Amazon

No, the Big Five are not a cartel and it really ignores reality to label them as one


One of the best-attended breakout sessions of Digital Book World 2015 was the discussion called “Should Amazon Be Constrained, and Can they Be?” which shared the very last slot on the two day program. That conversation was moderated by veteran New Yorker journalist Ken Auletta, and included Annie Lowrey of New York Magazine, thriller author Barry Eisler, and Barry Lynn of the New America Foundation.

It turns out that the two Barrys, who have pretty much diametrically opposed positions on Amazon (Lynn wants them investigated by the DoJ as a competition-stifling monopoly; Eisler casts them, for the most part, as the heroes of the book business’s digital transition) have a common position on the Big Five publishers. They refer to them as a “cartel”. Eisler is sneeringly dismissive of “New York”, which he refers to the way Republicans of the 1980s referred to “Moscow”, as an obvious pejorative. He appears befuddled by how anybody interested in the well-being of authors and the reading public could take the side of these publishers who maintain high prices for books, contract with authors to pay them smaller percentages of sales than Amazon does (either through Amazon’s own publishing operations or through their self-publishing options), and notoriously reject a very high percentage of the authors who come to them for deals.

Perhaps because the focus was Amazon, perhaps because Eisler was both emphatic and entertaining in his roasting of the publishing establishment, and perhaps because the facts to defend them are not well known, neither moderator Auletta nor panelist Lowrey challenged the big publisher baiting from Eisler with which Lynn mostly agreed.

It was just as well that I wasn’t on the panel. I am not certain that Amazon can or should be constrained, but I am damn sure that the Big Five publishers are not villains, and they are certainly not a cartel. They do seem to be extremely poor defenders of their own virtue but they are doing yeoman work maintaining the value in the old publishing model — for themselves and for authors — while adjusting to changes in their ecosystem that require that they develop strong B2C capabilities while maintaining their traditional B2B model, the death of which has been greatly exaggerated. If I’d been on that stage, the discussion of Amazon would have been diverted when the trashing of the big publishers began.

I took the step of confirming in an email exchange my recollection of the counts in Eisler’s very entertaining, persuasive, and unchallenged indictment of the big publishers.

1. Their basic contract terms are all the same, which it felt at the time he was suggesting demonstrated collusion, but which in our subsequent exchange he clarified he interprets as evidence of “asymmetrical market power and a lack of meaningful competition”;

2. They pay too low royalties on ebooks, which he also attributes to their “asymmetrical power” and “an implicit recognition that publishers come out ahead if they don’t compete on digital royalties”;

3. They only pay royalties twice a year, rather than more frequently or more promptly, which Eisler also attributes to a lack of competition;

4. The term of big publisher contracts is normally “life of copyright”, which Eisler calls “forever terms”, and;

5. They reject a lot of authors. Here Eisler clarifies that this is not an “indictment, just an axiom”. I agree when he applauds self-publishing for creating a better world where “readers have more to choose from”. But we quickly part company again because he characterizes self-publishing as freeing us from a world where “an incestuous cartel” makes “virtually all the decisions about what tiny fraction of books readers will every have a meaningful opportunity to learn of and read”.

In our exchange, Eisler expressed the belief that “the only reason people have been okay with this is that the Big Five are ‘my people'”. So they get a pass which he likens to what conservatives gave George Bush or liberals give Barack Obama. (In another point of disagreement between us, Eisler seems to find very little difference between the Democratic and Republican parties. I guess that is some people’s way of saying “nonpartisan”. What it says to me is “not discerning”.) And Eisler finds it “interesting” that the publishing revolution has “people decry” Amazon for “doing, or often only for potentially one day doing, the very things that are the definition of the Big Five.” (I have problems with this too, because none of the big publishers have a dominant market share selling books online and ebooks. In other words, Amazon and the publishers really aren’t comparable. Check back with me if any of the big publishers builds — or buys — a market-leading retailer.)

I’m going to plead “no contest” to the charge that the Big Five are “my people”, which I hope won’t discredit my arguments any more than the fact that Eisler is an Amazon-published author discredits his. But the cartoon picture of publishing in Eisler’s reviled “New York”, where some small group of extremely like-minded people apply their narrow views to effectively restrict what people read is a massive distortion of reality. Let me try to set the record straight about this world so many of my friends inhabit and with which I’ve been interacting for the better part of five decades.

First of all, the Big Five have plenty of competition: from each other, as well as from smaller niche publishers who may but be “big” but certainly aren’t “small”. (That is why the big ones so often buy the smaller ones — they add scale and simultaneously bring heterogeneous talent in-house). They are all quite aware of the authors housed elsewhere among them who might be wooable. In fact, since we have started doing our Logical Marketing work, we have done several jobs which were big author audits commissioned by publishers who wanted to steal the author, not by the one which presently has them signed. Eisler explicitly resisted accusing the publishers of “collusion”, but he does accuse them of “not competing” with each other. That is an accusation that is simply not supported by the facts. Nobody who has spent any time talking to people who work in big houses could possibly get the impression that they don’t compete.

(In fact, a friend of mine just moved from one big house to another. He is explicitly persona non grata at his prior employer. Now, in this case, I think the house that lost him is behaving childishly, but it certainly underscores the fact that they believe they are in intense competition and now this one-time colleague has gone over to “the other side”.)

But the big flaw in Eisler’s logic is the same one that dooms Hugh Howey’s “Author Earnings” project to irrelevance: the assumption that the per-copy royalty terms and rights splits are the most important element of publishing contracts. In fact, they’re not. Actually, those terms matter in 20 percent or fewer of the agented author contracts with the Big Five. Why? Because the agents get the publishers to pay advances that don’t earn out!

In fact, I have been told by three different big houses what they calculated the percentage of their revenues paid to authors amounted to. We could call that the true royalty rate. The three numbers were 36, 40, and 42 percent. That includes what they paid for sales of paperbacks, all of which carry “stipulated” royalties of well less than 10 percent of the cover price (and therefore below 20 percent of revenue).

Take that on board. Big publishers are paying 40 percent of their revenue to authors! That leaves them 60 percent to pay everything else: overheads, manufacturing, and profits! Compare that to the margin Amazon has even if they pay a 35 percent digital royalty, or compare it to what anybody else has in any other business after paying to acquire the raw material for what they sell. If there were really an “asymmetrical” power equation favoring publishers, you’d think they could acquire the author contracts for a bit less, wouldn’t you?

Not only were the authors’ collective royalty rates much higher than contracts stipulated, the authors got most of that money in advance, eliminating the authors’ risk. The only contracts on which the royalty terms matter are those that do earn out (and, arguably, those that are close). For all the others, most of Eisler’s list of complaints is irrelevant. And, for the record, I have never heard an author complain about that show of confidence, the work that follows in helping him or her reach an audience (which benefits all involved), nor the cash upfront.

More frequent accounting doesn’t matter if you aren’t owed any money. And if the solution to “forever” contracts were that you could buy your way out by paying back what you got in advances that your book didn’t “earn”, how many authors would do that?

But, in fact, agented authors don’t have forever contracts; agents have been negotiating performance clauses for publishers to keep rights for years. And, on top of that, no author in the US can possibly have a “forever” contract because the copyright law of 1978 requires the publisher to revert rights to the copyright holder after 35 years on request. Agents tell me this is has been resulting in additional “advances” for re-upped books for the past couple of years. Note: this is the law. No publisher disputes it. But the “forever contract” argument ignores it.

But, even beyond that, the negative characterization of Big Five New York publishing is terribly unfair.

First of all, the standard terms in big house contracts are almost always more generous than the terms in smaller publisher contracts. Few — if any — of the smaller ones pay a hardcover royalty as high as 15 percent of list. Although higher digital royalties can sometimes be found, usually those are from publishers who have little capacity to deliver print sales, so digital royalties is all you’re going to get. (That might be okay for a romance novel where a big majority of sales could be digital. It would be disaster for the author of just about anything except genre fiction.) And some smaller publishers actually pay less than 25 percent for digital royalties.

So the Big Five terms are generally better and they routinely pay agented authors advances that no other publisher would attempt to match.

But, beyond that, the idea that they are a “cartel” (a characterization enthusiastically seconded by Amazon critic Barry Lynn after it was introduced by Amazon supporter Eisler), is really preposterous. In fact, the Big Five are, to varying degrees, federations of imprints that even compete internally for books, sometimes to the extent that they will bid against each other when an agent conducts an auction. And it would appear from Eisler’s pre-Amazon publishing history that he himself has, in fact, been the beneficiary of bidding competition among major houses.

The internal-to-the-house competition occurs because of the way big publishers are organized. It has been understood for decades that some aspects of a publisher’s operation benefit from scale and size and other functions must remain small. In general, publishers deliver accounting, manufacturing, and sales as centralized functions and editorial acquisition and development, packaging and design, and marketing as localized capabilities housed within the imprints. The power of imprints, which are individual editorial units, varies, but it is generally the case that they have autonomy over their acquisitions and must “compete” internally for the centralized services.

The digital transition is definitely straining that organizational structure. Having the by-title P&L responsibilities distributed makes it more difficult for houses to organize cross-imprint initiatives for everything from direct sales to audience-centric (vertical- or subject-oriented) marketing. Having multiple imprints that all contain “general” lists is probably an anachronism in an age when we want brands (which imprints are) to make sense to consumers. Publishing imprint brands were always B2B, meant more to inform such trading partners as libraries and bookstores and reviewers, not the general public.

But the big houses reap large benefits from the power of their central services. They get rock-bottom prices for printing and lightning-fast service for reprints. They have daily contact with the biggest accounts, which matters for getting reorders onto suddenly-empty shelves or to execute a short-lived price promotion for an ebook. They have teams of people staying abreast of every promotional opportunity at every account or service like BookBub. They are increasingly developing teams and tools to keep their marketing metadata fresh and relevant, to monitor the online world for marketing opportunities, or to build or advise authors on creating effective web presences.

Although authors can certainly be found who felt they were signed and then ignored, most houses sweat all the details: editing the book, packaging it for sale, and following rigorous pre-publication routines to get endorsements. They all have special sales departments that are regularly working catalogs and specialty retailers for the books appropriate to their audiences. Smaller houses don’t have all these capabilities. To suggest to an author with no publishing background that s/he can do all this themselves, even with an unlimited budget to buy outside services, is really setting a novice up for frustration and failure, or at the very least near-certain dissatisfaction.

I asked Eisler about the competition among the big houses that doesn’t seem to enter his calculus. Here’s what he told me:

As for competition among the Big Five, I call it kabuki competition. Competition that results in decades of zero innovation and the same antediluvian lockstep contractual terms is by definition meaningless. It’s managed competition, agreed-upon competition. A lack of industry innovation is like the dog that didn’t bark: the absence is itself evidence, because in the presence of meaningful competitive pressure, industry players innovate. To argue otherwise, you’d have to argue there has never been room for real innovation in publishing practices. I think that would be a hard argument to make.

To put it another way, what the Big Five cooperate on is far more significant than what they compete on. By it’s [sic] nature, competition is more noticeable than cooperation, so a little bit of competition obscures a lot of cooperation.

