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Our May 29 conference is built around the theme of “scale” in our business, which means something different than it did a very short time ago. Usually “using scale” means “employing the competitive advantages of size” but it can also be leveraging efficiency; the key beneficial characteristic of scale is that unit costs decline with increased activity.

In times past in publishing, the advantages of scale included lower printing costs (bigger companies doing more volume get better prices); lower warehousing and systems cost (because operations almost always get cheaper on a unit basis as they get bigger); and more revenue for each unit sold (because bigger publishers with better lists could get retailer and wholesaler customers to buy at slightly lower discounts).

All of these scale advantages were centered around what has been the core capability of a book publisher: to put books in sight and in reach of consumers on retail shelves. For the better part of the past 100 years, the publisher who could do that more effectively than its competitors had a significant advantage in the marketplace.

But with more and more of the business of customers finding and buying books shifting away from stores, those scale advantages are both reversing in reality and diminishing in importance. Publishers who had built great systems, efficient warehouses, and a nonpareil sales network find them managing less and less “throughput.” That means that less of their business is taking place in their scale-advantaged activities, but it also means the price of maintaining them is going up on a unit basis.

That’s why you see the two Big Six publishers who have invested most heavily in their scalable activities — Random House and Hachette — most active in competing with Ingram and Perseus (two companies far more dedicated to providing services) pursuing distribution clients. They can offer the benefits of their scale pricing to clients and, at the same time, preserve those benefits for themselves as the print-to-store segment of their business diminishes.

The shift in the business to online discovery and purchase would, at first glance, seem to have a leveling effect. Scale in reaching customers that used to require big publishing operations are now largely offered by Amazon, Apple, and Google. When you “searched” for a book in stores (whether you knew you were searching for that specific book or not), you might find it there and you might not. And you were ever so much more likely to find it if the publisher had a stack of copies in the front than if they had one spine-out copy in a store section. Those distinctions aren’t nearly as determinant of whether you’ll find a book at Amazon, or have it suggested to you by Google.

So the smartest big companies have focused on where scale can benefit them in the new context. Brian Murray, the CEO of HarperCollins, made the point to me over a year ago that his company was advantaged because they were launching books by the dozen into the marketplace every week, and each one gave them an additional opportunity to learn about search optimization, customer reactions, and how various tools from Facebook to Pinterest worked to boost awareness and sales. He was confident that the volume of activity they engaged in provided its own scale advantage.

As former Random House marketing strategist Pete McCarthy will make exceedingly clear in his introductory remarks at our May 29 show (and will amplify considerably at the Marketing show we’ll hold on September 26 just about to be announced), publishers can and should plan and execute all their marketing efforts in a holistic way to keep learning both about the components of the marketplace environment and about individual consumers. And, yes, the bigger companies will have a definite scale advantage in doing that.

But in our increasingly unbundled book business, “scale” — unit costs going down with increased activity — can be applied to niches with precision.

Companies like Hay House and Harvard Common Press and even F+W Media are relatively tiny compared to Random House (even before the Penguin acquisition) or HarperCollins or Hachette, but their focus on specific audiences means they may learn more on a niche-by-niche, or even customer-by-customer, basis than the big guys do.

I keep being amazed at what my longtime clients at Vogue Knitting can do on the back of a relatively small-circulation magazine brand in a niche market, including staging phenomenally successful and profitable live events that will ultimately dwarf the returns from their book publishing efforts (and augment them at the same time). But they can truly apply the scale they have reaching the audience of people who knit and want to know more about it. Nobody can do it as effectively as they can.

(I’ve told this story before. An agent told me several years ago that he had sold a mind-body-spirit title to Random House and that they sold 12,000 copies. He sold the author’s second book to Hay House, a MBS publisher, and they sold 200,000 copies. At that time, I believe Hay House had about one million email addresses of MBS-interested people. They undoubtedly have many more now. That’s people that you can mail to free; scale doesn’t come more starkly presented than that. For MBS scale, Hay House is the 800 pound gorilla.)

What we’re beginning to see repeatedly is that scale can be provided from a position outside publishing. One of our panels on May 29 is of new publishers that work from a base outside the publishing business. Two major daily newspapers (the Chicago Tribune and the Toronto Star), a kids’ animation studio (Frederator), and a business school (Wharton) all have publishing programs. They’re built on their own scale, and they have cost-effectiveness both on the content creation side and the audience-reaching side of the spectrum of publishing activity provided by their existing activities.

Publishers have watched Amazon come into the publishing business employing their scale. They’re now seeing Google do the same thing. Google’s entrance is in a self-created game niche, apparently far less threatening than Amazon’s far-reaching multi-genre plus general publishing approach to signing up titles many publishers might also be competing for. (How long before Apple decides to publish some books?)

These cuts to the commercial publishers’ share of the market are coming from literally thousands of directions. Each is a relative pinprick, but cumulatively they could lead to a lot of bleeding. Will the “scale” that a big publisher can bring to marketing from the experience they have with thousands of titles from across the interest universe provide a proposition that gets them into the game for the biggest commercial-potential books that can be produced by this new myriad of players? If there is truly scalable marketing activity, it should only become more efficient by adding relevant titles to its activity base. That would seem like the modern publishing equivalent of the perpetual motion machine.

I’m not smart enough to know if that’s possible, but I don’t think we’d even be asking the question if bookstores had the share they had five years ago.

A dramatic demonstration of the opportunities that can be provided by scale occurred yesterday, when Amazon announced its new initiative “Kindle Worlds” around fan fiction. Fan fiction has existed in a commercial box; because it depends on using characters invented and owned elsewhere, it couldn’t be sold. But the all time record bestseller “50 Shades of Gray”, liberated by rewriting away from the “Twilight” characters that spawned it, showed the powerful commercial possibilities in the genre.

So Amazon is applying scale to create a whole new commercial enterprise. First, they are licensing the rights to material fans can turn into their own stories, starting with properties from Alloy Entertainment but clearly planning to build out from there. Then Amazon will sell (and own copyright) in the output, using its huge audience as a commercial launching pad and paying royalties to all the stakeholders. Everybody in the game wins: the originators, the fans who create the fiction, the fans who buy and read the fiction, and, of course, Amazon.

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The overarching theme of our upcoming Publishers Launch Conference at BookExpo America on May 29 is “scale”. I thank my PLC partner, Michael Cader, for urging that we label that as a core concern worthy of being the centerpiece for a day’s discussion. (With that nudge, I identified “scale”, along with “verticalization” and “atomization”, as one of the three big forces driving publishing change in the current era of transition.)

We’re covering “scale” from many angles on May 29.

The program will kick off with a presentation from Pete McCarthy, formerly a digital marketing strategist at Random House, about moving beyond our standard understanding of “industry data” — what we learn about the industry in the aggregate from BookStats and Bowker and others — to mining and analyzing the massive amounts of public data about readers: who they are and where they are. The data we care about, and that can really help us, isn’t labeled “book publishing data” but is far more useful and actionable than much of what we try to decipher meaning from that is tagged that way.

The requirements of scale threaten to really change the business of literary agents. Since the rise of agents as intermediaries between publishers and authors in the 1950s and 1960s, it has always been possible for agents to operate as very tiny operations. Single-agent offices have never been terribly unusual, and agents could run a successful business with a handful of prosperous clients, or even just one! The unusual convention in publishing by which the buyer (the publisher) customarily pays for the lunch at which the seller (the agent) learns about the buyer’s likes and priorities has been a symbol of the viability of this highly decentralized world.

But those times are changing. The opportunities for self-publishing and the requirements for authors to be self-promoters have placed new demands on literary agency offices. It is often no longer sufficient to have knowledge of acquiring editors and what they want and a network of foreign co-agents who can help place projects in other languages and territories. Agencies large and small are adding self-publishing services, which can include capabilities as mundane as getting cover art designed and as sophisticated as distribution to a global network of ebook retailers. This adds the potential for “conflict” for the agents. In some cases, agencies have chosen a course that might present a choice for an author between a publisher’s deal and their agent’s deal.

These changes and the challenges they present will be discussed by three agents — Brian DeFiore of DeFiore and Company, Robert Gottlieb of Trident Media Group, and Scott Hoffman of Folio Literary Management — in a conversation that will be moderated by Michael Cader.

We will have presentations from three publishers about how they are employing scale. David Nussbaum of F+W Media (owners of our Digital Book World partners) will talk about how they support a variety of vertical businesses with central services providing ecommerce and event management that make it possible for all their communities to benefit from a wider variety of offerings and capabilities. Ken Michaels of Hachette will describe some of his company’s solutions to knotty challenges like digital marketing and metadata quality that they are then making available industry-wide as SaaS offerings. And Jeff Abraham of Random House will be talking about their efforts to utilize scale in a new publishing environment, to drive efficiency and reach in the supply chain and to reach consumers more effectively via their marketing programs.

