BEA

Shown above are the slides which articulate the major points and ideas in the speech. Below are some video clips and the transcript of the speech. The transcript is also available in an “annotatable” form, to be marked up with reader comments, thanks to SharedBook’s Annotation platform, which allows comments to be linked to specific sections of the speech. Please note that this platform is only available to IE & Firefox users. If you are having difficulty reading the justified text, we have found it is easier if you reduce the width of your browser.

Special thanks to Christina Katz for providing us with the following clips.

Introduction

Michael Friedman and I were having lunch and he said to me, “You know Mike, the word is “evolve”.” And that’s the word. So in fact it’s not going to be about how you flourish, it’s going to be about how you evolve. How publishers who create products can evolve into a world that’s going to be about community.

There are a few fundamental premises that really ground this speech that we want to start with, and the first one is Things Will Change, and I don’t think we’re going to have a lot of disagreement about that. So, we can move on to the fact that It Is necessary to have a view of the future to anticipate change. Think, for example, that people in the future are going to look up publishers on the web, and search those publishers for the books they want. Well then you would do things differently to what I’m going to suggest to you, because I don’t really think that’s what the future is. But you have to have a view of the future in order to know what to do in the present. Another premise that I believe is true is that the market is going to shift in some ways, from now on, between the time you acquire a book and the time you publish it. Every book that is being published now was acquired before anybody had heard of Twitter. And every book that is being published now depends on something that is in Twitter. So that’s going to be normal. And because that’s normal, you’re going to be constantly trying new things. You’re not going to have any choice but to try new things! Because Twitter is a new thing, and things become new, and you don’t have the chance to sit on the sideline and watch how it works and analyze it. You have to be opportunistic, you have to see what opportunities are out there and you have to try new things all the time, and you have to do that within some sort of framework, within some sort of understanding of the future because we know that there are so many new things going on. We can barely remember them all from the last two weeks, let alone try them all. So if you don’t have some sort of an idea of where you’re going, and where the world is going, it gets very very hard to distinguish between the opportunities.

A Lot Happens in 20 Years

Now, before I describe what I think will be the world of content and publishing in 20 years, I want to make the point that a lot happens in 20 years, because I’m going to describe a world that is pretty different from the one that we’re in, and that would raise a lot of skepticism. Think about this:

In 1968, there were about three broadcast networks that had about 95% market-share. There was nothing else to do with your TV, and there weren’t a lot of things to do other than watch TV. So, half the country or 60% of the country, could watch The Beatles on The Ed Sullivan Show, that kind of thing doesn’t happen anymore. By 1988, half the homes in America had cable, and half the homes in America had VCRs. There were five broadcast networks, not three. And there were 40, 50 , 60, 70 channels on the cable. And the broadcast networks knew that that day they had, 20 years before, was never coming back.

I picked 1980 for the record companies because that was just before a huge boom. As a matter of fact it was before two huge booms, because the Walkman 2 was invented in 1980. So between 1980 and 1983, the record companies got to sell me all the records I bought until that time, as cassettes. And then in 1983 or 84, they invented the CD, and they got to sell me all the records they sold me as cassettes again as CDs. And that made the record companies a lot of money. And things looked great for them. And the future was booming. And we know where the record companies were by 2000. 2000 was before the invention of the iPod, but not before the invention of Napster.

Newspapers. Well 1989 was a peak year for newspaper ad revenue. It went down a bit after that, but you know what saved them? In the mid-1990s, classified advertising saved them. But you know what classified advertising is now? Craigs list. It’s not on the newspapers anymore. You know where newspapers are now. They’re threatened. So in 1989 they had a peak year, and in 2009, they’re facing extinction. That happened in 20 years.

Mass-market paperbacks. Now this is something where you have to be as old as I am to remember when book publishers made a lot of money selling mass market paperback rights, and the fact that that was the jackpot. You published that title in hardcover, and then you could sell the mass market rights for a lot of money. I’ve picked 1975 as a starting year there, because the record sale for mass market paperback didn’t occur until 1979. That was Princess Daisy. Remember Princess Daisy? Pretty forgettable book. 3.1 Million dollar sale from Crown to Bantam. That number has never been topped. By 1999, mass market paper backs were where they are now, which is that they are category books. 95% of mass market paperbacks fall into a fiction category. So in 20 years, it went from a business that meant, that mass market books were bookseller, to a business where it doesn’t anymore.

Online Access in 20 years. Well, in 1989, the World Wide Web was in the process of being invented. But you could go online. To Prodigy. Through a dial-up. And now, 20 years later, you carry the internet in your pocket. So, that’s changed a lot in 20 years!

Books. Well, 1989 was before two great booms, sort of like the music business in 1980. Because in 1989 the owners of Borders, and the owners of Barnes & Noble were headed down to Wall St. to get a lot of money, to open up superstores. And all those superstores stocked a lot of backlist. So in the early 90s, publishers were printing a lot of backlist to put into all those superstores. And then Amazon came along. And that, as a matter of fact, got the backlist for the guys who didn’t have enough sales clout to get into the Barnes & Noble and Borders. Their backlist is sold on Amazon. So everybody was moving up. But you know what? The last 10 years, unit sales on books are flat. And bookstore shelf space is now sinking, where it was really expanding. We have gone from a business that was expanding, to a business that is contracting in 20 years.

The World of Content 20 Years From Now

So a lot happens in 20 years! And that’s what we are going to talk about now. What might happen to the business we call “the book business” over the next 20 years? This is purely invention here. This is totally out of my head, but that’s what you have to do because you can’t drive with your rear view mirror, you have to think about how things are going to change.

The first thing that’s going to happen, or the thing that we’re evolving to, where we’re going to be in 20 years, is that we’re not really going to have hard drives. We’re not going to really have much information cached, or able to hold in our hands. Everything is going to be in the cloud. And that means that DRM is no longer a problem really, because you’re not authorized to get the material from the cloud, you won’t have a copy, people won’t be circulating copies. So almost all file access of any kind will be tethered. Now you will know we’re getting there when you can use your iPhone in the subway. You will be able to use your iphone in the subway. You’ll be able to use it anyplace, but until we’ve built that infrastructure, we’re not in the cloud. You’ll know we are when that happens.

We are Licensors and Licensees

What that means is that we’re all licensors and licensees. In that day, when you don’t have a hard drive on your computer and you’re saving the thing you just wrote into the cloud, you’re going to have to license it. You’re going to have to say “I can have this and no one else can have this” or “I can have this and my assistant can have this” or “Anybody who pays $100 can have this”. So you’re going to have to set the licensing terms for everything that you save in a sense. There will be defaults, you won’t have to fill out a form every time you save something, but in effect, that will be the case. Where is this happening now? On Scribd. Right now. People put documents up there, and they license them in way that they think is right for that document. One of the reasons we’re going this way is because it’s really very inconvenient to have your files in your computer, because if you don’t have your computer, you won’t have your files. Now that’s fine if you have an office network and you can tap into it from any place, but many of us don’t have office networks.

Everything is in the Cloud

Well we’re going to have a cloud network, and we’re going to access that material through screens and devices. Screens and devices will be the same thing. A screen is a device that will get you to the cloud, and let you read it on a screen. And we’re going to have all kinds of screens. We’ll have a screen on the wall that you can watch the football game, it will have a Picasso in it when you don’t have the football game on. You’ll have screens that you’ll roll up and put in your pocket. You’ll have screens of various sizes for various functions. And, by the way, if you want to get at your material using my screen, you’ll be able to do that. You’ll have your iris scan, or your fingerprint, or six passwords, or however you felt you had to lock up that material. But you won’t be locked to any particular device, you’ll be able to use any device.

Niches & Nuggets

I want to introduce the idea here of a nugget. I know the niche I something that we’re beginning to understand, but I wanted to also introduce the idea of a nugget, which is more granular than a niche, which might give you a picture of how I think this world is evolving. Imagine this as a nugget: there is a single person in Richmond, VA, or Tuscaloosa, AL, or Omaha, NE, who is obsessed with Civil War uniforms, and collects them, and collects information about them, and links to everybody who is interested in them. But of course, Civil War uniforms need to be found by the Civil War community, they need to be found by the military history community, they need to be found by the history of fabric community. So that nugget is going to end up in many niches. And most nuggets are going to end up in many niches, and that will be the composition of the world that we’re going to live in 20 years from now.

Inside the niche, everything is going to exist. That is to say that it’s a sort of a combination or Wikipedia, and Facebook, and Google. It has the taxonomy. It has the bookshelf. The Safari Bookshelf, great idea, makes a lot of money for O’Reilly. It won’t make a lot of money in every context, but the idea of a searchable bookshelf? It should exist in every vertical. And it will exist in every vertical 20 years from now. All of these things are going to be combined and there will be gateways to every niche, and what’s going to happen when that happens, is that format-specific publishing is going to give way to format-agnostic publishing. Because when your relationship to the consumer is that you can deliver them a file, you are no longer captive to any particular format. Your file could have something to be read, it could have something to be looked at, it could have animation, could have software, could have games, could have anything at all because when the transaction takes place on the level of the file, then we break out of this notion of format, which has really been the way publishing and all media has been in the 20th century.

So you’re going to have these community gateways, and these portals, and this upstream aggregate’s idea is that the guy who is interested in the Civil War uniforms, he’s not really thinking that he’s part of the world of the history of fashion, or the world of the history of fabric. Somebody else who has decided to construct a portal on the history of fabrics says “ha! This belongs here, this should be part of this, the discovery of this should be enabled here” And that’s going to be another kind of opportunity, which is aggregating things, and creating the logical front door to a lot of nuggets that go together in ways that perhaps the people who created those nuggets didn’t even think about.

Crowd Curation

The crowd is going to be doing a lot of work. The crowd is already doing a lot of work. We’re going to get here because the crowd is going to look at all the material we have created over the last many many hundreds of years, thousands of years in some ways, and digitize. They’re going to be editing it, and they’re going to be curating it, and somebody’s going to be deciding that that Civil War uniform thing belongs somewhere.

We’re also going to have professional and personal superediting and super-curating. A business that is already starting is Louis Border’s MyWire and Michael Cairns has a piece of that which he’s calling “Week’s Best” and this is exactly about professional super-curation. It’s about bringing an expert on to look through all the material that has been generated across the web about a particular subject, and selecting those things which are most important. Yes, it can be done by the semantic web, but it still can be done better by a person, and I think it’s going to be a long time before that changes. We’re seeing the front edges of that now.

The Subscription Model

I believe that the subscription model is going to be the common model, and the idea of selling individual items is probably going to largely go away. Now of course these things are not mutually exclusive. The phone company charges you a flat rate for your local calls and then you pay someone else more for long distance. You can buy a cable television subscription that has more free channels, or fewer free channels, or you can get additional channel subscription, but then you can also get pay-per-view. There is pay-per-view but there’s much less pay-per-view than there is subscription, and I think that’s probably where we’re going with content in general.

Since everything’s happening in the niches, it’s going to take another element of discovery to find things that are really of broad general interest. That is essentially already happening. Publishers are already looking at bloggers and niche content creators for their next books, and that is going to be where anything mass-market arises 20 years from now.

Something that I don’t think we pay enough attention to is – anybody with a website is a publisher. Because after all, if you’re putting content together, or you’re putting information together, and expecting people to come to it or buy it, you’re a publisher. But not all publishers are content creators. Most people who have websites are not expert content creators, but they need content. And that is the big unfolding opportunity for publishing and the people in it over the course of the next 20 or 30 years.

Perhaps: One General Trade Publisher?

When this day comes, 20 years from now, that the world is as I described it, there might be one general trade publisher, and that one general trade publisher will sort of scope the internet and they’ll deliver books, or whatever books are by then. Books will not be exactly as they are now, we have ebooks, we have multimedia… A lot of people, not a lot of people in the commercial sense, but a lot of people in the digerati sense who are thinking about how to enable group creation of books and of intellectual property. Probably to the extent to which these things are printed, they’ll be PODs. The problem with press runs 20 years from now is going to be, where are you going to sell them? It’s going to get harder and harder for the bookstore to stand as things move to the net, and so where the books get sold 20 years from now at retail, is going to be an interesting question. But that doesn’t mean that people with publishing skills have nothing to do, because inside the niches and the nuggets, there’s going to be a lot of publishing going on.

I say that publishers are going to be people who own, manage, administer or lead a nugget or a niche, or they work for somebody who does. I’ll make the case in a few minutes about why the power is going to be in the niche owner, not in the content creator. Within those niches and nuggets, you’re going to generate, that is create new content, you’re going to curate, that is look at what’s there, select, and edit, and you’re going to aggregate content of any kind for the people who are in the niche.

I might add, this is a little bit like a university press. You’re reporting to the niche owner, the niche is kind of like the university, and you’re serving the community with what you’re doing with your publishing, which is a little bit like a university press. And as I say, I think that B2B is going to be where the money is going to be 20 years from now.

What About Books?

Now, because this is BookExpo America, I know that there are people in the audience who want to know “but what about books?” Well, they’re never going to go away, I don’t know how many billions of them we have on the planet, we’re not going to suddenly burn them all. The books are going to be here, and because of print on demand, pretty much as long as anybody wants a book, they’ll be able to have a book. We have to keep a shift running, like lightning, so it can’t be down to one person wanting one book, it has to be a little bit broader than that. But for the most part, anything can be made into a book, and books will be delivered as most people want them. We’re going to reach a time, if we haven’t reached it already, and we may have, where the number of titles that are created by the readers is larger than the number of titles created by the publishers. So, for example, a person creates a book about their wedding, or a person that creates a book about their kid’s little league season, which is the world of author house or the world of LuLu. It could be, though the data has not been carefully analyzed, it could be that we already have more of those than we have books by publishers. If we don’t, we will next year or the year after. Press run titles, in those days far off, they’re going to be the exception, not the rule. They will happen occasionally, if there are presses to run.

There is no question in my mind that if, 20 years from now, you read a book on paper, you’re going to be definitely stamped as retro. This is not going to be a fashionable thing to do. We’re headed to a world which is quite different from the one we’re in, and that’s never comfortable, but what’s really uncomfortable is one little letter change from N to X. This is a title that I have ripped off from a paper I worked on eleven years ago for Vista Computer Services called “From N to X” and from N to X means from content to context.

From ConteNt to ConteXt

We are all in the content business, and we are going to have to move into the content business. The ownership in the future of eyeballs will be more important than the ownership of IP, because value moves to scarcity. This is immutable, you cannot change this. Content creation and distribution are no longer scarce. Anybody can do them. Distribution is not an issue. I can type something on my computer today, I can flip it to my website, it is distributed. Any body in the world, on the web, can get it. The problem is, will they know about it? That’s the problem. Marketing is the problem. Distribution is no longer the problem. And you’re going to do your marketing niche by niche, and nugget by nugget, and it does require scale. If you don’t have enough content, or clout in a community, you won’t be heard. If you don’t pay enough attention or put enough labor into a community, you won’t be able to command the attention of that community.

So if the community development requires scale, and the content development doesn’t require scale, and you’re a big company with a lot of money, where are you going to make your investments? Where are you going to look for your advantage? You’re not going to look for it in owning content. What we’ve come to is a point, where where we create value today is not going to create value tomorrow. You win today because you own valuable content and have the ability to put it on a shelf, but tomorrow what you need to own is the attention and the bandwidth of human beings.

Today vs. Tomorrow

The historical revenue model was very clear. We printed things for less than we sold them for, and when we sold enough of them, we paid for the cost of originating them, and when we sold enough of that, we paid for our overhead, and then we had a profit. I’m not completely sure I can tell you what the next revenue model is, and that is part of why this is all so scary. Because we have to do something new, and different, that we’ve never done before, and we don’t actually know how it will work. I believe in the model of value moving to scarcity, and I believe that when you have something scarce you can figure out how to get paid for it, but I’m not exactly sure how that’s going to happen.

So in the next 20 years, what we get from wherever we are today, to where we’re going, and I hope something resembling what I’m talking about. We’re in a transitional decade, and unfortunately these transitional decades are going to be categorized by two things: costs are going to go up and revenues are going to go down. Why are costs going to go up and revenues are going to go down? Well first of all, because you’re supporting multiple models. We have to support this whole print model that I say is going to be gone in 20 years. You can’t dispense with it, it’s not gone yet, it’s yielding the revenue that runs the business today. Ebooks – we don’t even know exactly what they are yet, right now most people think that an ebook is the print book in a digitally delivered form. That’s ok with me. It’s not ok with a lot of people. People are trying to invent new forms, and that takes money. Legacy content is being digitized, that costs money. The legacy content is being tagged and organized, all these things that the community is doing.

That means two things. First of all, the community is occupied, doing this tagging and organizing, and secondly, we’re not getting the benefits of it yet. It’s not organized yet. So in fact, we’re not really prepared to get revenue out of it. This is a big one. This is a big one that people are just beginning to come to grips with. It is going to cost more for the big publishers to digitize their rights databases than it costs them to digitize their content. And because those rights databases today are paper contracts in file drawers, and the file drawers aren’t even in the publisher’s office, they’re off-campus somewhere, where space is cheap. Not only that, but not all the information needed to build those rights databases are in those files, because when you bought the photographs that went into that book, you did it in a separate contract with the photo supplier, and that’s in another file cabinet somewhere else. Pulling all of this information together and having it in a digital form is going to be a severe challenge, and most challenging for the biggest publishers.