Unfortunately, this doesn’t tell me much. I don’t know what the Big Five “cooperate” on. And though the argument that there “has never been room for real innovation in publishing practices” would, indeed, be nonsense, so is the claim that there has been no innovation. A “failure to innovate” doesn’t describe the last five years that I’ve been living through. All the Big Five houses have continuously reorganized, brought in outside-of-publishing digital talent at a high level to up their game, and introduced digital-first operations and contracts, all at the same time that they have had to manage down fixed investments in plant (warehouses) and change manufacturing-and-inventory processes to take advantage of improved digital printing capabilities.

It is now often forgotten that, while it is true that Amazon “made” the ebook market really happen, publishers had for a very long time before Kindle been creating editorially magnificent products and were far ahead of Amazon in seeking to publish in ebook formats, only partly because of better economics. (At the time all costs were additive and the market was tiny.) They published them because readers seemed to want them and big publishers, whatever their bashers might think, feel a responsibility to assure maximum distribution of a writer’s work.

In fact, the big houses all are comprised of competing imprints. Among them they employ hundreds of acquiring editors who are each trying to build their own successful lists (competing with each other). They are shamelessly commercial: a book with the potential to sell only a few thousand copies won’t get their attention. But, beyond that and those things that are far outside prevailing public morals and sensibilities, I can’t see any restrictions on what they’ll publish.

The Big Five houses have negotiated the digital transition that has occurred so far with startling success. The self-publishing business has grown, fueled by investment from Amazon and other big players, but big houses have hardly lost any authors. They are facing down dominant retailers in their two biggest channels — brick bookstores and online — and managing to maintain their margins and profitability. They are all moving on a variety of initiatives to build vertical (audience-centric) capabilities and extend their global marketing and sales reach.

But even if one assumes the “worst” of the big publishers, it is a total canard to say, as Eisler did to me, that “in the absence of meaningful competition, the Big Five has exercised incredible power over what books are published and what people are functionally permitted to read.” In fact, the argument that authors can reach their audiences successfully through self-publishing (which on other days, Eisler and his fellow musketeers Hugh Howey and Joe Konrath make with gusto) explicitly contradicts that contention. But so do Harry Potter, published by Scholastic, and “Fifty Shades of Gray”, picked up by Knopf after a self-published start, to name two sales phenomena of relatively recent times. There are a number of very capable publishers just a bit smaller than the Big Five (Houghton Mifflin Harcourt has the Lord of the Rings books, for example) and there are legions of specialty publishers who do books the Big Five would generally not even consider.

Sometimes the Big Five acquire those publishers to add diverse author and publishing talent to their rosters to compete in niche markets. Harpercollins’s acquisitions of Thomas Nelson and Harlequin fit that description. How much a big house can publish is one thing; what they can publish is also a function of the talent onboard and the audience development that has already taken place.

The Big Five are actually specialists of a different sort: they do the books with the biggest commercial potential. I’d argue that having five very large companies all capable of making a book a mammoth commercial success is a pretty big number, not a small one. If those companies were broken into more of their component parts and we had 15 or 25 large-ish publishers rather than five giant ones, it is not at all obvious that author advances or sales would be higher. There would probably be more manufacturing and sales staff per title (and less investment in tech to support either) than there is now, but those salaries would be subtractions from the company’s margins, and would therefore likely increase book prices. That’s not going to produce more value for either authors or readers. So I actually think author advances — which one must always remember is the metric that matters most in determining how well authors are getting paid — would be lower.

During our on-stage conversation at Digital Book World 2015, Brian Murray, the CEO of HarperCollins, took great pains to express his view that self-publishing capabilities are good for authors and for readers. On the same morning, Judith Curr, who is the President of S&S’s Atria imprint, explained how her house specifically targets successful indie authors to bring them in. Every big house has some respectful variation on those themes. The animus between big publishers and some components of the self-publishing community is really a one-way street. In a prior post of mine about the illogical publisher-bashing, the comment string taught me that the mostly rhetorical and histrionic arguments from the self-publishing side against the big houses constituted an emotional, not a rational, reaction.

A dispassionate examination of the facts and an understanding of how things really work make it clear that big publishers — both goaded and constrained by powerful agents — are very good for authors. That doesn’t mean self-publishing isn’t good for them too but, then, no big publisher I know is saying that it isn’t!

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End of a year, and perhaps the end of a stage of the ebook transition


The year ends with a front-page New York Times story reporting the consternation in the indie author community at the current state of their commercial lives at Amazon. The proximate cause of distress is seen to be the Amazon Kindle Unlimited subscription service, through which indie authors are receiving considerably less compensation per read than they get through a sale, combined with the apparent migration of many Kindle readers to subscription, which would also explain the simultaneous sharp decline in those authors’ single-copy sales. Indie author and author service-provider Bob Mayer is quoted in the piece describing a complete turnaround in the past six months, with authors going from what they thought were secure incomes from writing to looking for day jobs.

Nate Hoffelder at Digital Reader makes the point that we’d want to know whether it is just the indie authors feeling this pain or whether publishers are seeing revenues shrink too. But that’s a very difficult comparison to make. Amazon gets the attractive books from the big non-agency publishers by just buying them for each use (paying whatever is the publisher’s wholesale price). Amazon wins that way because they don’t have to get the publisher’s permission to participate in the subscription program, but they’re paying a lot more for each subscriber read than they pay the indies. So even if the reader balance shifts from “individual purchase” to subscription read”, the publisher wouldn’t lose income.

My hunch is that the indie author community has a much more serious and intractable problem. It’s called supply and demand.

What a long list of indie authors has proven in the years since Kindle was invented is that there is a substantial market willing to try storytelling from unknown writers if it is offered at a relatively low price. As a result of that and of Amazon — joined by all the other ebook platforms and a legion of service-providers like Bob Mayer — making it relatively easy to “publish” a manuscript, many tens of thousands of authors have published hundreds of thousands of ebooks that way.

What is now being proven is that market is not infinitely elastic. Most of the data we see suggest that ebook sales growth has stopped. (As Mayer says in the piece, many ebook readers have an inventory of ebooks they’ve bought and not yet read.) Ever-growing supply and stable demand is a toxic formula for the prospects of each successive ebook published for that market. My own hunch is that Kindle Unlimited is simply the straw that broke the camel’s back.

And while Hoffelder’s question about the distribution of the pain is still a good one, it seems likely that the low-priced indie authors are disproportionately affected by KU. Who bought indie author ebooks in the first place? The price-sensitive reader! Who switches from buying individual ebooks to the subscription service first? The price-sensitive reader! In other words, the subscription service offering appeals most to the same audience as those who read indie-published ebooks.

And if that theory of what is happening is correct, authors may get less relief from dropping out of KU than they’re hoping for. They still have the supply and demand problem, compounded by the conversion of a chunk of their static market to the subscription model. Evidence of that is a shoe I expect we will soon hear drop.

POSTSCRIPT: Apparently the Disqus comment facility isn’t working (at least at the moment) on the site. I just got this note from Nate Hoffelder, commenting on “And if that theory of what is happening is correct, authors may get less relief from dropping out of KU than they’re hoping for.” Nate said:

As I pointed out a month ago (and have mentioned since) there are authors who never went into KU who are seeing a similar drop in revenue. So leaving KU will bring exactly zero relief.

So Nate has evidence that supports my conjecture.

Happy New Year to everybody. I hope we’ll see you at Launch Kids and Digital Book World!

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Headliners galore will address Digital Book World 2015


Half of Digital Book World is delivered to the entire audience from the Main Stage. The speakers for 2015 comprise the most illustrious group we have ever had. The headine is definitely that we have managed to corral both Amazon and Apple speakers for our main stage — a feat we don’t believe any other conference in the book business has ever managed to pull off — but I’d be proud of this program even if neither of them were on it! Beyond the retailers, we have three bestselling authors, three leading publishing executives (four if you count that F+W CEO David Nussbaum will deliver a welcoming speech), three data-driven experts, and two leaders from adjacent industries.

The program will kick off with a presentation from best-selling author Walter Isaacson, whose current book is “The Innovators”. Isaacson wrote definitive bios of both Benjamin Franklin and Steve Jobs in recent years, both of whom had their own role to play in the book business. His current book really is about the digital revolution in general, the context in which publishing’s change, DBW’s topic, occurs. Context-setting is always a good way to start, and Isaacson definitely fills the bill.

We discovered ed-tech investor Matthew Greenfield during the course of planning DBW 2015 and we think our audience will agree he was a great “find”. Greenfield’s Rethink Education business invests in start-ups, which for ed-tech he divides into three groups of companies: those that deliver ebook readers and content for school use; those focused on short form reading, like news; and those that are writing-related, which are likely to include leveled collections of reading to help developing writers. Since the ed-tech field is largely about creating new platforms within which the content is consumed in schools and colleges (as well as adding value with context and evaluations), he will explicitly include advice for trade publishers who sell their content for educational use and will increasingly find it necessary to sell through these platforms. Greenfield also has some interesting speculation to offer about where educational technology is going and what we can expect to see from publishing’s biggest disruptor, Amazon.

You can’t be trying to figure out the future of publishing without being aware of the new phenomenon of “content marketing”. So I reached out to the Founder of the Content Marketing Institute, Joe Pulizzi, about imparting some wisdom to book publishers. I started out thinking the content marketing business might make use of some of our content, but he straightened me out pretty fast: that’s not the most likely synergy between what he knows and what we need. In fact, Pulizzi is an expert on how to use content to drive consumer engagement and he does it for organizations and brands that have to pay to create that content. Of course, we in the book business already have lots of content and ready access to more within our existing staffing and networks. In this presentation, Pulizzi will be talking about how we can use content to build consumer engagement and loyal customers to whom we can market repeatedly (vertical thinking). Everything Pulizzi says is likely to suggest questions to publishers, so we’ve also given him a breakout session to allow those who want to hear more and interact more to do so.

The first of our publishing CEOs to take the stage will be Linda Zecher from Houghton Mifflin Harcourt. Zecher runs a company that is very big in education publishing but has a top 10 general trade list as well, so she is really the only CEO managing across those two publishing segments. She’s also the rare publishing executive with a tech background (hers was at Microsoft). This interview with Michael Cader will focus on the lessons learned from the education side which could be harbingers of adjustments trade publishers will also have to make.

Next up will be James Robinson, Director, News Analytics, for The New York Times. Robinson is, effectively, the Times’s techie in the newsroom. He takes the view that writers and editors need to understand who their readers are, and, of course, they are not the same for every story. He also wants to make sure that as many people as possible see each relevant story, whether they would have expected it from The Times or not. If I do say so myself, Robinson has a sterling background. He spent several years working with me at The Idea Logical Company before he went on to get a Masters at NYU studying under thought leader Clay Shirky. The way he thinks about content and audiences for The Times contains lessons for non-fiction book publishers and perhaps for fiction publishers as well.

The first morning of Main Stage presentations will conclude with Cader and me interviewing Russ Grandinetti, SVP, Kindle, at Amazon. Grandinetti is a straightforward and outspoken executive who has been with Amazon since just about the very beginning and who has shepherded Kindle throughout its existence. With Amazon now generally acknowledged as the most powerful and disruptive force in the book business, we will all be interested to hear what he thinks is the future for printed books versus digital, bookstores versus online purchasing, and how much Amazon’s own publishing and subscription programs are likely to grow.