Ben Evans of Enders Analysis studies big companies that operate at scale far beyond our industry but whose activities very much affect us: namely Amazon, Apple, Facebook, Google, and Microsoft. His presentation will focus on how their strategies and activities influence the environment for the publishing industry, with insights as to how publishers can surf the waves of these giants’ activities rather than be overwhelmed by them.

As publishers have rethought their organizations in the past several years, the words “business development” have popped up in publishing job titles, which they never had before. We’ll have four publishers talking about what “business development” means to them: Peter Balis of John Wiley, Andrea Fleck-Nisbet of Workman, Adam Silverman of HarperCollins, and Doug Stambaugh of Simon & Schuster, in a panel conversation moderated by Lorraine Shanley of Market Partners International.

Brian Napack was President of Macmillan for several years; he’s now an investor at Providence Equity Partners. In a conversation with Michael Cader, Napack will discuss how he views the importance of scale as an investor and how his views have evolved since he was an operator in one of the large companies that might be challenged by the scale of even larger competitors.

The changes in publishing and the provision of services have also enabled publishing with less organization or investment and by the application of scale created outside publishing to new publishing enterprises. A panel of new publishers with roots outside the industry: Jennifer Day of the Chicago Tribune, Steve Kobrin of Wharton Digital Press, Alison Uncles of the Toronto Star/Star Dispatches, and David Wilk of Frederator Books will talk about how their organizations publish in ways that wouldn’t have been possible or even conceivable a few short years ago on a panel that will be moderated by longtime Harper executive and digital pioneer Carolyn Pittis.

Dan Lubart of Iobyte Solutions has been tracking ebook sales data for years and has been providing the data and analysis behind the Digital Book World ebook bestseller list. Lubart will present insights from “behind” the bestseller list data, including a deeper dive into the trends relating to ebook pricing. The ebook bestseller lists have been the evidence of strong challenges to the publishers who operate with scale on their side, as an increasing number of self-published authors have seen their work rise to the very top of the charts.

Our conference will also tackle the special problems facing illustrated book publishing. The success of ebooks has been pretty much confined to narrative reading made reflowable on devices of any screen size. No formula or format has yet proven to work commercially for illustrated books. We’ll address that question from two angles.

Ron Martinez of Aerbook is the best thinker we know around the question of making creative complex ebooks and apps more efficiently. His company has developed its own tool, Aerbook Maker, to address that challenge. But Ron is also knowledgeable about and respectful of other efforts, including tools from Apple and Inkling, that reduce the cost of experimentation for illustrated book publishers looking for ways to deliver an appealing and commercially viable digital version of their content. He will kick off our discussion of the challenges for illustrated book publishing by reviewing the tools and best practices for lower-cost experimentation. And in his quest to improve the margins for illustrated book publishers delivering virtual versions, he has also worked out what might be a marketing and distribution tool that can improve the equation from the revenue side.

Ron will be followed by a panel of illustrated book publishers talking about how they plan to thrive in an environment where the virtual solution hasn’t arrived and the store environment is becoming more challenging. Joseph Craven of the Quarto Group, Tim Greco of Dorling Kindersley, Lindy Humphreys of Abrams, and Mary Ann Naples of Rodale will discuss these issues in a panel moderated by Lauren Shakely, who faced these challenges herself as the longtime publisher at Crown Illustrated.

Our normal practice at Publishers Launch Conferences, which this review of our planned show spells out, is to put the smartest and most articulate players really dealing with the challenges of digital change in the spotlight to talk about what they’re doing and what they’re facing. This has the virtue of showcasing real solutions to real problems.

Frankly, our view is that very few of the outside disruptors, often tech- and private equity-centric start-ups providing “solutions” to the problems as they perceive them, have gained much traction or added much value. We’ll get more perspective on that from our “business development” panel, who are the ones in their companies charged with interacting with the aspirants, but we stick to the belief that there is more to be gained by watching what the established publishing players and the biggest companies in technology are doing than in tracking the theories spawned by industry outsiders who think their insights will change our world.

But we recognize a weakness to our approach. There are some things the established players just can’t discuss. We can’t expect Random House and Penguin — or their biggest competitors — to talk about what the merger of the two biggest publishers will mean to the marketplace. We can’t expect publishers who must trade with Amazon and Barnes & Noble to discuss the impact of their unique marketplace power — one in online sales and one in brick-and-mortar — on publishers’ margins. We can’t expect agents and publishers to talk candidly about when and whether established authors might be willing to eschew their bookstore sales in favor of higher margins on their online sales through a direct tie to Amazon.

But Michael Cader and I have informed opinions on these subjects and neither of us is looking for a job in the industry beyond the one we already have, which is, from our different perches and platforms, to call them as we see them. So we’re going to engage in a 30-minute 1-on-1 discussion of the topics we think it would be hard for the speakers we recruit to discuss as candidly as we will.

I think our discussion will be a highlight of what will be a stimulating day. Frankly, I’m looking forward to all of it. Join us if you possibly can.

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The organizers of the Buenos Aires Book Fair, which will run for the next few weeks, invited me to speak at an opening session of their event last Friday. They left the topic completely up to me. What I offered to do, which the organizers liked, was to review the history of the past 20 years of digital change in the US and in the English language which has brought us to this point. The presumption is that understanding how it happened to us will help them understand what is going to happen in their market, in other Spanish-speaking markets, and in other countries and other languages.

The underlying premise of my talk, which was delivered formally at a Book Fair opening event last Friday and informally to other gatherings they scheduled for me — of students, of young editors, and of some publishing executives — and in a meeting consulting with about 20 employees of one publishing house, was that what happened in the US and then elsewhere in English was unique and would not be replicated in the same way in other languages and territories. What I had identified as the unique characteristics of the US market were:

Three hundred million people with one language, one currency, one commercial set of rules.

A powerful player (Amazon) able to change both publisher behavior (twisting arms to have them provide more titles as ebooks) and consumer habits (getting them to consider what started as an expensive device — a $400 Kindle) with their marketplace power.

Indeed, no other market has those two elements. In fact, in many markets, including all of the players I talked to in Latin America, Amazon is not seen as a really signficant factor.

In addition to the conditions that made the US market unique, I stated two additional assumptions which drew little objection from my audiences in Buenos Aires.

At some point — whether it is five years from now or 20 years from now — the world’s book publishing markets will look very similar. That is, the effects we see in the US — patterns of ebook uptake and the consequently devastating effects on bookstores — will somehow be replicated in other markets.

Both because the unique market characteristics of the US don’t exist elsewhere and because the market already made in the US has created global players and infrastructure that weren’t here when the ebook revolution caught hold, we need to expect that it will be a different path to the future in other places from what we saw in the US. The markets will not be made by the inherent marketplace scale and by Amazon, as ours was.

I thought some things we’ve seen constituted “universal” lessons worth taking on board. We’ve seen ebooks consistently work commercially for narrative reading and not for any other kinds of books. We haven’t seen “enhancements”, like video or interactivity, pay off in bigger sales or in making it easier to command higher prices. I suggested they should expect the same, and the people I spoke with agreed. They should also expect that the product competition from outside the commercial publishing community, which we’ve seen so far primarily from self-published authors, will drive down the prices for books from established authors as it has in our market.

But the more I probed, looking for what would make the market, the more I ended up in blind alleys. There is no online purchasing market anywhere in Latin America to compare with ours. That’s why Amazon hasn’t gained a strong foothold. Kobo’s strategy of working through local booksellers — an alliance has been formed in Brazil and they are clearly looking for partners elsewhere — apparently hasn’t made much of a dent either. One publisher said Apple sales were “promising”, but they’re still “insignificant”.

The reality underlying all this futility is the relative dearth of credit card use. In the US, we have had about three generations of ubiquitous credit card use. They are second nature to us. And the online purchasing world — Amazon in particular — would never have achieved the position they have if that weren’t true.

Well, it isn’t true in Latin America.

There is no way to make an ebook market, which must be an online market, without a payment mechanism. And the one we have in the US isn’t set up to work in Argentina, Brazil, or the rest of Latin America (or, for that matter, in many other parts of the world).

Of course, the cell phone carriers, who do send a bill and collect money from the masses in all these countries where credit card use is limited, had figured that out a long time ago. Nokia and others have been dancing around this opportunity for years. Txtr, a Germany-based ebook play, targets the cell phone companies as its path to the market. Txtr is building an inventory of titles and has come up with an ultra-low-cost ereading device called beagle to jumpstart their market. In doing that, they show that they learned something from Google’s experience, where ebook sales only started to grow when the Nexus7 tablet, which is tied to Google, made its way into the market.

All the conversation led me to come up with my own version of an “answer”; I don’t know if anybody else has made this suggestion but the small bit of conversation I was able to have between having this thought and leaving Buenos Aires didn’t uncover evidence that anybody else had.

It takes three components to make an ebook market:

1. A device to read the ebooks on. That could be a laptop or desktop computer or dedicated ereading device, but it is most likely to be a smart phone or a tablet.

