper classifieds — have demonstrated that in the current decade.

I don’t really know much about the advertising business but I was struck by an article in Advertising Age in March of this year by Bob Garfield called ‘Chaos 2.0′. Garfield posits an imminent flight from horizontal advertising — think network TV — to vertical — think web sites, even though there isn’t really enough inventory — that is, available page views — to absorb all the dollars now being spent on TV.

One tale in the article is particularly intriguing. OgilvyInteractive North America got an assignment from its client, Six Flags amusement park, to give away 45,000 tickets for opening day to drive traffic. They could do whatever they wanted: ads, microsites, whatever they could dream up. But they just posted the opportunity on Craigslist and five hours later, 45,000 tickets were spoken for. All very easy, but, as the executive creative director remarked afterwards, “Now, the trick is, how do you get paid??”

Chaos 2.0 also posits a new breed of aggregator, not of content but of vertical channels, demonstrated by such sites as magnify.net and ning.com. These are MySpace, Facebook type community organizing sites with tools making things easy for people to participate, but the emphasis from the outset is on niche. MySpace and Facebook and Second Life promote a more horizontal appeal, and the niching comes later.

So, summing up where the world is going — forgetting for a moment about the book business, here is a short summary of the future:

* There will be vast amounts of content available to everybody.

* It will be highly organized — tagged and rated — by communities that will form around it.

* The communities will self-create and mix and merge and re-form as people participate.

* And the mass media that has been competing with them that has been advertising supported and mass-audience supported will become progressively less competitive, as its economic base erodes.

And, while we feel intuitively that there is still a place for books in all of this — printed or screen-delivered — we know that place is changing, and very likely getting smaller.

Now, let’s consider book publishers and deconstruct what they do.

Their first role has always been to be a sentient member of a community, although many didn’t necessarily see it that way in trade as obviously as in college or school or academic or professional publishing. But just as the editor of math books for a college list would have to go to conventions of math professors and probably read their journals, a trade editor who acquires and publishes mysteries would attend meetings of mystery writers or even mystery fans; a trade editor who acquired a lot of literary fiction would get to know the important reviewers. You can’t publish to a community you know nothing about, and that was true before there was an internet. The tradier the editor, the more informal this community membership function has been, but it has always been there.

Editors mix with their communities both to know what to publish and to know who might write it, or where the pictures might be obtained.

Then, of course, a publisher has to manage the processes of creation and delivery, which has always been the tricky part, requiring knowledge, capital, and organization. The objective is to reach the potential audience with an author’s work which implies a symbiotic relationship with authors which the wisest publishers see as part of a covenant to be of service to authors. Author care was an unspoken priority for the gentlemen trade publishers of the early 20th century; it has crept back up in consciousness among the big corporate trade publishers recently. As examples, look at HarperCollins’s and then Random House’s creation of speaker bureaus for their authors, which have occurred in the past few years.

This description of a publisher’s functions applies to all publishing, but what characteristics distinguish general trade publishing?

First of all, the right product is much more a question of format and audience size than specific topic. It has to be a book. It usually needs to be a book that can sell for no more than a certain price: that is, not too thick, and not too demanding of color, paper, or size.

Trade publishers are also distinguished by the fact that they find authors through agents. The math editor in a college house finds his own professors to write textbooks. Trade editors don’t usually work that way. They develop a network of agents who understand to one degree or another what that editor will publish and count on the agents to deliver the right authors.

Although trade publishers have, through necessity, worked to discover special sales channels with increasing energy in the past couple of decades, most sales trade publishers make are to trade channels: bookstores and libraries. What distinguishes these customers is that they are horizontal: they buy books, not books on particular subjects. And the best bookstores and the best libraries might well buy every single title on the best publishers lists. It is now the case that the true vertical thinking necessary for the future exists only in the special sales department at general trade houses.