The second morning will begin with Michael Cader interviewing Internet and marketing guru Seth Godin on the subject of “what’s next?” Godin, who saw — and wrote about — the importance of building personal brands and mailing lists at the dawn of the Web era, is a successful book author who has been watching how publishers operate and market for several decades. In this conversation, he will deliver intuitive and logical advice that many can follow. Anybody who listened to Godin talk about “permission marketing” 20 years ago and followed his advice now has a massive emailing list that is a major marketing asset. Just about every publisher will likely come away from this session with some new ideas to apply.

Next up, for an interview with me, will be CEO Brian Murray of HarperCollins. Under Murray’s leadership, HarperCollins has established itself as the number two English-language trade publisher in the world. Two recent acquisitions, Christian publisher Thomas Nelson and romance publisher Harlequin, have given them strong foundations to develop large vertical communities. In addition, Harlequin had a global infrastructure in place that HarperCollins is using as a springboard to build out their own global — and beyond just English — presence. Murray will discuss how these acquisitions position HarperCollins strategically to compete with the substantially larger Penguin Random House and to build their ability to reach readers beyond those they get to through Amazon, Barnes & Noble, and an ever-smaller number of ever-larger retail trading partners.

Over the past several years, ebooks have taken market share from print that is probably in the range of 25 percent across the board. But that’s not distributed evenly by genre or subject or type of book. Jonathan Nowell, the CEO of Nielsen Book, is going to help us understand how the mix of what sells in print has changed as a result of this. Understanding what the evolving print marketplace really looks like willboth publishers and retailers plan for the ever-changing future, in which we will probably see less print overall, but not for everything.

Ken Auletta of The New Yorker has been covering both content and technology businesses for many decades. Nobody understands how the companies in both those industries work — including their cultures — better than he does. Among his five bestsellers is “Googled: The End of the World as We Know It”. Auletta will talk about “Publishing in World of Engineers” and how the smaller content companies cope with their new partners that come from the world of technology. The culture clash between long-established content providers and techies who place high value on “disruption” is a theme we all deal with and about which Auletta can shed real light.

Hilary Mason is a data expert who has honed her talent for analytics during a stint at Bit.ly. Mason has spent years learning about individuals through their online behavior. In this talk, she is going to tell publishers what she’s learned about how to gain insight into individuals and audiences and how to use those insights to garner interest and affect behavior. Like Pulizzi, we anticipate that Mason will raise a lot of points some of our attendees will want to pursue further around their particular interests. So we have also given her a break-out session in the afternoon, where the most interested can explore further how to use data and analytics effectively.

Judith Curr is President and Publisher of Simon & Schuster’s Atria imprint. She has always had an admiration for entrepreneurship and indie authors have looked attractive to her as a publisher for a long time. (She points out that Vince Flynn started out as a self-published author.) So Curr did some brainstorming and tried to figure out how to make her imprint a place that an indie author would want to be. In this talk, other publishers who see the importance of appealing to authors who want to market themselves, manage their careers, and publish faster (or shorter) than the conventional process, can learn from her thinking, insight, and experience.

Our main stage activity will conclude with an interview by Michael Cader with Keith Moerer, who runs Apple’s iBooks Store. iBooks Store has established itself as the second leading global seller of ebooks and has ambitious plans for continued growth. We’ve never had the good fortune to have them on the DBW program before. We are thrilled to be able to close our main stage day with Amazon and our second with Apple, giving publishers a chance to hear from the two biggest retailers in the world for their ebooks.

Not covered in this post or my prior post about the DBW breakout sessions is the sterling Launch Kids program organized by our friend and frequent collaborator, Lorraine Shanley of Market Partners International. The world of juvie and YA publishing will probably change the most of all publishing segments and there are legions of players outside what we think of the book business working on it. Lorraine has corralled a number of them — familiar names like Google, Alloy, Wattpad, and NewsCorp’s Amplify and innovators such as Kickstarter, Speakaboos, Paper Lantern Lit, I See Me, and Sourcebooks’s new smash success, Put Me In The Story. If publishing for young people is on your radar, you’ll want to plan for three days with us and start with Launch Kids the day before DBW 2015 begins.

Through the comments section of this blog, I got to know Rick Chapman, who is the self-published author of books on software (and, now, also some fiction.) Chapman’s comments on the blog were so insightful that I recruited him to speak on a panel at DBW (covered in the last post). Yesterday, Rick published this piece challenging the conventional wisdom that Amazon is the indie author’s best friend. He has even started a survey of indie authors to gather data for his DBW appearance. Whatever position one takes on Amazon, Chapman’s post is thought-provoking and entertaining. If you read this, you’re likely to want to see him when he speaks on a panel at DBW.

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The Digital Book World program this year covers the waterfront of the digital transition for book publishing


(This is a longer-than-usual Shatzkin Files post reviewing the topics and speakers for the 26 breakout sessions at DBW 2015. It serves as a checklist of “things to think about right now” for book publishers living through the experience of digital change. The entire program is here. We decided not to link to each and every speaker.)

The main stage speakers get most of the promotional attention leading up to Digital Book World. That’s just good marketing because there are many important names. Some have written big books (in addition to many other things they’ve done) like Ken Auletta, Seth Godin, and Walter Isaacson. We have a number of CEOs on the main stage as well, including Brian Murray of HarperCollins, who has just been named PW’s “Person of the Year”.

But half of Digital Book World is the six breakout session slots, at which attendees select from several choices. I take some pride in saying that we’re requiring some of the toughest decisions our attendees will have to make in 2015 very early in the year when they decide for each slot which session to attend and which ones they have to skip.

What we tried to do was to schedule things so that our “tracks” — two or more sessions on marketing, data, global, transformation, kids/education, technology, and new business models — are set up to allow people to attend all the sessions in that track. But there is overlap, of course.

“Marketing” is definitely the marquee subject for DBW 2015. We have seven sessions under that heading. On the first day we have a conversation about the skill sets required for marketing today, chaired by my Logical Marketing partner Pete McCarthy and featuring Jeff Dodes of Macmillan, Angela Tribelli of HarperCollins, Rick Joyce of Perseus, and Hannah Harlow of Houghton Mifflin Harcourt. Since two of the panelists are recent imports from outside publishing, presumably hired precisely because they had skill sets that publishing training wouldn’t have produced, this group is bound to help all publishing marketers identify what they need to bring on board.

That will be followed by a session on Smarter Video Marketing, which will be chaired by Intelligent Television founder Peter Kaufman, leading a discussion among video marketers Scott Mebus of Fast Company, Sue Fleming of Simon & Schuster,  Heidi Vincent of National Geographic Books, and John Clinton of Penguin Random House. In a world where authors are making their own videos and YouTube is the second leading search engine, this is a topic that suddenly needs to be on everybody’s radar.

The third marketing track session on Day One is on mobile marketing. Since tracking data is now showing that people now do more searching on mobile devices than on PCs, making sure books are optimized for mobile discovery has rapidly become essential. Thad McIlroy, a consultant with a long history in publishing, did a report on mobile for Digital Book World and will present some of his findings to kick off the session. Then he will lead a discussion including Nathan Maharaj of Kobo, Kristin Fassler of Penguin Random House, and CJ Alvarado of Snippet, a reading app that has been specializing in creating mobile reading experiences for branded authors/musicians /personalities, to detail how publishers and retailers are responding to this new reality.

Also related to marketing and also running on Monday, we’ve set up a break-out session for Joe Pulizzi, head of the Content Marketing Institute, who will have done a presentation on the main stage. Content marketing is something publishers need to learn from. Certainly all the techniques that are employed by non-publishers to market themselves with content created for a marketing purpose should be employed by publishers who have tons of content available for marketing. Pulizzi knows all the tricks and will have talked about many of them from the main stage. The breakout session will give attendees that want to learn more, and ask questions, an opportunity to do that.

The marketing track continues on DBW’s second day. One session, being moderated by my Idea Logical colleague, Jess Johns, will examine case studies of successful marketing campaigns. We’re featuring representatives from two of the platforms publishers can work with for marketing: Ashleigh Gardner of content platform Wattpad and Alex White from marketing data aggregator Next Big Book. They’ll each be joined by a publisher who has worked with them (about to be announced). Wattpad and Next Big Book, along with their publisher partner, will walk through what they’ve done in marketing that would have been impossible to imagine a couple of years ago.

Also on Day 2, we’ll be examining the new world of digital paid media. This has been a big challenge for publishers. Digital media is apparently cheap; you can do marketing that matters for hundreds of dollars in “media” cost, it doesn’t require thousands. But there’s also a lot of work and management involved to using digital media right. We were glad to get digital marketers from three leading publishers, Alyson Forbes from Hachette, Caitlin Friedman from Scholastic and Christine Hung from Penguin Random House as well as Tom Thompson from Verso Advertising. This session will be moderated by Heather Myers of Spark No. 9.

A marketing topic that has become top-of-mind for many publishing marketers is “price promotion”. A business has been built around it for the ebook business called BookBub, and its founder and CEO Josh Schanker will be on our panel discussing it. He’ll be joined by Matthew Cavnar of Vook, Rachel Chou of Open Road, and Nathan Maharaj of Kobo. We went for three retailers and service providers here because publisher experience with price promotion is still pretty limited, although the ebook pioneers at Open Road are an exception. Laura Hazard Owen of GigaOm will moderate this session.

Our data conversation begins on the main stage on the second morning of DBW with data scientist Hilary Mason, the CEO and Founder of Fast Forward labs. She started looking at Big Data at Bit.ly, the link-shortening and -tracking service. Mason is going to look at data across a content set that is the only one more granular than books: the content on the web. Her presentation will help us all understand how to interpret audiences for very small portions of the available content. Because we expect her presentation, like Pulizzi’s on Day One, to generate lots of questions, we also gave her a breakout session to facilitate questions and further explanations. DBW sponsor LibreDigital, which has a new offering to help their client publishers turn data into business intelligence, will help Hilary manage the Q&A.

Our panel on “Authors Facing the Industry” will be prefaced by two presentations.. Judith Curr, president and publisher of Simon & Schuster’s Atria Publishing Group, will have done a main stage presentation on the choice “self-publish or be published” that authors face. Then the breakout session will begin with a short presentation from Queens College Professor Dana Beth Weinberg of DBW’s annual “author survey”, giving a data-grounded underpinning to the panel discussion that will follow. Bianca D’Arc, an extremely successful writer of paranormal sci-fi and fantasy romance (and a former chemist), will be joined by two non-fiction writers for this conversation. Both David Vinjamuri, a marketing professor, and Rick Chapman, a computer programmer, have marketed their books themselves because they make more money doing it that way to their highly-targeted audiences. The panel will be moderated by Jane Friedman, one of the industry’s thought leaders about self-publishing.

The data we’ve never had before that is just beginning to be appreciated is the subject of our “How People Read” panel. It has become obvious that the platform owners know more about how consumers “behave in the wild” around reading than publishers do. Multiple device use, response to free samples, whether people read more than one book at a time, and how fast they read various books are all clear to those who serve up the ebooks, as well as differences in behavior that are geographically based, including uptake of English-language ebook reading. In a panel which will be moderated by Chris Kennealley of Copyright Clearance Center, Micah Bowers of Bluefire, Michael Tamblyn of Kobo, Jared Friedman of Scribd, and David Burleigh of Overdrive will share data insights their companies have gained by seeing many consumers of many genres in many contexts. Evan Schnittman, who had senior executive positions with Oxford and Bloomsbury and most recently with Hachette, will be moderating.