The Transition

During this transitional period, everyday, as we’re well aware, because I can’t keep up with it and I don’t know anyone who can, we get new screens, new platforms, we get new channels. Every single one of these things costs publishers money, because you have to know what it’s all about. You have a learning curve. Sometimes that new screen is going to force you to do something with the content, to make it look good on the screen, and that’s going to cost you more money. But even if you could just give them the ePub file, you’re going to need to understand the commercial realities, you’re going to need to understand how to promote through that channel. All of these things are a learning curve, all of these things cut in to current margins.

Meanwhile, the digital natives, who are not us, in the publishing business, are inventing a new future, and we have to keep up with that future, which is also time consuming and expensive. We have to respond to it, and we have to use it, initially for marketing, but it’s also going to change product creation in the long run, and all of that makes things more difficult for us during this transitional period.

Here are some things that I think are going to happen during the course of that transition. First of all, the distinctions between 20th century media are going to begin to go away. We’re already seeing that the newspapers and the magazines are printing less often. Do you notice that? And they’re going to have the content on the web. They’ll have the content on the web four weeks a month, but they’ll print the magazine one week a month, or the newspaper won’t print three days, and so-forth. We’re going to go the other way in the book business. We’re going to update our ebooks. We never did that before, particularly. The lines are going to blur. I don’t really want to get into games, because we could do a whole hour on games, but I think games are going to find their way into a lot of the content we do in he digital world.

Content is actually going to find the markets and the pricing models. Scribd is a very good example of that. Scribd gives 80% of the revenue to the content creator. As the ebook sales grow, an author is going to realize, “well, if the publisher sells my ebook for $15, maybe I make a dollar. And if I want to make a dollar on Scribd, I can sell my ebook for a dollar and a quarter, or $1.20, and make a dollar. I don’t have the marketing and a publisher and all this other help, but that’s certainly going to catch my attention, and it’s going to make things harder for the publisher in two ways, because, one, they just lost a good author that they were able to make money on, and two, that author’s out there selling stuff for a buck and a half, instead of $15, which is going to put pressure on everything else.” When I say that the markets are going to find the content, I mean the niche is full of people who are knowledgeable about subjects who are going to find content and surface it in ways that we don’t have now.

I wanted this slide to make a point that access to audiences is always a key. New York Times and Barnes & Noble 20 years ago had a stranglehold on access to audiences, and then Google and Amazon came along and everybody in the publishing business got really nervous. And about two or three years ago, or maybe up until now, everybody is worried about if Google and Amazon are going to steal this business from us. Are the going to be the ones to control everything? But then, wait a minute, Facebook and Twitter. Twitter is making Google nervous, because Twitter is the place to search for the stuff that happened in the last 10 minutes, which Google doesn’t really have. In fact, I don’t think Facebook and Twitter are going to be here in 10, 20 years, because they are horizontal. They’re not vertical. What Facebook and Twitter do is going to be broken into every niche, and it will be there for you. You’ll be able to tweet, but you won’t have to go to Twitter to tweet, you’ll be doing your tweets within the community that you’re interested in. By the way, where everybody will be more interested in your tweets.

Darwinian processes are driving a lot of this, if you don’t know Ning, you must. I’m not going to get into a long explanation of it now, but I’m going to tell you this: Ning lets anybody set up a community. I was talking to a publisher who I believe has an opportunity to aggregate teachers. It’s not the company you’re thinking of, it’s another one, but there is an opportunity to create a teach community. Somebody in that company said, “well, you know Mike, it’s really hopeless. They’ve self-organized.” I said, “You mean with Ning?” “Yes!” he said, “the teacher communities, they’re all over the web. They’ve just self-organized.” That’s an opportunity for an upstream aggregate. If they’ve self-organized, that means there are 14 different places in the country where people are sharing their Shakespeare lesson plans. They would like to know about each other. So there is an opportunity for more self-organizations, for someone to organize around the self-organizations to make a super organization.

This is not to say that the old models are completely broken yet, it still works. The problem is, it works for fewer books every year. It works for fewer bookstores every year. And it works for fewer publishers every year. That’s why everybody’s got to change, and that’s why I’m trying to give you an idea of a target to move toward, as you change. These are changes that we can feel right now. We can see the day coming when we’re likely to have one dominant bookstore chain the in the United States. When that happens, we’re going to have a serious critical mass issue, because publishers can’t market a book if they can’t print it, and they’re not going to be able to print it if there’s one bookstore chain and that store turns the book down. So you’re suddenly going to be faced with one “No” and you can’t publish the book.

What We Will See During, and After, the Transition

We have six major publishers. We’re not going to have six major publishers for a long time. I’d be very surprised if we have more than four, four years from now, and as I said, maybe we’ll have one major trade publisher. And by the way, this is about trade. I have a rule I call the “Wiley-O’Reilly Rule.” The “Wiley-O’Reilly Rule” is that Wiley and O’Reilly do just about everything smarter than every one else, but it’s almost impossible for any one to copy them, because of the nature of their business, the nature of their markets and the nature of their companies. But I’m not talking about O’Reilly, and McGraw-Hill, and Taylor & Francis, I’m talking about Hachette, and Random House, and HarperCollins. That kind of publishing can’t exist a lot longer.

Another thing that we’re going to see, and I think we’re already seeing, is that mass-market events happen very quickly. This is a product of Twitter, and Facebook, and viral spreading of the word. There won’t be as many mass-market events as we get niche-ier and niche-ier, but the ones that happen are going to rise and fall very quickly, which, by the way, is not particularly good news for book publishers.

We are already seeing that the niche in the self-publishing blog world is a farm system. We are already seeing that many more books are either short-run or POD. Bloomsbury has just announced a program, and I know there are others, where they are putting their academic list online in the UK for free, and if you want to buy a book, you buy a book, and they print it on demand. I think we’re going to see, as ebooks happen more and more, we are going to see a lot more of that.

The other thing we’re going to see is that ebooks are increasingly going to have a content edge. Authors will force this on publishers. It’s very uncomfortable for a publisher, because I published a book in January, a major even happened in April which changes something. The author says, “I need to add six sentences! Or six paragraphs! It’s important. I know I can do this in and ebook, but my printed books are in the store, and they are out of date. And the ebook isn’t out of date.” That’s a real problem, but it’s a problem we’re going to be facing, because the authors are not going to live with their ebooks being out of date when they don’t need to be out of date.

We know that it’s already more difficult to launch new titles than it ever was before. The amount of time they get, your ability to pre-market them, get pre-pub reviews. All of that is harder than it used to be, and we also know it’s harder to sustain backlists. Those slopes will continue to get steeper.

Another point that I’m not sure has really been taken on board, and this goes back to the idea that scale is in the marketing. The marketing vehicles are changing all the time. For most of my career in publishing, the press list was the press list in the publicity department. Sure, things got added, names got changed, but it didn’t change wholesale in six months or a year. Well, that’s happening now. All new sites, all new bloggers, all new influences. And because the social networks have become an indispensible word of mouth vehicle, this is another thing that’s going to drive publishers to the niche, because you know what? The followers you need on Twitter are different if the book subjects are different.

Going Vertical

So what’s pushing, I gave you a hint, but what’s pushing the book publishers to vertical? Necessity. Of course, because the horizontal marketing and sales channels are going away. There was a piece in The Nation by Elizabeth Sifton last week, a very thoughtful piece. I didn’t agree with all of it, but it was very helpful on a lot of useful history. One of the points Elizabeth made, and I believe she has a lot more authority to make these points than I do, is that newspapers dying is killing book review media in print, and all of the social networking sites around books are not replacing that book review media in print. Publishers are losing valuable marketing capabilities. What’s happening is, the old ways we used to market are going away, and the new marketing opportunities are on the web. The web is organized by niche. What publishers will start to find is that the cost skyrocketed when they do marketing outside of the known niche.

I was talking to a publisher the other day who has an extensive crafts list. Now crafts lists used to be about presenting to the craft club, or the book of the month club, or the craft buyer at Barnes & Noble or Borders, and so crafts meant needlework, and it meant beading, and it meant papermaking, and it meant glassmaking, and it meant just about anything that you could call a craft. Well you know what? On the web, it ain’t gonna be like that. If the last six books you promoted were knitting books, and somebody hands you a beading book, and you’ve been promoting on the web, you don’t have a head start at all. You have to start all over again. This is something that publishers are going to begin to take on board, is that what they used to think of as vertical organization ain’t vertical enough anymore.

What happens when you market in a niche is that you start to develop relationships, and those relationships can be leveraged, and they stay inside the niche. They can’t be leveraged if you move outside the niche.

This business for websites being a market for content is also going to force publishers to rethink, because you’re going to find, when you start to talk to the website that wants content on rock gardens, that your three books on rock gardens just aren’t enough. You need 40 books on rock gardens. There are going to have to be 11 publishers to come up with 40 books on rock gardens to have enough content to help the guy who is trying to sell the rocks and the fertilizer and whatever he needs to attract the audience. So this is going to be a different kind of verticalization, sort of outside the boundaries of the publisher.

What does a publisher do?

So as we face all these changes, I thought it would be helpful to get back in touch with what do publishers do? What is the value proposition of being a publisher? Well, what I always used to say when I started speaking 20 years ago, “publishing is the business of contents and markets.” And then around 1999 we figured out, “you know what, it’s not just about content and markets anymore, it’s databases and networks.” What publishers are doing is creating databases, which is lots of content, in an arranged, structured way, not to markets which are vague, but to networks which are specific. That’s really what we do in the 21st century. I’m very proud of the fact that if you Google the words “publishing is databases and networks,” well you Google those words and you’ll see what you get.

What a publisher also does is they understand communities of content. This is more obvious outside trade than it is inside trade. Outside trade, if you publish mathematics books, you go to conventions of mathematicians. You know mathematicians. To a certain extent that’s true in trade too, editors don’t do just anything, they specialize, and they specialize so they can understand the communities of content.

Publishers also recognize creative possibilities and ideas that aren’t fully developed. As a matter of fact, publishers usually buy projects based on ideas that are not fully developed, and participate in the development of ideas. That is a very important skillset. That doesn’t go away. And the publisher is coordinating the whole range of disparate activities that are necessary to connect the creator to an audience. You know what that is, it’s putting the art in the book, it’s deciding what typeface, it’s deciding what price, it’s deciding how to market, but sometimes it’s finding a co-author for the book, or sometimes it’s finding an illustrator. So sometimes you’re actually connecting the creators with each other, as well as providing the detailed management that the creator needs. Actually, I believe, is the most important skill set of publishers is that they manage a massive amount of detail. Which the authors would very rapidly table themselves up in knots if they managed for themselves. That is the scale opportunity that publishers present, and that is not going to change. It’s actually going to be even more necessary in the web.

The Pros & Cons of What a Publisher Does

I wanted to also talk a little bit, before I give you the prescriptive stuff, about what the pros and cons are to what publishers have going into this world. You know there are going to be a lot of people competing for that civil war niche, or that baseball niche, or that baseball history niche, or that baseball uniforms niche. It’s not just going to be publishers. It’s going to be all different. It’s certainly not going to be just book publishers.

So what do book publishers have going for them or against them in relation to other media or other businesses? Books are the ultimate niche product. The first thing I remember learning about books that was significant when I went into the business was, and this is no longer true because technology has changed it, but in the 1970s if you had a message for 5,000 people, you could deliver it profitably in a book. You couldn’t deliver it profitably through any other medium. Only a book. So going back to the beginning of time, is that books have a focus, targeted audience. That means that publishers, and particularly general trade publishers, are the most skilled, experienced, and trained niche marketers that exist on the planet. Because every single book requires them to think about a unique audience, and how they’re going to get to their unique audience. As I said before, the publisher has skills in content creation and development.

Here’s an important one, that fourth bullet, this is good for you for the next five or 10 years, it’s not going to last forever. When you go out in that niche and you talk to somebody who is not a book publisher, you can do them a big favor. You can put their content, or their brand, in a book, and you can put that book on shelves, where people are going to see it. And across the internet, where people are going to see it. They don’t know how to do that. That has value.

The last point is that publishers can target distribute URLs. That 5,000 books can carry as many URLs as you want. May I suggest that the URL, which is the front door to the publishing house, is not useful. The URL to the author’s website, where the author is never going to make a change to it, and never going to do anything about it, that’s not useful. What is useful is to engage some number of the people who buy that book, who will check out that URL, in an ongoing conversation. If you don’t have a URL that will log in to an ongoing conversation, you are losing one of the principle values in publishing the book. That is another thing that is going to drive your niche, because you’re not going to create a unique website, meaningfully, for every book.

Here are things that work against us. We’re product and book central. That is a real problem. Communities don’t care about your book or your product. As a matter of fact I was on a panel about a month and a half ago with an author who has published a novel and worked the internet, and then got a deal with Hachette for his novel. He did a very good job of promoting his book and then now he’s got a company, I think it’s called Author’s Gumbo. He’s got a company that’s helping authors promote on the web, very very sharp. So somebody from the audience is talking about Facebook and he says “Yes, definitely you want to work Facebook, but don’t mention your book!” and the authors in the audience were stunned. People on Facebook aren’t interested in you, they are interested in themselves. You need to engage them about the things they are interested in, which is not your book. I’m seeing this in a publishing company I don’t want to name, because I think they’re really smart and I like what they’re doing, but here’s the problem. They are organized by vertical, and they’re working those verticals, but from the standpoint of the product development people, those vertical websites are their marketing budget. They don’t want to see a front page that doesn’t have a book ad on it. But you know what? People in a community don’t want to see a front page that does have a book ad on it.

Publishers are not continuous. The web is continuous. We’re event driven. We’re going to start to get more continuous, but that’s going to be a real problem for us because there will be others. Most of general trade publishing is not vertically focused. The first thing to do is going to be to get vertically focused. Most publishers lack the resources to experiment. And as I suggested, we are not headed into a time where we’re going to have a lot more resources, and that is a serious challenge. It is a challenge that can be overcome with the right kinds of partnerships.

Publishers generally lack a culture of technology, or culture of experimentation. Tim O’Reilly said a lot of smart things, almost every time he gets on a platform I want to take notes. One of the things he said at Tools of Change that really resonated with me, although I wouldn’t know how to do it, it’s really important. You’ve got to have an IT department where you throw them an idea in the afternoon, and they come back with a sketch for you the next morning. It can’t be that everything has to require a business plan and a complete set of specs and all of this preparation to decide whether you’re going to go forward or not. You have to be much more nimble than that. I think that’s not where publishers have been. We don’t have the skills to hire that, we don’t have the skills to find that, we don’t have the skills to direct it, but we need it. This is something that is going to be a drawback for publishers moving forward.

When we started this conversation, one-way conversation, we said we are in an era of rapid change, we have to experiment and reinvent, we don’t have any choice about that, and we should do it in a framework molded by our view of the future.

Shatzkin just said that the future means vertical and community. I’m going forward with that because I haven’t heard a better idea from anybody. I’m going to go forward and say, if the future is vertical and community, how do you adapt to the future? Remembering, of course, that you have to continue publishing what you’re publishing because it’s going to make money. You have to publish what you’re publishing and move to the future at the same time.

What a Publisher CAN Do

What’s the action plan for the 21st century?

The first thing, is you’ve got to understand yourself vertically. You’ve never enquired that way. Most general trade publishers haven’t thought about that. There is no master plan about subject matter to most general trade publisher’s lists, they have to understand what those lists are.

The two shortcuts I can suggest are: The BISAC codes and the special sales department. In big trade publishers, the special sales departments are a big island of rationality. They organize the material that is helter skelter and across all niches into logical buckets, because they’re thinking about customers. Customers need things in logical buckets. Once company, Thomas Nelson, has moved to the BISAC code, a concept of organization. It’s another way of getting at the problem. You need to start thinking about how does your list stack up by vertical. Once you know what your verticals are, you can start to research your vertical web world, which you have to do. Who else is in there? Obviously there are other publishers in there. Those other publishers could be potential collaborators for you, they could be people to sell parts of your list to. They could be people who sell you parts of their list, but you need to know who they are. You need to know who the non book publishers are in there too, because if it’s a newspaper or a magazine publisher, you might be able to offer them a souvenir on a shelf. But if they’re a bank, or if they’re a company that manufactures sustainable living brick to build houses, you might be able to create some sort of a partnership with them. You have to look at the world of your verticals and understand all the people in it before you can do anything further.

Next: you have to have a sensible web strategy. There are almost none. The publisher’s name is a B2B thing. It is not a B2C thing. The community needs to get things in verticals that make sense. The names Random House, Simon and Schuster, Penguin, mean very very little to most consumers. It is not the way to sell to them. And in fact, one of the things that we checked for in my office yesterday because it suddenly occurred to me and I didn’t want to cast without checking. It’s true. Not one major publisher have different product descriptions for the trade than they do for the consumer. Not one. When you’re talking about a book to a consumer what you want to say is “you need this book because…” When you’re talking about a book to a bookstore you need to say, “X number of people need this book because…” It’s a different pitch, but we’re using the same content for each. The web strategies of authors need to be rethought from the bottom up.

