Hachette Book Group USA

Amazon as a threat to steal big titles from big publishers is still a ways off


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 bitterBut, 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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Three words of wisdom: standards, rights, & data


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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Publishers Launch conference at BEA will cover a wide range of digital change issues


What are the important topics to discuss today concerning publishing and digital change? I think we’ve got most of them covered at Publishers Launch BEA, the one-day conference we’ll stage at the Javits Center next Monday, June 4.

Our all-day event has sixteen distinct presentations and panels. There may be a topic of interest to somebody somewhere that we won’t cover, but we’re definitely not missing much.

The day will begin with a review of recent industry developments from Publishers Launch co-founder Michael Cader. As I write this, the news of the moment is “Waterstones will sell Kindles”. That event, and others that may follow between now and then, will be put into context by the man who prepares our daily Publishers Lunch. Michael likes to point out the topics we spend more time discussing than they’re worth. Those observations are always amusing and insightful.

We’ve noticed that cloud solutions — commonly called SaaS, “software as a service” — are becoming increasingly important in the operations at publishing houses. We think the topic is so important, in fact, that we’ve scheduled an all day conference called “Book Publishing in the Cloud” for July 26 in New York. Ken Michaels, the COO of Hachette Book Group USA, is a big proponent of SaaS and believes it could change the way we work, together and separately, as an industry. He’ll kick off our conference describing what he sees as the opportunity for publishers represented by cloud solutions.

Then a panel of four publishers will talk about a very much related subject: how publishing houses are remaking their processes and workflows to respond to the demands of the digital age. Publishing veteran David Wilk will chair that panel, which will include Chris Bauerle of Sourcebooks, Sara Domville of F+W Media, Joe Mangan of Perseus, and Carolyn Pittis of HarperCollins. All of these companies are doing some very basic things quite differently than they did only a couple of years ago and these executives will discuss how things have changed, how hard it was to change, and what benefits have come to them because they did change.

We like to feature short conversations with industry players who have a unique view. One of these is Molly Barton, who is the global digital director for Penguin. Molly is the only digital head I know today who started out inside the publishing house as an acquiring editor. Now she has a view of digital change around the world from the top of one of the world’s biggest book publishing empires and within an even larger publishing company that has many digital irons in the fire. I’ll have an onstage conversation with Molly, and we’ll cover a wide range of topics from DRM to enhancement to whatever might have arisen earlier that morning.

After Molly, we’ll move to a new feature of Publishers Launch Conferences: the Publishers Launchpad sessions. Launchpad is our slot for introducing new products and services. When we debuted it at Digital Book World last January, we were pleased to recruit a consulting client of my Idea Logical Company, Linda Holliday of Semi-Linear, to moderate the sessions. On June 4, Linda’s own new product will be the kickoff Launchpad subject.

And Linda’s new product, Citia, has as its objective nothing less than reinventing the presentation of high-concept non-fiction in the digital age. It is a shamelessly ambitious undertaking, literally deconstructing and then reconstructing the ideas in a book. The debut Citia title will be “What Technology Wants” by Kevin Kelly, from Penguin, the house of the previous speaker, Molly Barton. Barton is one of the biggest fans of the new Citia presentation of material. Michael Cader will interview Linda and they’ll show you how the complex ideas we previously could only access through narrative text and illustrations can be rethought and made clearer with what I call, for simplicity, “Cliff’s Notes for the Digital Age” but which is really much more than that.

Then Linda will bring on two other new propositions as part of the Launchpad session. Both of them are new SaaS services to make ebooks.

The simpler proposition is from Hugh McGuire and is called Pressbooks. It is a free XML ebook-making tool built on WordPress that enables users to produce epub and PDF files on the web.

The other tool is called Aerbook Maker, created by Ron Martinez of Invention Arts. Aerbook makes enhanced ebooks and both HTLM5 and native apps. It is a tool that allows mixing in audio and video and interactive elements without advanced programming skills.