Of course, that last session is not just about “data”, it is also about “global”, which is another track at DBW 2015 with two sessions on Day Two.

The first of these, moderated by BISG Executive Director Len Vlahos, is on “Global Publishing Tactics”, designed to help publishers know what to do to sell outside their home territory. Speakers from three companies that provide global ebook distribution — Gareth Cuddy of ePub Direct, Marcus Woodburn of Ingram, and Amanda Edmonds of Google — will talk about what it takes to make your ebooks discoverable and get them purchased outside your home market. All of these entities distribute to just about every market in the world on behalf of a wide variety of publishers large and small. They see what works in metadata, pricing, and marketing, and they know what doesn’t. They are in a unique position to help publishers hoping to expand their global sales know what it will take to do that.

Our other dedicated global track session is the “Global Market Spotlight”, which will help our US- and English-centric audience understand the opportunities in four of the biggest emerging digital markets. It will feature local experts Carlo Carrenho from Brazil, Thomas Minkus of the Frankfurt Book Fair speaking about Germany, Marcello Vena from Italy, and Simon Dunlop of Bookmate, the ebook subscription service from Russia. Following a general introduction about how to look at new markets from Gareth Cuddy of ePub Direct, each of them will talk about how both online and ebooks are taking hold in their market, what local competitors are doing (and there is a very interesting ebook competitor coming from Germany), and what the prospects are for English-language sales in their market. This session will give very directed advice to publishers trying to get sales in four of the most promising new digital territories in the world.

Education is a subject on the agenda for trade publishers because how their books will get to students is undergoing dramatic change they’ll need to understand.

College textbook publishing has been remade in the past decade. In a panel moderated by veteran industry executive Joe Esposito, we will have the four giants of college textbook publishing talk about what that has meant in each of their shops. Simon Allen of Macmillan, Ken Brooks of McGraw-Hill, Clancy Marshall of Pearson, and Paul Labay of Wiley will discuss how their businesses have changed over the past few years, and why. Each of the biggest college publishers has changed their organizational structure, their workflows, and even their products themselves in the past decade, sometimes responding to and sometimes anticipating the changes taking place in the market. All of them have essentially switched from selling textbooks to selling learning platforms. Publishers that sell content into the college market will want to understand the new platforms these players have created and how outside content will now make its way to this market.

The school market is also undergoing extreme change. Partly spurred by the new Common Core standards but also by the fact that digital devices are increasingly integrated into the lives of today’s youth, the classroom experience is being changed dramatically. Neal Goff, who has had senior executive positions in several companies, most recently My Weekly Reader, and who is currently consulting with Highlights, will moderate the discussion about the changing K-12 environment. Three companies with very different perspectives on the market will participate. Chris Palma of Google will describe the operating system that works on the district, building, and classroom level that Google is making available free to school systems, achieving remarkable penetration very quickly. Of course, Google also provides hardware (Chromebooks) and content (through Google Play). Neil Jaffe is the CEO of Booksource, which has been providing print and digital content to schools for many years and sees a continuing need to provide both in the future. And Erica Lazzaro speaks for Overdrive, the company that has dominated the ebook library lending business and is making its way in the school market through its penetration of school libraries. They each have a unique view of how this market is changing. Publishers who sell books read by K-12 students will find this session invaluable.

It is becoming increasingly understood that “gamification” is a way to engage a lot of people who might choose non-reading content, particularly potential readers among the young. Our panel on this subject includes two publishers that are using gamifying to create more engaged “readers”. Keith Fretz will speak for Scholastic, which has made this work more than once already, most notably with “39 Clues”. He is being joined by Greg Ferguson of Full Fathom Five, a collaboration created by James Frey among HarperCollins, Fox, and Google’s Niantic Labs. Another way to employ gamification to engage younger readers is being employed by panelist Thomas Leliveld of Blloon, a subscription ebook service that uses “virtual money” both to reward its users and for them to use to pay for what they read. Also on the panel will be Sara Ittelson, Director of Business Development at Knewton, an adaptive learning company that has developed a platform to personalize educational content and which has lots of data showing how students engage with educational content across ages. This session is moderated by publishing attorney Dev Chatillon.

You could call it “education” or you could call it “tech” (another one of our tracks), but either way DBW attendees will learn about some important new propositions on our Publishers Launchpad session on ed-tech. Our Launchpad sessions are moderated by Robin Warner, a tech investor through her role as Managing Director of Dasilva & Phillips. Launchpad seeks to feature companies that many won’t yet have heard about, but we think they should. Johnjoe Farragher, CEO and Founder of Defined Learning has a new approach to mapping skills to curriculum for the K-12 market. Neal Shenoy, CEO of Speakaboos, will explain his subscription platform for digital picture books which is pedagogically designed to promote education. And Jason Singer, CEO of Curriculet, will explain how his company provides a rental model combined with enabling teachers to annotate and structure the student experience. All of these companies effectively become “gatekeepers” for trade content in schools, making their models very important for publishers who want their books delivered to K-12 students to understand.

The other Launchpad session, also moderated by Robin Warner, is more clearly “tech”-centric. Kevin Franco, the CEO of Enthrill, will talk about how his company “makes ebooks physical” by the use of cards with codes, which is now being trialed in Wal-mart in Canada. Peter Hudson of BitLit enables publishers to provide a free or discounted ebook to people who own a print copy and, along the way, has also developed a really nifty technology that will identify the books on anybody’s shelf from a picture (which they call a “shelfie”). Andrew Dorward of BookGenie451, will explain how his company uses semantic search to make books more discoverable. Beni Rachmanov of DBW sponsor iShook, which has a social ebook reading platform for readers, authors, and publishers, will also present at this session.

Following the Launchpad session, we have our techiest session, moderated by my personal “go-to” guy for understanding tech development in book publishing, Bill Kasdorf, Vice-President at Apex Content Solutions. Bill’s panel’s topic is what might be thought of publishing tech’s “magic bullet”: HTML 5, a format that enables the nirvana of “write-once, use-many-ways” content creation. With the need to manage both print and digital formats and with digital now being rendered on what seems like an infinite variety of screens, the need for publishers to make use of this technology has never been greater. The panelists will include Bill McCoy, head of the International Digital Publishing Forum, and publisher practitioners Phil Madans and Dave Cramer of Hachette Book Group USA, Paul Belfanti of Pearson, and Sanders Kleinfeld of O’Reilly.

Because DBW is relentlessly “practical”, we don’t program much that is far from the current commercial mainstream. An exception this year is our “Blue Sky in the eBook World” panel, which will feature three perspectives that are clearly pushing the envelope beyond where we are today. Chris Kubica and Ashley Gordon have been convening a lot of industry thinkers around the invention of a new kind of bookstore, the publishers’ “dream” to compete with Amazon. They’ll be describing what they and their co-brainstormers have come up with. Peter Meyers, until recently at Citia, is author of “Breaking the Page” and the industry’s leading thinker about how straight-text ebooks can be improved. He’ll put forth his thoughts on that. Paul Cameron is the CEO of Booktracks, a company which puts sound tracks to ebooks and has evidence that the music along with the text improves recall and comprehension. All of these propositions are not (yet) commercially employed, but for DBW attendees who might be looking for the big things AFTER the next big thing, this is the session that will talk about those possibilities. This session is moderated by Professor John B. Thompson, author of “Books in the Digital Age” and “Merchants of Culture”.

Although what the educational publishers are doing might also qualify, we have a track dedicated to “transformation” that has three distinct groups of panelists, each demonstrating how radical change can occur in different ways.

The session on “building the trade publisher of the future” focuses on companies that are remaking themselves from what they were before. Carolyn Pittis, now Managing Director of Welman Digital and formerly on the cutting edge of change management with HarperCollins for over two decades, will moderate. We are proud to be the first industry event to host Daniel Houghton, the new CEO of Lonely Planet, a several-decades old travel book publisher, founded as an upstart, and now rethinking its publishing role in a very challenging travel book market. Lucas Wittman is at ReganArts, Judith Regan’s start-up venture which has an entirely different literary character than the art book publisher she’s working within, Phaidon. Andrea Fleck-Nisbet of Workman is in a company that has just reorganized to be better positioned for change. And Sara Domville, President of F+W (owners of Digital Book World), will describe the experience of turning a “book and magazine publisher” into a “content and commerce company” with a diminishing footprint in print and a growing dependence on ecommerce.

We aren’t neglecting publishing start-ups that are really entirely new propositions as well. Lorraine Shanley of Market Partners will moderate a session bringing together a few of them. Liz Pelletier is the publisher of Entangled, a publisher with new economics that rewards the service providers that support authors as partners in the projects they work on. Georgia McBride is the proprietor of Georgia McBride Media Group, a lean publishing start-up that is developing its properties for multiple media, not just books, taking advantage of her background in music and Hollywood. Jason Pinter of Polis Books is a bestselling thriller writer and has worked for a number of publishers (St. Martin’s, RH, Grove Atlantic, Warner Books) before he founded this digital-first genre book publisher with high author royalties (beginning at 40% of net) against advances. And Atria executive Peter Borland heads up an in-house start-up, Keywords Press, which seeks to leverage YouTube fame into bestsellers with the nurturing of an experienced publishing team.

But it isn’t just book publishers and entrepreneurs who are capitalizing on the digital transition. Former DBW.com editor Jeremy Greenfield, now with The Street, will moderate a session of media companies using digital as an opportunity to change their business models. Sometimes ebooks are very important to this effort and sometimes not so much so. The speakers in this session are Mike Perlis, the President of Forbes, Lynda Hammes, the publisher of Foreign Affairs magazine, Jay Lauf, President and Publisher, Quartz (The Atlantic), and Kerry Dyer, Publisher and Chief Advertising Officer of U.S. News & World Report. The tactics being employed by these three media companies to take advantage of their content and their audiences are harbingers of what all non-book media will be thinking about and doing in the years to come. Publishers can find new collaborators in their ranks, or they’ll be facing these entities as new competitors.

The sessions in the track we call “transformation” are also really about “new business models”. But we have two sessions that are more strictly about publishers exploring new business models.

One of these is on “publishers selling direct”, something that made very little sense for any but the nichiest publishers before the digital era. Dominique Raccah, the founder and CEO of Sourcebooks, pointed out to me that I needed that session (she surely was right!) and will appear on it. She’ll be joined by Eve Bridge from F+W Media, Mary Cummings of Diversion, and Chantal Restivo-Alessi of HarperCollins, the biggest of the publishers to aggressively pursue the direct sales option. The panel will be moderated by industry consultant David Wilk.

Publishers are also exploring new business models with their attention to “verticals”, audience-centric marketing that sticks to a topic in ways that might ultimately allow selling things other than books. This is also a big subject for DBW’s owner, F+W Media, and Phil Sexton, who runs their Writer’s Digest community, will speak about it. Mary Ann Naples, SVP and Publisher at Rodale, Adrian Norman, VP Marketing and New Products at Simon & Schuster, and Eric Shanfelt, Senior VP, eMedia, of HarperCollins Christian Publishing, show us that both specialist and general trade publishers are investing in building these enduring audience connections. Ed Nowatka of Publishing Perspectives moderates this conversation.