2. A store: a merchandised selection of ebooks that can be shopped through browsing and searching that is compatible with the device.

3. A payment mechanism.

In the US, we really didn’t think about the payment mechanism. For many other places in the world, that’s a very tricky part.

Txtr is trying to deliver the missing pieces to the solution to the telcos, right down to delivering a very inexpensive device that can be the reader if the cell phone is not.

What occurred to me, and I’m wondering whether it is being developed by anybody else, is what I think would be an even better — as in more likely to build a market quickly — solution. What I’m imagining is that a device manufacturer (or more than one, but if one, preferably one that makes both smart phones and tablets) teams up with a cell phone company (to do the billing) and persuades the ebook retailers — Amazon, Google, B&N, Kobo — to accept payment through the phone company. Then that hardware manufacturer has a fabulous value proposition to help them sell their devices and the ebook market has a choice of the best retailers with the best selections of ebooks already aggregated.

Actually, persuading one retailer will persuade them all. If Samsung were pushing a tablet and smartphone and got any of the major ebook retailers to go for the proposition, the others would surely have to follow. And, in fact, it would make sense for either Apple or Google to do this when they sell apps in credit-card-challenged markets as well.

Another complication in some places — particularly Brazil and Argentina at the moment — is created by complex regulations that make the sale of hardware manufactured outside their country either impossible to get or extremely expensive. Although that’s a problem that extends beyond the book business, it is much more likely to be solved by a multi-function device-maker than for one dedicated only to ebook consumption.

It is interesting to think about Apple’s position here. The other big ebook retailing operations already provide apps for both iOS and Android devices as a matter of course. The iBookstore, however, is a Mac-only play. If the solution I’m envisioning were to roll out around the world — and one can imagine a company like Samsung making such a thing happen — would that continue to be the wisest play for the Apple-owned ebook retailer? I think not, but one can only imagine how intense the internal discussions around that point could be.

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The announcement of what amounts to the first book publishing program spawned by Google demonstrates a paradigm we’re seeing repeatedly. It suggests a sweeping change in publishing from how we’ve known it. The bottom line is that most people employed publishing books perhaps as soon as 10 years from now won’t be working for publishing companies.

The trade publishing business over the past twenty years has been transitioning from what it was for a century. The Internet, which so many of us said two decades ago “changes everything” is ultimately responsible. Amazon.com has been the primary catalyst, with print on demand technology (especially Ingram’s Lightning Source) and ebooks (mostly Amazon, but others too) as supporting players. With so many more books to choose from and really available than there ever were before, the function of gatekeepers, which trade publishers and booksellers clearly and proudly were, becomes an anachronism.

The big question — at least for me — is what is trade publishing transitioning to? What does the trade publishing world look like when it doesn’t primarily reach readers through bookstores anymore, a day which one could say has already come in the past five years.

Overall trade sales today outside of special outlets, catalogs, and what remain of book clubs divide into three big chunks: one is printed books sold in stores, one is printed books sold online, and one is ebooks. The latter two are sold without stores, and far more than half of that is sold by Amazon. And that is the way it is most helpful to think about sales because it is only print-in-stores that requires (or benefits from) a big publishing organization.

What the latest Bowker information has to say, lumping ebooks into “online commerce”, is that 44% of sales are online, 32% through physical retail, and the remainder through book clubs and warehouse clubs (physical retail to me!) and “all other channels”. But they also report that 30% of sales are ebooks, which would mean that they’re only calling 14% of the remaining 70% online. There are a lot of ways to count these things, and the resulting calculation of 20% of print sales being online feels very low to me.

It all depends on what kind of book we’re talking about, of course. I visualize the market breaking into thirds among the three chunks. Certainly, one-third ebooks is an understatement for fiction.

However we view the current division of sales, the trade book business was built in a completely different environment. Indeed, the central proposition that all publishers offered all authors is ” we put books on shelves.” The companion reality was “you can’t do this by yourself”.

As recently as 2007, before Kindle, there were no ebook sales and upwards of 85% of print was sold in stores.

The requirements to deliver on the promise “to put books on shelves” included the capital to invest and specialized knowledge to turn a manuscript into inventory, a physical plant to manage the warehousing and shipping of those books, and a network of relationships with the owners of the shelves (in the bookstores) to get the right to put your books on those shelves. These were the minimum requirements to be a publisher. If you had them, you could move on to being smart about selecting books (in the case of non-fiction, almost always before they were were completely written), being skilled at developing them, being capable of packaging them attractively, and being managers of another network — of reviewers and broadcast conversation producers and, more recently, bloggers and social megaphones — to bring word of them to the public.

All of this together gave a publisher the capability to pay authors advances against what amounts, for all but the very biggest authors, to a minority share of the revenue the book generated. But, in fact, the central proposition has lost its power. Only a quarter to a half of the sales now — far less for fiction and far more for illustrated books — require a publisher to “put books on shelves”. And that number is going down. For the balance, no inventory investment is actually necessary. Nor is a physical plant or a vast network of sales relationships.

And, without that requirement, the barriers to entry to becoming a “book publisher” have collapsed, particularly if you’re willing to start with ebooks and think of print as an ancillary opportunity. Google is becoming one. Amazon became one a long time ago. NBC has become one. The Toronto Star and The New York Times have become ebook publishers. And, of course, so have many tens of thousands of individual authors, a few of whom are achieving startling success.

Soon — in the next 5 or 10 years — every university (perhaps most departments within a university), every law firm and accounting firm and consulting firm, certainly every content creator in other media, as well as most manufacturers and retailers will become book publishers too.

Why not? Without the requirement of an organization to reach the public through bookstores and without the requirements of capital or knowledge to create printed books, any organization that is routinely reaching people interested in a common topic — whether or not they are creating content around that topic now, but especially if they do — will find it constructive to publish, and well within their reach and means to do so.

That is: publishing will become a function of many entities, not a capability reserved to a few insiders who can call themselves an industry. Think about it this way. If you had told every museum and law firm in 1995 that they needed a web page, many would have wondered “what for?” If you had told them in 2005 that they needed a Facebook presence or in 2008 that they needed a Twitter stream, they would have wondered why. We’ve reached the moment when they all need a publishing strategy, and that will be as obvious to all these entities in a year or two as web pages, Facebook pages, and Twitter streams look now.

This is the atomization of publishing, the dispersal of publishing decisions and the origination of published material from far and wide. In a pretty short time, we will see an industry with a completely different profile than it has had for the past couple of hundred years.

Atomization is verticalization taken to a newly conceivable logical extreme. The self-publishing of authors is already affecting the marketplace. But the introduction of self-publishing by entities will be much more disruptive.

Publishing is not immune to the laws of supply and demand and the price of books is tumbling. Most self-published fiction is crap, but a small percentage of a very large number of self-published novels constitutes a significant range of good cheap choices for fiction readers, particularly in genres. That “diamonds in the dirt” effect has been becoming more and more evident with the passage of time. Recently, the Digital Book World bestseller list (compiled by ioByte’s Dan Lubart in conjunction with our friends at DBW) had a self-published book in the top slot for the first time. It won’t be the last time.

Publishers still have plenty of capabilities that are enticing to authors. There are still stores with shelves on which to put books. And big publishers can build on that increased presence very impressively; it is hard to believe that “Fifty Shades of Grey” would have sold the tens of millions of copies that it has as a self-published book. Random House made a quantum difference.

But perhaps we shouldn’t read too much into that. The publishers’ power to use that capability to command a share of the “easy” (no inventory investment or sales force required) money from ebooks, which was a sine qua non for them until very recently, is evaporating.

When Hugh Howey was in the early stages of what has turned into his eye-popping success with the novel WOOL, publishers would only offer him a deal to publish print if he also gave them ebook rights. Howey and his agent, Kristin Nelson, found those offers easy to resist, since he was making so much money on ebooks and publishers would have wanted a healthy share of it. A few months later, Simon & Schuster (wisely, in my opinion) agreed to give Howey a print-only deal for US rights.

How far away can it be for the NBC News book on a national election or the Whole Foods book on cooking the organic way or the Home Depot book on how to build a shelf or the Boston Celtics’ own book on the history of their team to get the same treatment? (Or, of course, the “brand” can handle the whole job themselves, using services offered by many — most prominently Ingram, Perseus, and Random House — to handle the decreasing percentage of the business that is “books in stores.”)

Of course, there is, or at least there can be, a lot more to publishing than just making good content available and making the people you know already aware that it is there. (Although, increasingly, that will be seen as “enough”, along with ancillary benefits, to make it worth the effort to many entities.) There are rights to be sold. There are ways to market to “known book buyers” that are increasingly going to be the property of entities that have developed lists and techniques at scale.

So there will continue to be a trade book business and it is likely that the machinery of the biggest book publishing organization (or two) will be required for a very long time to maximize the biggest commercial potential, like “Fifty Shades of Grey”. But, without a robust “book trade”, from which trade publishing gets its name, there cannot be commercially robust trade publishing, at least not as we have known it.