Then, before lunch (aren’t you hungry already?), we’ll have our agents panel. Laura Hazard Owen of paidContent will moderate a great agent group that includes Laura Dail of Laura Daily Literary Agency, Tim Knowlton of Curtis Brown, Simon Lipskar of Writers House, and Jennifer Weltz of The Jean V. Naggar Agency. They’ll be discussing both the changes in the business of agenting and the dynamic negotiating climate with the publishers. We’ll learn what they’re thinking about managing their digital backlist and what new skill sets they think their authors will be demanding of them.

Kelly Gallagher of Bowker will kick things off after lunch with with the latest report from their new Global eBook Monitor (GeM), a global look at ebook uptake around the world. Gallagher will feature “country level data” to a degree that hasn’t previously been revealed. We’re looking forward to it.

One key premise about digital change is that the world is getting smaller and publishers will find it easier to sell books, particularly ebooks, in territories other than their own. Our panel called “Sales Across the Borders — Import” will look at the increased penetration of ebooks from abroad, particularly in languages other than English. I’ll moderate a group of three panelists: Patricia Arancibia, Editorial Director, International Digital Content, for Barnes & Noble, consultant Javier Celaya from Spain, and Spanish publisher Blanca Rosa Roca of Roca Editorial. Blanca Rosa is doing some very innovative things to get her books into the US market in both Spanish and English. (She’s just created an English language ebook publisher called Barcelona eBooks and forged a partnership with Open Road for marketing and distribution.) Javier consults to companies throughout Europe and will report on how publishers, particularly in Spain, Italy, and France, are viewing this opportunity. And Patricia wrangles content for B&N to sell from all over the world. There are very few people, if indeed there is anybody, who knows more about this subject than she does. One wrinkle on this topic is that other-language publishers are now translating their own books into English to hit the English-speaking ebook market. One thing we’ll want to learn from our panelists is how commonplace they expect to see that practice become.

The complementary panel, which will be moderated by longtime sales executive Jack Perry, is “Sales Across the Borders — Export”. For this one we’ve gathered three experienced export sales executives: Chris Dufault of Random House, David Wolfson of HarperCollins, and Dan Vidra, who has just this month left Simon & Schuster to work for the new German-based (but global and multi-language) ebook platform, textr. They’ll be joined by David Cully, the President Retail Markets/EVP Merchandising for Baker & Taylor, the US wholesaler that has long been a global leader helping US publishers sell their books abroad. This panel will tell us what markets are showing the most promise for US publishers, how the sales growth of ebooks is affecting the sales of print, and how the growth of export might be impacting the related business of selling foreign translation rights. (We’ll be able to cross-check what they say with what the agents will have told us a couple of hours before.)

Michael Tamblyn of Kobo is always a popular speaker at publishing events because he shares interesting data. This time we’ve asked Michael to focus on what Kobo has learned from its recent experience in new markets, particularly the UK and France where Kobo tied up with major retailers. What we’ll want to know for non-English markets particularly is how powerful the draw of wide title selection in English is. Will ebookstores in other countries really expand the sale of our books in English around the world? Tamblyn will certainly get us started on answering that question.

Our final chunk of programming in the afternoon is all about change.

Fritz Foy is Macmillan’s EVP for digital. Macmillan made news a couple of weeks ago when they announced that they would be going DRM-free with their Tom Doherty Associates imprints including Tor, Forge and other related sci fi and fantasy imprints. We immediately called him and got him to agree to talk about that on the program. Foy is going to do a presentation that recaps Macmillan’s thinking about this question, which he says goes back several years. Thanks to Cory Doctorow, the anti-DRM crusader who is one of Tor’s key authors, Macmillan had already experimented with it. Foy promises us there will be surprises and at least one news announcement coming from his presentation. We’ll be surprised right along with you when we find out what it is.

Phil Ollila of Ingram Content Group accepted our challenge to comb their sales data for clues about how bookstores and other retailers have been changing their stocking decisions in recent years. The short summary of Ollila’s findings, which are summarized in an article he did for our conference book (all Publishers Launch Conferences have a printed conference book!), suggest that fiction is down, some surprising categories are up, and that what publishers can expect is more titles in more different stores with fewer sales per store per title.