There are two panels that will be among the best-attended of all, but which don’t fit comfortably under any of the track headings.

Probably the two most-discussed digital change issues in 2014 have been subscriptions for ebooks and Amazon. We’re pleased to have breakout sessions on each that should really shed some new light on topics that have already been the subject of much conversation.

The subscription conversation will be moderated by Ted Hill, who co-authored a White Paper on subscription for Book Industry Study Group early in 2014 which has looked increasingly prescient as the year has gone along. The session will begin with a brief presentation by Jonathan Stolper of Nielsen Bookscan, who will deliver data from Nielsen’s recent research into subscription sales. Hill will be joined by the two biggest players in ebook subscription, Matt Shatz of Oyster and Andrew Weinstein of Scribd, to describe how their companies have fared building this new model in 2014. He will also have two publishers with books in those services, Doug Stambaugh of Simon & Schuster and Steve Zacharius of Kensington, to talk about how it is going from the publishers’ point of view. As a bonus, Zacharius also has real sales experience with Amazon’s new subscription service, Kindle Unlimited. This will be most people’s first opportunity to get a wide-ranging view of how the subscription model is really working in the marketplace for the subscription services and the publishers themselves.

And, finally, we’ll have an Amazon conversation that is extremely timely against the backdrop of a year when contentious relationships between Amazon and their publisher-suppliers became a matter of public record. Our discussion is on the subject “Can Amazon Be Constrained? And Should They Be?” and it is moderated by Ken Auletta of The New Yorker, a journalist with several decades of experience tracking both media and tech. (Auletta will be appearing earlier that day on the main stage.) He will be talking with Barry Lynn, a scholar at the New America Foundation, who has recently proposed that Amazon be investigated for anti-trust; journalist Annie Lowrey of New York Magazine, who has expressed skepticism about whether the anti-trust rubric fits; and Amazon and indie author Barry Eisler, who has been a full-throated supporter of Amazon’s position against the major publishers. No conference has ever presented such a balanced and provocative conversation about Amazon before; we’re proud it is taking place on the DBW stage.

So there’s a lot to choose from at DBW 2015. We probably won’t settle all the questions around where book publishing is going in the future, but we’re certainly providing engaged conversation about the issues that matter most. And remember after you read this: the highest-profile speakers are mostly not mentioned. We’ll talk about them in a later post about what’s taking place on the main stage.

PS: The last Early Bird discount for Digital Book World expires on Monday, December 15. Save money by registering now!

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Penguin Random House does its competitors a favor by walking away from subscription


I sometimes feel like I’m the only guy in town (NYC, but I’d include London too) contemplating out loud how Penguin Random House might use its position as by far the biggest commercial trade publisher to make life a bit more difficult for its competitors, which in the first instance means the Following Four: HarperCollins (which is much bigger than the other three), Simon & Schuster, Hachette, and Macmillan.

What I mean, of course, is that PRH could use its position to either improve its margins in relation to everybody else or to create proprietary distribution. Either way, it would expand its ability to make money on books, fueling further its ability to outbid rivals for attractive properties. That’s why, when I looked at the Amazon agreement with Hachette and Simon & Schuster and the story of those negotiations, I thought first about whether they would tempt PRH to push for a better deal with Amazon than its rivals got.

The two most “obvious” opportunities for them to me, one of which appears to be anything but obvious to the people running PRH, are to build PRH-only general bookstores inside other retailers using VMI (vendor-managed inventory) and to start a PRH-only subscription service. They’ve never commented so I could hear it on my suggestion of the former; they continue to make it abundantly clear that they don’t share my opinion about the latter.

A NY-based executive of PRH told me a year ago that I had the subscription thing all wrong. From PRH’s perspective, it is unwise to offer a service and pricing plan that seems designed to give substantial discounts to your very best customers: those who buy and read many books. This is not a crazy perspective. If PRH sells about half the commercial books, then, on average, they get half the sales from these heavy book readers. Why would they want to help them reduce their book spending?

Last week, Tom Weldon, the CEO of PRH in the UK, issued an emphatic dismissal of the subscription idea. Weldon was speaking with Bookseller editor Philip Jones at the British digital publishing event, Futurebook. And The Bookseller reported it.

Weldon said: “We have two problems with subscription. We are not convinced it is what readers want. ‘Eat everything you can’ isn’t a reader’s mindset. In music or film you might want 10,000 songs or films, but I don’t think you want 10,000 books.”

Weldon also said the company did not “understand the business model”, and who made money. But he acknowledged that subscription could work “in certain markets around the world in emerging economies where access to books and bookshops is extremely limited”.

Nobody has more respect for the intellect and professionalism throughout Penguin Random House than I do, and that certainly includes Tom Weldon, whom I had the opportunity to meet once over a business lunch. But in this case, and assuming (as I do) that Weldon is speaking for his colleagues as well as himself, they seem just about 100 percent wrong. (And, of course, it is obvious that there are people in the home office at Bertelsmann who also don’t agree with him, since they power the German ebook subscription service, Skoobe.)

Weldon is absolutely right that the consumer case for a reading subscription is not as powerful as it is for subscriptions to music or video. Particularly when comparing with music, the point that having access to many thousands of choices all the time is not nearly as valuable for books is totally correct.

But making the leap from that that “it is not what readers want” is a totally unproductive generalization. SOME readers want it, and Oyster, Scribd, and Amazon (as well as 24Symbols, Bookmate, and others) are signing them up. The Oyster and Scribd subscribers will have HarperCollins and Simon & Schuster books to choose from but none from PRH. It won’t take a data scientist to prove that PRH will lose market share among those readers to competitors.

Perhaps Oyster and Scribd will fail. Is PRH essentially predicting that? Is PRH counting on that? Are they assuming that’s what will happen? It would certainly seem from the combination of their non-participation and Weldon’s remarks that they are. (Of course, it is also possible that Harper and S&S also think the subscription services will fail, but they don’t mind getting some revenue for themselves and their authors in the meantime.)

But it is the second objection that is most mystifying. Weldon is saying he doesn’t get the business model, which reinforces the idea that he doesn’t believe in it and expects the big subscription services to fail. But that is not an explanation for why Random House wouldn’t do this themselves. By definition, if a publisher starts a subscription offering for its own books, it is not the same business model as a third party offering it. There is one fewer entity feeding at the same trough. Oyster has to make enough money for themselves and for the publishers and authors whose works they peddle. Random House would only have to make sure their authors were whole, or maybe a little better than whole, and they could keep the rest.

Cutting out the intermediary supply chain, there’s a lot of vig in there for PRH to be able to give consumers a reason to subscribe to a service that provides only PRH books without costing authors a penny.

The joker in the deck, of course, which Oyster and Scribd would only be too glad to point out, is the customer acquisition cost. But even if PRH didn’t want to recruit subscribers for such a service by promoting it on the books themselves — certainly the most efficient and direct way to reach their customers — out of concern for how it would be received by the retailers selling their books, it has all sorts of ways to get the word out about what should be a bargain for many of their readers. Penguin Random House has been building its database for direct customer contact for years. It can reach literally millions of readers virtually free, and in many cases would know the names of their favorite authors which is nice ammo for the subject line of an email to get it opened and read. And it also has millions of page views through author sites, both those PRH controls and those where an author could be recruited to help.

And unlike the other services. PRH wouldn’t have to maintain a whole apparatus to make deals to bring in the content; they’re already doing that! Presuming they could make the right white label deal to manage the subscription service, they wouldn’t really have a “critical mass” issue either. And instead of being on the outside looking in as the extant subscription services sign up readers they could only get access to by putting their books into somebody else’s proprietary platform, they’d be building their own unique distribution that nobody else would have.

And, frankly, a service offering all of Penguin Random House’s books, whether they put in the new ones or not, would deliver a selection at least comparable and perhaps superior to any existing subscription service.

Why they’d simply dismiss this idea is very hard to understand.

Reading tea leaves, I have gotten the impression that PRH is preparing a licensing program to make its content available for use in schools, another very disruptive thing they could do by themselves that could only be effective for their competitors in combination with each other somehow. Maybe my tea leaf reading is wrong; we’ll see if that comes down the pike in the coming months or not. Of course, this kind of subscription licensing is completely different, and they could well believe that the customers do want this and that the business model makes sense.

It has seemed to me for some time that all of the Big Five houses could peddle a subscription service for kids ebooks that would be a reliable generator of cash flow and customer acquisition as well. Many parents would love to be able to let their young kids take the iPad in hand and “buy” books, as long as they weren’t actually spending any money. The big houses all have extensive juvie publishing programs. Each one could offer a subscription service that would keep many kids amused for months. It could be a “totally cool” 6th (or 5th or 8th) birthday present. While it is true that there are others competing for the kids’ market, any of the Big Five could pull something like this together very inexpensively and, over time, build a customer base that would be both proprietary and lucrative.

With the number of ebook subscription services for consumers proliferating, surely the tech to try this out on a smaller scale is getting cheaper and more accessible. In fact, if Weldon is right, and the subscription business model is wrong, then maybe even Oyster or Scribd will want to build a service provision model into their next pivot. And if they succeed, imitators in many ways will follow.

Subscription is here as a tool to sell ebooks that any publisher totally ignores at its peril. And whether it ultimately becomes a significant channel for general trade ebooks or not, it will be tried in many forms and many ebooks will be moved that way in the years to come.

We have a great panel discussion on subscriptions at Digital Book World, Jan 14-15, 2015. It will be moderated by Ted Hill, who co-authored a BISG study on subscriptions earlier in 2014 that is looking increasingly prescient. Ted will have both Oyster and Scribd on the panel along with two publishers providing them with books, Simon & Schuster and Kensington. Kensington, being a non-agency publisher with no choice in the matter, is also a provider to Amazon’s Kindle Unlimited. The discussion will be prefaced by a quick presentation from Nielsen’s Jonathan Stolper around what Bookscan has learned about the reading patterns in subscription services. This should be a very informative discussion.

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Amazon and Hachette have settled so there will be no big bang change in the publishing business model


It looks like Big Publishing will maintain its grip, which the most zealous of the indie author militia refer to as a “cartel”, on major authors and big books for another several years. What looked from the outside (where we all are if we’re not involved in the negotiations) to have been an attempt by Amazon to largely reset the terms of trade between publishers and the world’s dominant book retailer appears to have been postponed for a few years.

We don’t know — or certainly I don’t know — precisely what Amazon wanted from Hachette in the negotiations that became a public spat last Spring. All we know is that whatever they asked for (or demanded) was sufficiently onerous to make Hachette take an enormous amount of pain to resist it. The standoff held for six months.

The standoff wasn’t pain-free for Amazon either, although it certainly didn’t have nearly an equivalent commercial impact. Amazon could have expected when the dispute started that Hachette authors would pressure their publisher to settle. They could also have expected public attention to focus on Amazon “fighting for lower prices”. Neither of these things happened and, in fact, Amazon was demonized for their tactics by some pretty high-profile writers. And, although it was almost certainly unrelated to the impact of the Hachette fight, Amazon themselves had some tough financial reporting to weather during this period.