You need to be monitoring your business by vertical. One of the blog posts that I wrote that has gotten the most attention in the last four months since I’ve been doing this is one I wrote about what imprints should be in the 21st century. I think that publishers should stop tracking their profitability by imprint, and start tracking their profitability by BISAC code. The would have a much much better guide as to how to run their businesses.

You also need other metrics. You need better metrics. You need to know how many email names you’re collecting, you need to know how many links you’re creating, you need to know whether promotions are being put through or not. You need to come up with new metrics for the future. You need to be tracking your metrics and your financials by the verticals.

You need a complete email list strategy. This is another thing that I really don’t see that anybody has. It’s not good enough just to collect a lot of names and then spam them every once in a while. You need to be vertically sensitive in the way that you collect names. You need to understand – what is this person interested in? You need an author-facing component to your email strategy because the author has names they could be sharing with you, and you have names you could be sharing with them. You need rules of the road to do that. You need clear understandings with your email listees to do that. This is something that will be built over time but you have to start by having rules and having an engagement with authors around those rules.

Once you’ve done all those things, other things start to be possible. We will be reshuffling our publishing portfolios, because we’re not going to really know what the niches are until the publishers start going out on the web and looking at themselves in that way. You start finding out that, let’s say, maybe knitting and crocheting do go together, even though knitting and beading don’t. I don’t know enough about the web to know whether that’s true or not, within those communities, but neither do the publishers publishing, but they will over time. Over time, you’re going to see – here are areas where we’re strong, and you want to make an investment, and here are areas where we’re weak, and we either have to build ourselves up or we have to get out, and if we get out, we can see who the logical person to sell to is, and we’re going to see that coming over time.

You are going to maximize over time by looking at your verticals, the cumulative effect of your web marketing efforts. We did a project a couple of years ago about marketing where I raised the notion of investment marketing vs. spent marketing. Spent marketing is what we’ve already done, and always done. You put an ad in the NY times and it has a life span of a day, a week, a month, that’s it, it’s gone. When you market on the web, and you develop a relationship with a website, you’re posting to them and they’re posting to you, and you’re linking back and forth to each other, well that’s there for the next book, and it’s there for the next book. That’s the kind of change that is possible, and that’s what is necessary, because remember, we’re headed into a period where we’ve got to bring marketing costs down because margins are suffering. Over time, and this is the important part, you’re going to construct alliance that are going to enable new businesses and the new business models, because the new business models are not going to be about selling content, they’re going to be about selling other things, and they’re going to be about community, but they’re not going to be about primarily selling content. Everybody needs content to sell the other things. Everybody needs content as bait to attract a community. The publisher has a position of power, but the power is gained and exploited through linking up other people that can make that power have value in a vertical world.

Conclusion

I’ve just described what makes sense to me as a future. It might not make sense to you. But you have to have a view of the future of some kind in order to proceed in the present, and give context to the experiments that you’re going to be forced to try.

If anybody’s not too stunned to ask a question, I’d be glad to take some.

Thank you very much.

Good afternoon. And thank you for the opportunity to give a version of my “End of General Trade Publishing Houses” speech to a room with no big general trade publishing houses in it, unless they sneaked in. That actually allows us to get more practical because this audience starts in a place that is more practical.

The basic premise under which we’re operating here, I’ll summarize for those of you have never heard or read my work before, is that horizontal, format-specific media entities are oh, so 20th century, and won’t work very deep into the 21st. The reason for that is the web, which almost forces vertical organization. Horizontal presentations across subject matter — like CBS, Random House, or The New York Times — were the products of a capital-intensive, limited-distribution universe. CBS came out of an era when there were three national TV networks: they all tried to appeal to the broadest possible audience. Daily newspapers, to support their printing and distribution infrastructure, also had to appeal to just about everybody; the Times could get away without a comic strip page, but that was its only concession to verticality — a more intellectual audience. And book publishers were relying primarily on promotional media — newspapers, radio, and TV — and distribution outlets — bookstores — that were also appealing to people across the board. It didn’t matter what subjects Random House or Harper or Simon & Schuster published; what mattered is that each book have a large enough audience to be worth employing the powerful machine they controlled.

But all that is changing now. The newspaper and network TV audiences are shrinking. Bookstore shelf space is shrinking. Mass appeal is harder to achieve and lasts a shorter amount of time when it is achieved.

What the net is also doing is making “event” publishing, and books and magazines are definitely “events”, instantly outdated and feeling stodgy. Publishing on the web is continuous now. Bloggers write and update all day and all night. RSS feeds keep pinging people’s consciousness regularly. You know everything that is in the morning paper before you read it, probably before they even printed it.

Bookstores are also horizontal, and they are also highly challenged. Estimates of how much of the book business has gone to the Web vary from 15% on up, but that’s not spread evenly across the range of titles. One publisher I know thinks that as much as 50% of non-fiction may be sold through Amazon. The brick-and-mortar bookstore is still a magical place; it is a wonderful thing to be in a large room with 100,000 different book titles displayed in it. But now that bookstore is dealing with the fact that every book of great interest a customer heard and read about since their last visit was probably ordered online and already delivered. And customers can walk in with little hand-held devices that can point at a book’s bar code and instantly tell them what it would cost to get that book at an online bookstore. It might be cheaper. Maybe ordering that way will also save them some sales tax. It will certainly save them from carrying the book home.

And the rise of print-on-demand and the long tail, combined with internet-based retailing, probably means that the proportion of books sold that will have been printed and distributed in advance will decline.

In other words, our whole historical model is declining before our eyes. It isn’t collapsing yet, but it certainly is shrinking.

We know– despite some hysteria — that reading and quests for information and entertainment are not declining. So our audiences have moved. Where have they gone?

To the net, of course. And what’s replacing the horizontal print media of the past are vertically niched web communities in formation. It is early stages on this now, and there is still a lot of opportunity to establish a presence in verticals. But we can see from what happened in professional publishing, where law, financial information, construction information, medical information, and others have consolidated into one or very few web communities, that the web likes to mix content and commerce for the like-minded. And interest groups tend to cluster in a relatively small number of web locations.

The web also has changed information and entertainment exchanges from passive delivery from one (the publisher) to many (the audience), to many-to-many and one-to-one interactions, both of which are on the rise. The brilliant Clay Shirky, who is also present at this BEA, talks about reading, writing, and sharing. I think of it as reading, writing, and rating. There are more writers than ever before but, as Shirky points out, there is also a substantial amount of human bandwidth available with only a slight reduction of historical TV-watching patterns. The audiences are active now; this is part of what makes publishing a continuous exercise, not a series of isolated events.

The idea of somebody packaging something complete up for you in advance is certainly still prevalent: movies and TV shows still do it, along with magazines and books. But the web is beginning to make that idea seem a bit quaint. The record business has felt this in a big way because people can now buy songs rather than albums. In the pop music business, albums were created 50 years ago to make the artist and the record company more money when they had a hit single. The analog in publishing is the book of recipes or knitting patterns or house plans. These aggregates will get harder and harder to sell in the Internet world where I expect to purchase exactly what I want without a lot I didn’t want surrounding it. Or maybe not purchase it; maybe just get it free.

As the content offerings become more granular, the functions of aggregation and filtering, which used to be what the readers depended on the publishers to do for them, become new opportunities for web entrepreneurs. We don’t know how that will work yet; probably lots of different ways. The current vogue is for aggregation and filtering to be “crowd-sourced”; you get your site visitors to point to or upload content, and you also get them to rate it for the next site visitor. Over time, as niches become more defined, it is likely that new trusted brands can become both aggregators and filterers, giving you something more directed to your taste or interest than Google does. Of course, Google is always garnering information to allow them to do that better for you too, but they’re ultimately horizontal. And Google does not offer the social networking component integrated with the content and links that are what a vertical will require. Or at least they don’t do that yet!

The Long Tail has gotten a lot of attention since Chris Anderson introduced the book business to the term a few years ago in a Wired article that, with a lot of web participation, he turned into a bestselling book. Anderson saw that the Web eliminated the constraints of shelf space. Before the web, the biggest bookstores carried about 100,000 titles. Any title that wasn’t on their shelves had big barriers to both discovery and purchase.

But Amazon almost instantly knocked down both those barriers when they launched in July of 1995. They used a database that went beyond books in print, including many books that were OUT of print. So it was possible to discover a multiple of the titles you could find in a bookstore, and with fulfillment from the broad warehouse inventories of Ingram and Baker & Taylor, suddenly many times the 100,000 titles previously “available” could now be purchased.

But it didn’t stop there. Soon the used book networks were wired into another database, and then Ingram started Lightning in 1997. Every day, more and more titles were added to the choice available to any consumer, not just by the publication of new books anymore, but from the addition back into the mix of old ones.

And now everything published remains alive approximately forever.

The data we’ve seen on book sales says they’re flat and revenue increases have resulted from price increases. I have my doubt about that because the Net has tended to drive prices down, but the flat units ring true considering all the new competition from the Net for the reading time of the American public.

What Anderson documented in The Long Tail is that everything has a little market; the number of titles that sell something, even if very little, is just about all of them. And because there are so many of them — literally millions now, not the 100,000 from before — the cumulative effect of those sales is substantial.

So, who wins and who loses? Well, if overall units are flat and sales of books that would formerly have been dead are rising like a cemetary full of zombies, it is pretty obvious that the share of market left for new books is diminishing. But it is worse than that for legacy publishers, because the number of new titles competing for that shrinking market is growing by leaps and bounds as outfits like AuthorHouse and lulu.com, offering an ebook and POD model, obliterate the cash barriers to entry.

So it is not just the imagination of longtime book veterans that the business is getting progressively more difficult. It really is. Every day, the competition for a new book being published is greater than it was for those that came out the day before. And if there’s a way this progression ends, I haven’t been able to figure out what it is.

If that’s the challenge, what can publishers do? If the treadmill moves faster and gets more steeply inclined to the floor every day, and there’s no relief in sight, what’s the new model?

Let’s remember why we have publishers in the first place. The main thing they offer authors that authors can’t get anywhere else is access to the market: distribution, primarily, and marketing. Yes, publishers also shepherd the content development and project-manage the book’s creation, but those services are getting more ubiquitously available for hire. What the author wants from the publisher is the publisher’s ability to get that book on Barnes & Noble’s and Borders’s and every independent store’s front table and on the shelf at the public library. As long as those places occupy relative importance in relation to Amazon sales, and they still do, the author has a reason, aside from financial support. to have a publisher.

But those horizontal mechanisms are diminishing in relative importance. What comes next?

In the future, the eyeballs and audience bandwidth will be reached through rising vertical channels, in a variety of online ways: web sites, social networks, and more exotic communications devices like Twitter and others not yet invented.

Publishers have to learn to live in the vertical world. They have to establish their brands — probably new ones that don’t exist yet — and their presence and their market knowledge in spaces that are still in formation. This will require great changes in the way they think: about their audiences, about how hard to sell, about how they think about competition, and about where and when products must emulate services.

The short summary is this: the opportunity for today’s publisher is to use content as bait to attract communities. And communities, once formed and paying attention to new brands that have credibility in their niche, will be the monetizable asset of the future. And they will be the only means a publisher will have to really deliver distribution of an author’s work.

If making the move to vertical is the answer, and it is the only longterm strategy I can think of that might work, then let’s think about how today’s format-specific book publishers, born and raised in the 20th century, are positioned for the future.

The most challenged are today’s most powerful: the big general trade publishers. All of them have lists assembled with very little attention to niche. Their clout has been used to build a great physical supply chain, from printing contracts that give them speedy service and good prices, to warehouses that ship fast and can manage the requirements of major supply chain partners, and by establishing productive relationships with the biggest intermediaries between them and the book-reading public. Their infustracture machine demands volume because it’s built for scale. So they are attempting a feat akin to changing planes in mid-air. They must keep the old model robust while they figure out what the new model is.

The companies best positioned to move to vertical and format-agnostic publishing are those who have already done it. Companies like Wiley and McGraw-Hill and, of course, O’Reilly, and bigger university presses have been in professional and academic markets that have already gone both vertical and to digital publishing. They have had the opportunity to build and monetize community. They have been forced to develop “StartwithXML” workflows where their editors develop taxonomies and learn to tag content in development to aid future discovery. And they have experimented with new business models like rental and subscription and even advertising-based in their non-trade divisions. Porting the lessons over from one side of the company to consumer trade books isn’t a trivial undertaking, but at least a lot of the knowledge exists in-house. And these are big companies, so they can support the investments that new businesses require.

Small companies that are dedicated to niches have the basic tools to make the transition. In some ways, not having big pots of money to finance change can deliver an unintended advantage, because it will require them to partner with other players in the niches they choose. Partnership, particularly with non-publishers and non-BOOK-publishers, will be an important feature of successful community building anyway. Having slender financial resources can compel a company to do the right thing.

What simply is not going to work anymore is the small general trade publisher. With all due respect to the founder’s brilliance, I can’t see a company like Workman being built today the way it was 30 or so years ago. Small companies always had a better chance if they stuck to their knitting, once they figured out what their knitting was. Trying to be a small general publisher not only doesn’t enable modern community-building on the web, it also frustrates special sales efforts. It is hard to imagine a small publisher being successful today on the book trade alone

I’ve been explaining the switch from horizontal format-specific to vertical format-agnostic for well over a year now, much longer than that in a less clearly-articulated way. And a common response, particularly from big general trade houses and those others who, for one reason or another, are attached to traditional publishing, has been “what about fiction and poetry and belles lettres?” In other words, what about the stuff we make our money on?

I used to respond by saying poetry is a niche and fiction has many niches. And we all know there are web communities like LibraryThing and Shelfari and many others trying to get big readers of narrative writing to talk to each other about it. But that’s putting lipstick on a pig, as they say on Wall Street. I think the important thing to understand is this: it’s a pig! Here’s why.

The book business we’ve always known is a “critical mass” business. If you can’t sell enough, you can’t print the book economically. If you don’t run enough volume through your operation, you can’t support your sales rep or your warehouse or your office rent. And, most important to remember, if the bookstore can’t drive enough volume, it can’t stay open. Store volume may go down 10% because of market erosion, but then drop to zero because the store has to close.

The “writerly” books we all love to talk about and read are not the sole support of any brick-and-mortar retailer. The store keeps its doors open selling many other things: reference, compendia of various information, how-to books, kids’ books, joke books, travel books, and gardening books. If sales of those books, even just sales of those books through brick-and-mortar locations, suffer a severe decline, that will cause stores to close. The publisher of fiction and poetry may not like to think about it this way, but there won’t be much of a bookstore infrastructure for fiction and poetry alone. That is, we may not have a choice about whether to find additional ways to get those books to their market.

There was a recent article in The New York Times about Hay House. They don’t do fiction: the mind, body, spirit books they do are not so dissimilar. They are books to be read and discussed, for the most part. Some of them will “chunk” and some of them won’t. Hay House has learned how to build a coherent community from their audience, sticking to a niche that is comprehensible to them and to their readers. And, having built the community, they have learned to monetize it through events which become profit-generating marketing for their list. That’s the right idea, and a poetry publisher could learn from it.

Some of the outlines of the future world of publishing are taking shape.

Ebooks, after years of high expectations from people like me that were not met, are finally getting some traction. Amazon’s Kindle was a catalyst, but the anecdotal evidence is that sales in all formats are growing. Most ebooks to date have been sold in Adobe format and probably were read on laptop or desktop computers. We’ll be watching for handheld devices to start taking much more of the business, which will more fully capitalize on one of the big advantages of ebooks: easier portability for what would be heavy stacks of paper.

As ebooks grow in importance, it gives publishers and their authors a chance to start becoming more continuous. It’s much easier to add a chapter or a new forward or even an updating paragraph to an ebook than it is to a printed book.

The big social networks — namely MySpace and Facebook — defy this analysis because they are horizontal. They niche internally by subject, but they built themselves on social connections, not niche presentations. It wouldn’t surprise me if they start to yield ground now to more vertical plays. There’s a site called ning.com which allows entities to create their own social network. Social networks actually integrated into the verticals is where things are likely to go.

In fact, social networking “tools” — for tagging, sharing, rating, posting — are now being integrated into all sorts of sites. And tools are also developing to pull contacts and posts from across horizontal networks on an individual or subject-niche basis. There is obvious reluctance on the part of the current crop of winners to poke holes in the walls surrounding their gardens, but they recognize that they have to so they do. In time, this will allow new, more logical and more granular, aggregates to grow out of the old.

A new technology called “Twitter” has popped up in the past few months. It enables its users to send out “tweets” — very short bursts of information. If I sent one now it would be “I’m talking to an audience at PMA Academy.” And that would, presumeably, be of interest to somebody somewhere and they’d then know it.