We’ll have a bit of a change of pace with a presentation by David Steinberger, the one who is Founder and CEO of the Comixology platform. (There is another David Steinberger, of course, who is the CEO of Perseus.) Comics constitute a very big global business that operates in silos by language and by country. Will it stay that way? Will the rights and cultural issues that have kept the market from globalizing continue to do so in the digital age? As the creator of the most successful comics-selling platform in the US and a man with an eye for the world stage, Steinberger is in a unique position to speculate on the answers. And perhaps we’ll get some insight about how other highly-illustrated genres with strong localized content — travel and food come to mind — might change because of the digital transition.

There is a growing consensus in the industry around two points that would have been controversial only two or three years ago. One is that bookstores are declining rapidly and will, unfortunately and in the not-too-distant future, atrophy to the point that they are a subsidiary channel for book sales, not the primary one. The other point is that the marketing exposure that books get in retail stores is a critical component of their early exposure, leading to the “discovery” by consumers that is the key to getting commercial traction. Our last two sessions of the day will focus on that challenge.

Peter Hildick-Smith of Codex has been conducting studies of book purchasers for a decade, including careful tracking of how they learned about the books they bought and read. Peter is one of the greatest champions of the bookstore’s role in discovery, and perhaps the leading skeptic that search engine optimization and social network marketing can be an adequate substitute. In this presentation, Peter will make his case thoroughly backed with data from the years of research his company has done.

Then Peter will join our final panel of the day, one focused on “The Future of Book Discovery.” Two publishers that are doing a lot of work in this area, Amanda Close of Random House and Rick Joyce of Perseus, and Scott Stein, who heads up the book coverage for USA Today, will be part of that discussion, which will be moderated by Michael Healy of Copyright Clearance Center. One of Hildick-Smith’s key points is that there is a Catch-22: if you don’t know something about a book, you’re not likely to search for it. And unless somebody gets the ball rolling for a book, there’s nobody to comment on Facebook or Twitter to get you started that way. The publishers on the panel and the overseer of one of America’s most widely read book pages will talk about their efforts to build something new that will tell us about books the way window displays and stacks and face-out displays have for years.

After that, Cader and I will wrap up the day. Very briefly. We’ll all be very happily exhausted!

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Things learned and thoughts provoked by London Book Fair 2012


This post contains a batch of observations from this year’s London Book Fair. Some of it recalled an experience from about 20 years ago. We’ll begin there.

In the early 1990s, Microsoft was on a mission to get computer hardware manufacturers to install CD-Rom drives in new machines. Microsoft had a very simple motivation. Software then was sold as hard goods. One CD-Rom could hold the data that required many, many diskettes. So if the storage and transfer medium were changed, the cost of goods for Microsoft would drop sharply. Since the value customers were buying was the code, not the package, Microsoft figured (correctly) that they’d be able to keep the price of software the same and simply make more profit if their customers could handle the CD-Roms. (Please note this logic applies very nicely to any discussion of what ebooks should cost in relation to print.)

But, of course, most people don’t load that much software, so the CD-Rom argument would be strengthened if content were also available on them. That inspired Microsoft to stage a half-day conference to “educate” the trade publishing community about the “opportunity.” (Of course, areas of technical and professional publishing, which had opportunities in delivering very large amounts of data, had already started to move in that direction; the value of CD-Roms was real and obvious to them. They also had vertical audiences of professionals that were perfectly able to hook up a CD-Rom drive to their existing machines, and did.)

At the conference, Microsoft basically showed all the “cool” things the computer could do: delivering sound and images (not video so much in those days) and hyperlinks. They basically said, “we don’t know how you’re going to make money on this; you’re the content experts. But we’re giving you this great new canvas to create on. Create!!!”

The excitement Microsoft and others were able to generate led to a burst of activity by publishers to create CD-Roms. Very few people found this new packaging of content particularly appealing at any price, and they actually were listed at very high prices. In other words, the techies had no clue about the content business and their advice to it was self-serving.
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Last Monday in London, Susan Danziger of Publishing Point hosted The Great Debate. The proposition being debated was that the new tech companies would ultimately deliver a “knockout blow” to the conventional publishing establishment. Michael Healy of Copyright Clearance Center moderated.