Marketing for trade publishers has also historically been a stardardized, horizontal exercise. When I came into the business in the late 1960s, every newspaper had a book editor and did some reviews of their own. Every city in the country had local news in the morning and at noon and local talk shows on their radio stations, all of which were ready outlets for book authors on tour. It didn’t matter what the book was about; what mattered was that the publisher expended the resources to send the author out and had the wit to solicit the local media when they did. In fact, in those largely pre-chain days of many independent stores, the most common shortcoming of author tours was not having the books in place for the publicity, not the getting of the publicity.

When we stack up what publishers do against the trade world, we see that the community is really one of trading partners who are intermediaries, not individuals. In fact, this has always been the great strength of trade publishing: all of the relationships provide leverage.

The knowledge of the readers in a community is very general and vicarious, not built on direct contact. There are usually so many readers a publisher couldn’t possibly know them all.

The search for new writers takes place through the intermediary literary agents, also not based on direct contact. And the knowledge of photo or art sources is just as likely to be through an aggregator.

The functions of creation and delivery certainly are required, although the capital and expertise requirements for both are changing and, for many books, are neither as difficult nor as expensive as they used to be.

And reaching the audiences, for general trade publishers, is still about using intermediaries to reach big markets of people who are otherwise unconnected. Increasingly unconnected as mass audiences get harder and harder to aggregate.

How does brand play into this? Brand communicates something to an audience that knows it. It generates an expectation, a context, and a level of trust.

General trade brands, which are houses and imprints, have — with very rare exceptions — been meant to communicate to the publisher’s community: the trade. The horizontal intermediaries. Authors, of course, are brands with meaning beyond the intermediaries. And even the most one-book-at-a-time general trade publisher understands the leverage of series, or of continuing characters, all of which are ways to create and exploit brand.

But the web is changing the game in regards to brands. We have already seen that it favors one or two winners in any established niche: think of Amazon, Google, Craigs List, eBay. The same will be true as the next stage of the web moves brand power to vertical, to being more granular. And it is organizing audiences by subject; publisher house names and imprint brands are artifacts of another age as brands. Since brand management is a critical 21st century skill for all of us in the communication business, there are many implications to not getting this right going forward.

So now let’s map the publisher functions we talked about earlier to the world we expect to see in 2020.

In 2020, the communities exist online. Whatever you are interested in, you will be getting your messaging through niche communication. And you are going to know brands in your community that people who aren’t in it just won’t know. If you’re a writer, you’ll know who are the editors you trust, because you’ll have exchanged information with them on blogs or bulletin boards or video hookups or however it is we’re doing things in 2020.

Meanwhile, technology for getting books made has gotten xerox-copy simple — already evident today through such sites as lulu.com. So mini-publishing businesses will have grown up in every market niche, with books among the offerings. Now, what these mini-publishers won’t be able to do, without some sort of distributor-type help, is manage delivery outside their niche channels, if a publication wants to go beyond the community and its adjacent lateral reach.

The publishers in this niche will be members of the community. Marketing will be through them. In a digital world, much of the distribution will be through them. You either own the tollgate or you pay at it.

That doesn’t leave no room for today’s general trade publisher, but it doesn’t leave much.

Now the good news is that all book publishers — even general trade publishers — have great tools to get to an advantageous position in this future, if they start to use them. Which we’ll get to in a minute.

And the even better news is that the prescriptions we will discuss this morning are the right ones even if you don’t buy the idea that general trade publishing is a dead man walking.

There are some very big questions that influence the future for book publishers that only a soothsayer could know the answer to. But we’re bound to consider them.

One that seems to arouse more heat than it’s worth, since today’s publishers could adjust and perhaps benefit from this particular big change, is the one about physical books: will screens make them obsolete, particularly after the current adult generations are gone? We love author-futurist Cory Doctorow’s characterization that some people are pervy for paper. But, ‘will enough of us stay that way?’ is the question.

And then, even if many of us still want books, will we still want pre-printed ones that we can buy in brick-and-mortar stores as opposed to customized ones that we get printed on demand? Perhaps even at home?