I’ll admit that the attraction of something like this takes a while to dawn on a 60-year old like me, who is hardly looking for more detailed information about the daily lives of my friends and acquaintances. But the magic of the net, we keep learning, is that a very large database can generate small pieces that have great value to some people. Twitter was recently used to help “cover” the North Carolina Democratic primary. Tweets from polling places all over the state presented a useful picture in the aggregate. If enough people start sending tweets and enough people start monitoring them, it creates a whole new always-on monitoring of the world. And it is easy enough to grab attention outside the immediate network if something important, like an earthquake or a terrorist attack or a major traffic accident, is first covered by tweets.

One other trend that is becoming clear is a move away from laptops and desktops as the principal means of accessing the net. The iPhone and Blackberry are the game-changers here. A world where most people have internet access most of the time is going to be almost as different from what we’ve known as what we’ve known is to the pre-internet world. And we can see now that the iPhone internet world is upon us and that ubiquity is just around the corner.

It was recently pointed out to me that Asia, and to a lesser extent, Europe, developed a cell phone based internet culture because expensive PCs were not as ubiquitous in homes and neither were broadband connections. That might be a clue about where to look for future leadership we become untethered from our big screens and all-finger keyboards.

We’ll turn now from the historical, analytical, and theoretical and try to get practical. Exactly what should you DO?

First of all, you have to understand how your publishing program fits in the web world.

Map YOUR web. Title by title, figure out what sites and community subsets — groups within social networks, for example — are important to you. Ideally, you would perform the exercise of making that list for every title whose content you control, in or out of print. (And why, in the age of POD, would you let anything be out of print?)

After you’ve done that exercise by title, you will have created points of reference to roll it up by niche. Where the important communities overlap, a niche is certainly suggested.

You will probably see by what works for each title that the name of your publishing house or imprints or even your series don’t necessarily resonate across the same web communities. That’s a hint to you that the branding you’ve been using to navigate the B2B brick-and-mortar horizontal media world is not going to deliver for you in the evolving niche world. As this analysis starts letting you see the niches and your places in them, it should also start telling you where there are new branding opportunities. Being highly relevant to smaller audiences will serve you better in the long run than being known generally to larger ones.

Once you’ve done this exercise, you are ready to start thinking in niches that will be relevant going forward, at least for a while. Change will be more common than permanence. With the niches defined, they should become a critical organizing principle for your business. You have the opportunity to think in terms of them as you decide on each title you publish. You should try to stay within them, making sure that you’re building content with common markets that will ultimately build brand and reduce per-title marketing expense. You should be thinking about your investment and your profit by niche, as well as by title and by old-style measures like imprint.

What you should also be mapping is the other entities — publishers and non-publishers — that are in your niches. The book publishers particularly might be your competitors, but they also might be important collaborators. The community-building exercise is a long haul; as the recent emergence of Twitter makes clear, we don’t have nearly all the tools in place yet. You must at least entertain collaborating with book publisher competitors to work in this new vertical way. If you’re trying to be of service to a community, it’s a bad start to try to cut them off from content they’d care about. This is a touchy area that will require a lot of rethinking.

If publishers don’t find ways to collaborate, the niches will necessarily be built by third parties who will get upstream beyond all the publishers. Rather than being an aggregator, you will become aggregated.

The non-publishers in your spaces — like merchants of goods and services, academic entities, and hard-blogging interested citizens — are potential critical partners. For a while longer, at least, they are susceptible to seduction by book publishers. Whether you buy web sites or communities or whether you just ally with them, there is still a window for you to trade what you do anyway for what they do anyway in ways that are mutually productive and which raise barriers to entry for your competitors.

The suggestions we?e just talked about are long-term. These are “right now.”

First of all, you need to dedicate some of your marketing budget to community development. I was impressed to learn that one niche publisher, Berrett-Koehler, has already appointed somebody with that charge in their job title. What this means to me is responding to the right blog posts, being a good and public citizen of the right communities, and contributing content to the communities’ conversations. It also means not spamming with your press releases or making every post or remark a commercial for somebody to buy a book.

You also want to start capturing what are vast amounts of intellectual property that publishers routinely throw away. When editors compare one book they’re considering buying to two others in the marketplace in a memo, archive it! When you cut good material out of a book because it disrupts the narrative flow or is not quite worth printing additional pages for, don’t throw it away! Encourage your authors to give you 10-page bios if they have them; they can live online and in ebooks. Don’t lose any testimonials or critiques that come in at any stage. All of this constitutes content that can be useful when you aren’t paying by the sheet of paper to deliver it.

Start finding ways to be “continuous.” That’s about blogging, of course. It is also about adding material from time to time to ebooks. It is about creating a web page for every book that has updated information on it from the author or publisher. THAT is the URL that should go on a book’s jacket, not the one for the publisher’s generic home page.

Start finding ways to use community content. That could be within a web context yet to be developed, of course. But it also makes a lot of sense to think creatively about how community content could be turned into books, or parts of books. You’ll flatter your community and get commercial intellectual property at the same time.

We haven’t dwelt on the fact that “format-agnostic” is another big part of the vertical 21st century publisher. Once you’re distributing files rather than printed paper, you can just as easily be distributing audio, video, animation, games, or software as material meant to be read or looked at. It is going to become routine that the author videos go on YouTube before the book comes out. The long tail that is going to crowd audiobook sales is going to be author- and publisher-generated podcasts that people listen to on their way to work instead of the radio or instead of the latest novel. You need to be in that flow; you need to possess those skills. If you haven’t started already, don’t wait any longer.

The last item on this list is certainly the hardest. Until the most recent times, publishers did their production secure in the knowledge that there was one end product: a book. Sometimes it was slightly more complicated because they’d want to plan for a paperback in a slightly different, or even radically different, format. But now we don’t know WHAT format is next: some kind of ebook, or an iPhone, or a widget? The cost of content agility, which will certainly be a requirement for successful publishers very soon if it isn’t already, drops sharply if the publisher has the discipline of a digital workflow that starts with XML-structured documents from the very begining. And that kind of workflow also enables the author’s and editor’s inputs, such as those we mentioned earlier, and the attendant rights information, to “travel with” the content as it changes forms in development and in its commercial life.

Creating a “StartwithXML” workflow is a difficult process change. Taking advantage of it requires all kinds of work: creating design templates, agreeing on the taxonomies of different niches you publish in, and deciding what to tag and how to tag it consistently. Perhaps this challenge is so large that it belongs on the “strategy” page rather than the “tactics” page, but, either way, it is not too soon to start learning all you can about what it means to your company.

We know the world is changing, but we don’t know how fast change will come. The checklists of strategic and tactical items are important for you to start working on now while you can still make profits on old models.

Books are still very important. They are useful, ubiquitous, and revered. We are still in a world where distributing them requires organization, relationships, and knowhow. You have it; others don’t. That’s leverage now.

But the leverage diminishes as online sales grow. Online sales don’t eliminate the value of publishers; the sales are still driven to Amazon by the efforts of publishers. Even the sales coming to Amazon from affiliate web sites could have been influenced by publishers who called the attention of those web sites to their books. But when the day comes — not next year, but maybe ten years from now — when online sales are the dog and brick-and-mortar sales are the tail, owners of content will think very hard about whether they need the help of a publisher to get what they have to the public.

There’s an opportunity for the people in this room with verticals because the biggest players in today’s world are horizontal. You can out-compete the big guys in their niches, even if they have more content than you do; even if they have better content than you do. In fact, you will probably find them happy to help you own a niche with their content if you help them sell their book. They are product-centric and that’s your opportunity. Remember that the owner of the community is the winner in the end.

Ebooks and POD are tools you should use as well. They allow continuous publishing; they allow involvement with the community. They allow you to start businesses in new niches at lower risk. Harlequin, a very big niche publisher, has built a whole new list of short erotic fiction by starting as ebook only. They’re selling stories shorter than what would make sense in print for prices lower than would make sense in print. And they’re finding new audiences and new authors at the same time. What Harlequin has done there is a replicable example.

Thanks very much for your generous attention today. This slide shows you how to fine me. If I can give you a quick answer to a quick question, I’m always happy to do it. Best of luck navigating to success in the inevitable future.

At BEA last June, I unveiled a formulation I am going to reprise for you today, which is that General Trade Publishing Houses don’t “map” into the world we’re going to see develop in the 21st century.

We’re going to start with a view of what digital technology could mean to the overall world of communication over the next decade or two. What the history of the Internet seems to be telling us so far is that we will see a growth in niche organization — what people like to call “community” on the web — and a corresponding decline in horizontal media, which is much more threatening to magazines, newspapers, and broadcast than it is to us in the book business. But it will change us too.

I want to make the case to you today that the world is going to change in ways that are becoming increasingly clear. Media entities in the 20th century — particularly consumer media — were characterized by being horizontal in reach and format-specific. What’s horizontal? Random House. The New York Times. CBS. All three entities deliver content that satisfies the consumer across lines of interest. And all three have pretty much stuck to their formats with very limited exceptions.

The 21st century will see media entities which are the opposite: highly vertical in what they explore but format-agnostic in how they deliver information. If that’s true, and I hope by the end of today’s session I’ll have proved it to you, then general trade publishers don’t map into this future.

Because this is an emotional subject for those of us in the business, I want to enumerate a few things at the outset that I am not saying when I say General Trade Publishing Houses will decline.

I am not predicting the end of bookstores. There may be fewer of them, but they’ll still be here in a couple of decades.

I am not predicting that everybody will read on screens. You probably know that I’m a fan of the Kindle and perhaps you know that I’ve been an avid ebook reader on a Palm for almost 10 years. But I’ve learned that other people’s attachment to paper is greater than mine. And anyway, it would be a good thing for general trade publishers if there were more screen takeup; it would mean keeping the readers for their content and not necessarily any loss in margin.

I am not predicting that novels will be replaced by completely different forms, although I don? think any of us know how today? youth will feel about reading 100,000 words in a single work 20 years from now. To the extent that games and interactive pursuits increase, it probably comes more from disposable time not now spent reading. And while it is totally logical to assume that the text-messaging generation has less patience for a long form, we don? know that. Maybe in an attention-deficited world such as we are creating, the opportunity to escape into a long book will be even more welcomed. It doesn? change my view about general trade houses whichever way that comes out.

There? not a lot of mystery about what? happening right now. Every day a new device comes out that allows people to make more use of the Internet. The Kindle is just the latest, alongside the refrigerator that sends you an email when it sees you need more milk. The content just keeps piling up and the ways to access it only get more numerous.

At the same time, there are more and more tools for crowd-organizing of the content. Any of us can tag it, link it, edit it, or tout it. Wikipedia is the ultimate in ?verybody? a writer; everybody? an editor? but it is not alone. And you don? have to stop at being an author or editor; you can be a publisher, an aggregator, a reviewer. Anybody can play any role at any time.

In fact, the delivery of these capabilities puts us in a transitional period. The readers, the retailers, and the content forms are all adapting to these new realities. Right now, the tools are about finding, organizing, and annotating information. As the mass of information that has been reviewed and tagged by the various communities grows, we?l get to an entirely new place where we are making new products and learning in new ways because all that work was done. That? a few years off yet.

Here? a very important fact to take on board that I learned at the Google Unbound conference in New York just about a year ago. Experts forecast that the iPod of 2020 will be able to hold every book ever written, every movie or TV show ever produced, and every piece of recorded music that exists. That? what you? be able to have in the palm of your hand without connectivity to the net in a dozen years. That? what a book, which would actually be a bit bigger and heavier, will have to compete with.

The tools of today will, by then, have enabled the formation of communities of the interested for any imaginable subject. Think of Wikipedia entries as the top of the file. Add to the entry all of the interaction — conversation, teaching, participating in any way — mixed in with all of the content on the subject, largely tagged and rated by the community.

Every possible human obsession will be covered. In depth. And this deep choice across all subjects will take place alongside an erosion of what we have called ?ass media? Mass media are challenged by the great depth in the niches, but also because the mass media models — all horizontal and format-specific and, aside from books, most advertising driven — will have their own difficulties to overcome.

And an important additional effect here is that brand credibility becomes much more granular. When you can get your Washington news from one specialist and your financial news from another, those brands will matter more than ?he New York Times. There may be still be a horizontal aggregation for you to start your day with, but it will more likely be your uniquely-crafted one, not one chosen for you the way it is today.

So when we get to the point where this unfathomable amount of content of all kinds is organized according to community divisions and tagged and annotated by community “crowds”, the respected subject expertise will be within the community as well. The power of brands will move to “niche”. And the communities that have organized around citrus farming or baseball history or hip-hop will have respected members — that is: brands — that will attempt to extend their reach by generating information and products across all media. After all, a digital download doesn’t care if it is text, sound, pictures, animation, or a game.

What will secure the position of these niche brands will be the extent to which they really do satisfy communities, and that will be measured by how successfully they get user-generated content and user-generated tagging and organization. They will ward off threats by providing as much “completeness” as possible within the niche. We have an example of this evolving in our own industry. Publishers Marketplace is vying with legacy entities like Publishers Weekly and Bowker and Neilsen to be the central gathering point for our community in book publishing. Publishers Marketplace is an upstart, challenging long-established niche entities. Why? Because Publishers Marketplace has generated databases of information from the community that are critical to doing business. Once they became the aggregator of deal information volunteered by agents and editors, it became difficult even for established organizations to challenge them, and both Publishers Weekly and Neilsen tried.

Another thing that is very hard to imagine is how taxonomies will work. How will a community of interest in, say, “military uniforms” aggregate across other communities: those interested in a particular war, a particular country’s military, the fashion of various times, the history of fabric or clothing? How will the farming and gardening communities, which obviously have very different interests, pool relevant information about pest control?

The answers will develop in an evolutionary way. Individuals and entities, acting as interested volunteers or as entrepreneurs, will cull, tag, and edit. Some aggregations will catch on in a big way and others won’t. Whether crochet is a sub-set of knitting or is its own community alongside of knitting will be determined over time by the people who know about these things and do them.

None of this has to mean the end of books. Of course, we’ll always have them, or at least we will well beyond the lifetime of anybody living today. For one thing, even if we stopped making books tomorrow, we’d have the many millions of them that already exist around for hundreds of years. But print-on-demand technology assures that books will continue to be made even if society shifted so radically that the industry that we have now were no longer possible. POD assures that anybody who wants one can have material presented to them in a book, even if everybody else is getting the same content in a file for a screen. Or for a brain implant.

Nonetheless, book people are wise to consider the facts about other format-specific media.

The “album” — or the concept of selling music in blocks of 10 or 15 songs, usually by the same artist — is nearly dead.

Television networks, which shared 95% of the vieweing audience among three leading players forty years ago, now shares far fewer than half the viewers among five or six players. The concept of the mass TV audience is nearly gone, except for shows like the Super Bowl or the Academy Awards.

Newspapers are the most obviously desperate of the 20th century media. Their classified advertising is a fraction of what it was 10 years ago and, as rapidly as they are moving their audiences to net versions of their content, they are finding that the revenue on the net isn’t sufficient to replace what they’re losing in print.

The movie business is being transformed by changed delivery. As the number of 50 inch high def screens in people’s living rooms go up, the attendance in movie theaters almost certainly will go down even further. And that weakens the advantage of the big players who can do the biggest budget, most mass market kind of movies.

Disruptive technologies have gotten almost common. The iPod and YouTube have shown that things can change overnight. We didn’t have either of them at the turn of the current century.

I saw an article last year in Advertising Age called “Change 2.0″ by Robert Garfield. In it, he posits that mass advertising — what fuels TV and newspapers and magazines — is a dead man walking. Garfield foresees a massive shift to Internet advertising, which, by its nature, is much more targeted. Although more recent punditry from others is anticipating that the growth of new Internet businesses dependent on advertising has been so great that the shift won’t be rapid enough to avoid a new dotcom crash this year, there is still no good news for legacy media in this, because it suggests a surplus of Internet ad opportunities, which will drive down prices and accelerate the flight from old media.

In fact, Garfield, writing a year ago, thought there wouldn’t be enough page views to absorb all the demand that advertisers would want to shift over from mass media.

In fact, mass media has always depended on very high production values to attract and please the enormous audiences the advertisers require. Reductions in revenue threaten a downward spiral for the whole proposition. This is evident among many media. Newspapers are shrinking their newsrooms and the newspapers themselves. Network TV can’t afford to do many original comedies and dramas anymore; they’re too expensive compared to “reality” programming.

Now, of course, it is possible that the forces that have levelled newspapers, challenged magazines, shrunk TV, changed the economics of radio, and generated a constant increase in screen-reading by the public worldwide, won’t have much impact on the book business. But how foolhardy would it be to count on that?

If we accept as a given that the change in media consumption habits and the arrival of community organization must change the landscape for all media, we want to try to predict what that change looks like to book publishers. To do that, we need to think about what we know about the world of the future and look at how that “maps” against what we know about book publishing.

As we’ve seen, the world of the future will make a vast amount of content on every subject available to everybody through various devices that can be held in your hand. The day will come when almost all this legacy content will have been sorted through, evaluated, aggregated, and tagged by the community of the interested. Internet 2.0 (let alone 3.0) makes it easy for the communities to do all these things and organize themselves along whatever lines make sense to the members of the community themselves. And, while all this is happening, the mass media is getting less and less attractive.