In any case, there was no way Amazon could use the same set of tactics they used on Hachette with another publisher at the same time, and it would appear they didn’t try. Simon & Schuster and Amazon came to a deal last month which both sides suggest they’re pleased with. When that deal was announced, it seemed likely to me that anything S&S would accept, Hachette probably would too (and would have at any point). With the announcement yesterday that Hachette and Amazon have now come to terms, and with the wording of the deal announcement being so similar (but not precisely the same) to what was said when the S&S deal was announced, it would appear that surmise has been justified.

Where the announcements diverge is that it was suggested that S&S has ceded Amazon some limited rights to “discount” from the publisher-set pricing but that suggestion was absent from the Hachette announcement. The more limited the discounting allowed, of course, the more the new arrangement constitutes “agency as it was intended to be”. But forbidding discounting is a double-edged sword. It “protects” print-in-bookstores from price competition from ebooks, but it also potentially disadvantages those price-protected books in the ebook market against other ebooks.

(Of course, an agency publisher can lower prices themselves, but if they do it that way, they reduce their share and the retailer’s share proportionately. If they “allow” discounting, the retailer does it entirely out of their part of the sale price.)

I would now expect that Macmillan, which is about the same size as Hachette and Simon & Schuster, will be offered and will accept a similar deal and probably so will HarperCollins, although they are more than twice the size of these others. How each of these houses will view “strict” agency versus “looser” agency is an open question.

But Penguin Random House is in a different position. Now that it has been demonstrated that Amazon’s most muscular tactics didn’t bring Hachette to heel, why wouldn’t PRH, which is several times the size of Hachette, look for a contract that gives them some real separation from the rest of the pack either in terms of their margins or to get more aggressive with discounting through publishers’ biggest account? Let’s remember that Random House originally outflanked the others tactically in 2010 by sticking with wholesale when everybody else went to agency, putting their ebooks in a price-advantaged position and scoring millions in extra sales as a result.

The overall direction of the book market continues to tilt toward Amazon. Although the dual shifts to ebooks from print and to purchasing of print online rather than in bookstores have slowed down sharply in the past couple of years, the chances are those trends have not yet run their course. It is not a guarantee that those shifts will continue to grow Amazon’s market share but they certainly favor them. It would seem somewhat more likely that Kindle will suffer some competitive erosion as multi-function devices gain more of the ebook share than the online bookstore will, but the chances are that both will continue to grow their share. And, at the same time, the self-published share of the market will continue to grow, mostly to Amazon’s advantage, and so will the impact of other Amazon initiatives including their lending library and subscription service.

The reset ambitions that might have been somewhat premature in 2014 may be achievable in 2018.

But a lot can happen between now and then. Four years is a long time. Four years ago, Random House was still gaming the agency system and Nook was gaining market share by leaps and bounds. Four years before that, there was really no ebook business at all.

Assuming that Macmillan and HarperCollins make a deal similar to what Hachette and S&S have done, the big publishers have little to fear from their biggest trading partner for the next few years. But how they’ll cope with their biggest competitor, particularly if PRH gains either additional margin or greater flexibility around discounting compared to the others, might move to the top of their list of concerns.

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The support infrastructure for entities to publish is growing but the most important piece may not yet be provided


I remember a song lyric from the early 70s for which the opening line was: “we don’t need more sailors, we need a captain”. (I can’t find the reference in LyricFind and I don’t remember the name of the band.) That song could be about the new publishing that is arising from the phenomenon of “atomization”, books that could come from just about anybody anywhere (that’s the “we”). They are supported by “unbundling”, the availability of just about every service required (those are the “sailors”) in the complex task of publishing books.

This is what we should call “entity self-publishing”, as opposed to “author self-publishing”. The success of indie authors has gotten a lot of ink lately, partly fueled by the Amazon-Hachette dispute which has brought into bold relief that authors can make a living self-publishing — mostly by exploiting the capabilities of Amazon — without a big organization of their own. But entity self-publishing is ultimately far more threatening to the publishing establishment trying to make a profit because it could, in time, bring a lot more content into the marketplace with a lot more marketing muscle behind it than individual authors will. And sometimes the motivations of those content providers won’t include the need for profit.

(It also can be seen to offer opportunity to the establishment, to the extent that they find it productive to craft their own service-offering on-ramps to be flexible partners for entities.)

Companies abound that offer the core services that support publishing. Big organizations like Ingram and Perseus are mainstream providers and deliver the full suite of capabilities, including putting printed books onto store shelves. (In fact, if you’re big enough, you can get a Big Five publisher to do this for you.) Digital distributors like Vook, INscribe, and ePubDirect can turn a file into ebooks and put them into distribution around the world. Lulu and Blurb will also deliver printed books for you. The subscription services like Scribd and Oyster (not to mention Amazon, Ingram, Overdrive, and the other ebook retailers) will give you distribution. And, both as part of those larger offerings and as stand-alone services like BiblioCrunch, it is increasingly easy for an author (or self-publishing entity) to find editors, cover designers, marketers and web site creators, and just about any other specific skill set that is required to publish a book successfully. In fact, publishers themselves have relied for years on freelancers for many of those functions.

But entities have challenges that individual authors don’t.

An individual author knows what is to be published: what they write. And because most authors are most comfortable in a particular genre, they don’t have to worry much about consistency as they build an audience. They are inherently consistent. (Authors who want to span genres or write outside what they’re best known for have a tougher row to hoe to make themselves commercially successful as self-publishers.)

Of course, they have plenty of challenges outside their writing skill set: editing, cover design, even pricing and marketing. And those challenges are enough to make many authors prefer to have a publisher who will take care of them, even if they would otherwise be willing to give up the marketing and distribution clout of a professional publishing house. There are big per-copy-sold margin advantages to doing it yourself as well as being set free from the constraints and delays that come with working with a larger organization. There are still plenty of “how” questions, but there are very few “what” questions.

But when an entity commits to self-publishing, even one like a newspaper or a magazine that knows how to create the intellectual property, they suddenly need decision-making they’re not equipped to do, and it begins with “what” to publish.

They need a publisher. In the metaphor of the song lyric, they need a “captain”.

The position of “publisher” exists within the magazine and newspaper worlds as well, but it means something subtly different than it does in books. In either case, the publisher governs the whole enterprise, not just the editorial decisions. Because the revenue for magazines and newspapers comes primarily from advertisers, the publisher’s time, bandwidth, and focus are directed there. The publisher certainly has responsibility for things like marketing and distribution, but those tend not to require a great deal of issue-by-issue attention.

But the nature of book publishing is that each book is its own separate marketing challenge as well as an editorial one, and the two are interrelated. If the right book for a market should cost $15, you make a different book than if the right book would be $30, or $8. If the book is ready for publication in September but the right time to bring that book to the market is February, it’s a publisher who decides to hold it back.

And if there are 20 or 30 or 100 books an entity could do, it is a publisher who decides whether to do five a month or five a season, which ones to do first, and which ones should always come out in June.

In a post over a year ago, I cited the example of what publisher Bruce Harris did for Microsoft founder Nathan Myhrvold’s audacious (and successful) $625 cookbook. Myhrvold had the concept and the intellectual property and the business acumen to make key decisions. But it took Bruce, or somebody with his considerable experience and publishing sophistication, to orchestrate the inputs from marketers and publicity experts, coordinate it to the realities of the publishing calendar, and provide the direction to make best use of Ingram’s industrial-strength services.

This kind of expertise is even more important to structure lists within an ongoing publishing program.

Vook has certainly experienced some of that. Their new website announces them as “author-centric” (and they’ll move more and more in that direction), but they have totally cottoned to the idea that entities are a big part of the self-publishing future. They’ve provided critical infrastructure services to enable ebook publishing for The New York Times, Forbes, Thought Catalog, Fast Company, U.S. News & World Report, Frederator Studios, and The Associated Press.

Providing business intelligence has been a crucial part of Vook’s strategy for working with entities. Matt Cavnar of Vook told me:

“We’re tracking data on over 4 million books — print and digital — and we use that information to generate pricing recommendations to maximize revenue for the books our partners publish, to then adjust the books within the marketplaces, and to find specific categories where they will more be likely to rank on bestseller lists. We also coordinate the standard digital marketing and merchandising with the retailers. Thus, we’re acting as the infrastructure and data backend platform for these partners to be as successful as possible — allowing them to focus more on the creative and developmental side of their publishing program.”

But, of course, that data needs to be acted upon by a publisher at the other end. Vook’s client list is heavy with media organizations that can provide some version of that title-by-title, list-by-list decision-maker to make use of Vook’s tools. Because Vook  thinks hard about offering services to authors, Cavnar knows what it is like having focused direction and acknowledges the point.

“That’s right. That coordinated/creative decision maker on the partner side plays the role of the author in a sense.”

The news arrived over the weekend that Blurb, the publishing services company that grew out of an initial print-on-demand offering, had hired veteran publishers Molly Barton and Richard Nash to help them build a network of support services that they will, presumably, operate as a stand-alone business and as an on-ramp to their core business. Blurb has seen this coming for a while and the move made made sense: two publishers with vast experience know how to find and vet all the service offerings for every component of what it takes to publish a book successfully.

But I suspect that for most of the newbies who find editors and cover artists and book marketers in the network Barton and Nash will help Blurb deliver (and, one wonders, how much overlap and qualitative distinction there will be with what BiblioCrunch and a Google search would offer), it would be Barton and Nash themselves, and people like them and Bruce Harris and other veterans with experience with many books and many lists, who would be the most valuable service providers. The most ambitious of the new entrants to book publishing, coming to it to build on knowledge and a reputation established in some other ecosystem (even one that is “media”), would be wise to see that, like all the other tasks, the orchestration of a publishing program is best done by somebody with experience. And the person providing it doesn’t necessarily have to be on staff.

*********

And another, not unrelated thought.

In the world outside book publishing, a lot of content is being generated for “content marketing”. It has been part of my job in programming Digital Book World to understand how the world of content marketing and the world of book publishing connect.

The way a publisher instinctively wants to think about it is “if people are getting paid for content, can I sell some?” Of the three possible interactions with the world of content marketing, that’s likely to be the least productive one. The content marketing world is all about creating precisely the right content for a brand’s marketing needs. It’s not a particularly efficient approach to search the world of existing content for that, then have to license it and live with the licensing restrictions, and almost certainly have to modify it for marketing use. So, with some limited exceptions, scratch that.

Another potential interaction might be around distributing what is or starts out as marketing content as ebooks. I first made this suggestion to a law firm that had created a white paper on Trademark Law. Why not publish it as an ebook, I said? They said, why bother? I thought, don’t you want to show it to people who search Amazon for “trademark law”?

But when I talked to Joe Pulizzi, the head of the Content Marketing Institute, about ebooks, he said “well, sure, they might make sense in some cases, but there are so many other things that are more important to a marketer.” He’s talking about blogs and Pinterest and YouTube and the wide world of web and apps where content can be made to show up for the people who would be most interested in it exactly when they need it. In other words, “I see your point, but frankly, we usually have much bigger fish to fry.”