I reflect on a pithy bit of wisdom offered to me in conversation a few years ago by David Worlock, who might be thought of as one of the originators of digital publishing, and who, in any case, is a wise observer of the publishing scene and by a few years my senior. Well before we thought of any self-published bestsellers — this must have been about 2005 — David said, to me, “surely, in time, the number of books created within the network must exceed the number of books created outside the network.”

The “network”, of course, was the Internet. He was envisioning direct-to-ebook publishing and automated blogs-to-books publishing as well as a lot of customization. He was right.

And the atomization I think may be the overarching trend of the next decade or two fits right in.

Once the concept of the atomization and dispersal of the publishing function becomes understood, you see it everywhere. Aside from the Google-spawned publishing program — which is built around their massive multi-player game activity, but there are many other applications once they get used to this idea — we had a library announce a new digital press last week.

We’d already been putting together a panel of new entrants to book  publishing for our Publishers Launch BEA conference on May 29. Of course, the atomization we talk about here is enabled by the scale being provided by others, including service providers. And the major houses are trying their hardest to build marketing at scale. Ken Michaels, the President and COO of Hachette, and David Nussbaum, the Chair of F+W Media, are our first two confirmed speakers about that. We’ll have a panel of literary agents talking about how they’re tackling the need for scale to help clients with an increasingly broad range of choices for publishing.

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It was reported last week that Hyperion plans to sell off its “backlist” to focus its attention on new titles it will develop in conjunction with its corporate cousins at Disney and ABC. This follows Wiley’s selling a lot of the most bookstore-dependent parts of its list, including the sale of Frommer’s Guides to Google, in 2012.

I believe these transactions are the front end of a trend I first anticipated in a post about four years ago. 

Publishers are going to find it increasingly compelling to reconfigure their inventory of title offerings around their most current thinking about their marketplace. Both Wiley and Hyperion are moving away from a “general” trade model. They’re moving away from publishing books for which their primary revenue dependence would be on bookstores and their primary marketing dependence on the book review media.

Wiley is actually returning to its professional roots. I did a lot of consulting at Wiley in the late 1980s when they were building out their trade presence. Although they were very disciplined about sticking to specific subjects where they had special marketing capabilities or subject expertise, they became increasingly “trade-y” over time. They built a powerful organization to sell to the book trade which reduced the need for them to be as focused on core subjects as they were when they were first building their trade capabilities. But the core of the company — its heart and soul and its DNA — always remained primarily professional. (Wiley also has a college textbook list, but it is a much smaller part of their business than professional books and journals.)

That means that Wiley would view the diminution of bookstore shelf space with more equanimity than a straight trade house, like one of the Big Six (soon to be Big Five) would. They would see themselves readily able to move away from a shrinking business segment that was never “core” for them anyway.

Hyperion is a straight trade house. Unlike Wiley, they don’t have a direct-to-user business or the big library revenue that a professional publisher does. But what Hyperion does have is a close relationship with sister companies Disney and ABC. Those relationships make possible partnerships which don’t change the sales and distribution challenge, but have a huge impact on the marketing opportunities. Hyperion is increasingly able to publish titles that have a strong public awareness component built on the back of TV or movies.

But Hyperion is a straight trade house without a lot of fixed overheads. They have outsourced the heavy requirements of sales and distribution, currently to Hachette. So they can sell off their backlist, even if it amounts to a substantial chunk of their sales, without having to worry about reorganizing their sales force or underutilizing their physical plant. They have apparently decided to become a different, more focused, kind of publishing house, not so much committed to “publishing books” that can make money from whatever source as they are to being the book publishing arm responsible for building out the brands and franchises their corporation invests in for movies and TV.

Both Hyperion and Wiley are showing us what the publisher of the near future is going to look like. They will be more focused. They will be shedding overheads so they can expand or shrink their offerings more readily to respond to opportunities and circumstances. They will be less dependant on the trade bookstore and book review trade networks. And Hyperion’s decision says something more about the future that Wiley’s doesn’t: book publishing will increasingly be an activity operating in tandem with or in service of other objectives of the owning organization. (There is a parallel here in retailing, where Amazon and Google and Apple fit this description, and Kobo and Barnes & Noble do not.)

There may also be a message here about the relative importance of backlist. When digital first started to happen, it seemed like the backlist might be the biggest beneficiary. After all, stores had limited shelf space and online merchants can “carry” all the books they want, particularly if there is no pre-purchased inventory required. (There isn’t for ebooks and there increasingly isn’t for printed books either, which can be purchased from wholesalers for next day delivery, even if they are printed on demand!)

But it turns out that the current state-of-the-art for merchandising and presentation of books online is not very helpful to backlist. Most retailers return a limited number of books (10 or 20) per screen to any query. Customers have limited patience for refreshing screens, so the number of titles an online purchaser “browses through” is far fewer than the number that would catch the same eyes in an equivalent amount of time in a store. This appears to be pushing sales more and more to newer books and books on bestseller lists.

This problem of concentration will probably just get worse as mobile devices become more ubiquitous and the shopping takes places on ever-smaller screens.

It isn’t clear yet to what extent publishers’ marketing practices could be responsible for the consumers’ bent to purchase from the top titles or whether changes in how publishers market could ameliorate it. But it does mean that marketing backlist is its own challenge and not sufficiently addressed, as it was in years past, by sales reps or store systems just keeping in stock what has been selling.

It is now necessary for publishers to communicate directly with consumer audiences to be effective marketers. At the same time, it is now possible for publishers to do the core work of reaching the trade without big fixed overheads. The combination of those two things will motivate changes in how publishers view the value of both their backlists and their publishing programs. What Wiley and Hyperion have done shows what kind of conclusions publishing today allows them to come to.

Should be great times coming for the small number of players in trade publishing’s M&A world.

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We are now in a period replete with startups that want to be the disruption in publishing. We see a lot of them in our office. Part of our business involves helping startups find relevance and contacts within the established publishing community.

There are three areas in particular which the startups seem to think the publishing business needs their help with, if the frequency with which we hear about propositions in these spaces is any guide. They can overlap.

1. eBookstore alternatives to the established players.

2. Enabling social connections among readers of books.

3. Subscription services that will deliver books for a fixed monthly cost.

I wrote about the subscription services a while ago when one of the fledglings came into our office. They were well advanced in their planning and tech development. I asked them if they had spoken to any literary agents. They said “no”.

Presumably they have done so since then and have found out that big shot literary agents are very skeptical about the value of subscription propositions for big shot authors. In fact, they are (in their own enlightened self-interest) downright hostile to the idea. That makes smart trade publishers, who are highly dependent on literary agents, also hostile to the idea.

When it comes to selling subscriptions to a general audience, Amazon (and probably only Amazon) can do it without the biggest books. Maybe down the road Penguin Random House can do it because they’ll be the publishers of more than half the bestsellers. O’Reilly, with Safari, has demonstrated that subscription can work in niches, and we’d expect to see more of that in the future. But there’s a damn good reason why no Safari service has cropped up for general reading; it’s a bad commercial model for the copyright holders of the biggest commercial books.

Attention: entrepreneurs with this idea. The reason it isn’t happening has nothing to do with failures of imagination or tech competence by the legacy players.

The “social reading” play also attracts entrepreneurs and, apparently, some funding. I think there are two generic failures of understanding that drive this interest. One is the sheer granularity of the book business. The vast number of titles there is to choose from means that the percentage of overlapping titles in the reading lists of unconnected people is going to be very low. Therefore the value of shared notes and annotations or “in-book” conversations is low as well.

Enabling this kind of shared reading experience can make sense to a class of students or an organized reading group. But it takes a really vast community to deliver value in shared book conversations to many people. And let’s remember that both Amazon and Kobo offer social tools already. If they become important, they’ll build out more. The fact that they haven’t to date is not a reflection of their inadequacy; it is a reflection of how much the people selling lots of ebooks and observing real customer behavior think these capabilities matter.

Several years ago, when they were starting up, I was consulting to Copia, which built social tools right into the reading software as their distinctive feature from the beginning. As a skeptic about the value of social reading (we’re all prisoners of our own experience and preferences, and I have precious little personal interest in “sharing” my reading experiences), I suggested that the key for them was to work in niches: to recruit users who would have common interests and therefore better-than-average chances of being interested in the same books. I think they’ve moved in that direction, but the suggestion was counterintuitive to them at the time. How do you get to be bigger by targeting a smaller audience?

Many of the social plays require the simplicity of DRM-free files to make their proposition work. That just makes it harder for them to get commercial titles into their ecosystem. Or impossible.