So expecting a world where the most powerful media has its roots in niches and is highly dependent on a community of users to generate content, aggregation, and value, is consistent with the direction we have seen things moving for the entire Net era of more than a decade. And you could say it is longer than that if you date it to the proliferation of Cable TV channels more than two decades ago, which is really where the niching of consumer content first became evident.

Let’s de-construct what book publishing is all about so we can look with some specificity at how what we’re doing now is likely to work in a changed world.

A book publisher has always been a sentient member of a community. No publisher, and especially no editor, will publish a book on any subject. They need to know what a community of readers wants to read or have collected or archived for them in book form.

They need to know who can write it and who will be accepted by the potential market of readers as a trustworthy source on the subject.

They need to know how to manage the process of editorial development and then the conversion of the raw intellectual property into a deliverable form, which, for us in the 20th century, has meant a printable form.

Of course, the key to success for the book publisher is its skill at reaching the potential audience with the work, which are the functions of marketing and sales.

And the most effective and forward-thinking book publishers also see themselves as organizations “in service to” authors.

Since we’re most concerned here — in this speech and in this room — with general trade publishers, let’s consider how those publishers particularly stack up against these functions.

The subject-specific discipline of a trade publisher is the most relaxed of all book publishers. Academic, professional, and educational publishers all have market-imposed boundaries around what might work for them that are much more rigorous than for trade. Generally speaking, if a bookstore or public library would stock it, a general trade publisher would feel they could do it.

The primary author recruitment tool for trade publishers is literary agents. Whereas a math editor in a professional house or college publisher would likely find their authors by networking at conclaves of mathematicians, trade publishers have authors they may not even know of presented to them by agents whom they do business with regularly.

In fact, this kind of leverage is characteristic of trade publishing. Agents consolidate the huge author base into fewer points of contact. The marketing and sales efforts have similar leverage. Promotion has, historically, depended heavily on book review pages in daily newspapers or, in recently bygone days, promotional appearances on local radio and TV talk shows. Note that these channels are very 20th century: they are “horizontal.” They can handle a biography today, a novel tomorrow, and a memoir the day after. So can the primary sales channel publishers have depended on for about 100 years: the general trade bookstore. All of these have given the trade publisher ways to touch many customers through relatively efficient mechanisms. It has allowed their publicity departments and sales organizations to focus their efforts without it being necessary for the house to focus its list.

In fact, “vertical” thinking in general trade publishing houses has been pretty much confined to the special sales department. I don’t know how Random House functions at a fine level of detail, but if I’m right that your pubicists and marketers would find it hard to work across imprints on behalf of all your knitting books or all your business books at the same time, then your special sales department may be the only in-house entity which is thinking about your total content opportunities in the ways that will be increasingly important in the years to come.

So the general trade publisher lives in a community, but it is not a subject niche community. It’s a community of trading partners, not of individuals chosen by specific topic interests. It gives the general trade publisher critical leverage to compete in the horizontal format-specific world it has developed in.

The publisher reaches great masses of readers, but reaches them for marketing largely through mass media and reaches them for sales through bookstores and, increasingly, other retailers. The publisher doesn’t “know” these customers in any personal way, nor do they know the publisher.

The publisher keeps in touch with a very large writer community through aggregators known as “agents”. The publisher gets to know the writers it publishes, but it typically doesn’t find and develop them itself. The agents provide that service.

The publisher creates, produces, and delivers physical goods, leveraging both capital and expertise. Both the capital- and expertise-requirements have served as effective barriers to entry to competition. So has the capital-intensive physical distribution system, which is why smaller publishers have gone to larger ones or distributors to handle that challenge for them.

And that leads us to consider the value of publishing brands. The payoff to a “brand” is that it is a shortcut by which the customer knows something about the offer before the offer is even made. The brand conjures up an expectation, based on the customer’s understanding, and the most successful brands are trusted to deliver a consistent experience.

The way general trade publishing has always worked, the brand was really a B2B tool. All those intermediaries: agents, the book press, and the trade customers, understand very well that Random House isn’t Sourcebooks and that Abrams isn’t Workman. They would interpret a book’s title and format and price in the context of the meaning of the house’s brand.

But to the consumer, these brands are mostly meaningless. Of course, the author isn’t; that’s a brand consumers really understand. And they understand certain series — like “Dummies”, say. But the value of house brands and imprint brands is really lost on them, as valuable as they may have been for the intermediaries that get publishers to the consumers.

We have seen that the Web world confers enormous power to brands like Amazon and Google, among many others. This is something publishers need to take on board. The branding that was the key to success in the 20th century may be almost meaningless in a few short years. Publishers should be thinking about how to rebrand their businesses, into niches of course, while they still have the power to do so.

OK, back to a description of our future world, the one we’ll see in 2020 when the iPod puts the whole history of IP creation in your hand, subject to rights availability, of course.

Every subject worth considering — probably not as numerous as Wikipedia entries but on a highly granular level — will have its community: largely self-organized and with brands that are local to the community. And the brands and community will really know each other.

The readers that publishers will be looking for mostly exist within the community. And the writers will also, and they already know the brands because they’re all in the community.

Because technology has simplified making books and because POD and ebooks have very much lightened the capital requirements, those advantages for today’s publishers will be gone. And since the web community is where the readers will be, it is members of that community who will be able to reach them. Since much of this activity will be in the form of digital downloads, whether the file has material to be read, listened to, looked at, or watched — or some combination of the four — won’t make a lot of difference to the “publisher.”

Within the market niche, the brands will have the capability to reach the audience very inexpensively. Only in those cases where the content needs to reach many niches will more widespread distribution, such as what trade publishers know how to do, be of great value.

I’d consider what we’ve covered on the previous slide to be pretty certain. But there are some crucial questions that are much harder to answer.

First of all, how confident can we be that today’s youngsters will want physical books ten years or more from now. Author Cory Doctorow, who is a seminal thinker about these digital matters, notes that many people are “pervy for paper.” I love the term and see what he’s talking about all around me. But will we see it all around us ten or twenty years from now?

The second challenge that is critical for publishers to consider is whether a proliferation of print-on-demand capabilities will change the game. Today’s publishing economy is built on pre-printed books distributed through brick and mortar stores. Other things happen, but that’s the backbone of the business. Quite aside from the growth of online bookselling at the expense of brick and mortar, will pre-printed books lose market share to printed on demand ones? If not now, when POD is mostly a centralized game, how about when every Kinko’s does books? How about if the day comes when a print-and-bind machine can be in an office or home?

Third, we must wonder whether today’s youth — growing up with texting and blogging and all sorts of bursts of communication — will have the patience for or interest in long-form reading.

And last, how pronounced will be the shift away from mass, or cross-niche, markets? Will it be sudden and apocalyptic, which seemed possible to a reader of Chaos 2.0? If Oprah and The New York Times can’t garner mass markets anymore, and Garfield posits that they won’t, how will mass audiences be gathered? It is not a trivial question.

Nobody knows these answers, but we’ll all have to guess. Here are mine.

Although the book is a fabulous form — I loved Michael Cader’s recent formulation that it “comes with” its own “reader” — it isn’t the best for everything. It is easier to Google “define this word” than it is to pull a dictionary off a shelf and look it up. There is nobody in this room — or any other room — who isn’t using the net today for things they would have used a book for 10 or 15 years ago. And we’re talking about what will have happened by 10 or 15 years from now. We really have to expect continued erosion.

A big illustrated book provides an experience that isn’t yet replicable digitally, though screen technology keeps improving and that will continue to change. For a while, at least, we’ll certainly need those books.

And physical books are sometimes needed for their value as a “token”, like a birthday card. That won’t change. But in the digital future, aren’t you more likely to want to give a uniquely-created customized book than a mass-produced one, as a personal token? I’d think so.

There will ultimately be room for a middle-function here: somebody who assembles that personalized gift book for you: promising you it is unique and probably letting you tweak the concept yourself for an additional fee.

The Amazon Kindle, Sony Reader, and digital readers of many stripes to come, also threaten the pre-printed book model. The sales base for brick and mortar will keep shrinking. Some consumers will go to ebooks. Some will go to online shopping. And some will go for personalized compilations they create themselves and order printed-on-demand. But in the next 10 or 15 years, we’ll still have a large base of 20th century people — like all of us in this room — who might still prefer to read ink on paper. And who are still getting their information about books from horizontal media. And who still like the feeling of being in a large enclosed space jammed with books.

So while there is bound to be great consolidation among bookstores, there will still be a demand for them over the next 10 or 15 years. But the financial pressure and the infrastructure demands of dealing with print-on-demand, used books, and customization, will probably mean they’ll all be part of one large chain.

I keep asking parents the question about kids reading long form and I can’t get a consensus on an answer. Some parents — even of little 21st century toddlers — think their kids just love books and will want them forever. Some say the opposite. But what we know is that one? heavy book-buying days are later in life. My cohort — the baby boomers — is headed into peak book-buying age now. That should carry the industry for some time while we wait to find out whether the kids will read novels.

My hunch is that they will, but at a reduced level compared to us. Aside from the conditioning they?e getting being so different than ours, so is the competition. We never had the choice of watching a movie or reading a book while we waited for a plane. They do.

But whatever we?e reading ten or fifteen years from now, I don? think we will cluster around big titles as frequently as we do now. Mass audiences depend on mass media. It is hard to see how we can all gather around something unless we all hear about it and, if we?e not ?istening to the same sources, that becomes much less likely.

What should today? general trade publisher do to meet the challenges of the digital future. Assuming that the picture we’re painting is right, the imperatives become pretty clear. We’ll go into each of these in some detail.

First, General Trade Publishers must begin to see themselves as “Multi-niche Trade Publishers.”

And, in what will be a byproduct of the same sort of thinking, publishers need to see what they’re doing in aggregates, not just book-by-book.

There is also a big opportunity to move from what we’d call “expensed marketing” to what can be termed “investment marketing.”

When the publisher’s content and market identity becomes defined by the communities they are in, rather than the book format, many things become possible.

And when the publisher becomes “audience-centric” rather than “product-centric” the shift to a sustainable 21st century model becomes complete.

Book publishers today — indeed, along with the whole world of information in which publishing exists — are very much in a transitional stage. There are a host of changes taking place now that are necessary prerequisites to the digital future and even the most forward-thinking publishers will find it hard to move the needle on change alone.

First of all, XML-tagged content, which is just beginning to be implemented by trade publishers, enables a lot of change, and the lack of it makes some incremental opportunities marginally too expensive to initiate. When you have it, doing large-print or recombinant books, for example, become easy and practically free.

I hasten to add here that we’re only in the first stage of XML: tagging books to enable simpler production and rights clearance. Tagging for editorial value, so that you can find all the material for a Halloween book or aggregate the content you have on American presidential elections, is much more difficult. We’re going to have to get there, but I don’t think any general trade publishers have even started on that task yet.

SharedBook is the first easily commercializable application for online book assembly. We’ll be living in a different world when many publishers have harnessed this capability within their own lists and we can start looking across publishers’ content with this application.

In the general trade world, the first communities to be recognized have been horizontal ones: Facebook and MySpace and even LibraryThing are no more niched than AOL. In fact, they’re pretty similar conceptually: AOL was Internet 1.0 for Dummies and these new sites are Internet 2.0 for Dummies. But they’re already niching themselves; LibraryThing is one of a number of book sites that are inviting the community to help with the niching. As Wikipedia has demonstrated, give the crowd some time and they can do a massive job of content-organizing. The crowds are also organizing the communities.

And the ebook world is showing some signs of coming to life too. It will be a very different environment if the ebook readership gets to 10 to 15 percent of the total. How long will that take? I don’t know, but I believe we’ll get there within the 10 or 15 year time frame being contemplated today.

If you imagine these changes in place, along with the handheld device that holds the entire history of content, you’re in the right frame of mind to imagine the land grab we’re going to see take place, subject by subject.. We’ve observed earlier that, because of network effects, the Internet favors one or two “winners” for any category. We believe that will be true of each niche. If that’s true, the contest for media primacy in the middle of the 21st century is being fought, niche-by-niche, starting right now.

Of course, book publishers will not be competing in these niches alone. Everybody will be there: specialist magazines, newspapers, product and service companies, and content-originating web sites. But book publishers have some very important advantages over all these looming competitors.

Publishers own content. Newspapers often do too, but magazines often don’t own much.

Publishers have a unique commercial relationship with authors: a royalty relationship. We will see why that is an enormous advantage over the staff or work-for-hire arrangements in other media.

Publishers, through the many books they publish, can also distribute URLs to drive niche customers to niche websites.

Book publishers have products to sell to their internet community. Their competitors usually don’t.

Book publishers understand niches; they have a “taxonomic” feel. They understand the subsets that make up many markets.

And publishers have long been spotters of trends. Historically, they have been forced to “lead the target” with that capability, seeing what markets will be there for books that will come out 12 or 18 months after they’re signed. In the Internet world, that capability can be leveraged more effectively.

So now that we’ve ticked off the objectives and the tools, here are what I hope are practical suggestions about how to think about them and create a plan for migrating from the spectacularly successful format-specific subject-agnostic publisher Random House has been to one that will meet the challenges of a niche-specific and content-agnostic entity that will characterize the successful media company over the next two decades.

Moving from “horizontal” to “vertical”, or niche, is a process. But it must begin by visualizing, and then organizing, your company around the market niches you occupy already, but don’t think of that way. Thomas Nelson’s announcement last spring that they were eliminating imprints and reorganizing around BISAC codes sounds like a logical way to begin.

But it isn’t the only way to begin. You might look at how your special sales department organizes your lists as another way. But since the ultimate objective is to make your publishing activity map to the way the world is organizing itself online, probably the best way is to map the content you control to the way the internet is in some way. Since the premise is that web communities will drive publishing activity in the future, the sooner you think about both at the same time, the easier the transition will be.

When you do map what you publish against human activity on the Web, you’ll see your books either as living in clusters or as outliers. You’ll naturally start applying the concept of “critical mass”, which you’ve always used in other contexts, to the communities you’ll want to be important to on the Web.

This will be an iterative process. Houses like O’Reilly, Wiley, and McGraw-Hill have a natural advantage in this kind of exercise; they focused their program by subject matter long before the Web. They were already vertical. As you and the other big horizontal houses take the need to “verticalize” seriously, you’ll discover places you’re deep and places you’re shallow. And where you’re shallow, you’ll have to decide whether you want go deeper or get out. You’ll see that choice pretty quickly; you’ll know you can’t stay shallow, particularly as you start cultivating the advantages of being deep.

Once you have a niche-logical framework through which to view your content, you need to USE it. Think in terms of it. In the new world, strength in a subject area adds marketing clout to every book and cuts marketing cost for every book. Ask the publishers who do it that way.

Next, you need to employ the techniques you use today to manage imprints to manage niches. Look at your revenues and costs that way. Organize your marketing efforts around the niche, with the title-by-title aspect being a “layer.”

You’ll naturally start to see potential alliances with other stakeholders in the various communities. The chances are your special sales department is already developing opportunities like this. But if you have an overall niche-recognition strategy in the company, and fewer barriers created by imprint silos, the opportunities will come thicker and faster. And alliances with non-publishers is likely to be one of the revenue growth areas in the new media economy.

You’ll be doing two things for your marketing at the same time when you think about your content in aggregates for niches rather than book-by-book. First of all, you’ll be trading the “here today, gone today” aspect of most marketing done now with a series of more permanent marketing assets. And the second is that you’ll be building a replacement infrastructure, which you’re going to need as the old horizontal ones — the talk shows and book review pages you’ve relied on for years — continue to disappear.

When your focus is on using your content — frontlist and backlist — to continually build your presence in a niche community, you build relationships that will help you over and over again.

Activities you already undertake now, like acquiring email names or developing relationships with web sites and bloggers will become much more powerful within a niche context. You need to tally those email names and those web addresses and recognize them as the assets they are. As you use them, you will unlock the value of nearly-free marketing being built on the back of previous efforts.

You want to keep track of how many emails you get people to open, whether it was “selling” them something or not. You want to keep track of whether you get them to click through to you for any reason, whether you’re making a sale in the process or not.

One of my predictions in PW two weeks ago was that publishers will start acquiring web sites in 2008. Recognizing which ones are important marketing partners for clusters of your content is a good way to start prospecting. And, by the way, think about the possibility that the web site you don’t acquire might end up in the hands of a competitor.

All of this activity takes you in the direction of being a community leader. You take a subject, any subject, and start to use your tools to the benefit of a community. Give chunks of useful content to relevant web sites.

Some of those will be retailers or service-providers who can use your content to the benefit of their site visitors. Anybody but a book publisher trying to create a web presence finds content creation to be the biggest challenge. They don’t have it, and they’re not experts at creating it. Or contracting for it.

This is old news to a niche publisher already living in a 21st century paradigm. General trade publishers are thrown off the track by the book-by-book nature of their business. Seeing your content in aggregate — all the material you have on knitting, say, across imprints and including both juvenile and adult — will give you material to sell or barter across manufacturers, retailers, and blogs and personal-interest web pages that cumulatively have your core audience.