Speaking for the new tech companies were two stunningly successful new technology entrepreneurs: Bob Young of Lulu and Allen Lau of Wattpad, both of which take anybody’s content and put it into circulation. Lulu’s core mission is seamlessly turning content into printed books and Wattpad’s is about organizing it for crowd-sourced consumption and discussion.

Opposing them were two publishing veterans (and, I’m happy to reveal, good friends): Evan Schnittman and Fionnuala Duggan. Schnittman is about to move from a global sales and marketing position at Bloomsbury to become Hachette Book Group USA’s head of sales, marketing, and digital. Duggan came from the music business, spent several years heading up digital at Random House UK, and is now Managing Director for International Course Smart, the digital platform created by a consortium of college textbook companies.

There is no ambiguity about what happened in this “debate”. The format required each of the approximately 250 attendees to register their opinions as to which side they favored on the way in and then again after the speakers had presented. The “establishment” side — the Schittman and Duggan side — picked up about 100 votes with their arguments from where the audience was when it came in. The incoming audience favored the proposition that the knockout blow was coming by a wide margin. After the debate, the margin was as wide in the opposite direction. (Some were undecided; so don’t drive yourself nuts trying to work out the math.) It is hard to imagine a more decisive outcome.

Of course, Duggan and Schnittman know quite a bit about technology. But neither Young nor Lau seemed to know anything about the content business. That shouldn’t be a surprise. Both of them have gotten rich in businesses that are ostensibly content businesses, but they aren’t. Their financial success is not dependent on the quality of content, the skill in developing or marketing it, or its inherent appeal. In fact, Lau kept touting the volume of what he hosted and claiming that technology would handle the curation perfectly adequately in the future. This was “proof by assertion.” It was the ultimate declaration of faith. The audience didn’t buy it.
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On the day before, Schnittman had hosted the Digital Minds conference. One of the keynote speakers was an old friend of his, Andrew Steele, who is the creative director of the very successful web site, Funny or Die. Steele told us the story of that business, which is instructive.

The original concept of Funny or Die was to crowd-source user-generated content, like YouTube. They’d build up traffic and monetize it. But there was a problem. Most of the amateur stuff they got just wasn’t funny. As Steele points out, we go to YouTube when somebody sends us a link for something good. We don’t go to YouTube and browse all the amateur content. There’s a reason for that. Most of it is crap. And most of what Funny or Die was getting from the crowd was crap. They weren’t getting page views. They weren’t going to succeed.

So they tried something new. (That’s called pivoting, for those of you who don’t spend enough time talking to the tech-and-finance community.) They got professionals to create content. Things changed quickly. By allowing their professionally-produced content to go off the site while it maintained the “Funny or Die” branding, they soon built a large audience. It now keeps growing and growing. Success is assured. But the lesson Steele emphasized was that professionally-created and -curated content succeeds where amateurs fail. He sees no reason why it should be any different in our world.
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I got a chance to visit with Charlie Redmayne of Pottermore. He was a bit bleary-eyed at the Digital Minds event on Sunday because the site had opened to the public that weekend. When I saw him on the show floor during the week he had just benefited from a full seven hours of zzzs, and he was enjoying his status as a game-changer.

The key to Charlie’s disruption was his willingness to substitute watermarking for DRM. He said it definitely made him nervous to do it, but he couldn’t see any other way to achieve what he wanted for Pottermore. He had to be able to sell to any device; he wanted to be able to allow any purchaser complete interoperability. There was no way to do that and maintain DRM.

His technical infrastructure is awesome. It stood up even though the average length of engagement by each user was three or four times what they had projected and the traffic exceeded expectations as well. But the most startling early news was what he reported about piracy.

Apparently, Potter ebook files started showing up on file-sharing sites pretty much right away after they opened. But before they could serve any takedown notices, Charlie says the community of sharers reacted. They said “C’mon now. Here we have a publisher doing what we’ve been asking for: delivering content DRM-free, across devices, at a reasonable price. And, by the way, don’t you know your file up there on the sharing site is watermarked? They know who you are!” And then the pirated content started being taken down by the community, before Pottermore could react. And very quickly, there were fewer pirated copies out there than before.
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I heard a rumor from a very reliable source that two of the Big Six are considering going to DRM-free very soon. The rumor is from the UK side, but it is hard to see a global company doing this in a market silo. Another industry listener I know was hearing similar rumors from different sources.