Copia is also a competitor in the ebookstore category. There are a lot of them, despite the fact that there are market leaders with advantages it is hard to see how to overcome. The global market leaders are Amazon and Apple. The global runners-up are Google and Kobo. All four of these companies have extremely deep pockets and all except Kobo have other ways — besides selling ebooks — to amortize their investment in audiences. In the US, B&N has managed to make Nook a strong competitor, but it is still very much an open question whether they can do the same internationally without the store footprint they have here and without the funding capabilities of their competitors.

Yet, others, including Copia, keep trying. Baker & Taylor has Blio, which looked early on like a player for illustrated ebooks. Two problems: the flexible tool set they originally promised failed to materialize in the manner they first projected. And the sales of illustrated ebooks are not very good anyway. Joe Regal’s Zola Books has been trying to gain traction, with a variety of propositions including decentralized curation and exclusive content.

Three big US publishers have launched Bookish, which is presumably more a discovery mechanism than a bookstore, but which will have to attract traffic to be of much use as either.

And then there’s Inkling, which has developed tools to make complex ebooks (they seem, quite sensibly, to be more focused on school and college textbooks than on illustrated trade books) and is pairing that with a “store” which would appear by the deals they offer to be an important monetization element in their planning.

With whatever are the limitations of my understanding or imagination, I can’t see success in the cards for any of these adventures in retailing, social, or subscription (Inkling’s product-building tools are different and could have longterm value.)

All of this wraps into a larger question: how much time, money, and bandwidth should commercial publishers be spending on startups?

That subject is of great interest to the investment community, which has been frustrated by what they see as publishers’ lack of engagement with startups or interest in disruptive technologies. One angel investor we know tells us that a need to work with publishers is a real deterrent to raising money from technology investors.

But does that mean the publishers are wrong not to be embracing startups more than they do?

Javier Celaya, a Spain-based consultant to publishers on digital change, recently conducted a survey about this subject. What the detail of Celaya’s investigation seems to show is that investment in startups takes place in the educational sphere, but not in trade. That would make sense. After all, trade publishers deliver books to be consumed by a wide variety of people for an equally dispersed set of motivations. But in education, the “book” needs to fit into an ecosystem, a platform. Educational publishers recognize the possibility of controlling the platform, if they have the right tools to offer. That makes it sensible for Pearson and Cengage and McGraw-Hill and Macmillan to make investments in technologies that might give them that platform advantage.

(We’ve observed that “platforms” aside from those of the big retailers are becoming important in the juvie publishing world.)

I had an exchange with Javier Celaya about his survey after he posted it. To my skepticism that investing in startups made sense for trade publishers, Celaya pointed out that an investment in Goodreads would have been much more fruitful than the massive effort and investment three big publishers made to start Bookish.

That’s true. It is also true that no publisher that missed finding Goodreads in the first year or two or three of its existence would have been much handicapped in making good use of it whenever they did discover it. And it is not clear that owning a chunk of it would give a publisher any great advantages in using it over what they can achieve anyway. It is also not yet clear how successful Goodreads will be monetarily (although it has clearly managed to recruit an audience large enough to be valuable as a marketing engine).

If I were making policy for a publishing house, I would discourage spending any time with a social or subscription proposition that didn’t clearly have a “niche” strategy. And I’d allow the investment of only the minimum of effort in a fledgling ebookstore. Publishers do need to be able to provide their metadata and put titles up for sale easily (Ingram or others can help with that if they don’t want to serve each little ebook retailer themselves) and they should do that. But the odds of any new ebook retailer making much of a dent in the market are so long that conversations about it are most likely to just be a waste of time.

Of course, I’d also have a list of “tech we’re looking for”: ways to streamline metadata enhancement and improve creation workflows would probably make the list. The startups who came with a promise to solve a previously-identified need would certainly be welcome and experimentation might well be called for. But not investment.

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Blog posts have been scarcer for the past couple of months because I’ve been so engaged with a major responsibility: putting together what amounts to 7-1/2 days of conference programming that will be presented on four days next month in New York City.

As most readers of this blog probably know, we’re responsible for the programming of the two-day extravaganza that is Digital Book World. DBW 2013 — taking place on January 16 and 17 at the Hilton New York Hotel — will be the fourth iteration of the event, which aims to explore the commercial challenges facing trade publishing in the digital transition. DBW is not about technology per se; it is about the business problems publishers must cope with in an age of technological change.

DBW’s main two days are divided between morning plenary programming — all 1500+ people in one big room — and afternoon breakouts. We’ll have up to five simultaneous breakout sessions in each of three slots each day. So we have what amounts to 4-1/2 days of programming in the breakouts plus one on the main stage.

Because people really do come from all over the world to attend DBW, we were delighted to agree when they asked us at Publishers Launch Conferences (the conference business I own with Michael Cader) to add a show on each side of theirs to build out a week of programming. (The team at DBW itself are also putting together some pre-conference workshops that will run on Tuesday.)

So on Tuesday, January 15, we’ll do our second annual “Children’s Publishing Goes Digital” conference at the McGraw-Hill Auditorium (put together with the invaluable assistance of our Conference Chair and close friend, Lorraine Shanley of Market Partners). And on Friday, January 18, we’re presenting (in conjunction with the DBW team) a new program called “Authors Launch“, a full day of marketing advice for publisher-published authors. (Self-published authors are welcome and will learn a lot, but the program is framed for authors who are working with publishers, not looking for ways to avoid them.)

Programming the “Children’s Publishing Goes Digital” show revealed what we think will be the most important theme in the children’s book space for the next few years: the development of  digital “platforms” that, like subscription offerings (which some, but not all of them, clearly are), will “capture” consumers and make them much less likely to get ebooks and other digital media from outside of it. The list of platform aspirants in this space is long and varied: Storia from Scholastic; RRKidz from Reading Rainbow (the TV show brand); Poptropica from Pearson (which launched Wimpy Kid before it was a book); Magic Town; Disney; Capstone; and Brain Hive. All of them are presenting, as well as NOOK, which, like Amazon Kindle, has announced parental controls on its platform that encourage parents to manage their kids’ reading experience there.

There are other big issues in children’s publishing, particularly the creation of original IP by publishers so they can better exploit the licensing opportunities that follow in the wake of successful kids’ books. We’ll have data presentations from Bowker and from Peter Hildick-Smith of Codex to help our audience understand how kids books are found and selected outside the bookstore in today’s environment.

But we know that the digital discovery and purchase routines will be markedly affected by the platforms as they establish themselves. Publishers are faced with an interesting conundrum. They can’t reach the audiences that are loyal to a platform without going through the platform. But it is the presence of many publishers’ books that strengthens the attraction of the platform and, once it gains critical mass, the value of the content to it (and probably what it will be willing to pay for the content) is reduced. So publishers licensing content to these platforms may be strengthening beasts that will ultimately eat them. I think the roundtable conversation Lorraine and I will lead at the end of the day, which will include publishers Karen Lotz of Candlewick, Barbara Marcus of Random House, and Kate Wilson of Nosy Crow, will have interesting things to say about that paradox.

We’ve developed some “traditions” in the four years we’ve been doing Digital Book World. As we’ve done the past two years, the plenary sessions will open on Tuesday with the “CEOs’ view of the future” panel organized and moderated by David Nussbaum, the CEO of DBW’s owner F+W Media and the man who really dreamed up the idea of this conference. David will be joined this year by Marcus Leaver of Quarto, Karen Lotz of Candlewick, and Gary Gentel of Houghton Mifflin Harcourt. And Michael Cader and I will — as we have every year at DBW — moderate a panel to close the plenaries, “looking back and looking forward” with agent Simon Lipskar of Writers House; Harper’s new Chief Digital Officer, Chantal Restivo-Alessi, and Osprey CEO Rebecca Smart.

Among the presenters on the main stage who will be unlike what our audiences usually hear at a digital publishing conference will be Teddy Goff, the digital director for the Obama campaign, who will talk about targeting and marketing techniques that might serve us well in the publishing world; Ben Evans of Enders Analysis in London, who will tell us how publishing fits into the strategies of the big tech companies (Amazon, Apple, Facebook, Google, and Microsoft) that he tracks regularly*; ex-Macmillan president and now private equity investor Brian Napack, talking with Michael Cader about the investment climate in publishing; and Michael D. Smith, Professor of Information Technology and Marketing from Carnegie-Mellon, talking about a study he and his colleagues have done on the real commercial impact of piracy.

(We’ve also scheduled a breakout session for Teddy Goff so he can talk more about the Obama campaign for those in attendance who want to learn more of its lessons to apply.)

We’re also delighted to have gotten Robert Oeste, Senior Programmer and Analyst from Johns Hopkins University Press, to deliver his wonderfully insightful, entertaining, and informative presentation on XML, the subject so many of us in publishing need to understand better than we do. And we will after he’s done. (We’re also giving Oeste a break-out slot to talk about metadata which I’ll bet a lot of our audience will choose to attend after they’ve heard him on XML.)