And that points to what publishers most have to gain from the business of content marketing. Publishers have tons of content, but they are far from having figured out every best way to use that content for marketing. That’s an adjacent science for us, not one in our experiential wheelhouse. That’s why we have Pulizzi speaking on precisely that subject — using content to build an audience and how to apply all those things that work better than ebooks — from the main stage at Digital Book World. We even gave him a breakout session to follow because there are going to be tons of questions from publishers (and their marketers) who will want to put these capabilities in their arsenal.

Many of the companies mentioned in this post are speaking at Digital Book World, Jan 14-15, 2015. Blurb and ePubDirect are sponsors who will also be on the program. Speakers from ForbesIngram, OverdriveOysterPenguin Random House, PerseusScribdUS News & World Report, and Vook are on panels. From the main stage, we will hear a presentation from James Robinson, who does web analytics in the newsroom at The New York Times, and Michael Cader and I will have a conversation with Russ Grandinetti of Amazon.

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What we are learning about making digital marketing accessible to a bigger group of publishers


Every conversation I have with a publisher about digital marketing sitting with Peter McCarthy is an education for me and for them. The dialogues are peeling away layers of an endless onion, working through levels of understanding of what it takes to have truly discoverable content, surfaced to the right people in response to the right queries in whatever venue they search today. (But, as we keep learning, the “best practices” at any particular time are likely to change.)

Of course, we’re learning too. The challenge in “scaling” Pete’s knowledge is to get people in our industry, with their uniquely complex stakeholders and requirements, to be able to buy the services they need him to direct without taking a lot of his very precious time. (If you take his time, we can’t be economical, which we’re trying hard to be.) Our approach is to “productize” our offerings but, of course, our clients and potential clients each have very specific needs by their own lights. The challenge we almost always face is not “whether we can” but “how we can” deliver what they want in a way that works for us and for them. And we keep finding new ways to morph each product idea into another and then another to address those needs. The evolution of our thinking and our business probably provides useful clues for anybody trying to tackle the beast that is digital marketing of books in an evolving marketplace.

Although it is not simple to harness Pete’s knowledge, it would be absolutely impossible to replicate it. He’s read (and understands and remembers) every patent Google has ever filed about search. (Don’t try to start gathering that knowledge now; Pete started it in the 1990s.) He works with a huge number of listening and analytical tools. Some have obvious uses such as analytical and “SEO” tools, but some require a more interpretative approach to apply them to create better marketing. They numbered 140 when we last counted, but he seems to discover a new one or two just about every day. So far, I haven’t met anybody else in publishing who claims knowledge of a fraction of that number. Pete’s knowledge of Amazon’s algorithms and behavior similarly outstrips everybody else’s, understandings partly gained through a capability he had at Random House that nobody else we’ve met has ever had: an unlimited number of affiliate codes that allowed him to track conversion across a wide range of A/B tests and other variables.

(It should be noted that the unlimited number of affililate codes came about through serendipity, not any official negotiations or favoritism. It was not a formal “policy” move on either side.)

Knowing how the clicks you send Amazon convert is beyond very important. As an example of what this can reveal, Amazon loves it if you send them clicks that convert. When they see that happening, they help you. They don’t like it if you send clicks that do not convert and when they see that, they (metaphorically) throw sand in your gears or, at least, don’t put the wind in your sales. The many winds they can make blow happen at what for Pete are predictable kick-points. We don’t have an unlimited number of affiliate codes at Logical Marketing, but we do know that if we’re sending clicks that convert we’ll see Amazon buy keywords to get more of the traffic. If they don’t do that, the clicks aren’t converting and we stop sending them. We have other ways as well to see when the winds are blowing.

How many of our clients know that? We haven’t met one yet that did. That means that virtually every publisher is sometimes paying for clicks that are actually harming their sales. And they don’t even know when that’s happening. And I’d add that Pete himself doesn’t believe this is among the most profound insights he has about optimizing Amazon sales.

We do our work across three loci of interest: titles, authors, and brands. Authors are brands, but so are publishers (B2B, B2C, or both), imprints, and series and, in rarer cases, fictional characters. We can do a quick and cursory look at a title or author, or a deeper and more comprehensive one. For authors and brands, we can do a “360 audit”, which delivers a voluminous (80-100 page) deck, rich with data about how the author reaches their core and potential audiences. They tell you everything from how they sort on dozens and dozens of high-value search terms; their engagement in social media; the precise and thorough characteristics of their followers and, if they have them, “subscribers”; advice about how to optimize their owned web presences in terms of content, architecture and technology; and very specific recommendations to improve their discoverability and their sales.

We will also aim our analyses at any specific questions or concerns a client may have. For example, “how might we break this author in the UK market” or “can we reach and convert women into fans” are questions we can address. We answer based on what the data tells us and provide the degree of granularity and technology/publishing knowledge to act.

For a franchise author, or an author on which a publisher will spend substantially promoting their next book, these reports — costly though they may be ($5,000 and up) — are invaluable tools. They even tell you what days and times to tweet and which cities to choose for heavy print laydowns and tour activity. We’ve had several occasions where these reports confirmed hunches based on experience or a house’s analysis but there are almost always nice surprises too. Those are not always fun to hear when they upset previous plans but they will result in more efficient sales reach if they’re acted upon.

But sometimes an author or agent might be after information or analysis that is easier (and cheaper) to deliver because it is very targeted. One agent friend said to me, “I don’t care about the title descriptions. Doing those right is the publisher’s job and they wouldn’t listen to me if I wrote a better one anyway. But I want my authors to be list-gathering machines. Can you show us how to do that?”

A targeted ask of this kind is much simpler than a 360 audit. We save time and effort when we’re looking for very specific actionable data and then confining our report to just that. We analyzed three of that agency’s top authors, with recommendations about how to improve their web sites for email list optimization, each for much less than half of a full 360.

As we’ve noted before, management of author web presences is a weak spot in author-publisher relations. We just did 360 audits for three different imprints of a major house. In two cases, the authors in question controlled their sites and the suggestions for improvement devolved into discussions of how to persuade the close friend or relative of the author who maintained the presence to make changes. (Having the authority of our very well-designed and thorough report would help, of course.)

In the third case, the house controlled the site. It turned out to be very important that they did. One thing we found in the audit was that this well-known author wasn’t appearing for searches of “best thrillers set in London”. We could see that he very likely could, easily and within short order, rank high for that. We saw that with great likelihood; it wasn’t a guess. With a host of books that fit that description and rankings of 4.5 stars on Amazon and Goodreads, all it would take is a properly set-up landing page to make the author rank highly for the term, and the rank would be deserved in the eyes of Google and humans and likely to be self-perpetuating. That search is not only frequently employed, it would bring in likely customers who might well not yet know the author. It is roughly analogous to an evergreen end-cap with face-out display in just the right aisle for a book they will love by an author whom they probably have not read as yet, and one who happens to have plenty of books.

And setting up an optimized landing page is easy to do.

All you need to do is know that the term is important and that the author isn’t sorting for it and probably can. But only using the methodologies developed and employed by Pete would assure you’d find that out.

Google’s recently reported de-emphasis of Google Plus has led to widespread misunderstanding about Google Plus, but more importantly here, about author websites. One agent friend recently asked whether they just weren’t necessary anymore and if authors could just focus on social media. That’s a dangerous misunderstanding. An author’s website along with an author’s Google Plus account enables Google to understand who an author is and what is important about them. Author websites are as important as they ever were, as is an author’s Google Plus profile. (And it isn’t just about Google. An author’s Amazon author page is critical for their success as well.) Any real-estate in the social landscape is rented, not owned and the leases change all the time.

The wisdom of our agent friend about the publisher’s responsibility to write the descriptive copy has also been reflected in the evolution of our thinking. We have been selling SEO-optimized copy as the key deliverable for our “foundational title audit”. The process to get to it involves research to find the right keywords, phrases, and topics to include in the copy and training our own staff in Pete’s techniques to employ those in the copy itself. We’re optimizing for multiple environments, primarily Google and Amazon, which complicates the task, but we’ve been able to train previously uninitiated people to do this effectively and fairly quickly.

But we’ve seen that most publishers don’t believe that anybody else’s copy is as good as what they’d produce in-house. They’d far rather have us give them the keywords and write the copy themselves. That’s easier for us, and we can do it for less money, but then that requires us to train their team on how to use the keywords, phrases, and topics in the copy.

All that has led us to the latest addition to our offerings. When we started exploring this business nearly a year ago and launched it in the Spring, one Very Smart Publisher said “would you please just teach us how to do it ourselves?” I resisted that idea, partly because of the impossible challenge of replicating Pete’s knowledge and how he uses it in a training course of any length. But as time’s gone by, we realized that we did train our own staff. And Pete did a lot of marketer training at Random House. We have come around to the point of view that training people to do some things actually makes them appreciate even more the things we do that we can’t easily train. It also empowers them to innovate in ways we might not see or to provide feedback to us on what we might offer that we’ve yet to identify.

So we’ve now formulated seven specific training programs. We offer three-hour courses (if delivered in-house, or three 1-hour webinars if remote) called “Audience-centric Marketing 101″, “Author Optimization 101″, and “Advanced Optimization” (with the last one only open to those who have taken the first one). And we have four 1-1/2 hour programs as well: “Social Media for Publishers, Agents, and Authors”, “Supercharge Your Author Website”, “12 Tools for Marketing Success”, and “The 30 Chrome Extensions You Need Now”. The “Marketing 101″ course would cover both the keyword research and the instructions on how to place them in the copy.

As a result of Frankfurt, we’re now taking our talents and capabilities to other countries to work in languages other than English. We’re about to start our first assignment for an Italian publisher and we have a big project pending that would take place in German. In both cases, we’re getting help from our clients to make sure that what we find and do in Google Translate and other linguistic processing tools doesn’t have gaps we can’t see and to understand what we have to do to make it totally effective.

The digital marketing business is a global business as is all publishing these days and digital marketing, and the running of a digital marketing agency, is a process, not an event.

At Digital Book World next January 14-15, Pete McCarthy is moderating a panel on “Marketing Skill Sets Required in 2015″ with a star panel consisting of Angela Tribelli of HarperCollins, Hannah Harlow of Houghton Mifflin Harcourt, Jeff Dodes of Macmillan, and Rick Joyce of Perseus. There is a host of other marketing programming on the agenda. 

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Print book retailing economics and ebook retailing economics have almost nothing in common


There has been a lot of conversation lately about the differences between wholesale pricing and agency pricing for ebooks and about what constitutes a “fair” division of revenue between publishers and retailers. Since the economics of bookstores have been generally misunderstood for years, it is not surprising that the understanding of what changes make sense as we switch to digital have also been misunderstood. A better grounding in the print book economic realities might enable a more informed discussion of what makes sense for digital.

Here are a couple of points about book economics that I learned at my Daddy’s knee.

1. The investment in inventory is the single biggest capital requirement for a bookstore.

2. Given that the ability to invest in inventory is limited, the speed at which inventory “turns” (a measurement of how long a retailer has to hold stock before it sells) is a much more powerful determinant of a store’s total gross margin, and therefore its profit, than the margin it earns on each sale (the difference between what it pays for the inventory and what it is sold for).