Could we see another crack in this wall sometime soon, maybe this year?

This is one lecture the techies have been delivering to the content folks that might have been on the money. I’ve always been skeptical that DRM prevents piracy, but I’ll admit that I was more concerned in the past than I am now that it would cost sales.
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At the Digital Minds conference, there was a panel on children’s content publishing. Sara Lloyd, head of digital for Pan Macmillan, moderated a group that included Belinda Rasmussen from her own company, Eric Huang from Penguin, Jeff Gomez of Starlight Runner Entertainment, and Kate Wilson of Nosy Crow, which is a new children’s “book publisher” that seems much more focused on apps.

I have trouble seeing a future for book publishers in the kids’ content world. Everybody seemed to agree about what the apps of the future required (interactivity, game elements, animation) and that the parents of five years from now will be much more likely to hand their kids in the back seat an iPad than a book. So I asked them, as books diminish, what will publishers have to offer here? Wouldn’t this business belong to people who know gaming and animation, not books?

Kate seized the question from the stage and answered in a way that seemed to confirm my conjecture. “We don’t hire people with book experience,” she said. When I checked in with her later, she agreed that books were a revenue-generating convenience to get her company started. She sees the day when they won’t be part of her business anymore. What excited her (and well it should) was that they’d just made their fifth app and had created all the software tools they needed to build it while making the first four. The cost of creating their apps is plummeting because they’ve built the toolkit.

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The news about the DoJ’s charges against five publishers and Apple and their settlement with three publishers broke just before LBF. It was a topic of much discussion, of course. Most people in the industry are horrified by the lawsuit and the settlement and there is really widespread fear about the consequences of ending the agency model. (The settlement doesn’t do that, but having three big publishers pushed to allow discounting for the next two years at least certainly cripples it.)

On Publishers Lunch, Michael Cader rounded up an impressive set of links to media around the country who are just as horrified as publishers, retailers, and agents at LBF were. Here are the stories from the New York Times, the Wall Street Journal (behind a pay wall, unfortunately), Slate, and the Los Angeles Times.

We understand that an amendment to the Tunney Act obliges the DoJ to take note and report to the court any opinions expressed in writing by the citizenry about a settlement that takes place in a case still being litigated. Cader notes that the law has usually been used to expand a judge’s ability to exercise oversight when the court believes DoJ hasn’t been tough enough. In this case, we’ll be asking them to pare back a settlement, which is apparently a less common use of the law. But the law allows us 60 days from the settlement to get those letters in and it is what we in the community can do to help fight this battle.

As I wrote in my summary of the impact of this settlement, it is one where Amazon and the cost-conscious ebook consumer win, but everybody else (and that means authors, publishers, retailers, and the public that wants good books, as I explained on NPR) lose. The low-price side of this is easy to understand. The publishing business side isn’t. (If this were a GOP DoJ, I’ll admit that I would have inserted a snide remark here about what this shows about their IQ.)

One point to note here, which didn’t occur to me at first, is that the three settling publishers are about to game the two fighting publishers (and, perhaps, Random House) the same way Random House gamed them when they stayed out of agency at first. Whether or not they stick with agency, they are now enabling discounting, so they might get the same benefit of the retailer discounting their goods while they retain their revenue that Random House got for the first year of agency.

In other words, more weight on the shoulders of the two companies, Macmillan and Penguin, who are carrying the fight for the whole industry. And that means more reason for the rest of us to try to help.

I am working on my letter to DoJ now, and I’ll publish it in a future post. I hope all my readers who understand what’s at stake here will also write to Justice. Address your letters to

John Read
Chief Litigation III Section
Antitrust Division
U.S. Department of Justice
450 5th Street, NW, Suite 4000
Washington, DC 20530

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Should trade publishers start ditching their B2B imprints for a B2C world?