Some authors have had remarkable success without help from publishers in the past year, but few or none more than Hugh Howey, the author of “Wool”, who has just signed a groundbreaking print-only deal for the US with Simon & Schuster. His dystopian futurist novel has sold hundreds of thousands of self-published ebook copies and rights all over the world and to Hollywood. We’ll have a chat with Howey about how he did it and we’ll be joined by his agent, Kristin Nelson, for that dialogue. Kristin will stick around to join a panel of other agents (Jay Mandel of William Morris Endeavor, Steve Axelrod, and Jane Dystel from Dystel & Goderich) to talk about “Straddling the Models”: authors who work with publishers but are also doing some things on their own.

We will have several panels addressing the challenges of discovery and discoverability from different angles. One called “Closing the New Book Discovery Gap” teams Patrick Brown of Goodreads with three publishing marketers — Matt Baldacci of Macmillan, Angela Tribelli of HarperCollins, and Rachel Chou of Open Road — and is chaired by Peter Hildick-Smith. That will focus on what publishers can do with metadata and digital marketing to make it more likely their titles will get “found”. Barbara Genco of Library Journal will share data on library patron behaviors and then helm a panel discussion with Baker & Taylor, 3M, Darien Public Library, and Random House exploring the role of libraries in driving book discovery and sales. Another session called “Making Content Searchable, Findable, and Shareable” introduces three new propositions from Matt MacInnis of Inkling, Linda Holliday of Citia, and Patricia Payton of Bowker, along with SEO expert Gary Price of INFODocket. Publishing veteran Neal Goff (who is also the proud father of Obama’s digital director) will moderate that one. MacInnis, Holliday, and Payton offer services that will help publishers improve the search for their books. Price will talk knowledgeably about how the search engines will react to these stimuli.

We’re covering new business model experimentation (with Evan Ratliff of The Atavist, Brendan Cahill of Nature Share, Todd McGarity of Hachette, and Chris Bauerle of Sourcebooks) where publishers discuss ways to generate revenue that are not the old-fashioned ones. We’ll underscore the point that we’re about changes caused by technology rather than being about technology with our “Changing Retail Marketplace” panel, featuring publishers and wholesalers talking about the growth of special sales (through retailers that aren’t bookstores and other non-retail channels).

The future for illustrated books will be discussed by a panel with a big stake in how it goes: John Donatich of Yale University Press, Michael Jacobs of Abrams, Marcus Leaver of Quarto, and JP Leventhal of Black Dog & Leventhal. Two publishers who have invested in Hollywood — Brendan Dineen of Macmillan and Pete Harris of Penguin — will talk about the synergies between publishing and the movies with consultant Swanna McNair of Creative Conduit.

We will have major US publishers and Ingram talking about exports: developments in the export market for books — print and digital. And we’ll have some non-US publishers joining Tina Pohlman of Open Road and Patricia Arancibia of Barnes & Noble talking about imports: non-US publishers using the digital transition to get a foothold in the US market.

One session I think has been needed but never done before is called “Clearing the Path” and it is about eliminating the obstacles to global ebook sales. That one will start with a presentation by Nathan Maharaj and Ashleigh Gardner of Kobo where they will enumerate all the contractual and procedural reasons why ebooks are just not available for sale in markets they could reach. And then Kobo will join a panel conversation with Joe Mangan of Perseus and agent Brian Defiore to talk about why those barriers exist and what might be done in the future to remove them.

Oh, yes, there’s much much more: audience-centric (what I call “vertical”) publishing; the changing role of editors; the evolving author-publisher relationship; and a conversation about the “gamification” of children’s books. David Houle, the futurist and Sourcebook author who wowed the DBW 2012 audience, will return with his Sourcebooks editor, Stephanie Bowen, to discuss their version of “agile” publishing: getting audience feedback to chunks before publishing a whole book.

We will also do some stuff that is more purely “tech”. We have a panel on “Evolving Standards and Formats” discussing the costs and benefits of EPUB3 adoption, which will be moderated by Bill McCoy of IDPF. Our frequent collaborator Ted Hill will lead a discussion about “The New Publishing IT Department”. Bill Kasdorf of Apex will moderate a discussion about “Cross-Platform Challenges and Opportunities” which is about delivering content to new channels.

But purely tech is the exception at Digital Book World, not the rule.

And purely tech won’t show up at all at Authors Launch on Friday, January 18, the day after Digital Book World.

Authors Launch is what we think is the first all-day marketing seminar aimed squarely at authors with a publisher, not authors trying to work without one. It is pretty universally taken as a given that authors can do more than they ever have before to promote themselves and their books and that publishers should expect and encourage them to do that. But, beyond that, there is very little consensus. What should the publisher do and what should the author do? That question is going to be addressed, in many different ways, throughout the day.

The Authors Launch program covers developing an author brand, author involvement and support for their book’s launch, basic information about keyword search and SEO, use of metrics and analysis, a primer on media training, when and how to hire a publicist or other help, and a special session on making the best use of Goodreads. We’ll cover “audience-centric” marketing, teaching authors to think about their “vertical” — their market — and understand it.

The faculty for Authors Launch includes the most talented marketers and publicists helping authors today: Dan Blank, co-authors MJ Rose and Randy Susan Meyers, journalist Porter Anderson, David Wilk, Meryl Moss, Lucinda Blumenfeld, agent Jason Allen Ashlock, and former Random House digital marketer Pete McCarthy.

We have assembled a group of publishers and an agent to discuss how an author should select the best places to invest their time from the staggering array of choices. (Facebook, Twitter, YouTube, Pinterest, etcetera.) That panel will include agent Jennifer Weltz of The Naggar Agency as well as Matt Baldacci of Macmillan, Rachel Chou of Open Road, Rick Joyce of Perseus, and Kate Stark of Penguin. Matt Schwartz, VP, Director of Digital Marketing and Strategy for the Random House Publishing Group, will conduct the session on metrics.

A feature of both our Kids show on Tuesday and the Author show on Friday are opportunities for the audience to interact with the presenters in smaller groups so each person can get his or her own questions answered. At Kids we’ll do that at lunchtime, seating many of our presenters at tables with a sign carrying their name so our attendees can sit with them and engage. At Authors Launch, we’ll be conducting rounds of workshops, crafted so that the authors can get help in their own vertical (genre fiction, literary fiction, topical non-fiction, juvies, and so forth), and on the topics of greatest need for them.

We are sure the week of January 15-18 will prove to be an energizing and stimulating one for all of us living in the book publishing world. We hope you’ll join us.

Digital Book World Week | January 15-18, 2013

Children’s Publishing Goes Digital | Tuesday, January 15, McGraw-Hill Auditorium
DBW Pre-Conference Workshops | Tuesday, January 15, Hilton New York Hotel
Digital Book World Conference + Expo | January 16-17, Hilton New York Hotel
Authors Launch | Friday, January 18, Hilton New York Hotel

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When Larry Kirshbaum, the longtime head of TimeWarner Publishing (purchased right after he left in 2007 by Hachette and now the company called Hachette Book Group USA) joined Amazon many people thought — I among them — that Amazon was about to become a threat to take big titles away from the major publishers and, by doing so, also put pressure on competing retailers who would either have to buy from Amazon or do without major books.

An article last week in The Wall Street Journal spells out just how futile have been Amazon’s efforts so far to upend the Big Six. Their two biggest headline acquisitions — a celebrity bio from actress Penny Marshall and the latest from bestselling non-fiction writer Tim Ferriss — are achieving paltry sales outside Amazon as measured by BookScan.

Michael Cader does some deeper digging to suggest that the high-profile books are not the place to be looking for the successes in Amazon’s publishing. They’re publishing lots of genre fiction and buying up some backlists.

Yet, I can’t believe that the high-profile output from the New York office meets Amazon’s original expectations or Kirshbaum’s. If they miscalculated the impact they could make, maybe it was for the same reason I did. An abrupt slowdown in ebook switchover took hold at about the same moment the Kirshbaum era at Amazon began. Big publishers are reporting that ebook sales are now approaching 30% of their revenue, which is about a 50% increase from what they said last year. That follows several years when ebook uptake increased by 100% or more.

(It is important to note here that the reported figures are a percentage of all revenue. Many titles are not “ebookable”: they’re illustrated books or little kids’ books and, if they have ebook equivalents at all, they don’t sell nearly that percentage. So the digital sales of immersive reading would constitute a somewhat higher percentage than that.)

Amazon as a publisher has advantages and disadvantages against more traditional competitors. They have the advantages of direct customer contact, which pay off in two ways. They can send you an email pitching a book as the logical next one to the one you just read; general publishers can’t do that. And, as the publisher, they have more margin to either pay the author more or charge the customer less, which, either way, increases an author’s revenue through online channels.

But their disadvantages are also significant. For most books, and particularly non-fiction (as both of which the high-profile releases the Wall Street Journal wrote about are), more than half of the sales still come from brick-and-mortar stores. Despite their attempt to secure that exposure by a licensing deal with Houghton Harcourt, the resistance to Amazon from Barnes & Noble and many independent stores and mass merchants has curtailed that distribution.