And will there still be interest in what we call book-length narratives today? Or will our attention spans have become so compressed that the kids of today will have largely abandoned the novel and lengthy narrative non-fiction by two decades from now?

And will the turn away from mass markets, which in the future may be better thought of as gross-niche markets, be so pronounced that the phenomenon becomes rare? Or only so it is just less frequent?

Although we can agree that nobody really knows these answers, the questions are too important to be ignored. We’re obliged to speculate.

As for the survival of the book, I’ll take both sides. The book is a fabulous form and hard to beat for many presentations, but not all. We’ve already seen that the books that hold and deliver aggregates of short-form information — from dictionaries to cookbooks — have been seriously challenged by the web. If you’re already online it’s much easier to type ‘define X’ into a Google searchbox than it is to pull a dictionary off a shelf to look up a word. Or to look up most other isolated and well-defined searches for a pieces of knowledge.

But other books are not so easily substituted for by the internet. Some books are, effectively, large pieces of art. The bigger and better-rendered the art in a book, the less able the net and the devices we know today are to substitute for it.

And books are also used like objects in the way birthday cards are; they are tokens one person can give to another. Their tangibility is important in these circumstances (although, admittedly, a customized print-on-demand book, when they are widely available, might become better gift currency than a standard pre-printed one.)

We think the bookstore will still be here, partly because it will offer print-on-demand capabilities as well as pre-printed books, new and used. But it’s going to get much harder for stores when a print-and-bind capability is in many homes and offices, and by 10 or 20 years from now it almost surely will be.

Will today’s kids read books 20 or 30 years from now the way we do today?  For every parent that tells me their kids have no attention span for books or interest in them, another one tells me exactly the opposite. It is easy to imagine that having all those movies and TV shows available at a click of an iPod, not to mention reading habits fostered by blogs and posts, would undermine the habit of reading many tens of thousands of words in a single work. But it is also easy to imagine that the opportunity to immerse oneself in something large and long will become even more attractive to some people in an increasingly attention-deficited world. We all well know the wonderful feeling of reading a long book we wish would never end. That’s not an inherent desire for length speaking; it’s just good writing and a compelling story. They don’t go away.

In Chaos 2.0, Garfield explains that mass media do not exist in a vacuum. The mass media are supported by mass advertising, which supports the high quality mass content which pulls the mass audience for the mass advertising. Garfield sees the combination of audience fragmentation through niche offerings combined with ad-avoidance technology destroying that virtuous circle. If the commanders of mass audiences: the networks, the national newspapers, Oprah, no longer talk simultaneously to millions of people every day, will they coalesce around the same book or movie less frequently? How could they not?

One last thing before we get prescriptive for publishers. We have already mentioned that the Internet prefers few winners. Network effects — the more people involved in a community the more valuable the community is to its users — drive us to one dominant internet bookstore, one dominant auction site, one dominant search engine.

At the moment, network effects are fostering horizontal social networking as well: MySpace, Facebook, and Second Life being the most prominent among them. We see these sites as anomalies, as way-stations on the path to a mature internet. They are, in their way, like more sophisticated versions of AOL 10 or 15 years on. They make Internet 2.0 simple, just as AOL did for Internet 1.0. And they make interaction among strangers a little easier and the make it feel a little safer. But they are gathering people in a general trade kind of way, based only on the broadest definition of niche: teens for MySpace, college students for Facebook, and virtual world explorers for Second Life.

Within those communities, though, the niched future is definitely being seen. Once inside the doors of a horizontal community, individuals interest in sports or music or sex or anything else drives them to find like-minded others. We would contend that the real land-grab — the one that will matter more in the long run — is not in these social network sites writ large, but in the niche communities within them. It is only a matter of time before the communities for any niche in all three sites need to find each other. And they will.

You really won’t want to be a general trade publisher in the world we’re heading toward. Even if people are still reading long forms in book packages, it will no longer be possible to push book after book through a similar drill and achieve financial success. General trade publishers have to change.

They need to move from general to niche. Multiple niches, of course, but niche.