I touched earlier on the danger that you’d see a competitive book publisher acquire sites that are important to you. Actually, if I were advising one that did, I’d tell them that shutting you out would be a bad strategy. If you’re operating in the interests of a community, you don’t block content that they would want to have access to. On the other hand, the site owner collects the best benefits, the rest usually pay tolls.

As you interact with more and more sites and bloggers, new opportunities will open up: for customized books, for user-generated content, for useful databases you can construct that will drive more traffic or even give you something for a book.

In the niche-centric world of 15 years from now, the community itself, not content, will probably be the primary instrument of monetization. Having the attention of groups of people with similar interests is always monetizable. There are many lessons about the future to be drawn from Michael Cader’s PublishersLunch and PublishersMarketplace businesses, but a critical one is that you must focus first on creating a community, and then on monetizing it.

This is one of the hardest parts about the transition for a commercial publisher. The instinct — trained into all your marketers — is that the point is to sell books! But that can’t be the central focus if you’re going to build communities. The central focus must be to understand and satisfy the community’s needs, which could lead to publishing something you learned was needed, but it won’t work if all your outreach is about selling what you’re publishing anyway.

Of course, it makes you very popular with a community if you publish what the community creates. Figuring out good “crowd-source” projects — some variation of the old “Day in the Life” photographic series — might serve multiple purposes: engaging the community, developing a publishable project, and laying a marketing groundwork for it.

What is essential is to avoid the temptation to spam or to oversell. If you think first about your audience, you’ll make the transition. If every interaction you have with your web communities is to sell them a book, you’re still a 20th century book publisher.

We talked earlier about some advantages general trade publishers bring to the evolving contest to compete in niches of interest. Before we stop for any points you’d like to raise, let’s entertain how to apply them. The only practical way to think about this, of course, is niche-by-niche. Otherwise, many of these ideas will seem too vast to even contemplate.

Using your content requires taking inventory of it in a completely new way: by chunks. The most useful ones are stand-alones. They tend to be most common and easy to identify in reference books, how-to books, compilations. But general narrative can work too. Let’s say you had a few great reference books on the Civil War that you could build around. That would make it worth looking for biographical material on Civil War military and political leaders throughout your other books, even in fiction.

Or you might have several series or brands in some areas, like games or travel, that would permit you to mount an overall web presence that provided great utility. If you have content that solves a practical problem for people — and there are chunks in books on gardening and retirement and gambling, to name three examples, that do just that — you have the discoverable content that can draw traffic to a site.

Wiki-ing appropriate content can also be a tool to generate community. Material on subjects where experts abound — let’s say a Who’s Who in Film — can be the foundation to attract a lot of traffic which can be leveraged. And setting up a Wiki can be a good excuse to ask for registration, adding a new database of value to your asset base.

Of course, the straightest path to monetization of content on the net is to license it. Here again, you’ll be much more successful if you’ve analyzed your content on a level both more granular and more aggregated than “the book.”

Of all advantages publishers bring to the niche land grab, their relationship with authors is the most significant. In fact, now is the time that publishers who have royalty relationships with authors gain a distinct advantage over any publisher or packager whose model is “work for hire.”

We recognized in a project we did for a general trade house two years ago that “teaching authors to fish” was the key to a “new marketing partnership” between authors and publishers. That point of view has been acknowledged in some recent initiatives, particularly your speakers bureau and Harper’s recently debuted author tool set.

As part of the work for that same project, we collaborated with Market Partners on a survey of agents about author web activity. What we found two years ago was real cynicism about how helpful publishers were, but real conviction that authors needed to spend a great deal of time and effort promoting themselves online.

The vision I’ve had for a couple of years, as yet unrealized, is that a publisher could create a “vortal” — that’s a vertical portal — using legacy content and links out to all the other sites of interest to the community. Then you set your authors to blogging on the subject, on their own sites or on the vortal itself. Either way, RSS feeds from the authors could provide fresh content on a daily basis, a sine qua non for a site that wants a lot of regular traffic.

Of course, some, if not most, of these authors are already blogging or maintaining their own sites. That doesn’t change the concept. Publishers can add traffic to their authors’ sites by adding links: linking the authors to each other and linking them all back and forth from the publisher’s sites. As you know, legitimate links drive up Google search rankings. That’s a real reason for an author to join your site family, if you’re niched in a way that will drive the right traffic to them.

Back in the days when the idea of a “web site for every book” or a “web site for every author” was a very radical idea, publishers would often say to me, “but how we will we get any traffic for the site.” I hope I’m not insulting anybody here by saying this, but I always thought that was a remarkably lame question, coming from an entity that distributed hundreds of thousands, if not millions, of books a year — plus press releases and collateral — all of which have plenty of extra room to carry a URL.

As publishers have discovered.

But pushing a URL that is for a publisher’s web site is a waste of an opportunity. If somebody buys a book about retirement or Switzerland, they want a web reference with more information about retirement or Switzerland, not a book catalog.

That mistake isn’t made as often as it used to be, but it is almost as bad to send readers to an author web site, unless the site is maintained and has constantly refreshed content. In fact, that could be part of the negotiation with authors: sure, we’ll put your web link on your book jacket, IF you commit to posting new material on your site on a regular basis.

The right answer becomes obvious if a publisher has vortal sites and thinks in aggregates; you drive traffic from niche books to appropriate niche sites. A similar strategy is employed by some publishers with “newsletters.” If you publish regular newsletters by subject niche — and perhaps have some excerpts from your authors’ blogs to power that — you can drive sign-ups with the relevant books you publish.

Every book cover and every press release and every ad should contain a useful URL, which means one the consumer will find worth bookmarking and returning to. As you become a 21st century niche publisher, it will be obvious to you that if you don’t have such a URL to put on the cover, you probably shouldn’t be publishing the book!

When publishers compete for the niche-future, their non-book competitors will fall into two categories. Some will have products but no content; others will have content and no products. Book publishers are really the only ones with both.

There are two great benefits here. One is that being a publisher adds credibility; if you hire authors, edit books, and market them to a niche community, you must necessarily have knowledge the community wants to share. But the other is more straightforward: book sales can produce revenue.

I want to emphasize the positioning here. Until now, most of your web activity has probably been for the express purpose of selling books. We’re advocating a web effort that is about community building, not necessarily book sales. Book sales should be used judiciously as part of that community building effort.

Direct sales by trade publishers are bound to increase, but care should be employed not to overuse the tactic. Doing it for margin enhancement is probably the least good justification. The additional margin isn’t necessarily that great, once you factor in the “referral fee” you’d get from most retailer sites. And your site visitors already have accounts with Amazon, BN.com, and Powell’s; they don’t with you. So offering youself as the only option, even with attractive pricing, is likely to reduce unit sales.

Of course, direct selling can also enable bundling (book and audio, book and ebook, this book and that book) experiments, which is a good reason to do it. And direct selling also gives you direct customer contact: names and credit cards. There’s value there too.

I know everybody who publishes fiction listening to this description of the future says, “yeah, but what about my niche?” Fiction is, of course, already in many niches, and they are each developing their own online communities.

Beyond that, sites like LibraryThing and Shelfari are pulling together communities of readers to tag books their own way. These tags will lead to easier niche-discovery in the future.

Obviously, poetry creates its own community, and a highly interactive one. Literary fiction is carving out its own world too.

And the niching of the subject world means that subject-oriented fiction can attach to its community more readily. How much easier would the launch of John Grisham have been through the lawyers that were his first core audience if there had been an online world to use when he started?

We all know that Word of Mouth sells books, and particularly fiction. Word of Mouth today is largely done through instant messaging or cell phone texting. Or Facebook or MySpace. Or Twitter or deli.cio.us.

Obviously, there will always be some books — many books — meant to reach across niches. It isn’t that those books will disappear that should concern us, but that the horizontal book-specific review, promotion, and sales mechanisms will atrophy. And that the attention of the public will be increasingly consumed by each individual’s niche interests.

When books can cross many niche lines, there will be the need for the services of an organization that looks like today’s General Trade Publisher. But how many such opportunities will there be? Enough to support one or two, maybe? Not many.

Bookstores will find cross- or multi-niche books by data mining the net, part of the expensive infrastructure we think bookstores of the future will require. And that’s why we think bookstores will all boil down to one chain in the decade or two to come.

There is logic behind the idea that the still-standing bookstore chain, which viewed from today certainly looks like it would be Barnes & Noble, is a competitor to be one of the general trade players. They’ll control the primary outlets for what are general trade books by then.

Bestsellers will not entirely disappear. The top echelon of what is sold in B&N in 2020 may well also be sold in the Costcos and Sam’s Clubs that are around then too. But the combination of output and audience won’t generate anything like the number of mega-sellers we’re used to now.

On the other hand, the total title output will be way up. By multiples.

There is only way to avoid the future, and none of us is volunteering to take it.

The web is going to be more content-rich than we have ever imagined; much of the content will be free and all of it that you want will be held in your hand.

The support system for general trade, particularly the horizontal media that have allowed us to promote books just because they were books, is disappearing.

The self-organization of the web into niches is inexorable. That’s not an open question. What are open questions are how to monetize it, and how to get to a position of strength in it from a position of strength in general trade publishing today.

But we all have to tackle these questions. I’m likely to be the oldest guy in this room, but I expect to be consulting to publishers, such as they are, when they are operating in this changed world. Those of you much younger than I am will have a career that stretches beyond the life our current business models. It is in all our interests to figure out workable answers.

Thanks very much for your attention. The previous version of this speech, the one given at BEA, last year, is at the URL on this slide. So is my email address: I’d be happy to extend this conversation with anybody here who wants to. It’s been my pleasure to join you today.

Good morning. I hope to give you a few things to think about today. And maybe even  things to act on without much further thought.

We’re going to start with a view of what digital technology could mean to the overall world of communication over the next decade or two. What the history of the Internet seems to be telling us so far is that we will see a growth in niche organization — what people like to call “community” on the web — and a corresponding decline in horizontal media, which is much more threatening to magazines, newspapers, and broadcast than it is to us in the book business. But it will change us too.

I have some real skepticism about how general trade publishing maps into this future world which I’ll also elaborate on.

The two together will beg the question, but “what do we do?” And we’ll tackle that question too. Some of the answers are to simply “get more efficient” and nobody can really argue with that, but other answers require a change in thinking that I think plenty of people will argue with.

And, before the end, I want to introduce you to a new model for publishing books to small audiences that is already being used by many American university presses, and which I think might well apply to the publishing primarily intended for your home market as well.

Since I have now been in your hemisphere for 36 hours, I am quite sure my ignorance of your local perspective will show. I am going to deliver you what is, admittedly, a set of facts and opinions formed by extensive experience with the publishing communities in New York and London. You will recognize what I don’t know and, I hope, over the next couple of days, educate me a bit about that.

But I DO know you’re different in many ways.

For one thing, a big chunk of the books sold in Australian shops were written and commissioned half a world away. Although data from 2004 says that sales of non-fiction books in Australia are 75% of domestic origin, more than half of your fiction and children’s books originate abroad.

And I know that, whatever copyright law says or corporate practices require, your territorial rights are protected by vast oceans between you and most potential commercial violators. Of course, consumers going to Amazon, even without a local operation here, create increased buying around that can’t effectively be stopped.

But you’re not completely insulated even commercially, because most of your biggest publishers are branches of multi-nationals. Their overall economic health, a big chunk of their output, their employment practices; all are at least somewhat dependent on the performance of their parent companies in the US and UK. That means that the health of your book trade is tied to theirs.

And if most of the books sold in your shops come from those companies, that means the locally produced books are living in an ecosystem that depends on books from elsewhere as well.

So if anything I say sounds strange or alien, indeed, it might be. But it should still be of interest for two reasons. One is that it is affecting big parts of your biggest publishing enterprises. And the other is that what we’re feeling across the world today might hit here tomorrow, even if it hasn’t been evident yet. You know the story: the bomb may have exploded a while ago, but the radiation could still be travelling through the atmosphere. You can’t imagine what I had to fly through to get here!

If anybody came to today’s sessions thinking book publishers don’t have to change in the decade or two to come, that we can just keep doing things about as we have for the past 100 years or so, I would ask them, “why should books be different from EVERYthing else?”

Where I come from, newspapers are desperately changing their models, even though they are still throwing off cash profits. They can see that they’re being squeezed from all sides. The big national stories are all reported, absorbed, and discussed by the most alert parts of their audience before they can get print into the hands of a consumer. The classified ads have just about completely deserted them, for general sites like Craig’s List or eBay or for specialist sites that sell real estate and cars. The most local of the information they provide, about community school boards or local town governments, has become the material of blogs and bulletin boards. So the smartest newspapers are trying all manner of new models, including “crowd-sourcing”, where the site visitors become the reporters and the professional organization provides the editors. That’s radical, but it is being pioneered by Gannett in the US, which is has always been a pretty conventional organization. They are also the publishers of the only intentionally national general newspaper in the US: USA Today.

Magazines are also struggling with their models. Major companies like Hachette and Time Inc are shuffling their portfolios, and trying experiments where they go web-only with some publications to avoid the costs of physical production and distribution.

Both newspapers and magazines are generating real revenues on the web; the problem is that those revenues aren’t sufficient to replace what they are losing in print. So they’re running hard on a treadmill that moves a little faster and gets pitched a little steeper every day. It will get hard to stay on when that treadmill is perpendicular to the floor.

Movies and TV have also seen their business models turned upside down. This was happening even before YouTube turned the digital download from a phenomenon into a common event. But as we approach the day when the Net, through downloading or streaming, is the primary distribution mechanism for visual entertainment, all of the structural advantages of the big companies are being erased. Movie studios used to control distribution. TV networks used to dominate audiences. And not long ago, either.

And music? We ALL know what THEY are going through. Similar story in its way. Digital downloads are selling like crazy, but they aren’t selling fast enough to replace the decline in CD sales. The whole concept of an “album”; 8 or 10 or 12 or 15 songs by one artist sold in a bundle, is headed for extinction. In the very first speech I gave about digital change, at a book convention in the US in 1994 or 1995, I said “thank goodness we’re not in the music business.” That’s one prediction that turned out to be correct.

But even though we’ve seen our business get tougher in many ways, some of the predictions made at the turn of the century for big changes in this decade, such as disruptive ebook takeup, just haven’t come true. The book business has, arguably, been less affected than any of the other major media by digital change. Or maybe I shouldn’t say “arguably.” Maybe I should say “apparently.” And CERTAINLY I should say “so far.”

But it is true that books are different, as we in the business frequently explain to others to defend practices — like, say, returns or the lack of test-marketing or the dearth of space advertising — that seem strange to people from other industries.

First of all, books are — again I’d say, so far — not advertising-supported. Many of the problems of newspapers, magazines, and television have to do with the flight of advertising dollars to the web, and the desire of advertisers for better targeting and more interactivity, which the old media forms can’t supply.

And books have also been insulated from digital change by the “user experience.” Your ears don’t care whether the music got to the speakers or headphones via a CD played through a stereo system or by a digital download into your iPod. When you watch a movie on a screen of any size, you see the same movie made larger or smaller to fit the screen you’ve chosen for the purpose.

But an ebook is qualitatively different from a paper book. It feels different. And your interaction with it — and page-turning doesn’t really have an equivalent for music or video; nor does underlining or dog-earing a page — is distinctly different. Of course, while we’ve been telling each other in the book business that “people don’t want to read on a screen”, people ARE reading on a screen. Most people in this room read on a screen for many hours every day. Most of us just don’t read BOOKS. But just about all of us read emails and articles and reports and spreadsheets. That books are not among what we read is not something the book business should be proud of.

So it appears that the book, as a form, locks in users in ways that a Walkman and a movie screen and a daily broadsheet didn’t.

One thing the web does very well is disaggregate and reaggregate content. All newspapers and almost all magazines are content aggregations, collections of content “nuggets” that can each stand without the rest of the aggregation. That characteristic immediately confers an advantage on electronic delivery.

And those books which are aggregates of nuggets of information have been the first to be negatively affected by the electronic delivery of information. There has been much more turmoil lately in the market for gardening books, or computer instruction books, or travel books than in fiction or biography. Some books “chunk” very easily. If people want chunks of content, not long narratives, the barriers to electronic consumption fall very fast.

Still, in many ways, the media story of the last 15 or 20 years could be the resilience of the book form. Book publishers, particularly consumer book publishers, have managed to keep their product and their business practices pretty close to what they’ve been for a century. I don’t think the next 15 or 20 years will be quite as change-free.

Let’s start with this fact. The progress being made at expanding storage capacity for digital information will lead us to 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 you would be able to hold in your hand, unconnected to the Internet, and read or view with a couple of clicks. That’s competition the book never had before.

There will also be new screens abounding. You may be aware of the Sony reader and other devices like the iRex now using what is called e-ink. These screens will be flexible and foldable; they’ll be able to be read under the same light conditions in which ink on paper can be read. You’ll also be able to “throw” the content from your iPod containing everything — or everything on which rights have cleared — to larger screens mounted on walls or placed on desktops.