I spent last Friday at the On Copyright 2012 conference staged by my clients at Copyright Clearance Center. CCC is an organization dedicated to generating revenue for content creators from what is referred to as “secondary” licensing, or uses that are not core to the publisher’s revenue stream and which are often impossible to manage from an individual publisher’s point of view. CCC has the interests of copyright-holders at heart and at the core of their enterprise, but they also live on the cutting edge of digital content consumption where mash-ups, fair use, and the reality that piracy often happens because rights are too difficult to license can’t be avoided.

I’ll admit that discussions of the nuances of copyright itself leave me mostly befogged. Fortunately, this event was much more about the practicalities of the marketplace than about the theories of the law.

The most engaging and interesting speaker of the day was Robert Levine, author of “Free Ride”, an analysis of content and the Internet that deeply questions the increasingly ingrained notion that getting paid for content is inherently contradictory with the growth of digital media. Levine is smart and open-minded about content models and DRM and piracy and enforcement. Indeed, one of the noteworthy features of the entire day was its willingness to entertain notions that might be considered heretical by copyright and old model zealots.

In fact, Maja Thomas, the chief digital thinker and strategist for Hachette Book Group USA, opened the door just a bit to the idea that DRM on ebooks might be counterproductive (at worst) or futile (at best). Maja’s background is extensive in audiobooks. She told the conference that she had been assigned to monitor the destruction of her audio business when DRM was removed from those products a few years ago. And, in fact, there was no destruction!

When the program ended, I dashed down to the front to introduce myself to Levine. He knew me before I said my name and “reminded” me that he had interviewed me during his research for his book. (Somebody else later told me, “oh yes, you’re in there.” I’ll have to read it…) I don’t know whether to blame the fact that my memory for these details is a sieve or that I do an interview or two a week with somebody about something and am seldom called upon to remember them later.

What triggered further thoughts for me (and, ultimately, the point to this post) was a discussion in that last panel, chaired by Michael Healy and including Levine and Thomas, about branding. There was a reprise of the frequent (and mostly accurate) meme that author brands are the ones that matter to consumers, not publisher names, with rare exceptions such as Harlequin.

I think that could be changing. Certainly the circumstances around it are. As publishers are challenged to think about and articulate the value they bring to the process, they often cite curation (publishing just the good stuff and filtering out all the inferior stuff) and editorial development (helping the author improve the work before it is published) as significant contributions. Thomas seemed to suggest that a lot of thinking is going into articulating a publisher’s value at her shop.

I have said for some time that the core value proposition for a trade publisher is “we put books on shelves.” That’s looking at it from the author’s point of view. From the consumer perspective, the curation function is seen to be performed by the bookstore and the hurdles that stores create to getting on those shelves assure that only well-conceived and well-edited books make it there. (There have always been exceptions, of course.) As the shelves for print books diminish and are replaced by virtual shelves that are not nearly so limited, books that might not have made the selection grade in a physical world are sharing space with the carefully (and expensively) selected and edited works of major houses.

And that brings us back to branding. Brands are shortcuts for their users, telling them in a name what they can expect from a product or service they haven’t sampled yet.

Publishing brands until the digital era were really shortcuts for the trade, not for the consumer. The buyers at chain and independent bookstores, the collection development team at libraries, and the editors of major book review media all believe they understand the difference between a Farrar Straus or Knopf book and one from a “lesser” house. That figures into the “hurdles” I cite above. Top publishing imprints found it easier to get placement and reviews and get their books in front of the purchasing public.

That fact (alongside the fact that big publishers grew by acquisition of smaller companies and often would preserve the name of the company they bought, which is how Knopf ends up a Random House imprint and Scribners is an imprint at Simon & Schuster, to cite two of far more examples than you’d care for me to name) started the proliferation of imprints we now see. It has been fueled by publishers’ use of imprints as way to attract and award top acquisition talent.

Imprints have dedicated editorial teams and usually some internal marketing resources, but their value as identities is diminishing. The point to them was always to provide useful branding for business intermediaries, not the end consumer. And, as they proliferate, their value for their original B2B purpose is diluted.