The need to stop thinking about publishing one book at a time and think about the aggregate value of their intellectual property to their niche audiences.

They need to move from expensed marketing, which is what we’ve always done, to investment marketing, which builds capabilities for repeated use.

They need to move beyond the identity of book publisher and make that part of what they do as a community leader.

And that is part of the biggest move of all — from product centric to audience centric businesses.

Publishers will not be alone trying to grab brand share — by which we mean fame, credibility, and trust — within subject niches. Everybody will be there: magazines, manufacturers, service providers, radio and TV stations, entrepreneurial bloggers. But today’s publishers have some significant advantages over today’s other competitors.

First of all, anybody trying to do something on the web needs content. Publishers have copious amounts of content and know how to find and get more.

Publishers also have a unique commercial relationship with their authors: a royalty relationship. If a magazine or newspaper wants to get some promotional writing done, they have to pay for it. If a book publisher wants to enlist an author to promote his or her book, they likely have an eager and cooperative collaborator.

And publishers push lots of print to interested market niches, so they can distribute promotional URLs to drive traffic to a web address or get sign-ups for an email newsletter.

Publishers have relevant products to sell their interested audiences. That means that their efforts to build a presence in niche communities is, in effect, uniquely subsidized compared to their competition.

These are hard, tangible advantages. Publishers also have a couple of softer advantages, based on the way they’re trained to think. Publishers instinctively understand the taxonomy of niches. They think about beginners and experts, geography-specific markets, and age- or wealth-driven distinctions in interest.

And successful trade publishers have always been spotters of trends, able to move fast on opportunities where they see public interest. Of course, the whole definition of moving fast is changed in a web world, but greater speed makes that skill set more valuable, not less.

The summary picture is that the ecosystem of general trade books — enabled by literary agents, general book review media, general trade bookstores, and widespread book distribution through public libraries — is disappearing. A world of niched internet communities is springing up. For today’s general trade publisher the question is: what’s the migration path? How can the business assets of today be turned into an organization that will succeed in the world of tomorrow?

The general trade publishing business developed an infrastructure suited to the societal ecosystem that existed. Society is changing; the way people learn about and consume information is changing. Publishers will need a new infrastructure in the new ecosystem and, unfortunately, a general trade publishing business can’t create a compatible one.

Moving from general to niche is, of course, the sine qua non of this entire exercise. I would hope everybody is aware of a recent reorganization announced by perhaps the most general trade of the religious publishers, Thomas Nelson, whereby they have ditched all their previous imprints in favor of organizing around BISAC codes.

CEO Mike Hyatt of Nelson, who instituted the change, blogged two weeks ago about the benefits he has seen already, and it has been mere weeks since the step was taken. Three of the four benefits he enumerates — a simplified business model, better internal collaboration, and more market visibility — really speak to the cost of maintaining the current imprint silos and the value of eliminating artificial internal divisions within the company. The fourth — greater consumer focus — will, I believe, become increasingly evident and increasingly valuable over time. I think Hyatt and his Nelson team have taken the first big step to becoming compatible with the way society and information are reorganizing. But, now, having broken apart the artificial divisions in their organization, they have to exploit the more natural divisions of niche. No doubt, that will come. At least, the elimination of the irrelevant silos makes it possible.

Nelson has demonstrated the first point general trade publishers need to take on board: the imprints are company infrastructure that are built around a dying ecosystem. Everybody’s are.

After a publisher has organized all their offerings by audience — and BISAC codes are as good a way as any to start — the next step is to map those audiences against existing internet activity. How many web sites and bloggers are suitable targets for each group of books you can identify? How does the inventory of web activity change your thinking about what constitutes a niche, or what books might belong in multiple niches? The guess here is that the real world of the net won’t line up perfectly with the conjured world of BISAC; a publisher wants to make their map of offerings conform to the net, not to a theory.