Apparently Amazon led at least some people to believe with their success on the recent Barry Eisler book that they could sell more copies through their own channels than big publishers could through the entire network. The claim that they had outsold all his previous NY Times bestsellers was made to literary agents in a letter that also cited other great successes, all with genre fiction. Without questioning anybody’s numbers, I was skeptical about the significance of the relative Eisler sales because, it seemed to me, whatever they could do for Eisler (whom they published) they could do for any other book they wanted to, whether they published it or not. So it seems illogical to me that they would somehow magically sell more than the whole trade combined on a book because they were publishing it.  It seems apparent that Amazon isn’t succeeding at persuading agents that the Eisler case, even if it is as portrayed, is replicable.

I saw reports of bitter comments from Tim Ferriss, complaining about Barnes & Noble’s apparently-effective boycott of their competitor’s publishing program. Maybe he would be doing that even if Amazon is selling more than his conventional publishers did before. But I doubt it.

This is not a final answer. Amazon’s share of the trade market — ebooks and online print combined — is still growing and shows no sign of abating. Most publishers would still report that Amazon is their fastest-growing account.

But shelf space erosion — a metric with no reliable index anywhere — seems to have slowed down. That means that, at the moment, we have a more stable book trade than we’ve had for at least five years. It is smaller, but it is more stable. In the US at least, our market of three big ebook players (Amazon, B&N, Apple) and two sturdy and persistent upstarts (Kobo and Google) is still welcoming some new entrants. Zola eBooks, promising some interesting merchandising innovations, and Bookish — the repeatedly postponed effort from three major publishers — are expected to join the fray soon. Sony and Copia and Blio are still trying to gain traction, but they’re also still here.

Amazon definitely has the most advantages. Their Kindle ecosystem is still the best-functioning, deepest in title selection, and benefits in numerous ways from having more readers and selling more ebooks (and books, for that matter) than anybody else. The growth in their genre title base that Cader points out increases their market share of dedicated genre readers, who read other things too. They have the most self-published titles and the best ecosystem for self-published authors to make money. And the big title growth enables them to build subscription or subscription-like capabilities like KOLL (Kindle Owners Lending Library) which do take customers out of the game for everybody else.

As their share of the market grows — as long as it continues to grow — their argument to authors to cast their lot with them gets stronger.

But, for now, it would seem that B&N definitely did the right thing for their own good by boycotting Amazon’s titles. And, for now, it would seem that most of the authors Amazon will get for their general list will be those who are annoyed at the publishing establishment like Konrath and Eisler or curious about working with a tech-oriented publisher like Ferriss.

Authors who want bookstore exposure or to maximize their total sales across the US bookselling universe will remain hard to persuade for the forseeable future. But probably a little less so with each passing day.

I note with sadness the passing of Senator George McGovern. I am proud to have worked on all three of his presidential campaigns: 1968 at the Democratic National Convention working for Pierre Salinger, two years on the 1972 campaign, and a weekend in New Hampshire trying to light a fire in 1984.

What motivated us to join Senator McGovern was primarily his opposition to America’s involvement in Vietnam, but his personal and political appeal went far beyond that. He was extraordinarily decent and straightforward. In my stretch of two years working for him in the early 70s, it was remarkable how consistently he took issue positions we young idealists could be proud of. A poorly-vetted choice for vice-president will always be part of the explanation for why he was crushed, but my friend Professor Wade — one of McGovern’s top strategists — told me years ago that it was the assassination attempt that crippled George Wallace that actually was responsible for the defeat. 

Nixon had won the 1968 election with a little over 40% of the vote. Wallace had taken a share in the high teens. The McGovern planning from the beginning assumed a similar race in 1972. When Wallace was eliminated by the assassination attempt, Nixon’s “Southern Strategy” made him the heir to the Wallace vote and a landslide victory.

In the end, of course, it was Nixon’s vice-president, Spiro Agnew, who went to jail and his administration that ended in disgrace. McGovern was always gracious and never bitter. But, as a country, we’ve never spent enough time contemplating how different things could have been if Bobby Kennedy hadn’t been shot in 1968 or if McGovern had won in 1972.

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The Book Industry Study Group’s annual membership meeting on Friday concluded with a panel discussion among four industry executives who have leadership roles in the group. They are also four of the sharpest minds in publishing and they all had provocative things to say. Recollection of detail is not my strongest suit and I didn’t take any notes, but all of them said things that stuck with me and which struck me as ideas that deserve more attention than they get.

Dominique Raccah, the founder and CEO of Sourcebooks, made the now-obvious (but new to me that morning) point that we are going to have to streamline generating metadata in multiple languages to take advantage of emerging global markets.

Maureen McMahon, the CEO of Kaplan, which serves a very targeted audience, recalled that five years ago she was able to track her very discrete list of competitors and closely calculate her market share. But as an information-provider, she now finds competitors can pop up from anywhere.

Ken Michaels, just appointed President of Hachette Book Group USA, reminded us that 70% of the sales are still print. He said that we need to stop talking about digital as if digital is all there is; that just as media and consumer habits are converging so must the approach publishers take to running their business. He stressed building workflows around content, not product, so you can curate and compose once for all formats, and incorporating digital as a way of life, even in publicity and marketing, rather than having any stand-alone digital workflows. In other words, it is time to integrate digital, not treat it as a thing apart.

All great insights, but what I really took to heart was some simple wisdom from Tom Turvey of Google. Turvey is spending a lot of time outside the US these days, as Google Play opens in markets across the globe. He reminds us that we are way ahead of everybody else in digital change. That means that potential markets abroad are only in their earliest stages of development. He sees that the publishers in those markets –and we as well — need to concentrate on three things: standards, rights, and data.

Standards, rights, and data. These are the three elements which can restrain digital growth, or propel it. They’d also serve as a good short summary of BISG’s agenda. Turvey took the opportunity to say that every country needs a BISG, but not every country has one.

Standards, of course, are a community endeavor. It is not for any one publishing player to create standards on their own for everybody else. If you’re powerful enough, like Amazon, it might be in your best interest not to throw yourself wholeheartedly into participation in standards that make it easier for others to compete with you. But, as publishers well know, insufficient standards can cost a lot of money, rendering content for different screens or even subtly different applications of epub or Adobe.

The challenges with rights are, first, having them, and second, making sure a file’s metadata spells them out clearly. One of the the first rules I learned when I came into publishing decades ago was “acquire rights broadly, license rights narrowly”. That is practice which was unambiguously the wisest commercial course until our current and developing age of digital delivery. Now agents (or publishers) having licensed rights “narrowly” can cause books not to be available to customers who would be happy to buy them when they easily could be doing so.

Data is a combination of an industry problem and an individual publisher challenge. The digital age is presenting us all with new metrics if we can gather and use them: from websites and Twitter and Facebook, as well as from publishers’ sales. We are beginning to learn what marketing and social activities move the sales needle and we’re finding it isn’t necessarily the same for different kinds of books. BISG and AAP have joined forces to deliver BookStats, the most rational and accurate book industry sales data we’ve ever had in the US and perhaps the most accurate industry data in the world. Tara Catogge of Readerlink Distribution Services did an eye-opening presentation of what that database can do earlier in the show, but we’re still at the earliest stages of learning how best to use it and we’re as blind as we’ve ever been everywhere else.

Standards, rights, and data. Publishers could benefit by reviewing their practices and progress in all three areas at a senior level on a regular basis. My hunch is that some, including the ones who joined Turvey on that stage, already do.

Two of those BISG panelists, Raccah and Michaels, are among the “innvoators” presenting at our Publishers Launch Conference next Monday, 10:30-6:30, at the Frankfurt Book Fair. Dominique will be talking about two new initiatives from Sourcebooks and Ken will be explaining the value of SaaS — software as a service — to modern publishing IT departments, including some tools his team at Hachette has developed and are making available to the industry. Pub Launch Frankfurt will also feature a presentation from Noah Genner, who runs Book Net Canada — their version of BISG — about a survey of Canadian book consumers they’ve just done: more about data.

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In some ways, I think this year’s Publishers Launch Frankfurt show kicks off the next era of digital change in global publishing. The US and other English-speaking markets have established clearly that immersive reading — fiction and narrative non-fiction — is easily ported to screens for most people. In the past 18 months, changes in the UK book market have begun to resemble what we saw in the US, including Amazon’s dominance and bookstore shelf space shrinking.

While there are still many unanswered questions about how the English-speaking trade book world will look in a few years, I think the story of the next 12 months could well be more dramatic in non-English markets. The Frankfurt show is our most international; Americans are in the minority as attendees at this event.

We have packed 18 panels and presentations into our one-day Publishers Launch Frankfurt. (I like to keep things moving.) In keeping with the way digital change has taught us to think about the book business, we have two themes that are actually analogs for “content” and “context”.