(It is currently fashionable to castigate publishers for their focus on the supply chain rather than the end purchaser. This fashion, along with the totally ignorant bashing of the convention of “returns”, is based on apparent indifference to the history and development of the business. When the entire imprint structure of publishing houses is built around B2B brand recognition and has been built up that way over a century, you’d think people would think twice before being reflexively dismissive of the B2B focus. It is really only recent developments that have turned it into a questionable idea.)

But times really have changed. Attention on the end user is rising; the intermediary structure is declining. And publishers should be rethinking their branding strategies, at the core of which are imprints, as they address the emerging marketplace realities.

Publishers seem to recognize that the competitive statement they need to make going forward is about quality, expertise, and investment in professional support for the creative effort. This will distinguish theirs from the swelling mass of self-published books which are usually sorted out today by their pricing. On the agency model, the Big Six books are $9.99 to $14.99 (a few bucks cheaper on the backlist) while the self-published books cluster around a band centered at $2.99.

That may actually work, for now. But what if big publishers want to compete at the lower price points but still make a “quality” statement? And some indie writers are trying to nudge pricing up a bit while publishers are experimenting with bringing them down, so what if we start to see both indie and branded ebooks in the $5.99 range? Can the big publishers do anything that would help them then?

I think they can, but it will be require a decision that is painful to make, considering their history. They should, for the most part, get rid of their imprints. They should brand every general trade book they publish for quality and professionalism, and that only requires one name per major house and could never benefit from more than two.

That is, knowing that a book is from the Random House family of books is all the quality branding the consumer needs. They don’t benefit from from the more nuanced distinctions between Crown and Knopf, and Random House scatters its consumer firepower to its disadvantage trying to establish multiple names in the consumer mind. (In fact, I’m not sure the big houses even try to establish all these imprints as consumer brands. If they’ve already abandoned that effort, they’ve taken the first step in the direction I’m trying to encourage here.)

If this idea is right, then each Big Six house should select one name (and logically, the single best known name they now have among consumers would be the most sensible choice), or perhaps two, and promote it. (The second name might make sense if there is an imprint already known for “quality”, like Farrar Straus or Knopf.) No other name should be promoted to consumers unless it is establishing a clear niche identity (Fodor travel books or tor.com science fiction, as examples). There’s no point establishing brand identity unless you expect consumers to return to it repeatedly, the way they return to stores to buy reading material.

Consumers can’t keep dozens of imprint names straight in their heads, but they can learn the names of six big houses, particularly if they’re starting with names they already know. Like the possibility that Random House should preserve the brand equity in Knopf in addition to building Random House as the general trade imprint, there are nuances to consider in other houses to best implement this strategy.

For example, should Penguin perhaps restrict the use of the Penguin name to classics and established backlist and use something different (Viking?) for everything else? Penguin, because of its publishing history, means something to some people, although I’d argue that not restricting the use of the imprint name to classics and the most distinguished backlist actually dilutes the meaning it might have.

Should Hachette, a name that probably has very low recognition to US consumers as a quality book imprint, be ditched as the brand? Should the company use Little Brown, the most venerable and best known of its imprint names, even though it has created an internal distinction between LB and its relatively new (and therefore mostly unknown to consumers) Grand Central imprint?

What’s the best known name the company now known as Macmillan has? Is it Macmillan? Or is it St. Martin’s or Henry Holt? Farrar Straus might have a cachet worth preserving at the high end, but it would be diluted if it were the overall brand. I suspect that should be Macmillan, but that’s not what they’ve ever called their books; it is just what they have recently started to call their company!

America’s biggest consumers of books can readily remember a few company names to signifying “quality”, and perhaps a few more to mean premium content. Knowing a book comes from an established company with a long list of previously-published titles that book readers are familiar with is the kind of signal people need to be persuaded to part with a few additional bucks for an otherwise unknown author. But that’s all we can ask the brand to do: signal professionalism and quality. The much more nuanced distinctions that the imprint names have been intended to communicate within the trade can’t possibly be delivered cogently to the public at large.

And since the public is now the brand target that matters, it is time to align brand strategy and the brands themselves to that reality.

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