EVERY trade publisher who does this exercise will, we’re sure, find themselves spread too thin. They will find many niches for which they have two books or six across their backlist, or one on their current list. That’s not tenable. To succeed in the future, you will have to make commitments to communities: commitments to publish a critical mass of content and commitments to be a presence in the communities conversations. This will require choices that were never contemplated when the interested parties were PW, The New York Times, and the buyers at major trade customers.

After a publisher has assessed how its roster of product offerings maps against the evolving digital community structure, the next step is, to the extent possible, reorganize the business around the future, rather than around the past.

First of all, the publisher needs to exercise discipline to stick to the niches to which a commitment is being made. Any book published in those niches can add future value, regardless of how much money the book might lose. Andy any book published outside those niches adds nothing to future survivability, regardless of how much money the book might make.

Revenue and expense, particularly marketing expense, need now to be recognized by niche, not just by title. The niche must become the main unit of management attention. Marketing efforts, similarly, should be conceived, directed, and measured by niche, not just by title.

And recognition of the niches helps identify the other stakeholders in the niche, most of which will not be publishers and will not be competing with publishers. In fact, they will often be potential partners for publishers, able to forge a symbiotic relationship with them. You need to get your company partnered with those other stakeholders before your competitors do. You remember the Oklahoma Sooners, right? The people who got in and squatted on the land in the Oklahoma territory before it was officially opened for settlement. Publishers need to be Internet Niche Sooners to survive in the 21st century.

This will enable a conceptual shift in marketing: from expensed marketing to investment marketing.

Expensed marketing is what we have always done. Whether it is an ad in the newspaper or in broadcast media, an author tour or in-store appearance, it is here and then it is gone. You spend it and probably get almost no residual benefit beyond the day or week in which it appears.

But the opportunity is now here for investment marketing. If your activity captures email addresses, they can be available to use on the next book or the one after that. If somebody signs up for your free newsletter, you can promote to them until they ask you to stop. If you find a blog or web site that will carry an excerpt of a book as a promotion, staying in the niche will almost certainly enable you to work with that site again and again. Investment marketing is about building marketing assets, not just about promoting a particular book at a particular time.

Measuring the effectiveness of investment marketing efforts requires new metrics. It’s not a CPM game. Some of the things a publisher might start to watch over time are the new email permissions acquired, site or blog relationships developed, the aggregate of emails you get consumers to open each month, and the aggregate click-throughs for more information or for sale you are able to provoke.

Of course, you’ll also be able to count some directly-attributable book sales. That’s not a bad metric to track either.

The point is that you want to spend today’s marketing money to grow assets that reduce future marketing expenses, or leverage them.

Indeed, what publishers need to do is migrate to a new role. Just being a book publisher just isn’t enough, or won’t be as we move deeper into the 21st century. The successful publisher’s base will be as a recognized community leader in a niche. Identifying the niches to which a commitment will be made becomes critical here, because no publisher will be able to spread-eagle the entire world of consumer interest.

Succeeding in a community will never be about a single title. It will require using all the assets a publisher can bring to bear — all the content, all the contextual understanding, and all the contacts, including authors — to brand the publisher as a real force in the niche.

There will be opportunities, using extant content and the ability to create customized content as powerful levers, to form alliances with other stakeholders in the niche.

There are many content creators out there who are not book publishers. Many high-profile web sites in niches can be extremely revenue-challenged operations, particularly now, before all the monetization opportunities of the net have been realized. We believe we’ll see niche plays by publishers bolstered by acquiring web sites in the niche; publishers would be wise to be pursuing that strategy to grab content and niche presence in the same motion.

An important point to be made here is that niche leadership implies a new relationship to competitors. Romance readers are interested in romance publishing, not just one publisher’s list of titles. The niche player that tries to ignore competitors, rather than embracing them, is only assuring fragmentation in the niche and, in effect, nurturing competition. You will build a community faster if you offer the community more of what it wants, and your competitors have some of what the community wants. Figuring out how the deals will work is part of the creative effort that this evolution will require. But I could certainly see publisher X pursuing romance and embracing — so to speak — publisher Y’s titles, while publisher Y develops a presence in the sci-fi niche and includes Publisher X’s titles.