Providing the “content” will be nine “Innovators”. The presenting innovators are publishing executives who are doing things inside their companies that are hard (or impossible) to find being done anywhere else. Yet.

Creating the “context” are a number of presentations on “Circumstances”. The context of the digital revolution differs by country, by language, and by time. What happened in the United States over the past five years offers clues, but not definitive answers, about what to expect in other countries over the next five years. We are exploring a wide range of circumstances that are defining the environment for publishing around the world in the future.

Both sets of presentations are extremely diverse.

We’re starting off the day with what I think will be one of the most impactful of the “circumstances” descriptions. Benedict Evans of Enders Analysis tracks the strategy of the five big tech companies whose activities are most likely to have an impact on publishing: Amazon, Apple, Facebook, Google, and Microsoft. He’ll describe the overarching objectives of each company and examine how book publishing fits into their thinking. The point will be to help publishers see how to take advantage of opportunities that will be created and avoid the pitfalls that will come along with the opportunities.

Jim Hilt, Theresa Horner, and new International Managing Director Patrick Rouvillois of Barnes & Noble will be talking about their company’s recent first move outside the US, launching the NOOK in the UK with local retailer partnerships. The UK will therefore become the first market outside the US to experience an initiative from the one company which, inside the US, has made a meaningful run at Amazon. If they can do it in Britain, then perhaps they can do it elsewhere as well. This is a “circumstance” everybody in the business will be watching.

Michael Tamblyn of Kobo will also speak. Kobo has opened in six major markets in the past year. They’re bringing an independent — but complete with devices, including new ones just announced — ebook retailing presence into many markets. The spread of the digital delivery infrastructure is definitely one of the changing circumstances that all publishers need to stay aware of and these two retailers are an important part of it.

The decline of print bookstores has been taking place for some time in the US, an effect not yet evident in much of the rest of the world. Peter Hildick-Smith of The Codex Group has been studying that, surveying book consumers about their purchasing decisions for a decade. He has data spelling out what the impact on sales and discovery is as bookstore shelf space contracts, which he’ll be reviewing for publishers to consider as they do their own forecasting about how fast bookstores will decline in their own markets. Hildick-Smith also has data about the reading habits of consumers on tablets as opposed to ebook readers which will be of great interest because so much more of ebook uptake outside the English-speaking world will take place on tablets.

We will have panels looking at two sets of emerging markets.

The BRIC countries — Brazil, Russia, India, and China — are watched by economists for emerging trends and we’re going to do the same. All of them are in the earliest stages of ebook uptake, but the beginnings are there in all four markets. We’ll have local representatives from each — publishers and retailers — to fill us in on the prospects and expectations in each of these countries.  The panelists will be Carlo Carrenho (PublishNews) from Brazil, Alexander Gavrilov (Book Institute) from Russia, Ananth Padmanabhan (Penguin) from India, and Lisa Liping Zhang (Cloudary Corporation from China.

We will also have a panel of leading Spanish-language publishing executives, chaired by Patricia Arancibia of Barnes & Noble, to discuss how digital change is playing out in the Spanish-language market. Spanish, like English, is the local language for many countries — more than 20 in the case of Spanish — and also has a very large market within the US. Digitization has been slow and there are unique issues having to do with the fact that control of copyrights is often housed in Spain, despite the fact that the biggest markets are in Latin America. Patricia and her panelists (including Arantza Larrauri of Libranda and Santos Palazzi of Planeta) will explore how fast that will change and when we should expect to see ebooks rising beyond the sliver of the market they have captured so far.

Michael Healy of Copyright Clearance Center is going to do a presentation on changes to copyright law and practice that may not be taking place where you live and publish but which could affect you where you do.

Noah Genner, their CEO, will report on the first fielding of a BookNet Canada survey of Canadian book consumers, the beginnings of a project that is planned to take place over the next couple of years. This may be the first intensive study of digital reading habits outside the United States so we thought it was worthy of a report to our global audience.

And a circumstance on every big company’s mind in publishing is how they will be regarded by the investment community as they navigate the digital transition. Brian Napack is now at Providence Equity Partners. Last year at this time he was President of Macmillan USA. Nobody is in a better position to discuss this topic than Brian and he’ll present on it at our event.

The innovative executives who will be navigating these shifting circumstances constitute the other half of our program. These speakers will be talking about initiatives that are often unique but are always pioneering. Our bet is that they are introducing a lot of practices that will be common in a couple of years.

Two of our innovators work from outside the English-speaking world but part of their story is that they’re not letting that cut them off from the biggest book-buying language.

Helmut Pesch leads the team that provides the internal ebook support for the German publisher Lubbe. But he’s using that position to pioneer. He’s teamed with a TV production entity to deliver a multi-media novel as a serial, launched an ebook first imprint, and is publishing original work in both English and Mandarin Chinese!

Marcello Vena oversees digital initiatives for the Italian holding company RCS Libri, which owns the book publishers Rizzoli, Bompiani and Fabbri Editori. Vena has started two ebook first genre imprints (thrillers for Rizzoli and romance for Fabbri) and is delivering those files DRM-free. He’s created a couple of very successful illustrated ebooks (this in a market where digital has barely cracked 2% of sales) and he also is trying out English-language publishing.

Stephen Page of Faber and Faber in the UK is building publisher- and author-services businesses while he innovates in his own publishing house. As an example of that, Faber has produced delivered two compelling apps for classic poetry: one on T S Eliot’s “The Waste Land” and one just released on Shakespeare’s Sonnets. And he’s building author communities that include live events and writing courses.

Rick Joyce, the Chief Marketing Officer for Perseus and their digital Constellation service, is exploring “social listening” tools, but with a twist. Joyce points out that working with these tools isn’t easy but he also is skeptical of the value which can be derived as they are often used: tracking the impact of social media efforts by a publisher. Joyce and his team are exploring whether the tools can be used to find the right marketing venues and approaches, down to the level of what blog comment streams to join and what nomenclature to use when they’re being worked. He will explain the tricky balance between being terribly specific in your search (like using the book title) which yields far too few opportunities and being so broad that the targeting is ineffective.

Anthony Forbes Watson is Managing Director of Pan Macmillan in the UK, part of the newly reorganized global trade division of Macmillan. Watson’s house is distinctly smaller than the four biggest UK trade houses (Random House, HarperCollins, Hachette, and Penguin) but much larger than any other player. Watson has reorganized his shop to get closer to both the authors and the markets. The evidence so far is that Pan Macmillan is proportionately outselling its competitors in digital; Watson will lay out the ways in which internal structural changes can lead to competitive advantage.

Rebecca Smart is the Chief Executive Officer of Osprey, a global publisher whose first vertical audience was military history. Since then, Osprey has executed acquisitions to put them into other verticals: science fiction, mind body spirit, food, and health. Her company is global and focused on audiences and she is building a multi-vertical publisher that will work with very diverse set of customers with a consistent approach and central services when possible.

Ken Michaels is the COO of Hachette Book Group USA. He’s also a big believer in SaaS: software as a service and he’s been rethinking and rebuilding Hachette’s internal technology structure in light of that belief. Hachette has also created some solutions themselves — among them, a capability to track metadata and ranks of books at ebook retailers and a tool for sharing content on Facebook — that they are making available as SaaS services themselves.

Charlie Redmayne is the CEO of Pottermore. He believes they’re building the digital publisher of the future and that a key element of that is to go where the audiences are: every device or channel that commands eyeballs is in his sights. Of course, Pottermore was built on the back of one writer’s amazing fictional brand and world. Redmayne believes what they’ve built might be applicable to other worlds from other authors. And that part of his presentation might get a lot of publishers and agents in the audience thinking what they have that might apply.

Dominique Raccah is the founder and CEO of Sourcebooks. Dominique is an indefatigable experimenter. She’s developed a poetry vertical. She’s experimented with “agile book creation” which invites the author’s audience to participate in creating the book. Dominique does more experiments before breakfast than most publishers do in a year. I put her on this program “on faith” because she told me she’s got 2-1/2 experiments to discuss that support her conviction that publishers have to completely rethink their businesses. (Today on a listserv she mentioned that she has “five startups” taking place internally!) Maybe I’ll find out exactly what she’s going to talk about at the conference before we get there, but I haven’t found out yet. But I’ve never been disappointed by Dominique and she says she’s more excited about what she’ll discuss at Publishers Launch Frankfurt than she has ever been about anything she’s done before. I am confident that we’ll be glad to hear what she has to say and all the other innovators will feel they are in very good company.

As we usually do at Publishers Launch events, Michael Cader and I will be opening the show with stage-setting remarks and doing a quick wrap-up at the end as well as popping up during the day whenever we think we can be helpful.

We got Peter Hildick-Smith, Rick Joyce, and Marcello Vena to do a webinar with us previewing what they’re doing at the event. Check it out! And our friends at the Frankfurt Book Fair did a little session with me talking about the conference as well. Take a look.

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