In simple shorthand, that means that a retail store selling books can improve its profit more easily by more closely matching what it buys to what it sells than it can by squeezing more margin out of its suppliers. It also means that a publisher can do more for a store’s profitability by shipping quickly and allowing smaller orders at workable discounts (which make it easier to match supply to demand) and offering delayed billing than it can by offering extra points of discount (which is what added margin is called in the book business). The additional benefit of employing this understanding is that margin division is a zero-sum game, but increased inventory efficiency is actually synergistic: both the publisher and the retailer benefit from it.

This reality about bookstore economics explains the value to the supply chain of wholesalers like Ingram and Baker & Taylor. By offering the ability to combine orders across publishers and giving rapid, often next-day, delivery, the wholesalers enable stores to gain much more inventory efficiency at a relatively trivial reduction in margin. (Where the publishers’ “deal” is sometimes better than the wholesalers’ in a meaningful way is that publishers will often allow a longer period before demanding payment. Inventory “investment” only really begins when the books the store received are paid for.)

So, in fact, there is very little similarity between the economics of retailing print and retailing ebooks. The tech infrastructure for selling is not a trivial investment, and DRM — including customer service — is a significant expense that ebook retailers deal with that bookstores do not. The print retailer has to build a customer-friendly location and invest in (presumably knowledgeable) clerks. How those costs of doing business compare is a complicated question that changes over time as the tech gets cheaper and the cost of physical locations — driven by ever-higher real estate values in the attractive neighborhoods where bookstores tend to thrive — goes up.

But the things that change aren’t nearly as important as the things that don’t.

The stock turn of an ebook retailer is infinity. There is zero inventory investment.

Publishers first had to deal with the question of what the bookstore’s margin should be on ebooks back in the late 1990s when Palm Digital and Microsoft created the first reflowable ebook platforms. Prior to that we had PDFs, which delivered — in the current jargon — “fixed page layout” ebooks which didn’t adjust the number of words per screen to the screen size. At that time, the ebook retailers were inclined to sell at publishers’ “list prices” and publishers tended to price ebooks at about the same level as print.

But nobody paid a lot of attention because the sales and revenue were de minimus. Since Palm had the most hand-held digital assistants (Palm Pilots) in circulation back at the turn of the century and because (as we have clearly learned since) portability is one of the big drivers of ereading, Palm’s ebooks were the best-selling format. But Palm decided not to enable widespread distribution of their ebook format; they sold the ebooks themselves through a controlled vendor (originally called Peanut Press and then Palm Digital).

In fact, the mobi format that Kindle uses today was developed at the time as a bridging format, able to be read on both Microsoft and Palm devices. This was before the creation of the epub format used by everybody except Kindle today. When Amazon bought Mobi, it was apparently to prevent any other retailer from building a real ebook business selling to what was then the “entire” ebook market. B&N’s one-time exit from ebooks was because they could sell only to Microsoft and not to Palm devices, which meant they had the smaller piece of what was a very small market. Amazon apparently figured then that they’d enter the market when they were ready, but they wanted to prevent B&N from building a foothold in it before then.

I’d argue that the biggest mistake B&N made in the history of ebook evolution was not buying Mobi before Amazon did.

So it became “established” that ebooks would be sold on a similar basis to print books with discounts of 40 percent or 50 percent off publisher-set retail. It should have been no surprise to anybody that once “real” retailers — not software companies like Microsoft and Palm — took the reins, they’d give away a lot of that margin to go after market share. That’s what real retailers do; it’s in their DNA.

In fact, the first wave of discounting of print in the 1980s by the Crown Bookstores chain followed very quickly behind increases in publishers’ discounts to stores from the low 40s to 46 percent and up. Most people never noticed that; others think there’s no connection. It always seemed to me that the increased publisher discounts and the discounting to consumers were linked.

In the early days of ebooks, the volumes were so low and the tech was still under development, so the significant margin the publishers offered — and the retailers employed — might have been necessary to have any ebook retailing at all. As time passes, the fixed retailing costs get lower and the customer service costs also tend to get lower.

Once a real retailer, Amazon, got into the ebook business, deep discounts off publisher prices had to follow, and they did. The move to agency pricing had purposes beyond the principal one, which was to remove pricing as a weapon from the retail competition arsenal. It also put publishers on a path to set realistic retail prices for consumers and to reduce the notional share given to the sales intermediary from around 50 percent to 30 percent.

There’s reason to believe that even 30 percent is too high, given the plunging cost structure for retail and the economic reality of infinite turn on inventory investment. A senior Random House executive told me during the period they were not in agency (the first year it existed) that part of the reason they stayed out is that the 30 percent figure Apple wanted and the other publishers agreed to seemed “too high”. As it turned out, Random House came in a year later and accepted the 30 percent. They said at the time it was because indie bookstores were attracted to ebook retailing by the assured 30 percent margin and fixed retail prices, and Random House always wants to support independent retailers.

It was always curious to me that the preference of all the other retailers except those who can use the book business as a loss leader — Amazon, for sure, and perhaps Google —  for publisher-set retail prices never made its way into the discussion of the publisher motivation at the time, nor to Judge Cote’s reasoning, nor to the arguments which have taken place about it since.

Ebook pricing today is very confused. Apparently, many of the retailers will accept wholesale terms at a lot less than 50 percent, although this is not widely known and, indeed, isn’t even really confirmable. Discounts of print to bookstores were published, standard terms. That’s not the case with ebooks (because they’re not really sales, they’re licenses, no matter what anybody says, and they are individually negotiated contracts, the terms of which are kept private). Nobody outside Amazon really knows what margin Amazon actually takes from ebook sales; it is certainly true that most of the ebooks are discounted from whatever prices publishers “suggest”. (And sometimes those publisher-set prices may be inflated, particularly if the publisher is selling at a bookstore-like 50 percent discount.) Perhaps they only really take the 30 percent that they get from agency publishers and that they take from individual authors in KDP and that they have said in their arguments with Hachette is the “right” share for a retailer.

We actually still don’t know what the “right” or “fair” margin is for retailers of ebooks. Random House had some idea of that in 2010 when they were holding out and they seemed to think “less than 30 percent”. Comparing ebook retailing economics to print book retailing economics only tells us that physical retailers of print need a lot more to have a viable business. Dad also taught me is that the reason publishers give stores a discount off the publishers’ retail price — which should be the price a publisher would sell the book at if a member of the public came directly to them — is to give stores the margin they need to operate. Because publishers want there to be stores. First purposes may have been forgotten in course of the digital transition.

There is programming relevant to this post at Digital Book World 2015 in addition to the main-stage appearance of Amazon’s Russ Grandinetti main-with Michael Cader and me. We have a great panel discussion on “price promotion” with Josh Schanker of BookBub, Rachel Chou of Open Road, and Matt Cavner of Vook. And “Blue Sky in the Ebook World” where a panel of visionaries will talk about what is over the horizon for ebook retailing, rethinking simple ebooks, making complex ebooks, and creating ebooks with soundtracks. Jonathan Nowell of Nielsen Book’s talk about how the profile of what sells in print has changed will enlighten around this topic as well.

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Export sales is one of the few areas of predictable growth for book publishers


For a client meeting last week, I was shown a chart that came from Bookstats of channel revenue for publishers. Bookstats is the recent (and now no longer) partnership between the AAP and BISG collecting book publisher shipment information. It has four years of data, which were arrayed in a neat bar chart.

Since the chart showed publisher shipments, it was an imprecise gauge of sales. The third largest channel was “jobbers/wholesalers”, and those books went somewhere else (if they got re-sold and not returned), but we don’t know where. Basically all the other channels got those books eventually.

But it is noteworthy that of the eight channels enumerated (one of which is “other”), only two showed increased sales from 2010 to 2013: online retail and export sales.

Indeed, export sales are one of the real growth opportunities for publishers, and particularly English-language publishers, in the future.

The reasons for this aren’t hard to understand. English is the most important second language in most countries that are not English-speaking. And, obviously, ebooks create no-inventory and little-friction distribution opportunities that make it easy for a publisher in New York or London (or Sydney or Toronto) to deliver to a customer separated by any distance or number of oceans.

In addition, the search engines are global so “discovery” can take place anywhere as well which can increase the demand for printed books as well as digital ones, even though the printed books present a more complex delivery challenge.

The opportunity brings along its challenges. One is that rights conventions need to change. Publishers often have their rights to distribute in some parts of the globe limited by contract. But even when rights aren’t an issue, marketing — including both customizing the metadata and the pricing to a very large number of local territories — can be.

This opportunity has grown rather recently at the same time that many publishers have been preoccupied with overcoming obstacles in their home markets. Both the US and UK markets have been roiled by the relatively sudden emergence of a strong ebook market and the concurrent (and related) weakening of the brick-and-mortar infrastructure for print. Publishers have been scurrying to change many of their practices: licensing differently, learning to do SEO well and employing other digital marketing techniques, shifting their internal structures and workflows, and grappling with the opportunities presented by social media. Many have expended effort on apps and enhanced ebooks which were time and money traps in markets that briefly looked promising but then didn’t pan out.

But in a more settled marketplace, which we have now (perhaps temporarily), the opportunities for growing revenue through export sales is going to get increasing attention from all publishers, who will be happy to know that entrepreneurial companies — some new but some quite established and familiar — have been building out the capabilities to help them.

There are three panels at Digital Book World that will really inform publishers that want to work harder to exploit this opportunity.

The mostly obviously relevant one is called “Global Publishing Tactics: understanding distribution, metadata, pricing, and marketing to maximize sales in different markets”. Two of the panelists are Marcus Woodburn of Ingram and Gareth Cuddy of ePub Direct — we have other conversations pending — and moderated by Len Vlahos, the executive director of Book Industry Study Group. Marcus and Gareth and the panelist(s) who will join them have experience selling around the world on behalf of many publishers. Their insight and advice will be gold for publishers looking to expand their export sales.

We also have a panel discussion “Global Market Spotlights: reports from markets around the world”. The four markets we’ll discuss are Germany, Italy, Brazil, and Russia. The panel will be moderated by Thomas Minkus of Frankfurt Book Fair. Our panelists — all of whom are local players — will talk about the switch to digital reading and online sales in those markets, but will also give specific insight into the market for English-language books.

Another discussion which is a bit more tangential, but will still be informative for publishers trying to grow ebook exports, is one on “How People Read”. What we’re trying to get at here is to use the knowledge that ebook platform providers have about the granular detail of reading consumption: about devices, how far people go in various kinds of books, whether they read more than one book at a time, and how they respond to pricing changes. All of our panelists — Micah Bowers of Bluefire, Michael Tamblyn of Kobo, David Burleigh of Overdrive, and Andrew Weinstein of Scribd — are superintending global platforms. Another aspect of what they’ll reveal is how these consumption patterns vary across markets, including how much English is read in various export markets. Chris Kenneally of Copyright Clearance Center, which also has an increasing international focus, will moderate.

We could well also learn more about global opportunities from the keynote talk we’ll hear from Brian Murray, the CEO of HarperCollins, and Michael Cader and I will certainly be asking Russ Grandinetti of Amazon about how publishers can maximize their export sales through them.

So if export sales is on your current agenda, a visit to DBW on Jan 14-15 also should be. And, in that case, sign up before the end of the day on Monday and save yourself some dough. Early bird pricing ends on Monday night.

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