As the content and communities aggregate, there will be the opportunity to create new publishing models like subscriptions, free samples, leveraging site visitor generated content and many we can’t imagine yet. Be inventive, but also be alert to other people’s inventiveness. If you watch what goes on, you can be the first mover in your niche with an idea invented in another one.

All of this imples another shift for publishers, moving from being product centric, which is the DNA of a general trade publisher, to audience centric, which a niche strategy requires. Here is an extraordinarily important concept to take on board: in the future, you will not montetize content — you will use content as a tool to monetize community.

If you want to be recognized as a good community citizen, let alone a leader, you must always have the community’s interests foremost in mind. The product promotion has to be secondary to community service; in fact, the most effective product promotion will be community service.

Among the best ways for publishers to ingratiate themselves to a community is by publishing the content the community creates. Particularly in the transitional period of the next 10 or 15 years when horizontal interest and brick-and-mortar exposure is still highly desirable and access-limited, the fact that book publishers can provide it gives them a great ability to be useful to a niche community.

And a final point on being audience-centric: Don’t spam and don’t oversell. Don’t be a junk mailer or a shill. Nobody likes either and it is worth remembering Willy Loman here: your job is to be well-liked; very well-liked.

Ownership of content is a big advantage book publishers have moving into the digital future.

First of all, you have to start thinking about your books the way your publicity or sub rights department thinks about them for serialization: in chunks. The most valuable chunks on the web are those that give real value as a stand-alone. Non-fiction books which are aggregates of information or advice are loaded with these.

When you feature a chunk on the web, on your site or somebody else’s, first highlight the utility of the information, not the book. Let the discovery that there is a book be a secondary element of the user experience. Most people encountering a chunk of content on the web were looking for that chunk, particularly if they found it through search. It is perfectly okay to reveal that it comes from a book and to offer a buy the book link, but it’s not the point to lead with.

Content can also attract audience and participation if it is a wiki. I think we all know what that means: making the content open for addition, modification, or linking. This technique could add enormous value to lots of content: how-to or travel information or restaurant reviews could all benefit from additional perspectives and information.

Web sites run by other-than-publishers will often be content-starved. Participation in a community-of-the-interested can also result in opportunities to license content for other people’s web sites for the currency we all like best: money.

The most valuable asset that publishers have to springboard into the new niched content world is their commercial relationship with their authors. Other media that employ writers — magazines, newspapers, and ad agencies — pay them by the project. Only book publishers have a royalty relationship with their authors that can tempt the author to do original work for no cash payment based on the prospect of a mutually beneficial boost in book sales.

The author comes to the party with knowledge of the book’s content and knowledge of the community. And authors can express themselves. So all the author needs to really help sales efforts is an understanding of how to use the web: how best to set up a MySpace page or a Second Life atavar; how to blog most effectively; how to approach web sites for guest blogging opportunities. It is the publisher’s job to create a new marketing partnership with authors, to be the experts that teach the authors how to turn their efforts into fame and sales.

We know from a survey we arranged last year that agents are pushing their authors to be web-active. The preponderence of agents believe that authors should spend 2 to 10 hours a week promoting themselves online. Multiply that by the number of active authors a house has and it gives a glimpse of how much untapped power exists within the publishers web of author relationships.

Harnessing all of this can multiply the power. A publisher can set up a web site for the interested community and, if they have enough active authors, have daily content to bring people back regularly. And linking everybody to everybody else and back and forth to the publisher creates higher search rankings for everybody.

It is worth mentioning here that at one imprint of a major trade house, the associate publisher told me that she routinely has author sites set up nine months before the book comes out. Why? Because she’s collecting email names to notify on publication day. She routinely has between seven hundred and several thousand names, even for relatively little-known authors, by using this technique.