In fact, you’ll likely be able to throw content to your own home print-and-bind machine, if you remain pervy for paper. That preserves the paper book “experience”, but it doesn’t do much for the paper book supply chain.

As we’ve touched on and will elaborate on shortly, today’s mass audiences will be fragmenting into niches. That will certainly create niche publishing opportunities, but it will make it increasingly difficult to pull audiences across niches. The horizontal — cross-niche — media we have been used to, particularly newspapers and TV, will find the niche-interest world increasingly difficult to navigate.

Because the net will create niche communities, within which the costs of marketing and distribution will drop to near zero and with each containing many potential content creators, the capital and organizational barriers to competition for publishers will also come down. Publishers will find more and more frequently that the book they’ve planned has been beaten to the market by something not quite as good and not quite as professional, but “good enough” to spoil their commercial prospects.

And book publishers can’t be helped by the dying off of the population that formed all its media consumption habits in a simpler world with less competition and less choice. Can anybody really doubt that today’s kids will be more comfortable reading something other than bound paper when they are adults 15 or 20 years from now?

So change from where we’ve been and where we are now is inevitable. People will be consuming information differently and that includes much information which has, historically, been found in books. Markets will also be organized and reached differently. Since publishers are about bringing content to markets, and both components of that equation are undergoing a transformation, publishers can’t expect to just continue historical practices if they want to survive.

Let’s take a look at publishing’s position in the bigger world, the ecosystem in which book publishing lives.

Up until what seems like about 15 minutes ago, people got their information more or less the same way for about a century. The fresh news came to them through daily newspapers, radio, and, for the last 50 years, television. Although different countries have different patterns and combinations of local and national print and broadcast media, those choices were certainly limited. And until the 1980s and the proliferation of TV choices engendered by cable TV, almost all news was at least hours old and vetted by professionals before it was delivered. We need to remember that this was our routine for nearly 100 years.

It may need to be emphasized that the information we are talking about here includes information about books: reviews or author profiles or interviews. After all, we learn about books through the same media forms, and often from the same media, that tell us about everything else.

For greater depth of information than newspapers or broadcast media delivered, or to aggregate information about a specific subject, people turned to magazines and to — books.

Further depth could be found in libraries, where archives of old books and magazines sit side-by-side with new issues, and with librarians to help with navigation and, increasingly in the last quarter of the 20th century, electronic databases and archives augmenting the offering as well.

And, of course, we in the book business have always been aware of the importance of personal recommendations, which we call “word of mouth.” Until very recently, of course, “word of mouth” could only be delivered by telephone, snail mail, or face-to-face. That created inherent limitations on how much information flowed, or what we would call today “limited bandwidth.”

One more time: included in this information flow was the information about books, not just the information in books.

Now let’s consider how people seek and get infomation today, which are various ways to use the Internet.

The first thing anybody looking for information does is “search” for it, which more than half the time means “Google” it.

Most people sign up for email alerts from a variety of sources; slightly more sophisticated Internet users get RSS feeds straight to their browser instead of email.

Increasingly, information travels to people through personal networking sites, such as MySpace, where telling your “friends”, a word in the process of redefinition, is part and parcel of the experience.

And people exchange information among each other by a proliferating array of tools: email, of course, but also instant-messaging on the computer, text-messaging on the phone, and by tagging content, posting to sites like deli.cio.us, and blogging.

And all of these new means of getting information are making the old means less and less relevant. You know what is in the newspaper before you read it and what is on the evening news before you see it. You’ve been told about a book or a movie or a joke by your friends or a trusted web resource — or by your friends forwarding something to you from a trusted web resource –  before any of the “old media” can deliver it to you.

This is all part of the shift from “horizontal” to “vertical”. When you choose your information sources from the Net, you get just what you want without the rest. It would be as though your newspaper skipped the funnies, beefing up on the financial news and mine skipped the TV listings, beefing up on the sports reporting. What we used to call the “Daily Me” ten years ago — a customized newspaper we imagined would be the new vehicle of choice on the net — has happened piecemeal.

Now, pardon a US-based example, but I’m sure it replicates elsewhere. Until the 1970s, three national TV networks shared the entire national audience, undiluted by many distractions, some of which compete for the TV screen itself, which exist today. This is horizontal programming writ large; every show had to be tolerable, if not satisfying, to about a third of a very large country. Now there are five networks competing for about a third of the national audience — two-thirds having switched their TV watching to one of hundreds of smaller channels, or to DVDs, or to nothing at all.

When TV was truly mass, the budgets for the TV shows themselves reflected it. With the attention of many tens of millions of American viewers to pay for it, they could afford to spend a lot for talent and production values. With those audiences reduced by half and half again, the production budgets must be slashed to suit. That further reduces the audiences for mass, or horizontal, or cross-niche programming. Meanwhile, every niche is getting more and more robust on the web: more content, easier navigation, more community participation.

In the world of 20th century media, books were the tool to provide content to niche audiences. You could barely do a TV show on a subject as narrow as “gardening.” But you could do a book on “vegetable gardens” or “house plants.” The bigger the audience you need to support the content form, the harder it is to get granular with the information you deliver.

In the world of 21st century media, books need a lot more audience to be viable than a web site does.

As a result of the changes in media we’ve talked about, and some others, there are a number of global realities that I believe the book business will face in the next two decades.

Last month, at BookExpo America in New York, I delivered a talk called The End of General Trade Publishing Houses. It’s on the web at www.idealog.com/speeches/endoftrade.htm. That speech was as long as this one, so I won’t try to repeat it here now. But the gist is this: the niche world that we’re heading toward and the drying up of horizontal media will make it increasingly difficult for a format-specific play, regardless of market, to be commercially viable. We’re going to find publishers — even the biggest ones — obliged to specialize so that their marketing efforts build on each other in the niche world we’re all going to be living in. Since the biggest providers of product to the Australian book trade are general trade houses based in New York and London, this change will certainly be felt here.

We are also bound to see a diminution of publishers’ territorial control. Online bookselling, spearheaded by Amazon, is already making sure of that. If the price differential between the locally-sold edition and one available in another market is large enough, and the consumer is patient enough, ordering from another market becomes a desirable option and it is easy to do. The British territory is under threat from American-origin books coming in through Europe, if not directly from American wholesalers. American wholesalers Ingram and Baker & Taylor serve Canada like a home market. They are much more disruptive to local rights than they are here in Australia, and I know your book trade heavily depends on them already. Saying how close we’ll be to a laissez-faire market in two decades can only be conjecture, but it is pretty clear that territorial protections are getting weaker as time passes.

This is a good point at which to mention another problem the internet has delivered to today’s publishers: the ubiquitous availability of used books. This is a headache, and it isn’t going away. Amazon very cheekily runs their used book marketplace right alongside their new book offers; you search for a book and they really don’t care which way you buy it. So used books are out of the low-rent neighborhood on the other side of the tracks; they’re being displayed right alongside the pristine new copies. We don’t know how much this is costing in sales, but it is certainly costing something.

I asked a couple of experts I know how used books fit into the picture of protected territories. The answer I got was that they don’t fit in at all; they don’t count. So Norton in the US may not be allowed to sell a book for which they only have US rights in Australia, but if my sister buys a copy in the US, she can then sell that book to somebody in Australia without breaking any laws. So even if you could get Amazon.com to perform perfectly within your borders on the sale of new books on which they don’t have rights, they could still sell the used books, which are even more troublesome from a price-competition point of view.

Internet retailing and print-on-demand each are playing their part in reconfiguring the supply chain. The more we go “direct to consumer” by internet ordering and common carrier delivery, the more we enable used books to compete with new; printed-on-demand books to compete with press runs; and customized books to compete with standardized publishers’ editions.

We will also increasingly see rich media tied to books. At O’Reilly’s “Tools of Change” conference in San Jose last month, the show-stopper was a technology called bLink by which digital content gets linked right into physical books by printing “links” in conductive ink on the same page as the text. Of course, you need to be reading the book nearby a computer to make use of this feature, but it underscores the fact that text, or text and pictures, need not be “stand-alones” anymore.

As we know, material that will be read on a screen can readily contain audio or video or hyperlinked text or databases. As more and more original content is created for online consumption, text being supported by rich media will become a pretty routine experience for many readers. That’s a challenge for publishers who have traditionally worked in print, but it is a challenge that is already being met in ways we will elaborate on in a few minutes.

Publishing is also transitioning from being driven by deadlines and editions to becoming continuous. This is clearly a much more relevant concern to The New York Times than it is to Random House, or even to Wiley or McGraw-Hill more than it is to Random House. Publishing in non-fiction areas, particularly fast-changing ones like politics or science, will require constant updating. The market will expect it. But this can be as much an opportunity as a problem.

For example, one client of ours publishes many books on crafts. For years, they would publish “resource directories” in the backs of their books: lists of the retailers that would sell you the yarn or the buttons, or which offered the classes in a particular technique introduced in the book. This created a problem for them in the old days: these resource directories would be out of date by the time the book came out and would be more trouble to update on future printings than the effort was worth.

So, some years ago, the publisher moved the resource directories for each book to the web, with a URL provided in the book. That solved the problem, and now is creating an opportunity.

The directories were created book-by-book, and offered in book-defined silos on the web. They can now be easily reorganized into one big database of crafts resources. When it is reorganized and launched, it will be both a branding tool and an independent revenue center on the web. It takes the requirement of perpetual publishing — because you can’t do resource directories without updating them continuously — and turns it into a revenue center.

So we can project a bit, understanding the changes that have already taken place over the past couple of decades in how people get information and how communities cluster together on the web, and see the outline of our future niche information world.

Niche communities will exist — if they don’t already — for every imaginable subject. Over time, aggregators will pull together diverse web efforts, blogs, and commentary. Members of the community will review the information, tag it, rate it, append to it.

Over time, preferred channels will develop for each niche and become established. Whoever controls those channels, which are web sites, will, in effect, “own” the audiences to which they lead.

The audiences themselves are “players”. They create content, their rating and appending and tagging are, in effect, huge components of both the editorial and marketing functions in the 21st century.

Because information searches, content creation, and, ultimately, the community conversation move to these web niches, so does the power of “brand.” These web communities will be influenced locally, not globally, in an informational, not geographical, sense. Whether the discussion is about knitting stitches or surfing or literary translations, the community that forms around the information and discussion leadership will be the first stop for any marketer promoting an idea or a product to this niche. And that community will know whom it trusts, and it will confer credibility based at least partly on familiarity. The brand identity will have to be established niche by niche.

Of course, the niches ultimately interact. The niche for “military uniforms” will exist within the niches for each country’s military or within the niches for particular wars. Marketers of the future will need to understand the taxonomies of their interests as they evolve, which they will constantly do.

So these niches are organizing, tagging, and rating various nuggets of information in any conceivable media form and, to the extent that rights issues don’t interfere, making all those nuggets available to be read, viewed, or listened to, always with the ability to add one’s own comment or rating, and all of it deliverable to a device no larger than today’s iPod that can be carried in a pocket.

Quite aside from how the systems of information distribution will reconfigure, and how people learn about what they want to read will change, there are the questions about reading on paper and reading long narratives in any form. Everybody in this room grew up in a world where we had no choice about paper and with very clear expectations about long forms. Today’s youth are already in a completely changed information environment. Texting and instant-messaging and emailing and blog posting all exist without paper and place a premium on brevity. What impact will this have on reading habits?

Well, truthfully, nobody knows. Nobody can know. Can a generation that grew up reading more on screens than anywhere else develop the affection we have — the addiction we have — to reading on paper?

Whether we are reading on paper or screens, will the text-message generation have the patience and interest to read 50,000 or 100,000 or more words on a single subject or constituting a single narrative? Perhaps not, if attention spans are truncated. But perhaps with greater enthusiasm than ever, to get a dose of sustained thinking in an increasingly attention-deficited world.

We know that the music-listeners are moving away from albums to songs. But that doesn’t necessarily prove anything, since the unit of appreciation was always the song. Album length was just a unit of transfer, which is different. Only if almost all books were collections of short stories would the comparison be valid.

We can expect that technology will drive us to different business and distribution models in the future, though. Wouldn’t it make more sense for publishers to license you the file for a book for one price, but charge you something more if you want it printed on paper and bound? After all, the physical book comes at an additional cost, so why shouldn’t it bear an additional price?

The NY Public Library last month became home to an Expresso Machine, a new technology that delivers a printed and bound paperback book from a file. This is the next new entrant in our changing supply chain: a distributed print-on-demand technology that can sit in any library, bookstore, or copy shop. How far away can we be from an equivalent technology that could be put in offices and homes? What are the implications to today’s commercial models for publishing, or to the competitive advantages of today’s publishers, when this capability becomes widespread, as it must almost surely in the next 15 or 20 years?

Let’s take a few moments to discuss ebooks. Since the explosion of digital downloading that has transpired since the iPod came on the scene, many people who expected ebooks to become popular have been looking for what can trigger the “iPod moment” for ebooks. Although increased digital downloading of music and video does have the potential to have impact on the ebook market, the parallels are very imprecise. We shouldn’t be expecting the music experience to tell us what the book experience will be. The differences in user experience and the unit of appreciation make the music and video experiences so different that they don’t tell us much about books.

I have an admittedly biased view about ebooks, because I have been reading them on my PDA since 2000. In the past seven years, I’d say my personal consumption has been about three or four ebooks to every paper book. I don’t find the small screen the least bit of a problem for immersive reading. The ratio of consumption partly reflects the ratio of opportunity; I have my PDA with me almost all the time. But it also reflects a preference for the small-screen form.

When I first started thinking about and writing about ebook takeup around the turn of the century, I thought it would take the form of many other technology adoptions, beginning at work and migrating to home. I figured that ebooks would be used in many professional situations where they would constitute a big functional improvement. Think about something like aircraft repair manuals where updating and version control are at a premium. Many tech introductions occurred this way: personal computers, spreadsheet programs, word processing, fax machines, even email and the internet. All of these were tech that people had to learn to do their jobs but which easily ported over to personal use once the learning curve was conquered. But that didn’t happen; whatever use of ebooks has occurred in professional spaces — and reading on PDAs has apparently only caught on with doctors in emergency rooms among potential professional users — it has not had much impact on people’s personal reading habits.

Because ebooks seem so obvious, there has been a great deal of speculation as to what holds them back. The most commonly cited constraints are consumer-unfriendly DRM (digital rights management), inadequate devices for reading, unimaginative non-interactive products, and pricing, as in not low enough in relation to the physical book price.

I find all of these unconvincing and, certainly, none of them deterred me.

But what has deterred me is the fragmentation of the product offerings: not enough books are offered as ebooks, and the number of new titles on offer has actually diminished over the past few years. Until Powells.com started offering ebooks recently, the major internet booksellers seemed actively discouraging about ebook sales. Amazon has ghettoized them; you can see the used books available for any title you look for, right alongside the new copy you thought you’d buy. You can even pre-order a paperback that isn’t coming out for many months. But their ebook offer is buried and uncharacteristically chaotic. Barnes & Noble doesn’t sell ebooks at all.

The ebook only site that I have frequented because, until recently, it was the only place to buy in the Palm format, is ereader.com. This site is one of the user-unfriendly sites on the web: slow, clunky, and virtually unsearchable.

The other problem with ebook takeup is format. Microsoft tried hard for a little while, but their dot lit format just didn’t make it. Right now we have Adobe, Palm, and Amazon-owned Mobipocket, as well as Sony Reader’s proprietary format. The digital rights management element is a nuisance, but the wide variety of formats and the fact that not all of them are sold wherever you might find ebooks for sale — Sony, of course, is only available from them — is another large barrier to adoption.

One presumes that Amazon will get better at this when they start selling their long-awaited new reader, Kindle, and when they have a large number of titles available in their owned Mobipocket format. Mobi has the advantage of being readable by both Palm and dot lit readers. Kindle is just one of a number of new developments that will propel ebooks forward. The new iPhone, which has a very large device-sized screen is another new entrant expected shortly. There is a new iRex reader which uses the e-ink technology in the Sony Reader. And a new operation called NetGalley, which aims to cut review copy costs and increase review copy distribution by employing digital technology, could also add participants in the ebook marketplace.

Some stats I got recently from the International Digital Publishing Forum, the US-based trade association for ebooks, suggests that, after a sluggish period earlier in the decade, growth in the market is now 50-75% a year and is expected to continue at that pace. So the market is expanding, and it would be foolish for any publisher of narrative writing to ignore it, because it promises far more incremental income than incremental cost. There are a few things to think about as you get into this business.

First of all, it might be that expensive and restrictive DRM — “protecting” the ebook from being circulated by a user to somebody else — might not be necessary. Another approach is called “social DRM”. You simply get the purchaser to agree before purchase that what they’re getting is a “license” that allows them to use it — restricted however the seller wants to do that. Then you “watermark” the purchaser’s name and email address throughout the product. Now, watermarks can be removed by hackers, but so can DRM. This kind of restriction will really slow down the distribution by just plain folks; maybe that would be enough and it would certainly solve the problem of my needing to move something from one computer of mine to another, or letting my wife read it.