We have often heard publishers, when we talk to them about setting up web sites, ask us where the traffic is going to come from. And that brings us to another advantage publishers have over non-publishers: the ability to distribute URLs. Most publishers today waste this opportunity, often posting the URL for the publisher’s general web site. Aside from the fact that most of these are really set up to be B2B, not consumer-oriented, they also suffer from the generic trade publishing problem: they are horizontal, not vertical. They are broadly general, not niched.

The second most common use of the URL-distribution opportunity most publishers have is at the other extreme of no value. Sending traffic to an author website which is static, unchanging, and offering little opportunity for involvement doesn’t get you much either.

The trick here is in aggregation. When I bought How to Read a Financial Report, published by John Wiley, I was invited on the book cover to sign up for a free personal investment newsletter. One can assume that offer is made across many books, and the traffic it produces can be used to promote many titles in the future.

In fact, every book cover and every press release and every ad should contain at least one useful URL: a web site that will be involving and appeals to the niche of interest, not just to the readers of a single title. In the niche-by-niche world we’re trying to survive our way in to, if you can’t do that, you probably shouldn’t be publishing the book!

Having books of interest to a community delivers more than free content, it delivers revenue opportunities. Having something to sell, even if you don’t sell it aggressively and even if you don’t sell it to nearly all your traffic, gives you a revenue-creating tool. And, at the same time, it adds to your credibility that you have such product.

It is important to note here that selling direct is not always the best strategy. First of all, most of your customers who would buy books already have accounts with booksellers, so buying from them is easier than buying from you. When you consider that online booksellers often discount, deliver spectacular service, and will pay you for referring a sale to them, the margin advantages of direct sale are not as great as they might seem. What is of value is knowledge of the buying customers. I would look for negotiation in the future between publishers with substantial web presences and the online retailers about sharing names. There are almost certainly ways to grow the pie here for everybody by sharing information.

The sales opportunity need not be limited to the publisher’s catalog of books. In the near future, we expect user-assembled print-on-demand books, sort of like course packs for the general public, to become part of the arsenal for publishers on community-based websites. O’Reilly Media, the most advanced publisher in the industry in the ways we are discussing today, already offers this. And, as we mentioned near the top, now DK is introducing this idea to a consumer travel audience.

As we said earlier, we do envision the survival of general trade bookstores, even though general trade publishers will, for the most part, disappear. There is a certain magic created by a big place full of books that we don’t think will go away, even when we boomers do.

But we also think that the days of the new-books-only store are already numbered. And we think that one big retail chain will probably own all the bookstores because the infrastructure requirements to do the job will be so demanding.

Libraries will likely evolve into that bookstore chain’s biggest competitors. Forward thinkers in the library community worry about their future: of what value is a repository of printed content in a world where everything is discovered and available through the computer? The answer is, not nearly as much as today, and not a fraction of what it was twenty years ago. Libraries will be selling books — they actually are already — and they are already comfortable places to hang out with plenty of reading and multimedia material for the whole family.

The biggest future threat to Barnes & Noble is that the market for pre-printed books will decline.

The biggest future threat to Amazon.com is that an improved and diversified search-and-referral infrastructure will displace them as the first stop for any book-oriented quest.

The biggest threats to all other dedicated book retailers are the extremely well-run operations at Barnes & Noble and Amazon.

There is no doubt that the most challenged parts of general trade publishing as we migrate to the new digital world are fiction and belle-lettres, the tradiest trade books of all. But, unfortunately, they require an infrastructure that is supported by a lot of other books to be promoted and merchandised the way they are today. And it won’t be there.

It is useful to note, though, that fiction niches too: mystery, romance, sci-fi, chick-lit, thrillers all have their own audiences and online communities. A mystery editor I spoke to recently believes that even within her market, readers stick to their sub-niches: cozies, police procedurals, and so forth. So the niche community strategy still applies.

Great reads will also have online communities. In fact, they already do. And they will niche in ways we may not envision yet, but which the successful fiction publisher of 2020 will understand. Poetry is a niche; what we call literary fiction is also a niche.

Subject-oriented fiction has its chance to attach to subject niches. We all know that John Grisham first built his following among lawyers. He did it before the internet. It would have been even easier to do with the internet.

We all know that word of mouth sells books. Word of mouth is, increasingly, becoming word of fingers: IMing or texting.

Of course, no matter how intensely the world is niched, there will be titles and subjects that work across niches. The cross-niche relationships will be part of the developing and always-evolving infrastructure. When those opportunities arise to sell something to so many niches that it begins to look like a general audience, it will require a specialist to handle them, and that is what the general trade publisher of the future will become: the specialist for multi-niche, general interest books. But how many of them will we need?

In fact, the bookstores of the future will have the greatest interest in finding those books, which will be doable by data mining across millions of web sites and thousands of publishers. That’s part of why we’re positing a significant infrastructure associated to the surviving general trade stores.

But if we’re right about that, wouldn’t Barnes & Noble just morph into the one — or at least the leading — general trade publisher? They’ll certainly be in the best position if they have the only remaining nationwide cross-niche, general trade, bookselling infrastructure.

Of course, even in a niche-by-niche world largely devoid of mass media, bestsellers will happen. But there will not be much of an industry surrounding them; certainly not what we saw 20 years ago with general interest book clubs or what we see today with mass merchants cherry-picking the output of a general trade industry for the top 50 titles at any one time.

Change is seldom sought; it is usually forced. But in the media world, more than in most others, we are living in an era of blistering change. The future web — and even unconnected digital devices enabled by the web — are going to be more content-rich than we have ever imagined, and much of the content will be free.

The roots of general trade are sunk in a societal ecosystem that is disappearing.

The fact that the future of content and web community is a niched environment is absolutely certain. The details of it aren’t certain; how to get to it isn’t certain; and how to monetize it is something we’re a long way from figuring out.

But the shelf life of the industry we all grew up in is growing short. Anybody who wants to be in this business five years or more from now is going to be coping with painful withdrawal from the industry as we’ve known it for about 100 years. The good news is that we have at least the material for ramps to carry us across the chasm, if we have the sense to recognize that continuing the status quo will not be an option for very much longer.

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10 Responses to “End of General Trade Publishing Houses: Death or Rebirth in a Niche-by-Niche World”

  1. [...] difficulty for publishers, as readers of mine know, because I’ve written and spoken about it repeatedly, is that the “horizontal” [...]

  2. [...] Custom publishing is a growth area. This one was good to hear  me because it confirms the “end of trade” idea, which says that publishers have to (and can) create new channels to replace the time-honored [...]

  3. [...] communities—a trend that continues with many more participants today. She gave me a link to the speech that publishing consultant Mike Shatzkin had presented at BookExpo America earlier in 2007, because [...]

  4. [...] sum for a quick-and-dirty strategic assessment. My advice anticipated my later thinking, even before I had learned to articulate the concept of “vertical.” What I told them is “book clubs don’t map into the 21st century. Communities of interest [...]

  5. [...] have written and said many times, going back to 2007 and before, that big general trade publishers depend on a bookstore network for their survival. [...]

  6. [...] for large general trade houses, whose challenges from the inevitable decline of bookstores have concerned me for several years and which has been the subject or subtext of many posts on this [...]

  7. [...] para grandes editoras em geral, cujos desafios causados pelo inevitável declínio das livrarias me preocupam há muitos anos e que foram o assunto ou subtexto de muitos posts nesse [...]

  8. [...] that will increasingly tempt authors (and readers) to abandon it. But it also could be that I was right four years ago when I said that the general trade publishing house was a dinosaur in the emerging world of 21st [...]

  9. [...] I’ve been trying to get across aggressively for at least four years, since my “End of General Trade Publishing Houses” speech at the 2007 BEA, is that the world will move to vertical community organization and that publishers [...]

  10. […] books in stores. It has been my concern for years—first elaborated on at length in the “End of General Trade Publishing Houses” speech I gave at BEA in 2007—that the publishing industry that grew up around 50 years of […]

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