If ebooks do start to really happen, they open up a big opportunity for “living” books, books that don’t stop developing after they are first printed. Customization, updating, and localizing would become very simple and non-disruptive to the production process. It would seem that would create opportunities for Australian publishers to add local value to many books that come from abroad much more readily than you could in print.

Ebooks are a nightmare for controlling territorial rights. Although one could imagine ways to do it — say, by restricting what domains could order a digital download based on the publisher’s territorial rights — nobody has seemed to want to try. So the growth in the ebook marketplace just punches another hole in the increasingly porous wall protecting territorial rights.

It is worth taking note of the fact that Amazon is building a nice little publishing platform with proprietary capabilities. Once they roll out their Kindle reader — which, by the way, they officially deny they are developing — and, presumably, start to make a much more aggressive play to get titles loaded into Mobipocket format, they will be able to team this up with their unparalleled market reach and their BookSurge print-on-demand capability to offer a complete service for somebody that wants to take a manuscript to market. This puts them into a directly competitive position to Ingram, which has Lightning for print-on-demand and for ebook distribution. Amazon takes you direct to millions of end users and Ingram takes you to every intermediary in the world. Ingram has always been very cautious about “channel conflict”, taking care not to be seen as competitive to either publishers or retailers. Amazon is clearly already in direct competition with retailers the world over. There have been indications over the past few years that they’re going to be no less concerned about competing with publishers for relationships with authors.

The linking of ebooks and POD has been very spotty. I think we’ll see the two much more closely tied in the future, in ways I’ll suggest in a couple of minutes.

All of this says that circumstances march us to three significant changes over the coming two decades.

The old marketing techniques for publishers, which were based on book-centric marketing mostly through what we can call “horizontal” media most interested in the book as a form, rather than in the subject the book is about, aren’t going to work anymore. Most of the horizontal media will no longer be there and will have been replaced by vertical niche media, centered in communities which are mostly found through the web.

Second, the companies providing most of the product to the Australian book trade, by which I mean the big global general trade publishers, will be forced to change their business model. So will the local publishers which are not already niche-centric.

Third, we are moving from an era where information purveyors have been defined by form: publishers of books weren’t publishers of magazines and TV producers were not print product producers, to one where information purveyors will be defined by the niche they serve, and the owners of information and audience will move their content to their markets in whatever form makes the most sense.

This is not going to happen overnight. It is actually already beginning. Professional publishing shows the way. In every market niche, the number of players controlling the lion’s share of the audience is shrinking. The Internet demands aggregation of content and interaction prefers larger numbers of potential participants for better network effects. And once the interaction with the customer base is online, delivery of audio and video becomes as easy as delivery of words or data. The journal “Nature” now has an audio recording studio on the premises; they wouldn’t have needed one prior to the coming of the digital download world we live in today.

We are seeing this in the consumer publishing world as well. Digital downloads have really fueled growth of the already robust consumer audiobook business. In fact, audio has become a sort-of placeholder for ebooks, particularly in public libraries in the US. Libraries set up mechanisms to distribute ebooks, but their patrons didn’t bite. The infrastructure might have atrophied or been abandoned, but the iPod and the explosion in podcasting created a market very happy to download audiobooks from libraries and what was set up for ebooks works just fine.

At the same time, the publishers are encouraging their authors to make podcasts and are themselves making more and more video “trailers” to promote books. As publishers get more and more comfortable with rich media — sound and video — it will start making its way into electronic products as well. It’s inevitable.

So the requirement I envision that the publisher of the future not be limited to one media form — books — won’t be a problem by the time it really is a requirement. And today’s book publishers have some significant advantages as they compete for their places of prominence in the niched world that is evolving.

When book publishers start to compete for community presence, they come to the contest with certain advantages over all the other players, including those who are publishers of newspapers, magazines, journals, or web sites.

The book publishers’ royalty relationship with authors is a key strength. It means that authors will collaborate by blogging or posting articles without necessarily demanding compensation, because they are already partners with the publisher in an effort to sell books. In fact, what we have dubbed a “new marketing partnership” is a key aspect of the internet and the book publishing world; the new technology makes author-based promotion much more productive and enables it to be much more enduring than it ever was before. We did a consulting job in 2006 about marketing in the new digital world and as part of it arranged for a survey of agents about their expectations for authors regarding online marketing. A preponderence of agents felt that author websites were essential, that they didn’t need to cost very much, and that authors should be spending 2-to-10 hours a week promoting themselves online. A publisher who does the math on how much free publicity can be generated if the house’s authors actually do work an average of, say, five hours a week promoting would see that the effect could be the same as substantially adding to staff. It is harnessing those efforts and making them productive which is one of the new challenges for publishers that they need to tackle right away.

Another advantage book publishers have over non-publishers is an ability to distribute URLs, or web addresses. We have reached the point that every book should be carrying at least one. But it is a bit of a waste to use that opportunity to drive traffic to a publisher’s own branded site, which should in most cases be a B2B site for the trade, not one aimed at consumers. This is where the need for a niche strategy becomes more apparent. Where on the Net do you send the customers for a book? An author web site is fine, if it is dynamic and changing and involving. But many aren’t. A publisher who does not have a good place to send a reader is actually wasting an asset.

Assuming a publisher already has some kind of niche publishing strategy, there is content from the backlist that could help build an attractive niche web site. The things which are hardest to publish these days: “nuggets” of standalone information, constitute the best content for this purpose. This is something almost everybody else does not have, even magazines and newspapers, whose old content is likely to be more dated than book content — since book content had to live with a year-long creation cycle to begin with and then was often expected to survive in the marketplace for years. In the case of magazines, sometimes they don’t even have the online rights to material they published in print.

And publishers have one other natural advantage: something to sell. If the objective is to build an enduring community, selling books should not be front and center of a web site, but something conveyed with more subtlety and nuance. But if you have a site on “buying a home” and one of your little features is a calculator for “how much mortgage can you afford” that comes from a book, of course you should attribute the calculator to its source and offer a “buy the book” link when you deliver it.

A very important rule here is that you must build your community first, and then monetize it. If everything you do looks like a commercial and if your attempt at community is just a catalog of books you offer, you will neither create a community nor sell very many books.

The things we’re saying here apply quite differently to different publishers in this room. Obviously, an Australian publisher using Australian authors to publish Australian-based information is going to be positioned best to apply these insights. A publisher here whose books mostly originate abroad, particularly if it is fiction or belles-lettres from abroad, is going to find it difficult to leverage the authors or even to come up with a unifying principle that will form a community on the web. But if you believe the world is headed in this direction, it does suggest some new tactics no matter where on the spectrum you fit.

Even if you’re buying a novel from a New York publisher written by an Omaha-based writer, you should find out about the author’s web presence and whether you can get the author to give some marketing time to interact with an Australian audience. If you’re publishing a local book on a subject of worldwide interest — surfing or wine or coral reefs — there is an international web community you need to tap into. Many of your readers here already have.

And an idea that should not be lost is that all the new technology really can help you export much more than you ever have. You can get your local books seen by an international core audience through the web. For the right books, you can even generate fast and sure delivery in the United States and Europe without a complex distribution relationship by using POD installations associated with Ingram and Amazon. Even the Australian ex-pat community constitutes a market that is now in reach and that should not be ignored.

I want to turn now to a completely different kind of opportunity made possible by digital change and one which my admittedly inadequate knowledge suggests is not being exploited here. It will take cooperation from retailers and publishers to make it work, but it would be to everybody’s benefit if you could.

While BookScan is here, I know, the supply chain data you get through BookScan really only scratches the surface of an enormous opportunity to improve efficiency. Major accounts in the US, UK, and Canada augment what is available through a national point-of-sale aggregator with much richer and deeper data delivered by each account to each publisher only for that publisher’s books. What data is offered varies by account; as does its quality, frankly. But a weekly feed from any account holding significant inventory telling the publisher what’s on hand, what’s on order, and what sold in the prior week enables a publisher to build a database that has two big payoffs. It helps spot over- and under-distributed books, in relation to sales, so that opportunities otherwise missed can be exploited. And it allows a view of what is in the supply chain to inform every reprint or reorder decision.

Because you currently appear not to have this kind of data, I will save elaborating on exactly how to use it for my next trip, when I hope you will. But publishers should start now lobbying the major accounts to make this kind of data available. It is in their interests as well as the publishers’, as retailers such as Barnes & Noble, Indigo in Canada, and Waterstone’s could tell them. Delivering this kind of information allows a publisher’s rep to be an additional set of eyes for opportunity and also helps assure that the publisher can order reprints with confidence that they won’t be meeting returns at the warehouse door.

The June 2007 issue of Bookseller + Publisher had an article by Scribe publisher Henry Rosenbloom about how futile it was to make reprint decisions from BookScan data, which lacked the inventory component as well as any clear picture of what sales might have been missed in the reporting. Having a picture of the titles across the industry is perhaps helpful in making publishing decisions that require knowledge of books published by others. But for controlling your own inventory and making informed printing decisions, the kind of data you can and should get from your major accounts about only your own books would be much more helpful.

We will touch on it a bit more in a minute, but short-run printing and print-on-demand also should be an integral part of every publisher’s print-and-inventory strategy.

It’s a bit further away, you also want to start informing yourself about RFID, “radio frequency identification” chips. This technology — which has come into widespread use as a way to collect highway tolls from cars moving through a collection point where trying to “read” a bar code would be just about impossible — is getting cheap enough to individually identify every copy of every book. A bookseller in Holland has become the pioneer, starting about a year ago to put their own RFID chip in every book they stock. Soon, the chips will be printed into the books or their jackets.

RFID allows a bookstore to take inventory by putting a reader near a shelf, not needing to “see” each book. It allows a bookstore or library to “check out” a customer with all the books inside a bag. It stymies theft. And it even allows a retailer to see which of multiple locations in a store displaying a book is the one from which the copy being bought right now came.

Although RFID is a bit futuristic, supply chain data and digital printing technology are not. And they are already enabling publishers in the US, Canada, and Britain to come much closer to matching the creation of inventory to its need, freeing up capital and improving cash flow. Up to this point in our conversation, we’ve been exploring changes publishers must make that will require cash investment. Increasing supply chain efficiency is where some of that cash can come from.

The University of Chicago has been distributing the books of other university presses for some time. About five years ago, they got Edwards Brothers, an American printer, to put a print-on-demand installation right into their warehouse and started to get all of their books and those of their distributed publishers into a POD program. Their arrangement isn’t actually “pure” POD, because they print each book in multiples of 2, not 1. That wouldn’t work if you didn’t already have a place to store the second copy when you’re printing two because you need one; with POD right in the warehouse it presents no problem at all.

This capability has enabled the evolution of a new publishing model, which I would encourage Australian publishers, particularly those serving small audiences, to study very closely. The standard routine now for the university presses working from this distribution capability is that there is one real press run, the first printing. After that, everything is printed to meet confirmed demand. There are exceptions, of course; occasionally even a University press book shows “legs” in the consumer marketplace and a second or later press run is warranted. But that’s rare.

Since university presses exist primarily to support scholarship, and place a high premium on making intellectual content available in book form, another model is bound to emerge as well. If you don’t even need to do the first press run, the cost of putting a book into the marketplace drops to a fraction of what we got used to in the 20th century. The number of titles that can be published this way on the savings from eliminating even one print run can be substantial. We would expect to see an ebook-and-POD combination ultimately become the norm for university press publishing with the press run becoming the exception, rather than a requirement. Remember that all these titles are as available to the consumer as they would have been if they’d printed 2,000, or 5,000, or even 50,000. Waste is eliminated. Cash isn’t tied up. In fact, once the book is rendered as a printable PDF, publishing each title becomes very close to a cash-neutral exercise.

In fact, if you are serving small audiences, a strategy like this becomes essential. You will not be able to compete effectively any other way. A commitment to small audiences means you have to do more than books. You will need the full arsenal of 21st century communication tools: blogs, ways for your audience to tag and comment, ways for them to interact with each other and, in fact, to substitute their filtering and recommendations for your own.

The smaller the audience, the more the marketing leverage provided by a web community is essential; there is simply no other way to reach the people you want to sell to that is remotely cost-effective.

And, as we suggested earlier, adopting this strategy extends your audience beyond geographical boundaries. Publishers serving niches and who restrict themselves to the customer base which is geographically convenient will also find it difficult to compete against publishers who are reaching out to the world. If you were an author, based anywhere, you’d see the difference pretty clearly and it would matter to you a lot.

I want to cover one more development from the worldwide stage before we close. A new infrastructure is developing for the distribution of digital assets which parallels what we’ve seen in the physical world. My company has been doing a lot of work in this space and, in fact, has coined some nomenclature for it which I think will become widespread. So I want to introduce you to the world of DADs, DAPs, and DARs.

DADs are “digital asset distributors”. What DADs do is work for publishers, taking their content into a repository in whatever form it can be delivered, which can be books to be scanned, printer PDFs, or something in between. The DAD converts, or arranges for conversion, of the content into any form necessary to deliver ebooks in any format or materials for print or web pages. We count about 10 companies in the world competing to be the industry’s DADs; although their numbers may grow in the short run, we think they will probably consolidate in the long run. The companies competing in this space now include publishers — Random House, HarperCollins and Holtzbrinck — as well as digital conversion houses like codeMantra and Value Chain International, a new venture called Ingram Digital Services, and a few others.

DARs are “digital asset recipients”. This category includes search engines like Google, online retailers like Amazon, web sites, ebook vendors, and, of course, printers, who work from digital files. Many DARs are in the distribution business; certainly Amazon is, Google might be thought of that way, ebook vendors are. What defines a DAD, though, is that they are in service to publishers; DARs may distribute, but they do it in service to their own business model and customer base.

DAPs are “digital asset producers”. These are the publishers who choose not to build their own digital infrastructure.

The cost and continuous tech challenge of handling digital asset distribution will, we believe, continue to drive consolidation of this function. It just doesn’t make sense for 1000 publishers around the world to figure out how to solve the conversion problem to put files into the form required by a new ebook reader or to imitate the book widget: a little app that permits book content to easily be displayed on anybody’s web site for promotion purposes. In fact, the widget is the first battleground of the DADs. Random House and HarperCollins announced their own versions of them within a week of each other a few months ago. Now all the DADs are planning a similar offer because publishers have gotten excited about the widgets’ utility as a marketing device. Kids are beginning to decorate their MySpace pages with them; they’re quickly becoming an important viral marketing tool.

The rise of the DADs is a significant development. They are not expensive to use and putting a book file into their hands suddenly multiplies the ways a publisher can promote it or draw revenue from it. We’ve been saying that 2007 is the year every publisher needs to find a DAD; it certainly is the year every publisher needs to start looking for one.

I want to conclude with a manageable checklist of next steps. But any “to do” list for a roomful of people is hard. Each publisher is in a different place today in terms of workflows and opportunities. And some things really have to be done by the industry; they can’t be left to an individual publisher.

At the risk that I am leaving something important out, which, if I have, I hope we’ll discover in conversations later today and this week, here’s what I suggest you put top of mind.

First of all, as an industry, try to create useful data flows in your supply chain. Any retailer capturing POS information at the cash register can, without extravagant effort, give publishers weekly reporting of inventory, orders, and sales. Publishers are, in my opinion, really entitled to visibility of any inventory that could come back to them. The positive financial impact of organizing these data streams will be signficant for all publishers and all retailers. It needs to be a priority. One good early step might be to contact your counterparts at BookNet Canada, which has organized this kind of reporting in the past two years for a market very much the same size as yours.

Second, you need a robust in-country POD capability and perhaps an Australasian DAD. The DAD function might work fine with the offshore choices; after all, one great virtue of digital is that it removes the need for geographic proximity. But a robust POD capability is essential precisely because of your geographical isolation. This is something else that is beyond the reach of any single publisher or retailer to provide. You need to go after it as an industry.

Turning to publishers, you must develop digital workflows, so that your content is properly archived, tagged, and accessible to you. A DAD can be a band-aid for this problem, taking a book and turning it back into digital files. But the book won’t tell you what rights you have to the picture on page 37, and, unless you are archiving that kind of information, you really constrain your ability to use the intellectual property for marketing, or to sell it.

Publishers also need to start thinking about how they make the leap to the niche world. That starts by mapping your content to web niches. That is a continuous process, because new web sites of interest in any niche spring up all the time. But there is a big initial task understanding what niches your backlist can vault you into.

And last, for now, is that each publisher needs to understand the world of digital asset distribution. One way to start is to go to www.klopotek.com and get ahold of the White Paper we’ve created on the subject in the project I referred to earlier. Contact the DADs and get them to pitch their services to you. Getting your intellectual property into their databases can produce positive results for you very quickly.

The world we know and the industry we’ve grown up in are undergoing dramatic change. I hope these remarks have given you some useable suggestions for navigating it. I’ll be happy to field questions to the extent that time today allows; please feel free to email me with anything we don’t have time for today or which occurs to you later. As I hope is clear, most of what we need to know about the future isn’t really figured out yet; the questions provoked by each discussion light the way to the answers we all seek.

Thanks very much for your attention.